Operator: The next question comes from Tom Hallett from KBW. Please go ahead.
Tom Hallett: I suppose one of the debates for investors has been around the sustainability of profits, and within that, what normalized trading pools look like. If we take this year, it looks like your FIC revenues could land around the 8 billion mark with consensus expecting something similar over the next couple of years. But this is 2.5 billion higher than what we saw in 2018 and ’19, and I appreciate the rent environment is very different. There’s been a bit of balance sheet growth there as well. So what makes you confident that the 8 billion is sustainable given a pretty well documented normalization of the wider industry? And then secondly, on government taxes, it’s been a key theme for the sector over the last few months. And again, I appreciate the impacts on you. Will it be limited so far, but do you see any risk for Germany to follow suit?
Christian Sewing: Let me start. Look, what makes me confident on the fixed side that this kind of 2.5 billion higher than three or four years ago is something sustainable. It’s 3, 4 points, but number one, the healing of the bank. I mean this is the most important if you talk to our institutional clients, but also to the corporate clients. And I cannot even tell you — and that was our focus, the transformation, the healing and with that obviously the rating upgrades which we have received from all the major rating agencies. That resulted in a completely different way how we can deal with our clients and that a lot of clients actually return to Deutsche Bank. And to be honest, we are still in the documentations of clients who have returned after the last increase and improvement of the rating agencies because you know how long it takes to get the documentation is the agreements, right?
And in this regard, I can still see the benefits from that. So the healing of the bank is one of the key reasons. Number two, I think it’s the focus which we have given ourselves, and in particular, Ram has done in the FIC business, in the trading business. It was exactly right to focus on that, where we are strong from a regional point of view starting with Europe, then obviously going into our emerging markets franchise also covering Asia, but also investing very focused in the U.S. And Ram has a clear plan how to grow also our FIC business in the U.S. over the next 12 to 18 months, and he put the right investments into that. Number three, it’s the front-to-end reengineering of our processes in FIC. Also that is obviously which is not only making us more efficient, but at the end of the day, front-to-end always results in one thing.
This is client experience for our clients. And with that, obviously, we make ourselves more attractive to deal with us. So, I think it’s the overall healing of the bank but also the real focus and reengineering of the platform Ram has done to the FIC business, which makes me comfortable that the €8 billion which we have seen so far is a very good number to actually plan for the future and, in my view, if I look at his plan to even increase from there. Nevertheless, always said, we even want to make the investment banking business more balanced and therefore the investments into the O&A businesses. And also in the prepared remarks, we said how stable actually within the FIC business the financing part is. It’s 35% of the FIC business. And that is coming through year by year, I think, with a very good and solid underwriting scheme.
Regarding government taxes, look, it’s always hard for me to judge what is coming. But on this end in Germany, on this side in Germany, I’m very calm. We have clear statements that these kind of excess taxes, I think, is not supported, in particular not by our finance minister. There is really no active discussion on this one. And therefore, it is for me a non-topic.
Operator: The next question comes from Andrew Lim from Societe Generale. Please go ahead.
Andrew Lim: So firstly on capital, just one clarification here. It doesn’t seem like you’re prepared to increase the €8 billion overall capital return envelope, but it does seem that you’re more confident on reaching that 50% payout sooner rather than later. Is that the best way to think about it? So that €3 billion capital, that’s being released as it were. That doesn’t really become additive to the €8 billion? And then with that, if you look at your actions to optimize capital and RWAs, I guess that reduces risk weight density. And is that the way you see it? And so that being the case, maybe your guidance on the output floor there. Your comments earlier are that we should maybe stick to the €30 billion RWA impact there. And just very lastly, on the Corporate Bank NII, it does seem like the largest impact there is from the increase in liquidity reserve costs. What’s your expectation there for how that should develop going forward, please?
James von Moltke: So Andrew, the answer to the first question is no, that’s not the correct way to think about it. So think about it this way. We had a capital commitment to shareholders of €8 billion at a point in time where our outlook and our step off were weaker than they are today. What we’re not able or willing to say at this point is how much of that increment is going to come out to shareholders and how soon. We obviously owe you an answer on that in time, and we’ll work through that internally in our capital planning and then with supervisors. But no, we would see it as incremental to the €8 billion. In terms of optimization, it’s complex just because at a point in time, we’re going to need to optimize around the output floor.
That’s not something that we’ve really done. Ironically, the impetus there would be to take on higher-risk density assets and so sort of optimize in that way. And actually, it goes a little bit also to Stuart’s question. The — what regulation asks you to do now is run this complex optimization algorithm across all of those resources in time. So, it’s advanced approaches RWA, it will be standardized approaches RWA and then the leveraged balance sheet, And we’re going to need to find the optimal use of the balance sheet under all three of those tests. In the case of the standardized, we have until 2030 when we think the out floor bites. I wouldn’t expect — just on the CB NII piece, I wouldn’t expect that to change sequentially in the next couple of quarters.
Again, a little bit depending on whether — on how the loan and deposit sort of trajectory for the business go from here. We’d like to think we can continue to grow deposits and grow the loan balances, but it’s the relationship between the two that really drives the question of the liquidity funding in the CB business.
Operator: The next question comes from Kian Abouhossein from JP Morgan. Please go ahead.
Kian Abouhossein: Thanks for taking my two questions. The first question is related to P&L sensitivity. If you can — clearly you are hitting the gas pedal right now and driving revenues and then you’re doing really well in that back then and then it looks like you’re indicating flattish cost. If you have to, if you have to have the break, due to market conditions changing. Can you talk about the flexibility of cost? As you indicate, there’s a lot of stickiness, there’s inflation in cost, and I just try to understand your flexibility in that respect. How we should think about the elements of cost reduction in a different environment, and how you model that internally? And then secondly, the question is regarding your remarks on cost of risk.
You mentioned model changes and improved macro forecast leading to reversals in Stage 1 and 2 provisions. Can you help me understand what’s driving this more optimistic outlook, please? And if you could talk a little bit about the health of large corporate and Mittelstand in particular clearly in Europe, sorry, in Germany.
James von Moltke: Well, look, we’ve about this over the years, the P&L sensitivity, and I’d like to think. In fact, I’m confident that both sides of that equation have improved over the last several years. So start with the revenue side, as our revenue mix has shifted over time, I think our revenue sensitivity has declined dramatically, and not just because more of the revenues are coming from the businesses that we describe as more stable, but also because the revenue composition in the Investment Bank, I think has firmed up as well and our market position as Christian has outlined. So, I think that revenue sensitivity is lower than you might think, and by the way you also see us take relatively conservative decisions whether that’s about risk type or on our interest rate risk management.
