Kian Abouhossein: The first one is more a general question. I mean if I look at the turnaround of the bank, and I think Berlin should send you two medals, both to Christian and James, the market is clearly thinking differently. I mean, you’re trading at 0.3x tangible book. You’re trading at 5x roughly — year’s earnings. So there’s a disconnect. And I’m just trying to understand how you’re going to bridge that disconnect. And if there’s going to be any change in the sense that you’re going to overcommunicate maybe in Investor Day or any other measures that you feel are understood in particular, that we should be thinking about and investors should be thinking about? And the second question is I’m quite interested in some management changes that you have announced.
And clearly, you have being the COO and also being responsible for cost besides the transformation. Just wondering if there’s any change in your thinking around cost? I mean it feels like there is from the language but just wondering if there’s any — and clearly, the EUR 500 million. But I wonder if there’s any change in the way we should think about Deutsche and cost management going forward now relative to last year?
Christian Sewing: Yes. Thank you, Kian. And look, let me try to start and James will jump in. Look, it’s always hard to talk yourself about why we are perceived in the market as we are perceived. This is actually a question I would like to always hand back to you guys that you tell us what we can do better in communicating. Look, I give you three items and one of that is not meant in any defensive way. But I do believe that if you just think 14 months back, where we stood in February 2022 before this awful war broke out, I think, at some point in time, we were a share price around 14 30 or something like that, not that this would be our ultimate goal, as you know. But you could see that actually people started to think about this is going into the right direction.
Now I still believe that the overall uncertainty — the geopolitical uncertainty is a drag for us and that we are still kind of suffering from that. That is point number one. Point number two is clearly that we have to show and we also hear it on this call, and I think it’s only delivery, but you have two very resilient people here on this call. And we will drive this resilience, and we will show you quarter by quarter, week by week, month by month and day by day that we keep the ship exactly in this direction. But the composition of Deutsche Bank of the revenues completely changed. We have 66% of revenues from the Corporate Bank, Private Bank and Asset Management. And if you would listen to me for another 2 hours, I can tell you these revenues in these businesses only have one direction.
And it will — this 66% will be kind of the ratio potentially, it even goes into an even more favorable number if you think about balanced versus — a stable versus less stable business, it even goes into an even more favorable number. So we have a bank which is now that balance, that stable from a profitability, from a sustainability of revenues that I’m very, very confident that we can show quarter-by-quarter a very sustainable development. Now to the Investment Bank, to be honest, I think we are — and again, potentially we need to do a better job, and I’m the first one who tries to learn. But I think the inner stability of the Investment Bank with all the changes we have done over the last 4 years is far stronger than potentially the market thinks about it.
James just talked about the financing business, a very stable business. I think it’s a financing business in the Investment Bank, which is, in my view, among the top 3 in the world. Also from an underwriting standards, if you think about the value chain from the first line of defense to the second line of defense. I think it’s a business where even others outside people of Deutsche and saying, this is — honestly, this is top of the — business. That is a business which is constantly there, continuously there with about EUR 3 billion of revenues. We have reconfigurated the trading business under Ram to one of the leading trading businesses. Again, if you look at Q1 and take out the idiosyncratic items, I’m just mentioning the name, which we talked about in ’21 and ’22, a lot, which obviously is not something which comes back every quarter, then the underlying business in the Investment Bank in 2022 in the first quarter — 2023 in the first quarter was actually stronger than in the first quarter of 2022, despite it was a very strong quarter.
We will see now a comeback in the O&A business in the Investment Bank. We do some selective investments there because we see the market opportunities and we will be awake for these market opportunities. So that I think you have three very stable business with the interest rates still to come in one of our largest business, which is the Private Bank, with revenues above EUR 9 billion, clearly above EUR 9 billion. So that I think from a pure revenue point of view, I think this bank has completely turned around, and we are playing there where the clients want us to play and where we see the momentum. Secondly, on the cost side, yes, we are now in the second phase, and I’m grateful for your question, Kian. We’re in the second phase of real cost takeout.
And that is a cost takeout, which now goes in particular, front to back, that we see the revised processes where we have invested a lot in the front offices, which now need to go into the infrastructure because we need one process from the originating to the infrastructure. And for that, we decided that all COOs in the infrastructure functions are now sub summarized under Rebecca so that we can do the changes in one process from the front office into the various infrastructure functions. Secondly, when you have invested so much into controls and we are keep doing this, at some point in time, obviously, automation and machine learning, artificial intelligence, but in particular, automation will also lead over time to reduce cost. Unity will pay off as we said.
So what you now see in the second phase of taking cost out is not like in the first phase that we exited business, and we took those costs out but it’s actually the smart takeout of cost, plus a constant revenue also of our workforce where we need to do something. So the reduction in force action is something which we have done now. And I’m sure we will do similar things in ’24, ’25 again. That is a constant review of our organization that’s all now under Rebecca. And I think with one person driving that, we will even have more force on it. So I think it’s a normal development in transforming an organization but with the robustness and resilience of the revenues. And that discipline on the cost management, I do believe that we will show now quarter-by-quarter, year-by-year that this bank is on the right track.
And at some point in time, I’m sure that also the investors will see that. If this is then even joined by hopefully, and this is, I think, the most important we should all look at that this awful war comes to an end at some point in time, I think that also Europe will be seen differently. And then latest then, we will also have relief from that side. With your medal item, actually, I will bring that message to Berlin.
Kian Abouhossein: By train — take it, I hope.
Operator: The next question is from the line of Amit Goel from Barclays.
Amit Goel: I’ve got two questions, kind of largely follow-ups. One, just on — I’m just trying to gauge the size of potential share buybacks in the second half. If I use the math that you were talking about, you kind of suggested, I guess, off of a 13.6% to 13.2% CET1 ratio, 40 bps, so EUR 1.4 billion for buybacks, growth and other things. But then obviously, the last buyback was about EUR 300 million. So I’m just trying to get a sense of are you thinking of — or have you asked the numbers in the kind of EUR 750 million to EUR 1 billion range? Or is it kind of closer to what was previously done? And then the second question, just a follow-up on the LCR ratio. I guess in the end, I suppose I’m just wondering, are you going to continue to target 130% and trend down towards that level? And — or are you going to look to keep the LCR similar to where it is today? And do you have a benefit in your plan on revenues for bringing that LCR down to 130%?
James von Moltke: Thanks, Amit. Look, your math is right. So the 40 basis points would represent something a little shy of EUR 1.5 billion, so use EUR 1.5 billion. As Christian indicated, we look at last year’s buyback at EUR 300 million. And given the progress we’ve made — and by the way, I don’t want to be committed to a specific number, a specific timing, and it’s too early, obviously, and we need to go through this with the supervisors in presenting a new capital plan. But a step forward on last year’s number would be consistent with the guidance or the capital planning that we shared with you back in March of last year. And as Christian mentioned to maybe give you a sense of ranging then, a 50% increase in dividend if that was mirrored also with the — an increase of the buyback of a similar amount, it would give you a sense of a range of what we think it might be sought by us.
I will say that given the starting point of the 40 basis points, that’s why we think it’s — this type of ask would be affordable. There’ uncertainties in the environment. You would expect us to remain prudent. But as we say, with the buffers we have, we think we have space for something like that. In LCR, we were very conscious as we went through Q1 that we had a high print at the end of December. That was frankly an accident. The average last quarter and the average this quarter are both almost exactly where you’d want it to be in this low 130% range. If we’re targeting 130% then you’d expect us to be a little bit higher than 130%. I would — I think for this quarter, we’d probably target a gentle decline. We are mindful that the risks in the outlook haven’t entirely abated.
But I wouldn’t want you to be surprised if the number started with 130% next — when we’re talking with each other again in July. As to the cost of that buffer, obviously, it does play a role, but it is very dynamic. So I wouldn’t tie a specific revenue better or worse number to a ratio better or worse view. I hope that helps.
