Deutsche Bank Aktiengesellschaft (NYSE:DB) Q3 2023 Earnings Call Transcript

Deutsche Bank Aktiengesellschaft (NYSE:DB) Q3 2023 Earnings Call Transcript October 25, 2023

Operator: Ladies and gentlemen, thank you for standing by. I am Sandra, the chorus call operator. Welcome and thank you for joining the Deutsche Bank Q3 2023 Analyst Conference Call. Throughout today’s recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. [Operator Instructions] I would now like to turn the conference over to Silke Szypa, Deputy Head of Investor Relations. Please go ahead, madam.

Silke Szypa: Thank you for joining us for our third quarter 2023 results call. As usual, our Chief Executive Officer, Christian Sewing, will speak first; followed by our Chief Financial Officer, James von Moltke. The presentation, as always, is available to download in the Investor Relations section of our website at db.com. Before we get started, let me just remind you that the presentation contains forward-looking statements, which may not develop as we currently expect. We, therefore, ask you to take notice of the precautionary warning at the end of our materials. With that, let me hand over to Christian.

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Christian Sewing: Thank you, Silke, and a warm welcome also from my side. It’s a pleasure to be discussing our third quarter and nine-month results with you today. These results show our continued progress on the path to our targets in several respects. First and foremost, we continue to demonstrate strong earnings momentum. We generated profit before tax of €5 billion in the first nine months, after absorbing nearly €950 million in non-operating costs including restructuring related to operational efficiencies. Our post-tax RoTE was 7% and would have been nearly 9% excluding these non-operating costs and with bank levies apportioned equally across the year. This reflects progress on our path to meet our 2025 target of above 10%.

Second, we are seeing progress across all three dimensions of accelerated execution of our Global Hausbank strategy, namely revenue growth, operational efficiency, and capital efficiency. Strong operating performance is driven by business momentum through a well-balanced business model. Revenues in the first nine months were €22.2 billion, up 6% year-on-year, well above our target growth rate. Private Bank and Asset Management together attracted net inflows of €39 billion alongside €18 billion of deposit growth at the Group level in the third quarter. We also continue to make progress on the second dimension of our Global Hausbank strategy, operational efficiency. We have progressed with existing measures and we have additional measures in flight.

And in terms of capital, we are delivering on our distribution commitments. We are on track to complete the €450 million share repurchase announced in July, thereby delivering total distributions across 2022 and 2023 of €1.75 billion. We finished the third quarter with strong capital. Our CET1 ratio was 13.9%. In addition, we have identified further capital opportunities and we now see scope to free up additional capital of €3 billion, enabling us to accelerate our strategy and boost returns, above our original expectations, from now to 2025 and beyond. This gives us added potential to increase capital distributions to shareholders while also deploying capital to support clients. Before we move on to progress in our businesses, let me give you an update on the Postbank IT migration.

This was one of the largest IT migration projects in European banking and is essential to lay the foundations for a more digital bank offering at Postbank. We successfully migrated 50 billion records of 12 million Postbank customers; however, we saw unexpected levels of client enquiries which led to backlogs. We have put measures in place to work through these backlogs. This not only includes an increase of temporary staff, but also accelerating measures already underway such as implementation of automation and process optimization tools. And I am pleased that we have reduced the operational backlog by about two-thirds over the past weeks, and we expect 70% of all impacted Postbank customer processes to run against service level commitments again by end of October, including processes which have been particularly critical for our clients.

We are confident that the remainder will be completed in the fourth quarter. Let me now turn to the key highlights of our resilient performance over the nine months on Slide 2. We delivered operating leverage of 4% on an adjusted basis in the first nine months, with revenues up 6% and adjusted costs up 2%. As a result, our pre-provision profit for the first nine months was up 5% year-on-year to €6 billion. In addition, we continue to reap the benefits of disciplined risk management and a high-quality loan book; provision for credit losses for the first nine months remained in line with our full year guidance at 28 basis points of average loans. Our balance sheet proved its resilience. Deposits rebounded by €18 billion to €611 billion in the third quarter.

We saw franchise momentum across the board. And furthermore, we strengthened our capital position. Our CET1 ratio rose to 13.9% during the quarter, thanks, primarily, to strong organic capital generation from earnings and the results of our capital optimization efforts. This more than offset negative regulatory impacts, mostly model changes, and deductions for dividends and share buybacks. Let me now discuss the growth and balance across our business on Slide 3. The Corporate Bank delivered a post-tax RoTE of 17% in the past nine months. Strong revenue growth, combined with flat adjusted costs driven by tight expense discipline, produced operating leverage of 24%. Our momentum with key clients is encouraging; we saw an increase of around 40% in incremental deals won with multinational corporate clients which will drive future revenues.

Our client focus, strong core capabilities and standing as an innovative thought leader in the market have been evidenced by The Banker’s Transaction Banking Awards 2023, where Deutsche Bank has been voted Best Bank for Cash Management as well as Transaction Bank of the Year for Western Europe for the second consecutive year. In the Investment Bank, we have a well-diversified business portfolio, supported by our leading Financing business, which contributed €2.2 billion or approximately 35% of FIC revenues, year-to-date. We have invested into our Origination & Advisory business, taking advantage of market opportunities which are expected to drive future revenues, including through the acquisition of Numis, which we recently completed. We are also seeing clear signs of recovery in the market, led by Debt Origination.

Turning to the Private Bank, the business grew revenues attracted inflows of €22 billion, supported by new money campaigns, and made further progress in streamlining our distribution channels. And finally, we also grew volumes in Asset Management. Assets under management grew by €38 billion, including €17 billion of net inflows in the first nine months of 2023, driven by strong inflows into Passive, including Xtrackers. The business launched 18 new products in the third quarter alone, including our first thematic ETFs in the U.S. market. To sum up, we delivered revenues of €28.5 billion in the last 12 months to September 30th, up over 6% versus the equivalent prior period. We also see forward momentum from net inflows, investments, and business wins with key clients.

Our businesses are strongly complementary and well balanced. All of this supports our conviction that we will continue to grow our franchise and exceed our revenue growth targets. Now let me turn to the progress we’re making to accelerate the execution of our Global Hausbank strategy on Slide 4. First, on revenues, with compound annual revenue growth of 6.9% over 2021, we are well on track to outperform on our revenue growth target of 3.5% to 4.5%. And we will continue to benefit from the higher rate environment which drives sustainable performance in the Private Bank and Corporate Bank. We also made progress with our own initiatives that are expected to drive fee income. We are confident that the new addition to the family, Deutsche Numis, will enable us to take added advantage of an expected pickup in corporate finance activity.

With €39 billion of net asset inflows in nine months, we expect the growth of our assets under management to drive fee income in future quarters. Second, on operational efficiencies, our existing savings measures are largely proceeding in line with or ahead of plan. This includes streamlining of front-to-back processes and headcount management. We are also optimizing our distribution network and we have reduced branches by more than 90 over the first nine months of 2023. And this enabled us to keep our adjusted costs essentially flat compared to the prior year quarter, despite absorbing inflationary pressures and investments in growth and controls, and we continue to work on further measures. And third, turning to capital efficiencies, as I mentioned earlier, we have made considerable progress on several fronts.

We have already delivered, after two quarters around €10 billion of the €15 billion to €20 billion RWA reduction we planned by the end of 2025. Other measures are already ongoing, mainly focused on hedging and reductions in sub-hurdle lending. And, given progress to date, we have identified additional opportunities to reduce RWAs further, and this enables us to raise our target by €10 billion to €25 billion to €30 billion. Let’s now discuss what this means for us on Slide 5. As just mentioned, we will deliver a further RWA reduction of around €10 billion from our capital optimization measures. And on top of this, we now anticipate a lower impact from Basel III, by €10 billion to €15 billion, which James will discuss in a moment.

Taken together, these two factors give us potential to free up additional capital of around €3 billion through 2025. We believe that our enhanced capital outlook will support accelerated and expanded distributions to shareholders while increasing our ability to invest in our platforms to boost growth and profitability. We will deliver this by sharpening our business model around capital-light and at-scale businesses, while applying rigorous hurdle rates to our portfolios to drive returns. As we look to 2025 and beyond, we see a clear opportunity to shift gears through a self-reinforcing process of franchise growth, operating leverage, and increased returns, and to create more lasting value for our shareholders as our Global Hausbank grows.

With that, let me hand over to James

James von Moltke: Thank you, Christian. Let me start with a few key performance indicators on Slide 8 and place them in the context of our 2025 targets. Christian outlined the business momentum and our well-balanced revenue mix, which resulted in revenue growth of nearly 7% on a compound basis for the last twelve months relative to 2021. This performance puts us well on track to deliver revenue growth above our 2025 target. Our strong revenue growth combined with cost management led to a 2-percentage point improvement in the cost income ratio to 73% and our return on tangible equity was 7% in the first nine months of 2023. These ratios would have improved by almost 5% and 1.8 percentage points if adjusted for higher non-operating costs and if bank levies were apportioned equally across the year.

Our capital position remained strong with the CET1 ratio at 13.9% this quarter after absorbing regulatory headwinds and the impact of the share repurchase. Our liquidity metrics also remained strong. LCR was 132%, in line with our target of around 130%, and the net stable funding ratio was 121%. In short, our performance in the period reaffirms our resilience and our confidence in reaching or exceeding our 2025 targets. With that, let me turn to the third-quarter highlights on Slide 8. Group revenues were €7.1 billion, up 3% on the third quarter of 2022 or 6% excluding specific items. Non-interest expenses were €5.2 billion, up 4% year on year, mainly driven by higher non-operating expenses. Non-operating expenses this quarter included litigation charges of €105 million and €94 million of restructuring and severance provisions.

Adjusted costs increased 2% year-on-year, which I will discuss in more detail shortly. Provision for credit losses was €245 million or 20 basis points of average loans. We generated a profit before tax of €1.7 billion, up 7% year-on-year. Net profit of €1.2 billion was down 3% year-on-year reflecting an effective tax rate of 30% compared to 23% in the prior year quarter. Our cost income ratio was 72.4% and our post-tax return on average tangible shareholders’ equity was 7.3% in the quarter. Diluted earnings per share was $0.56 in the third quarter and tangible book value per share was €27 and $0.74, up 5% year-on-year. Let me now turn to some of the drivers of these results, starting with interest revenues on Slide 9, average interest earning assets increased by €6 billion quarter-on-quarter, driven by the increase in our deposit levels, led by the Corporate Bank.

Net interest margin in the Corporate Bank declined by approximately 25 basis points due lower lending income and a higher cost of liquidity reserves; however, net interest income on the corporate deposit books remained stable over the quarter. Net interest margin in the Private Bank remained broadly stable in the third quarter. Overall, our deposit betas continue to outperform our models. At the Group level NIM is down 12 basis points of which approximately 5 basis points relates to an accounting impact in C&O, similar to the first quarter, and the balance relates to the NIM reduction in the Corporate Bank. With that, let’s turn to adjusted costs, on Slide 10. Adjusted costs excluding bank levies were €4.96 billion, in line with the prior quarter and up 2% year-on-year.

The increase is driven by inflationary pressures, ongoing investments in controls and business growth which were partially offset by active cost management measures. All cost categories except for other costs were broadly flat to the prior year quarter. The variance in other non-compensation costs includes the non-recurrence of benefits in the prior year quarter, which related to deposit protection cost as well as movements in operational taxes. In addition, we see a normalization of marketing spend and we continue to invest into talent. Let’s now turn to provision for credit losses on Slide 11. Provision for credit losses in the third quarter was €245 million, equivalent to 20 basis points of average loans. The decline compared to the previous quarter reflected a reversal of approximately €100 million of Stage 1 and 2 provisions driven by model changes and improved macroeconomic forecasts, mainly impacting the Investment Bank and Corporate Bank.

Stage 3 provisions of €346 million were broadly in line with the previous quarter. Provisions this quarter were driven by the Private Bank and Investment Bank, while the Corporate Bank benefited from a lower level of impairments. For the full year, we continue to expect provisions to land at the upper end of our guidance range of 25 to 30 basis points of average loans. Before we move on the next two slides starting with Slide 12. Our third quarter Common Equity Tier 1 ratio came in at 13.9%, a 19 basis point increase compared to the previous quarter. Regulatory changes, principally from the go-live of now-approved wholesale and retail models, resulted in a decline of 38 basis points, slightly below the low end of our previous guidance. Optimization initiatives generated 27 basis points from lower Credit Risk RWA, principally reflecting improvements in our data and certain process changes.

Further 19 basis points of ratio support came from diligent risk management in our businesses. Finally, 11 basis point increase came from strong organic capital generation, that is net income, offset by deductions for the share buy-back, dividends and AT1 coupons. Building on Christian’s earlier comments, let me give updated guidance on our capital outlook on Slide 13. As mentioned, regulatory changes led to a reduction of 38 basis points in our Common Equity Tier 1 ratio. With the go-live of the now-approved wholesale and retail models, the ECB has completed the review of approximately 85% of the relevant portfolio, and we expect only a limited ratio impact from the remainder. Next, we announced in the first quarter of this year a targeted €15 billion to €20 billion RWA reduction by end of 2025 through several capital optimization initiatives.

We accelerated some of the anticipated data and process optimization initiatives into the third quarter which brings the cumulative RWA reductions to €10 billion to-date. The work we have done over the past several months gives us the confidence to increase the original target by €10 billion to €25 billion to €30 billion. Lastly, let me touch on our Basel III estimates, the latest review of our impact assessments indicates an RWA increase of only around €15 billion compared to the €25 billion to €30 billion, we have previously guided. The majority of the improvement comes from our Market Risk and Credit Valuation Adjustment, FRTB program, the impact estimates for which matured significantly. Credit Risk estimates are still under review and remain dependent on final CRR3 legislative text.

Overall, let me highlight that current estimates are based on our interpretation of current draft regulation and therefore remain subject to change. Cumulatively, these changes in our outlook are significant and support Christian’s earlier statements relating to our enhanced ability to execute our strategy and improve our return profile. Let’s now turn to performance in our businesses, starting with the Corporate Bank on Slide 15. Corporate Bank revenues in the third quarter were €1.9 billion, 21% higher year-on-year driven by an improved interest rate environment and pricing discipline with double-digit growth across all client segments. Sequentially, revenues decreased slightly due to lower net interest income from lending and a higher cost of liquidity reserves.

However, pricing discipline in our deposit businesses remained exceptionally strong, with limited pass-through and higher business volumes, resulting in strong deposit income. We continue to anticipate a normalization of our deposit revenues over the coming quarters which we expect to be partially offset by growing non-interest-rate-sensitive revenue streams, including commissions and fees. Loan volume in the Corporate Bank was €117 billion, down by €12 billion compared to the prior year quarter, but €1 billion higher compared to the low point in the prior quarter. Deposits were €286 billion, €15 billion higher than in the second quarter, with growth in both overnight and term balances in Euro and U.S. dollar and essentially flat compared to the prior year quarter, despite the market events in March.

Provision for credit losses was €11 million or 4 basis points of average loans. The decrease compared to the prior quarter reflects a lower number of impairments in the third quarter and further benefits from Stage 3 recoveries as well as model changes impacting Stage 1 and 2 performing loans. Non-interest expenses were €1.1 billion, a decrease of 2% year on year driven by FX movements. Sequentially, expenses decreased by 7%, predominantly driven by the non-repetition of litigation charges. Profit before tax was €805 million in the quarter, doubling year-on-year and driving the post-tax return on tangible equity to 18.3%, with the cost income ratio at 57%. I’ll now turn to the Investment Bank on Slide 16. Revenues for the third quarter were essentially flat excluding the impact of DVA and 4% lower year-on-year on a reported basis.

FIC Sales & Trading decreased by 12% against what was a strong prior year quarter. Rates, Foreign Exchange and Emerging Markets revenues were all lower compared to a very strong prior year quarter and reflected a less volatile market environment. Financing revenues remained strong on an absolute basis, though down year-on-year, due to the non-repeat of a material episodic item in the prior year quarter. Credit Trading revenues were significantly higher driven by ongoing improvements in the flow business and continued strong performance in Distressed. Moving to Origination & Advisory, revenues were up over three-fold, materially driven by the non-recurrence of leveraged lending markdowns in the prior year. However, excluding these markdowns, Origination & Advisory performance was still significantly higher and outperformed the industry fee pool.

Debt Origination revenues were significantly higher benefitting from the non-repeat of the aforementioned markdowns and improved LDCM performance, which saw a partial recovery in both the industry fee pool and our market share versus the prior year. Advisory revenues were significantly lower reflecting a decline in the industry fee pool. However, as previously stated, with signs that deal activity is starting to recover, we expect our investments in Origination & Advisory to result in a significant improvement in performance into 2024. Non-interest expenses and adjusted costs were both essentially flat year-on-year. Risk-weighted assets were broadly stable year-on-year. Leverage decreased year-on-year driven by the impact of foreign exchange movements.

Provision for credit losses was €63 million, or 25 basis points of average loans. The decrease versus the prior year was primarily driven by model changes affecting Stage 1 and 2 performing loans, partially offsetting Stage 3 impairments from Commercial Real Estate. Turning to the Private Bank on Slide 17. Revenues were up 3% year-on-year or 9% if adjusted for specific items in the prior year period which related to Sal. Oppenheim workout activities. Net interest income was essentially flat quarter-on-quarter, and higher deposit revenues in the third quarter were mainly offset by higher mortgage hedging costs following the Postbank transition, which were held centrally before. In the Private Bank Germany, revenues increased by 16% due to higher deposit revenues.

A decline in fee income mainly reflected changes in contractual conditions impacting insurance products. Reported revenues in the International Private Bank were down 13% or up 2% year-on-year if adjusted for the non-recurrence of both specific revenue items in the prior year quarter and revenues from the divested Financial Advisory business in Italy, as well as FX impacts. Growth was driven by deposit products in Europe which were in part offset by continued client deleveraging in Asia. Revenues in Wealth Management & Bank for Entrepreneurs declined by 21% or 3%, if adjusted for the aforementioned effects. Revenues in Premium Banking increased by 14%, supported by higher interest rates. Turning to costs. The increase of noninterest expenses mainly reflects continued higher internal service cost allocations including investments in controls as well as restructuring provisions and severance related to strategy execution.

The prior year period included a benefit from deposit protection costs. Provision for credit losses was €174 million or 27 basis points of average loans in the quarter and included an impact of approximately €25 million driven by the temporary operational backlog at Postbank. Overall, credit quality remained stable across our portfolios. The Private Bank attracted net inflows of €9 billion in the quarter with €6 billion in AUM deposits and €3 billion in investment products. Let me continue with Asset Management on Slide 18. My usual reminder, the Asset Management segment includes certain items that are not part of the DWS stand-alone financials. Assets under management remained stable at €860 billion in the quarter, supported by net inflows and positive FX effects, largely offset by €13 billion of market depreciation.

Net inflows were primarily in Passive, continuing the momentum in our Xtrackers products we have seen throughout the year. As you will have seen in their results, DWS saw a decline in revenues compared to the prior year; however, with slightly lower non-interest expenses, profit before tax was essentially flat. This development principally reflected a 6% decline in management fees to €589 million due to prior year declines in assets under management, driven by net outflows excluding cash and market developments in 2022, as well as FX movements. Performance fees declined by €19 million. Other revenues declined due to lower mark-to-market valuations of co-investments, partly offset by favorable outcome of deferred compensation hedges. Non-interest expenses and adjusted costs were both 8% lower than the prior year.

Compensation costs were lower driven by a significant decline in carried interest expense, partially due to lower performance fees in the period. Non-compensation costs were also lower, reflecting effective cost reductions across almost all cost categories. Profit before tax of €109 million in the quarter was down 18% compared to the prior year reflecting revenue performance. The cost income ratio for the quarter was 75% and return on tangible equity was 13%. Moving to Corporate & Other on Slide 19. Corporate & Other reported a pre-tax loss of €195 million this quarter versus a pre-tax loss of €28 million in the third quarter of 2022. This year-on-year change was driven in part by valuation and timing differences, which were positive €158 million in this quarter, versus €199 million the prior year quarter.

The V&T result in this quarter was driven in particular by the reversal of prior period losses. Expenses associated with shareholder activities were €170 million in the quarter, compared to €144 million in the prior year quarter. And, the pre-tax loss associated with legacy portfolios was negative €137 million, driven primarily by litigation charges. Turning to the Group outlook for the full year on Slide 20. We remain focused on delivering positive operating leverage, as we drive our revenue growth initiatives and execute our cost reduction measures. We now expect full year 2023 revenues to be around €29 billion. Our noninterest expenses will be slightly higher reflecting a series of non-operating items; however, we expect our adjusted costs to remain essentially flat, in line with our guidance.

Provision for credit losses is expected at the upper end of the 25 to 30 basis points range of average loans for the full year. Thinking ahead, our fourth quarter earnings are expected to be impacted by a number of one-off items, both positive and negative, including an accounting impairment of the goodwill from the Numis acquisition, a potential restitution payment from a national resolution fund, further restructuring and severance, as well as year-end tax adjustments. And finally, as both Christian and I have mentioned earlier, our capital outlook is substantially improved by further RWA reductions we have identified and we plan to engage with supervisors on the scope for further additional distributions to shareholders. With that, let me hand back to Silke and we look forward to your questions.

Silke Szypa: Thank you very much. Operator, we are ready to take the questions.

Operator: [Operator Instructions] The first question comes from Nicolas Payen from Kepler Cheuvreux. Please go ahead.

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Q&A Session

Nicolas Payen: I have two please, on capital. The first one is on your increased capital efficiency. Could you give us a bit more color on how you managed to increase your reduction targets by €10 billion? And also regarding the €3 billion of potential additional freed up capital to 2025, what does it mean for your capital distribution and your targeted €8 billion shareholders distribution? Should we expect a meaningful increase as soon as next year? And then on the regulatory capital outlook and the improved Basel III outlook, is the new guidance related to the input floor? And also do you have any chance regarding your output for guidance? Thank you.

Christian Sewing: Well, good morning, and thank you, Nico, for your question. Let me take the first part and then I hand over to James. Look, let me start that this is a very important and I think very good day for Deutsche Bank, because I think what we show now also on the capital side is nothing else than further evidence that our long-term strategy and obviously, the diligent execution around it is paying off more and more and obviously more to come. To your capital distribution question and how we did arrive, yes, it’s a good day for shareholders, with material progress on our capital measures and scope to freeing up additional capital of the mentioned €3 billion from now through 2025. And as both James and I said in our prepared remarks, we see the outlook improvements regarding capital efficiency and Basel IV is providing us with the opportunity to both accelerate and expand our distribution right path.

Amongst other things, it gives us the confidence to go beyond our earlier expectations In terms of buyback potential already next year. The better than expected third quarter RWA optimization and the improved outlook are both relatively recent changes and hence and hope you understand that it is a bit too early to provide exact details of how and when, we will be in a position to accelerate exactly this distribution path. And Nico, as you would expect, we are obviously in discussions with our supervisor on the revised capital plan. As we have laid down though a very clear path for dividends, i.e., a 50% increase per year the next two years. Extra distributions would come in form of share buybacks and subject to further dialogue with our supervisors.

We would expect a significant proportion of the incremental capital to be distributed to our shareholders. And for instance, one way to think about this trajectory, Nico, from here is that it gives us the opportunity to move to a 50% payout ratio sooner than we initially expected. So I think at this point, we can safely say that shareholder distributions is a key priority for Deutsche Bank and for more details, I hand over to James.

James von Moltke: Sure. Thank you, Christian, and Nicolas, thank you for the question. So to give you a little bit of color on what is the optimization been that we’ve accomplished so far. You’ve seen us do three securitizations over the past couple of quarters including one on the Italian consumer portfolio in this quarter, and so that’s been sort of quicker and more effective than we might have expected. And then when we talk about data and process improvements, the data is quite powerful, and by the way, this is where also we’re getting the Postbank portfolio onto the same systems as DB is helpful, because we’re able to apply, for example, SME support factors, infra support factors on the portfolio, in a way that we couldn’t in the prior landscape.

So it’s enhancing the data, enhancing the way that our portfolio, if you like interacts with the rules. We think there’s still a distance to go with that. And although we’ve worked on it for years, as rules change, one always finds additional optimization measures, so that’s been very encouraging. If I think about, your question about input, output put floors on Basel III, we’ve really been focused on the 1125 impact and, as you’ve seen, dramatic improvement based on better visibility into the FRTB models as we mentioned. At this point, the output floor is still some years away, so I think of that as biting maybe in 2030. If you want guidance, we would probably stick with the 30 billion impact, at that point, but to be fair, we haven’t really done this next round of mitigation in terms of portfolio shifts and what have you, so that’s still a long way out.

Hopefully, that helps, Nicolas, on your questions.

Operator: The next question comes from Adam Terelak from Mediobanca. Please go ahead.

Adam Terelak: I have one on capital and one on revenues. I appreciate you don’t want to front run exactly, what we’re going to look, what this is going to look like in the short-term, but you’re on the tape this morning discussing higher payout next year than in your original planning. Can you confirm that that original plan was the plus 50% on the buyback to match the dividend increase? And can you also discuss whether we can look at more regular capital return over the next few years rather than having to wait for full year results each year? Secondly, on revenues, NII clearly stepped back in corporate bank, Private Bank this quarter. That’s kind of been guided to, but can you give us some more color about the shape from here and use that to reference your confidence in revenue growth for the group into 2024?

Christian Sewing: Look, let me start on briefly again on the capital question. And again, I think it’s good order to discuss all the details with our regulator first. But I think you’re right, the 50% dividend pass, we always said, and we also said that this is quite a good guidance for our past guidance on the share buybacks. So in this regard, I think you have a good assumption. And as I just said, I think with the scope now of the additional 3 billion. Obviously, we would like and we intend then to start increasing the share buyback already in 2024, beyond that what we already communicated in our previous correspondence. So clearly an acceleration and expansion that’s our goal and that will focus now — this is our focus in our discussions with the regulators going forward.

With regard to the revenues, I will hand over to James for more details in particular when it comes to NII. But also here I think very good messages because the clear jump off point for 2024 is now the 29 billion in 2023. You have seen a good development in the third quarter. Again, a very stable development also by the way on the NII side in both Corporate Bank and Private Bank, We see that momentum going forward into Q4 and therefore there is a high confidence in delivering 29 billion number for the full year 2023. On top of that, and I think we refer to that in our previous calls already. The geopolitical environment, the economic environment is something where at the end of the day, the advice which is asked by the clients, on the private banking side, on the corporate banking side, also with regard to our investment banking services is increasing and increasing.

And therefore, we also said in our prepared remarks a 40% increase in mandated deals from the corporates in these first nine months of 2023 versus the same time period of 2022 is just one signal how much we are actually and see the momentum with our corporate clients around the world to think about how to best position in these geopolitical situations where we are. And hence, in particular also the investments which we are doing on the corporate side, in the investment banking on the advisory side, the investments which we have done on the wealth management side, now the finalization of the Numis transaction will grow also the non-NII business in 2024 a lot. And therefore, seeing the stability actually also in the NII business in 2023 plus the growth we see from the advisory, our clear goal is to show a 2024 revenue number of 30 billion.

Regarding the composition, James will outline further but we can see a momentum which is simply unbroken.

James von Moltke: So, Adam couple of things on your comments, well let me start with the comment that our group NII number is a very noisy line and we’ve talked about it before the impact of the FX swap book and therefore the rate differential between euros and dollars plays a role here as does hedging results and other parts of the treasury piece, which is why it’s actually I think more instructive to look at the net interest income and the margins of the businesses especially PB and CB. Now, there we show you margins that were actually reasonably stable quarter-on-quarter, some pressure in PB and CB rather. But interestingly this quarter the principal drivers were not the deposit margins. There was again noisy even at that level around mortgage hedging for example in the private bank, you know the excess of deposits over loans impacting the margin in the Corporate Bank, so things outside of the deposit margins.

That difference was about 130 million if you take the two businesses together. We think Q4 will be about the same level, so flat to that. Really as deposit margins come in a little bit, but some of this other noise kind of clears through the system. So as Christian says, we feel good about the trajectory looking forward one even two quarters in those two businesses. And that of support, of course, supports our view going into to 2024. I think the other thing just briefly you mentioned on the timing of the buyback and distribution announcements, it’s a fair point. It would take a lot of pressure off of us and the supervisors to do this more frequently and let’s see is the short version. We want to — the nice thing is if you split it out over the year, you can be a little bit more dynamic to the market environment and conditions.