So we manage that, it’s not just an accident. And then on the cost side I have said over the years that that less is of the cost base is variable than I would like it to be. I think that equation is also changing for the better. Let’s start with just the investment profile. As we shift from, I’ll call them non-discretionary investments, investments that needed to be made in technology and in controls to a more discretionary profile, we can hit the brakes on those investments. And the other thing is that as we get deeper and deeper into the structural cost saves that Christian outlined, more of the cost base ends up being variable, and that can be variable compensation, but it can also be other elements of the cost base. So, the short version I think we’re improving both aspects of that equation Kian relative to where we were a few years ago.
On the cost of risk just in the detail there we had €100 million net on the Stage 1 and 2. Actually what that was a €100 million model benefit associated with the PD LGDs in the new wholesale and retail models plus about €30 million of FLI, forward looking indicator benefits, offset by about €30 million of in Stage 1 and 2 of portfolio changes, including sort of internal ratings and that sort of thing. Now why did the FLI improve? The point in time is always hard to remember, but the last time we booked this on a quarterly basis was in July where the outlook for the soft landing particularly in the U.S. was actually less optimistic than it became through the third quarter, so what you’re seeing is a bit of a lag effect as to where things stood at that time.
Christian Sewing: And Kian, on your last question, I think on the German corporates, large corporates and Mittelstand. Look, we’re observing a very stable situation in terms of their credit worthiness. They benefit hugely from the resilience. I think I said it in one of the previous calls if I compare the situation of German Mittelstands clients with 15 years ago, we have a capital ratio, we have a liquidity ratio, liquidity position of those clients which is in much better shape than 15 years ago after the global financial crisis, they all worked on themselves. So, I think despite the no growth situation in Germany, we can really attest a very resilient portfolio. And hopefully with growth coming back in ’24, albeit very low growth in ’24, we then will also to see that there is obviously growth coming back into those slides.
So for the time being also from our rating downgrades versus upgrades, no negative or no deterioration to that what we have seen three or six months ago.
Kian Abouhossein: If I could just briefly follow-up on the cost flexibility and I know I’ve asked this question, but you’re trading at 0.3x tangible book value for a reason and that’s a reflection of the concern that in a different scenario, you will not be able to manage cost to some operating leverage, let’s put it this way. So can you quantify and give us more confidence in your cost stability and managing your cost stability in a different scenario?
Christian Sewing: Look, let me start and James will follow-up. First of all, I do believe that it’s most important for our credibility that we achieve those cost targets which we have given to the market and we will do so. That’s therefore, I ran you through the structural cost savings and that what we now put on top actually in order to get to the 2.5 billion. Secondly, of course, if this would happen, you have three or four layers, of course, where we can very quickly reduce the spending. That is the variable comp which means — with regard to investments. Obviously, we are reviewing those investments on a quarterly basis. Also adhering, obviously, to the profile on the business side and whether the performance is the right one.
I think we have a very good monitoring in place on this one. Secondly, yes, there is always the flexibility on the variable comp, which we obviously would adjust to the performance — to the revenue performance. I think we have also shown that in the past that we are able to do this, and we will do this. So this is obviously, if you look at our variable comp, that is not an insignificant number, which we could reduce like for the CTB, i.e., change the bank investment. And then you have those items where Rebecca is going actively after already now but which also plays into this one, which is everything on third-party costs, which means also consultancy, which means marketing. And easily in this regard from a flexibility point of view, Kian, you are in a very high 3-digit million number.
And in this regard, I would say this bank has clearly the ability to react. But most important for us is obviously to first of all deliver that what we promised to you and this is the €2.5 billion.
Operator: The next question comes from Timo Dums from DZ Bank. Please go ahead.
Timo Dums: I’ve got two please. One is on Q4 and the other question is on O&A. So starting with Q4, maybe you could provide specifics on the one-offs you flagged for the current quarter. So a quantification maybe on the restitution of the National Resolution Fund and the year-end adjustments, tax adjustments that you mentioned that would be helpful? So this would be my question number one. And my second question is on the outlook on O&A. So again, a strong recovery here. So what’s your view on the last quarter? Should we expect another pickup despite the seasonal patterns? And what are your expectations looking further down the road?
James von Moltke: Briefly on the second question, yes, we would see a continued improvement sequentially in O&A, and we would look to a much more significant improvement going in then to 2024. So, we’re optimistic there. On the Q4 one-offs, why don’t I meet you halfway? On the DTA, I would expect and here it’s a different geography from last year, where the DTA related to the U.S. I would size it today at about 5 million of opportunity in the tax line, potentially larger. It all depends on our forward-looking view of profitability in the UK entities and jurisdiction going forward. That’s to the positive. The Numis goodwill, it’s too early to give an exact number given we’re going through the purchase price allocation process sort of as we speak.
But to give you a ballpark, I would expect us to book about €250 million in — as a non-operating cost around that Numis goodwill. The numbers that I can’t really guide you on today would be, one, the restitution payment to the upside. And then as you all know, restructuring and severance and legal litigation items are always subject to some uncertainty. And so as we get more visibility, if we get an opportunity, we’ll give you an update on that. I’d like to think the net of those four things is biased to the positive, but we have to wait and see how it all plays out.
Operator: The next question comes from Giulia Miotto from Morgan Stanley. Please go ahead.
Giulia Miotto: So, the first one on CRE, commercial real estate. Thank you for the detail provided in the slides at the back. If I compare your level of provisioning, especially on the U.S. side with what U.S. banks have been seeing so far this quarter, it seems like you have — your provisions are lower. I was wondering what gives you the confidence of these passively lower provisions in these markets specifically, especially for U.S. office, which seems particularly challenged? And then on Numis, I know it’s early days. The acquisition closed 13th of October, I believe. But I was wondering if you have any early thoughts that you would like to share now that this is part of Deutsche Bank. And then a quick technical one. DTAs, with all these DTAs being written back, what’s the benefit for the tax rate in the coming years?
James von Moltke: Thanks, Julia. So I’ll try to — well, starting with CRE, it’s just hard to say because we have no insight into our competitors’ portfolios. And so we can tell you what we think of ours. And as we’ve said sort of consistently from the start of this cycle, we think we have a high-quality portfolio. It’s — to the extent it’s concentrated — obviously, there’s an office exposure, but it’s concentrated in Class A strong sponsors and what have you. And what we — but we’re happy to share this time in the appendix material is, frankly, the experience that we’ve had. So now we’re sort of four, five quarters into this cycle in commercial real estate. And we think that the relationship between the loan modifications and the expected credit losses that arise from that speak to the quality of the portfolio.
