Joachim Muller – Head-Investor Relations
Anshu Jain – Co-Chairman-Management Board
Stefan Krause – Chief Financial Officer
Kian Abouhossein – JPMorgan
Jon Pearce – Nomura
Stuart Graham – Autonomous Research
Jernej Omahen – Goldman Sachs
Deutsche Bank AG (DB) Q4 2012 Earnings Call January 31, 2013 2:00 PM ET
Ladies and gentlemen, thank you for standing by. Welcome to the Fourth Quarter 2012 Conference Call of Deutsche Bank. For 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 Joachim Muller, Head of Investor Relations. Please go ahead sir.
Thank you. Good morning ladies and gentlemen. On behalf of Deutsche Bank I would like to welcome you to our fourth quarter analyst call from Frankfurt. By now you should have access to all of our publications, which you will find on our website. Anshu Jain, our Co-CEO will kick off this call, and provide the highlights of our full year results. Our CFO, Stefan Krause, will then walk you through our financials in detail.
As usual, please take notice of the cautionary statements regarding forward-looking statements at the end of the presentation. And with that, I will hand over to Anshu.
Thank you, Joachim, and good morning ladies and gentlemen. As you have seen, our revenues in the fourth quarter were resilient despite a difficult environment, EUR 7.9 billion in revenues, up a billion on the same quarter in 2011. Most pleasingly our Basel 3 core tier 1 ratio now stands at 8%, 80 basis points ahead of the 7.2% target that we set ourselves for the end of 2012.
However, we do have a pre-tax loss of EUR 2.6 billion in the fourth quarter, and a full-year profit of EUR 1.4 billion, which is way below the EUR 5.4 billion that we had in 2011. This reflects a number of decisions that we have taken, especially in the fourth quarter, many of which have been taken to position Deutsche Bank well for the future. Let me walk you through some of those decisions.
The non-core operations unit has taken a full year loss of EUR 2.4 billion, of that there is a EUR 1.1 billion loss in the fourth quarter. But equally has given us a reduction in risk-weighted assets of EUR 29 billion, which in the net is a capital generation of EUR 2.5 billion to significantly net accretive.
Litigation and impairment charges in our core bank have totaled EUR 1.5 billion, and EUR 1 billion respectively, which is EUR 2.5 billion, significant. Stefan will provide more details on that in a few minutes. The core bank adjusted profitability has been strong, EUR 6.5 billion in 2012, and this after absorbing cost-to-achieve and other costs of EUR 1.4 billion. So you can actually back up in 2012 core bank EBIT of nearly EUR 8 billion.
So now if you move to slide three, you can see we have galvanized Deutsche Bank around the creation and the achievement of our capital targets. When Jurgen and I presented our full-year plan and project 2015 in September, we reflected the feedback from clients, regulators, employees, analysts and investors, which was clear. Capital had to be our top priority. Jurgen and I are very glad and very pleased with the team, which have actually acted across all aspects, pulled every lever in order to be able to [achieve us] to attain this target.
Let me point out some very key features around this target. This has allowed us to narrow our gap to peers. We believe it is the fastest Basel 3 organic capital formation (inaudible) in 2012. It has been achieved by reducing our non-core risk-weighted assets by the equivalent of EUR 29 billion. I said that to you a little bit earlier, and in our core business we have a reduction of EUR 51 billion through a combination of measures, better models and processes and derisking through asset sales and hedging. Here I do have to acknowledge the fact that benign circumstances really from July onwards, thanks to some of the actions taken by central banks, and really the euro crisis getting through to a most acute phase, has definitely been of assistance to us.
In simple terms, this is equivalent of raising EUR 8 billion of core tier one capital with our valuation. Many of you had given us the feedback that that is what we should have done. We stayed resolute and indeed we feel we have been able to achieve the targets we have promised you. In addition to achieving our targets, I’m also pleased to announce that we are increasing as you would expect our target to 8.5% by March 2013, and needless to say if we were to hit that, which we are highly confident we will that will finally put us back in with our peer group.
On slide four you can see our second significant promise to you was to deliver EUR 4.5 billion in annual run rate savings of a full-year cost base of EUR 27 billion back when we spoke to you in September. I’m pleased to tell you that this program as well is on track. We have delivered savings on a run rate basis of EUR 400 million in 2012. Well, where is this coming from? It is coming from really two sets of – two dimensions of cost saving activity. In the front office all our businesses are now enacting the plan that we mentioned to you they would.
I would especially single out here the investment bank and the asset and wealth management unit, which are well ahead actually even of some of the targets they set themselves in terms of front-office headcount and other cost reductions. On the infrastructure side there is a series of initiatives underway, amongst which I would have to say the IT platform renewal and the footprint rationalization have played a very strong role.
In addition to what we have achieved in 2012, for 2013 we already have visibility towards EUR 800 million of cost savings, out of the 1.6 that we set ourselves, and in short, we are as committed and as confident that we will achieve this goal as we are of anything else.
If you move to slide five, you can see that as we move on from capital and costs, it is very important that our franchise continues to remain strong. Clearly as we set bank up for the future, it is vital that we continue to defend and protect and grow our market share. I’m very pleased that we have been able to do that. Again Stefan will take you through the detail business by business, but let me just give you some highlights.
Starting with PBC, I am very proud of our PBC business. They are facing tremendous headwinds, but have increased market share in Germany, have a profitable European business, and are ahead of schedule in delivering synergies from the Postbank integration. Asset and wealth management is a strategically crucial business for us. Michele Faissola and his team have the task of merging five businesses into one. It is a considerable task. Significant progress has been made, but we are under no illusions. It will take some time in order for them to be able to turn this business around. I’m confident that it will emerge as a strong pillar, but a lot still remains to be done.
GTB’s core business had strong market share growth across all areas and a very good return on capital. Without significant charges in 2012, pre-tax profits would have been 12% higher than 2011.
CB&S has faced the stiffest headwinds and significant management transition, but it is strengthening its leadership, doing more with less and our global dominance is crucial to our clients. So finally for me to conclude my opening remarks, business outlook in 2013 is better than we would have felt this time last year. The Eurozone has stabilized, the US economy is growing. We have some major challenges from regulation, the sheer volume of regulatory change, every aspect of our business is being scrutinized, the significant uncertainties around the implementation of some of these changes, but most of all we are concerned about the emerging lack of a level playing field, out of line with the initial G-20 FSB proposed international coordination.
So to conclude, we feel we have embarked on the most comprehensive reconfiguration of Deutsche Bank in recent times. Our joint franchise remains robust. This has enabled us to take deliberate but tough decisions to position us for the future. We are confident that the strategic direction we have taken is correct, but we have to remind you we are under no illusion this journey will take years, not months, and we’re listening very carefully to feedback from clients and employees, which so far has been very encouraging.
With that Stefan let me hand it over to you.
Thank you Anshu, and good morning from my side as well. Now that Anshu has provided you with the full year highlights and the context of the strategy 2015 plus, I will go ahead and comment on some of the results and key issues in the fourth quarter.
The results this quarter were clearly impacted by the management actions taken as part of the implementation of the bank’s new strategy, which I will walk you through in a moment in a couple of slides that you have in front of you. However, I would like to point out that our proposed dividend remains at EUR 0.75 a share, and our capital ratios under Basel 2.5 again improved substantially.
Total adjusted assets came down, while liquidity reserves increased again now also including the contribution from Postbank as you can see in our (inaudible). Let me move on to page nine, as you can see here for the quarter the group reported a pre-tax loss of EUR 2.6 billion, of which EUR 1.5 billion is attributable to our core bank, and EUR 1.1 billion from our non-core operations unit.
The true underlying earnings are more accurately reflected when excluding the two non-operational and specific items in the quarter, approximately EUR 1.9 billion for the impairment of goodwill and other intangible assets, and EUR 1 billion for significant litigation related charges. On this basis, as you can see in the chart, for the first quarter we present an adjusted pre-tax profit of EUR 287 million for the group and EUR 978 million for the core bank. These numbers are not adjusted for additional specific items, which are considered to be outside our normal operation, including cost-to-achieve and other restructuring charges.
On page 10, you see that the core bank’s reported pre-tax profit for the full year 2012 was EUR 3.8 billion. Adjusted for the same and aforementioned major nonoperational items, as you can see here in the chart, pre-tax profit of the core bank was EUR 6.5 billion.
Let me move on to page 11, the table provides you with an overview of adjusted EBIT by segment, as well as the details of further specific items impacting the segments. We do obviously clearly understand that we had quite a lot of one off issues and that is why we provide you with some further information and transparency on this.
On the next slide, I will discuss the most significant items, impairment of the goodwill and the intangible assets. So let us turn to page 12. In the fourth quarter we took impairment charges of EUR 1.9 billion in total, of which EUR 1.6 billion relates to goodwill and about EUR 300 million related to other intangible assets. The impairments were mainly attributable to businesses acquired prior to 2003 by CB&S. For example, it is Bankers Trust and by asset and wealth management, [which is current].
The timing and size of the impairment reflects the bank’s implementation of strategic initiatives, including the accelerated derisking of non-core activities, the implementation of the operational excellence program, and the introduction of a new divisional structure including the creation of a dedicated non-core operations unit. The impairment also reflects the impact of market conditions on parameters underlying the valuation of the affected business unit.
Of the EUR 1.9 billion impairments, EUR 1.2 billion were attributable to CB&S, and about EUR 400 million to the NCOU, and EUR 200 million to asset and wealth management. Please note that the impairment does not impact the bank’s pro forma Basel 3 fully load core tier 1 ratio.
Turn to page 13, you will see the ongoing strength of the franchise, which is reflected by our strong revenue streams both quarter-over-quarter and year-over-year. I think the solid revenue base allowed us to take decisive actions and continuing to execute our strategic vision.
On page 14 you see our provision for credit losses for the fourth quarter, which came down from EUR 555 million to EUR 434 million. As you can see, this is mainly a result of lower credit losses in relation to IF 39 reclassified asset, which are now part of the NCOU. As you know, the IFRS accounting effect recognizes three leases from Postbank allowances taking before consolidation its revenue, and not as an offset to credit loss provision. Therefore the true decline in credit losses was more pronounced declining by EUR 176 million over the quarter. Overall, for full year 2013 we expect a stable level of credit losses.
Let me now move to page 15, where we provide you with our usual non-interest expense developments. Giving all the specific items this quarter, I would like to draw your attention immediately to the next page. This table represents how we would likely look at our cost base. Firstly from the reported non-interest expenses, we adjust for the impairment of intangibles and significant litigation items. These are the adjustments we included in our adjusted EBIT calculation.
Secondly we adjust for specific items arising mainly from management decisions, such as our cost to achieve our operational excellence and other items. After these two categories of adjustments our cost base is roughly flat quarter-over-quarter. Regrettably, the impact of the operational program will not allow us to show progress in the reported cost line for a while as we announced in our strategy announcement in September.
On page 17, we promised to provide you increased transparency on our compensation costs, and this is how we can show this on the chart, and this is how we show how we compensate our people for our performance during the year 2012. As you can see, we have again brought down our variable compensation, both in absolute terms and as a percentage of revenues. It is also worth highlighting that we have reduced the percentage of deferred compensation to 47%. One of the recommendations of our external compensation panel was that we need to strike more of a balance between aligning cost with the revenue period in which they were incurred, and making sure these are properly incentivized to make long-term value creating decisions. We think that 47% ratio strikes this balance.
Of course, this comes at a cost for the 2012 performance that we kept our deferral ratio unchanged at 61%, our compensation ratio would have been slightly below the reported 40%. At the same time, we would have obviously mortgaged further the future years.
On page 18, you find details of our compensation cost. Including the deferrals from the variable compensation to be awarded in February 2013, there is a total of EUR 2.8 billion compensation award, which by the end of 2012 had not been expensed yet. This accounting treatment reflects the fact that the awards include the future service requirement from employees who would typically use this award if they would voluntarily leave the company before divesting. And most of these awards can be classed back before vesting under specific conditions.
As we showed you at Investor Day, we also provide the amortization schedule for these unvested awards. On the right-hand side, you can see some of the findings from the work of the compensation panel on the chart.
On page 19, this slide puts our reporting and adjusted pre-tax profit in a quarterly context. Let me say a quick word on our tax rate, we show an income tax benefit at 16%, which is primarily impacted by expenses that are not deductible for tax purposes, which include the impairments of goodwill and intangibles.
So let me now move on to page 20, we finished the quarter with a core tier 1 ratio of 11.6%, which is approximately 80 basis points higher compared to Q3. The increase in our core tier 1 ratio is the result of our successful derisking initiative program, which I will talk about more later on.
With regard to our tier 1 ratio, let me put things into perspective. This ratio which only a few years ago was managed to achieve a target of greater 10% and to 8% to 9% before that now stands at 15.3% and this under the more stringent rules of Basel 2.5.
Let me review the capital and risk weighted asset development in the quarter in a bit more detail on the next slide. To start with, the negative impact of our fourth quarter net loss on our core tier 1 capital and our related ratio was relatively small at 9 basis points, as goodwills and intangibles are already deducted from regulatory capital. So an impairment of these items has no impact.
At the same time, the other more significant fourth quarter movements are the positive effects of our capital build program, which are most visible here, you can see on the slide in two areas. First of all, in core tier 1 capital, securitization related capital deductions have come down by about EUR 0.5 billion as we have sold highly capital consumptive positions. And secondly in risk weighted assets, where we achieved a reduction of EUR 32.5 billion, this reflects primarily the risk-weighted asset reduction efforts in credit risk weighted assets focused on our non-core operations unit, as well as the portfolio optimization, model rollout, and operating model improvements in our core businesses. But also EUR 11 billion lower market risk weighted assets through the strengthening of our internal market risk models and processes over the last three years.
This improvement has led to a reduction of our market risk multiplier from 5.5 to 4, which brings us more in line with peers, and has been approved by our regulator. On page 22, as you can see, with a fully loaded Basel 3 pro forma ratio of 8%, we have clearly outperformed on our 7.2% target for 1st January 13 that we communicated last year. So let me walk you through how we get there from Basel 2.5. Firstly we see a EUR 75 billion risk-weighted asset increase in relation to Basel 3 in the phase-in case. This increase is far below where we were before our successful core tier 1 initiatives.
Moving on to the fully loaded case, where we see EUR 8 billion risk-weighted asset reduction driven by capital deductions working with risk-weighted asset buffers, as well as the 10/15 rule. Second, on regulatory capital we want to show you additional details regarding the phase-in rules, those rules that would be valid right now if Basel 3 had gone live on January 1. Note that under Basel 2.5, we always put all Tier 1 capital deduction straight against core tier 1 capital when presenting this ratio.
The current draft legislation will not require us to do so in the phase-in period, but allows us to apply capital deductions first against additional tier 1 capital, such as hybrids. As a result, under the phase-in approach our core tier 1 capital would be higher than EUR 11 billion, and the ratio would actually increase by approximately 90 basis points to 12.5%, far above all regulatory requirements.
Now moving over to Basel 3 fully loaded and taking all Basel 3 capital deduction, which then have to be put against common equity tier 1 capital, EUR 1 billion capital decrease to EUR 32 billion. This EUR 19 billion of deductions relate mainly to a reversal of the 11 billion already mentioned, as well as deferred tax assets, but also to items such as pension funds, DVA, and minority interest and others.
So the fully loaded ratio is therefore 8% now, and given our excellent progress on derisking we have now raised our March 2013 fully loaded Basel 3 core tier 1 target ratio to 8.5%.
Let me move on to page 23. As already mentioned in October, we achieved EUR 25 billion of Basel 3 de risking in the third quarter, and now I am pleased to inform you that we have accomplished a further EUR 55 billion in the fourth quarter, which means that we are already at EUR 80 billion of our EUR 90 billion previously communicated Basel 3 capital to the financials. So clearly we can say very well on track. Therefore we have increased our planned derisking from EUR 90 billion to over EUR 100 billion all to be achieved by March 2013.
Now let me take you through how we achieved this in some more detail. Let us go over to page 24. As you can see we have achieved more than 50% of the derisking for the quarter and about 60% for the second half of 2012 from asset sales and hedging in the non-core unit and core businesses.
Secondly, as I mentioned earlier, we achieved an additional EUR 11 billion worth of asset reduction through a decrease in our VaR multiplier from 5.5 to 4. But remember this only corrects our previous overcharge, and brings us closer in line with peers. Also in the quarter, we have received approval from our regulator Basel for certain credit risk-related model, for example, IRBA model. As we showed you at investor day, we have an obligation to roll these models out to comply with Basel defined coverage levels of exposure. As a result of these approvals, we exceeded the German minimal regulatory requirement of 92% coverage at year-to-date.
Finally we achieved 8 billion risk-weighted asset reduction from operating model improvements. Examples include migration of additional derivatives into our approved IMM model, or consideration of netting agreements under migration of additional derivatives in legal review. Sorry, I jumped the line.
Page 25, before I move off the capital topic let me make a few remarks regarding the publication of the draft [FDO] rules by the Fed in December 2012. Deutsche Bank is evaluating the potential impact of these proposed rules on the group’s business, planning and financial statement. Based on the proposals the Fed laid out in the draft, which is open for comment until the middle of March 2013, Deutsche Bank is thoroughly assessing the measures that may need to be taken with respect to its US subsidiary.
These measures include the creation of an intermediate holding company, IHC that would consolidate Deutsche Bank’s US subsidiary. A reduction in US debt assets over the next 2.5 years to decrease the additional capital requirements, and conversion of existing intragroup liabilities into equity instruments in 2015 to meet the additional capital requirements.
The effects of these measures and the impact on the P&L in the next 2.5 years has already been taken into account for the 2012 HGB valuation of Deutsche Bank’s investment in US subsidiaries. As of today, we expect an increment of roughly EUR 2 billion to EUR 2.5 billion for the Deutsche Bank AG standalone account under HGB. There is no impact of the impairment on the group’s consolidated financial statements under IFRS, or the Basel 2.5 or Basel 3 capital ratios.
The management board proposes a dividend of EUR 0.75 for 2012 based on this HGB account rule. Please note that we do not envisage any additional investment in the US subsidiaries due to these proposed rules.
Our investment bank’s performance if you see on page 26 was resilient in the fourth quarter and delivered solid results in the context of the normal seasonal slow down, exacerbated by a very strong third quarter 2012. Full year 2012 CB&S revenues, excluding DVA gains in the fourth quarter are up 7%, while VaR is significantly down, resulting in the significant up tick in our return on VaR ratio, which continues to remain market leading.
The DVA charges in the fourth quarter were driven by the retirement of the methodology related to the fair value of uncollateralized derivative liability. There has been no change in the methodology towards valuation of own debt, where it was carried at fair value. We had only three negative trading days in 2012, a testament to the stability of our revenue model.
CB&S Basel 2.5 risk-weighted assets were down 13% quarter-over-quarter and 20% year-over-year demonstrating our commitment to resource efficiency. Our cost saving initiatives delivered material savings in full-year 2012. However, this has been more than offset by adverse FX impacts, cost-to-achieve, higher litigation related charges and the goodwill impairment.
Excluding the impact of the goodwill impairment and adjusting for the full year cost-to-achieve, 2012 EBIT was up 21%. On restructuring we have made good progress. As of the end of the first quarter, 1400 of the announced 2500 headcount reduction in CB&S and related infrastructure functions had been completed.
Let me now move on to sales and trading. First-quarter debt sales and trading revenues were negatively impacted by approximately EUR 200 million impact stemming from changes in the estimation method for CVA and risk-weighted asset mitigation. Our client franchise remains market leading and we rank number one in overall global fixed income by Greenwich Associates for the third year in a row. In FX, we saw record client volumes for any fourth quarter. We therefore achieved record client volumes in each of the fourth quarters of 2012, and for the full year.
In rates and flow credit, our revenues were down quarter-on-quarter across most products, reflecting the effective seasonal slow down, exacerbated by an exceptionally strong third quarter. In equities, a solid performance in equity derivatives was offset by lower revenues in cash equities and prime finance, resulting in lower revenues quarter-on-quarter. In cash equities, our revenues held up well quarter-on-quarter, down only slightly despite the fourth quarter seasonal decline supported by market share gains in Europe. Full-year revenues were flat with particularly strong performance in North America and market share gains in Europe.
Let me now turn over to page 29 origination and advisory. For full year 2012, we are ranked Number 5 with record market share globally and in the US. This is a testament to the strength of the franchise and the increasing productivity of the business. In EMEA, we are ranked Number 1. DB was named Bond House of the Year and Equity House of the Year in 2012 by the IFR Magazine. DB is the only (inaudible) both these awards in the same year. The M&A environment continues to be positive, and we have a healthy pipeline of peers.
On page 30 I will talk about our global transaction banking business. If you can see the fourth quarter earnings were adversely impacted by a litigation related charge, as well as turnaround measures of the commercial banking activities in the Netherlands, for example, restructuring charges. These charges of net EUR 0.5 billion led to a pre-tax loss of EUR 259 million. Despite those charges, GTB finished the year with a solid performance across major businesses and regions with a seasonal slowdown towards year-end.
Compared to the fourth quarter of 2011, trade finance continued to benefit from high demand for international trade products and financing. Trust and security services profited from higher business activity in the corporate trust business, while revenue and cost management increased on the back of improved cash balances, as well as strong transaction volume.
In terms of income before income taxes, GTB would have had a record year if adjusted for the net charge of about EUR 0.5 billion. Full year 2012 revenues were up year-over-year reflecting strong volume and market share gains on track with our growth plans supporting the ambitious IBIT aspiration for 2015.
Let us move on to page 31, our asset and wealth management business, and as we mentioned at the investor day, the integration of the new asset and wealth management division is in many ways like a complex M&A transaction, bringing together multiple business lines. Clearly, there is potential to unlock significant value.
Phase 1 is now complete, which focused on reduction of front office headcount outside of Germany. We have eliminated 10% of the division’s headcount from midyear, or around 700 positions. The new management team is in place, and we have launched our new brand identity. We have managed to maintain revenues and grow assets. Net new money in the private bank was EUR 15 billion. Our next phase is about further efficiency in Germany and parts of continental Europe, as well as our focus on the infrastructure, particularly our technology and operations platforms.
One example would be our recently announced plans for (inaudible) in Germany to maintain a strong independent brand and business model, but leveraging the strength of Deutsche’s middle and back-office platforms. We had a number of significant one off items in 2012 that impacted the cost line in particular. We expect this given all the change, but the actions already taken are starting to have a positive impact on our run rate with further efficiencies to come in 2013.
We have seen a significant improvement in net inflows in asset management. Through the first two weeks of the year, total net inflows from retail and institutional clients in active asset management were close to EUR 6 billion.
We now turn on page 32, the private business again turned in a very solid quarter, delivering a good full-year result against low interest rates, while implementing several changes to its internal setup. Adjusting the reported IBIT of EUR 287 million for cost-to-achieve as well as PPA effects we get to EUR 582 million of operating IBIT, EUR 24 million higher than the third quarter.
The single effects are as usual displayed in a separate chart in the appendix. The improvement quarter-over-quarter is mainly due to an up tick in insurance related brokerage revenues, once again lower credit loss provision, and a higher equity pick up from HuaXia Bank. Key reason for the lower reported IBIT in the first quarter were high cost-to-achieve of EUR 209 million divided into EUR 190 million relating to Postbank integration and EUR 90 million to the operational excellence program.
When looking at the full year development of credit loss provisions, let me remind you about the IFRS accounting effect that recognizes releases from Postbank allowances taking before consolidation as revenues, and not as an offset to credit loss provision. Excluding this effect, credit loss provisions would have declined by 12% or EUR 97 million. Full year revenues in PBC are down 8% compared to 2011, mainly due to two technical effects. HuaXia Bank one-off gain in 2011, and higher negative regular PPA effect in consumer banking in Germany. The remaining revenue decrease is only 3% mainly due to the low interest rate environment.
While Postbank related PPA has peaked now in line with our integration plan with a total full year charge of EUR 422 million, we forecast Opex related CtA to increase to levels of around EUR 300 million in 2013 from EUR 19 million in 2012. While we expect operating performance to further improve in 2013, at least thanks to the growing synergies related to powerhouse, and initial savings related to Opex, the reported IBIT will likely be around 2012 level, mainly due to the cost-to-achieve that in total will be significantly above 2012 levels when taking Opex and powerhouse together.
This is, you know, on page 33 is the first regular reporting of the new non-core operating segment following our analyst call on December 13 of 2012. To reiterate one of the main purpose of NCOU is enabling, deaccelerating, derisking and I think we have proved that in the quarter. During the fourth quarter 2012, we have reduced Basel 3 risk-weighted asset equivalents by EUR 19 billion.
Key components of this reduction were disposal of our stakes in Actavis and EADS, comprising EUR 4.3 billion of risk-weighted asset equivalents, derisking of EUR 7.4 billion risk-weighted asset equivalent from portfolio previously assigned to CB&S, changes to our VaR multiplier saving about EUR 3 billion, and sales of part of structured credit portfolio and other bonds from Postbank totaling EUR 2 billion. This risk-weighted asset reduction supported the core Tier 1 ratio increase by 39 basis points.
Fourth-quarter revenues were impacted by one-off items including CVA changes in estimates for the CVA methodology. Underlying expenses are relatively stable quarter-over-quarter after excluding one-off items in the goodwill impairment of EUR 400 million in this segment.
Finally I will focus on some key current topics as usual, so let us go to the third segment of my presentation. As I mentioned previously on page 35, we expensed EUR 1.9 billion for legal matters in 2012. Most of the bank’s legal risk is not unique to DB, and it is experienced by many other banks in our peer group, and the tale of legal liability is fairly typical and relates to conduct from many years back.
Here is some additional context or public legal disclosures. Contingent liability, which are the potential outflows in matters where liability is more than remote, but less than probable, decreased from approximately EUR 2.5 billion to approximately EUR 2 billion and is attributable to the resolution of certain legal matters, and the establishment of provision in others. Please remember that current contingent liabilities do not represent our maximum possible legal losses.
The increase quarter-over-quarter in legal provision is largely attributable to adverse court ruling, in litigation, and developments in regulatory investigations. Once a provision for a matter is established it is our best estimate at that time as to the probable outflow. If our estimate for that matter changed in the future the provision will be adjusted.
The increase in mortgage repurchase demands from approximately $3.3 billion to $4.6 billion, which reflects the original principle balance, is attributable to demands made by RMBS investors. This increased activity has been experienced industry wide and we expect to continue to see this trend in the near term. The reserves associated with these events are treated as contra-revenue in our non-core operations unit. While we have resolved a number of important legal matters and made progress on others, we expect the regulatory litigation environment to continue to be challenging.
Let me go to page 36 and the slide is an update of the slide I presented to you at investor day, our derisking activities here in the NCOU are well on track. Here we highlight the major accomplishments achieved in the second half of 2012. Looking ahead to 2013, we continue to derisk with 25% reduction of Basel 3 risk-weighted assets by 31 December of 2013. This is mostly frontloaded in the first quarter of 2013, and in line with the estimate we provided to you in December 2012.
On page 37, I give you some more disclosure on the NCOU, which as NCOU it is not just about derisking but it is also about deleveraging. In the course of 2012, NCOU assigned assets came down just over a quarter of EUR 35 billion. But as I said before the key objective is derisking, which was done in capital accretion. Although we have realized a loss in the NCOU, the impact on our regulatory capital position was a positive. This is based on the calculation we provide on this page. For your reference, in the pie chart on the right we provide you with an update of the asset compositions given the significant decline over the fourth quarter.
Let me turn now to page 38, on the funding side a few words on this. We continue to be in a very strong position. The most stable funding sources now comprise of 62% of total funding, the highest share ever. We now include Postbank in the liquidity reserves, which as a result exceeded for the first time then, EUR 230 billion, and we continue to be sure it is now well below our CDS spreads also in the new year, and we close our local funding gaps in Italy, Spain and Portugal.
Eventually now as the Basel community has released its final LCR guidance, I’m now in a position to share with you our latest pro forma LCR ratio which exceeds 95%. We intend to be above 100% by the end of 2013 at the latest and do not have any intention to weaken liquidity standards going forward in the light of the LCR phase in provision.
So this concludes my remarks. Anshu and I are looking forward to all of your questions, assuming that hopefully they are a few remaining. Thank you very much.
Hi, Joachim, Anshu and I just a sec, we just need to get the technical equipment out. Give me just a second.
So, I think we have our first question there. Could you please identify yourself, and ask the question?
(inaudible) please go ahead with your question.
Sorry, yes, good morning. Thanks very much for that update and very helpful in particular on risk-weighted assets. I was wondering if you can give a bit more perspective on proposed Fed rules. You mentioned it had – may not have any further when you've taken the P&L impact into account. But as you think about the breadth of your business and the potential impact on return on equity, could you perhaps give a bit more color about how you're thinking about the potential impact of the proposals? Thank you.
Well, for us obviously the proposals mean that obviously we will have to allocate some more capital to the United States at some point in 2015. So this is ahead of us. As you know, we have been looking at our businesses overall on a global basis in terms of their return on capital and much of the derisking that we have done was focused on areas where we had lower profitability, some of that were also US businesses.
After the impairment we took now in our local books, we are prepared and we would be and able to do in the capital position. We do think though and our concern is really on an international context of global banks, really not very helpful in terms of helping a global financial market to properly work. That is why we are quite confident and hopeful that some revisions to the framework today. But that is the broader question.
For example, while our technical abilities to provide the capital and our need for Additional capital at this point, we don’t need any further capital at this point. But we have to wait until the final rules come out, and then, I hope you understand, what the capitalization requirements are principal.
Thanks for your answer.
And the next question is from Kian Abouhossein from JPMorgan. Please go ahead.
Kian Abouhossein – JPMorgan
Yes, hi Anshu and Stefan. Three questions, and the first one relates to your target for 2015 first quarter where you clearly want Basel 3 of 10% plus as outlined in the investor day, now that you are already moving to 8.5%, how do you think about capital movement into 2015, the 10%, is that something that you feel could also be potentially brought forward, that is the first question.
The second question is regarding portfolio optimization, can you outline a little bit more what is actually portfolio optimization, the 15 billion, what you are doing there. And the third question comes back to the holding in the US legal entity, can you because you mentioned several things that you could do, one of them you mentioned capital injection, but you also talked of intragroup liability movements, so really can you just say that whatever happens that there will be no share count increase in Deutsche Bank even if there needs to be a capital injection into the US legal entity, can you rule that out by any chance? Thanks.
Good morning Kian. I will take your first question and then Stefan will take your next two. Look, as Stefan has said already, it is not just the US, but we can actually see in a number of locations, we could get regional fragmentation potentially, too early to say. So the reality is that the eventual capital target is a moving piece. We cannot commit right now to exactly what the optimal destination would be.
We had said to use the rule of thumb. We were looking around 100 basis points of accretion in capital per annum. I have no reason to believe that that would be any different. Undoubtedly once we achieve our optimal level of capital, our focus would be on returning as much free cash flow back to investors as we possibly can. That has always been our commitment. Exactly what that final target would be would be in part a result of how we see the regulatory activities falling, in particular once we see how the global situation stabilizes.
There is no doubt about the fact that we are significantly ahead of the capital planning numbers that we had shown you back in September, and this organization remains galvanized around capital. That is the key message which everyone should get. We said we would put capital at the forefront of all of our medium-term activities. It continues to be the case.
Okay, Kian, good morning as well. And to your portfolio optimization at the end of the day, we will look at it as a combination of asset sales and hedges, yes. The reduction (inaudible) to a large extent related to securitization positions. As you know, under the Basel framework there is punitive capital requirement. And obviously these numbers do not include any model or process deliveries. They are separate. So this is hedging to be more specific, and obviously improvements we can do in terms of optimizing our weak position, on this position, and it is mainly targeted at securitization.
You are asking a very difficult question on US regulation as it is not finalized yet and the implications. First of all, what we can say from today’s perspective we would not have to really move cash in order to provide the capitalization in the United States. But of course we will not provide capitalization that would not provide future good returns for our US – to our investors globally. If our US business does not provide adequate returns for us, we therefore hope that the capital requirements remain, you know, somewhat acceptable in light of the profitability we can achieve.
In terms of including or excluding any measures, you could have asked the same question, would you significantly reduce our US activities, that is obviously one option. We would increase capital is the other option. It is too early for us to tell, or include or exclude anything because we have a framework that we can’t really say much about at this point in time. But these will be two options, we either have to significantly reduce our US activities. The worst outcome is the one that comes through that obviously the international community is hoping that will not be the stance of the US in this case, or we would have to – but at this point in time, we have the capital in the group to supply.
What we had to do is we had to take an impairment in our standalone German accounts. We did make the decision to take it. So we are prepared to move if it is required.
Kian Abouhossein – JPMorgan
And can I just follow up on that Stefan, would it be possible to issue debt instruments such as close to maybe inject on the tail-end to inject capital into the US, would that be potentially – could that be an option?
This is certainly one of the options that are in discussions, and it is one of the options that could be a solution to some of the topics. Again the rules are not final, yes, please take my comment that it is really early guesses rather than any really estimates because the rules are just not final. So it is very difficult to say how it turns out to be. What we – the very clearly have to obviously say that obviously we hope that in terms of the international community and keeping financial services market and liquidity in that available, that we do consider that global operating banks need to have free movement of capital and funding to properly function. And that I think is hopefully what at the end the outcome will be.
Kian Abouhossein – JPMorgan
Great. Thank you. Anshu and Stefan.
The next question is from Jon Pearce from Nomura. Please go ahead.
Jon Pearce – Nomura
Yes, good morning. Can I ask two questions please, the first one is just looking at your fixed income trading performance, and comparing the quarter-on-quarter and year-on-year with the US peer group, it was a little bit softer, I just wondered if you had any comments around that. And the second is I wonder if you could give any guidance to the longer term about your gross assets, I know you prefer to present your balance sheet on an adjusted basis, but obviously Basel 3 is quite prescriptive and it is a challenging target to met, so beyond the gross asset reductions that come out of the non-core unit, do you have any picture of the broader balance sheet, and if you are reducing gross assets, what the cost of that could be in terms of profitability? Thank you.
Jon, if you have been studying Deutsche Bank’s performance over the last decade, I will take your first question, Stefan will take your second one. We have pronounced seasonality in our performance, particularly in the investment bank. Fourth-quarter tends to be a slower quarter for us. We have studied this very closely. Potentially it has something to do with the geographic mix of our business, which is a little more Europe and Asia tilted to an extent.
Yes, we have underperformed our US peers, but not by a dramatic margin, and in line with the seasonality in prior years.
Before I answer your second question I wanted to add something to Kian’s question, why we have difficulties in assessing, if obviously the US rules were to come in the extreme case, what you have to keep in mind that there will be retribution, or we expect retribution from European regulators on that. And that is what makes this difficult to assess what it really means to us in terms of what our capital flexibility will be on a global basis, and how we could move, and how we have to think about allocating capital on a global basis.
So I think the US side is something we have a little bit more clarity, but in our thoughts for the longer term, we think about retribution that in our view will certainly occur if the rules start hampering International free flow of capital and the international free flow of liquidity. So (inaudible) add that why at this point the outcome is quite uncertain for us to make any final statement.
On our total assets, you know, we only do the adjustment in assets to reflect the US GAAP versus IFRS difference. So you have a better comparability when you compare ourselves against our peers. But as we said in our strategy, we clearly understand that leverage will become more important, hopefully reported, not regulated guideline in terms of assessing risk on capital, and we have said that we will continue as we have to reduce our leverage over time, and adjust our balance sheet to compensate.
We will not do this at the price of our clients. So because of our clients we will also be careful with that, and second obviously we will consider obviously the profitability of our balance sheet in doing so.
Jon Pearce – Nomura
Okay. Thank you.
The next question is from Stuart Graham from Autonomous Research.
Stuart Graham – Autonomous Research
Good morning. I have a few questions guys. Maybe just on the Taunus again, maybe a clarification, can you just explain in detail the significance of the impairment in German GAAP, what that frees you up to do? The second question was around the RWA litigation. I guess that at the investor day you got the feedback that people were worried about your reliance on internal models and a key part of the progress in Q4 has been more use of internal models. So I guess maybe you could just give us a feel of the management team, what comfort you have that you're not going to wake up one day and the goalposts have been moved on you in terms of internal model harmonization and suddenly you've got a capital gap. And then the final question for Anshu, clearly there's been a lot of change in the competitive environment since the investor day with UBS and Morgan Stanley, Barclays. And maybe you could give us your perspectives on how you use Deutsche's market franchise now versus how the competitors are shaping up? Thank you.
Okay. I will take the first two and then Anshu will take the third one, Stuart on Taunus, I need to give you some more background on it. According to the German councils, I have to value my participation in the subsidiary channel. And this occurs under the German GAAP, and under German GAAP that is a very conservative GAAP, the impairment is based on a DCF valuation, you know, they are built on a five-year plan.
And therefore obviously it has to reflect the implementation phase in 2015 of the capital measure required. So what we did, we looked at the business plan in the United States. We made an assessment after mitigation and after reducing our balance sheet in the United States on the capital that we will have to provide by 2015, and then the DCF model gave us evaluation, and then we compared that to our book value account in our German account and then we took the respective impairment.
This will now obviously frees us up. It was a consideration because obviously the concern is we have as you know out of the German books, we used to measure the dividend, and the dividend blocking rules. In the dividend blocking rules we had to obviously consider while making a substantial impairment to our subsidiary in the US, but we managed within our German account to get that and still allow for a dividend. So that's the background of what happened in the German book. So from that perspective, it is something that is now behind us and you would be prepared to deal with it. From a German accounting perspective to deal with any further issues and so it is part of our plan. And now…
Stuart Graham – Autonomous Research
What's the carrying value, I can't understand your German GAAP please?
I can look up the number. I don't have it now. But I can give it to you, but it is obviously you know conservative German accounting, not very high remaining. So now on your questions on risk weighted assets and mitigation on our model, first of all the majority of the previous CD derisking did not come from model approvals in the second half of 2012. Keep that in mind. 60% comes from NCOU derisking and portfolio optimization, and only 24% from model changes. And the biggest one was VaR multiplier.
Now we look very confident in the future on this subject, but we still have one of the higher VaR multipliers in the industry. You know, the Basel framework requires a 3% about on average VaR multiplier. We are still at 4%. Yes, so that provides us first of all big comfort that despite all the modeling going on and the concerns around that that we can. Second, I think we will see these threats coming in terms of our risk-weighted asset comparability, and I can only tell you at this point that we are very comfortable with the results.
If they would prove that these accusations to Deutsche Bank's reliance on modeling might not be true, and that maybe some of our other competitors may be much more exposed to it than we are. Don’t the framework in itself does arrive at assumption. The more granular risk you manage, they are more exactly able to model the risk that if rightfully so an incentive to that then results in less risk-weighted asset charges. That is the background of it.
Don't forget also that it takes a long time and continues proof between standardized and our individual models here to make sure that you know that our modeling risk corresponds. I do understand that the concern because of the lack of transparency that exists around this modeling but we are very confident with the information that we will be provided in terms of these comparisons over the next couple of months that we are doing with the regulators to provide the market with transparency that we will come out quite well.
Hello, Stuart. In terms of your question regarding comparative positioning of our investment banking franchise, I would actually say that there has been a clear validation of want we said to you in September. The main point we made at that time was that with Basel 3 implementation if you are significantly outside the top five, where five or six years ago you could still hope to beat your cost of equity, it will be very difficult to sustain a second tier investment banking franchise.
And that's exactly what we're seeing. So we're seeing some very significant consolidation, particularly in fixed-income currencies and commodities, which we are confident will continue to accrue to the top handful of funds. Clearing against that they will give some level playing field questions, which will rise as we see the future of regulation payouts, but certainly the first dynamic, which we were counting on is in fact playing out much of the Fed input.
The next question is from Jernej Omahen from Goldman Sachs.
Jernej Omahen – Goldman Sachs
Good morning from my side as well. It is Jernej here from Goldman. I just wanted to ask you a few questions, and it's got to be boring because they are going to follow some of the topics you have already been questioned on. The first question I'd like to ask relates to the Fed proposal, and I have to say so and maybe it's me but I'm just confused because I don't understand whether Deutsche Bank believes this is a big deal or whether you think it's not a big deal because on the one hand you're telling us we won't have to raise any capital as a consequence of this. It's not going to have a meaningful impact on our operation and on the other hand you're telling us this is such a big deal that it is going to spike retaliation from European regulators.
So, I would just like from your side an unambiguous statement, do you believe that the new Fed proposal will have a meaningful impact on your business in the US, and if the answer to that is, no, we don't have to transfer any, we don't have to raise any capital, we don't have to raise any liquidity, if you can then explain why you think it is going to spark a big global debate as a consequence, and how it impacts your business from that perspective.
The second question I had is when you ran us through the options of response for Deutsche Bank in the US, you listed three if I understood you correctly. The first one was the IHC, intermediate holding company, but if I understand it correctly this would essentially force you to dismantle the structure that Deutsche put in place after the rules were initially changed by the Fed, and would result in a significant intragroup capital transfer. The second one is the reduction of US assets, but I just wonder how the auditor would look at the value of a DTA you have on your balance sheet in the US from that perspective. I believe from memory because I don't think this is reported anymore but the last reported activated DTA figure was around EUR 5.2 billion if I'm right. So if you start cutting and if I understand this correctly it is activated in spite of your equity. So what is the prospect for dollars, sorry, what's the prospect of impairment from that number if you start cutting assets, and the third one is this conversion of liability, which you understand is the same is essentially an intragroup transfer of capital, and then you here is the conceptual question.
The fed wants you to have more capital in the US and it wants you to have more liquidity in the US. It is also telling, well, not just you, all European banks it is also telling the European banks that they will stress test you on that basis. So it is not the question of meeting the minimum capital and liquidity requirements. It is a question of having a substantial buffer. It has then also telling you implicitly or telling the European regulator there would be no recourse for that capital from your European business. And I was just wondering if that gets implemented even if you say you are fine with the intragroup capital transfer is BaFin or the ECB, your new supervisor going to be fine with Deutsche carrying a disproportionate amount of capital and liquidity in the US and therefore by definition a lower amount of capital and liquidity available to your other operations.
So that's on the Fed, and the other questions are shorter. The first one is on page 50 of your presentation. I would just like you to reconcile a sharp improvement in capitalization on a core tier 1 ratio basis with a static development of the leverage ratio that you reported yourself over the past two years. So how it is possible that on the one side we're saying okay, you know, this is great. We are ahead of our targets on fully phased Basel 3 core tier 1, on the other side your own calculations of leverage tell us actually the leverage doesn't change. And the last question, again this is even shorter, I'm just looking at your presentation of your chief risk officer from the investor day, and on page 6 you basically outlined what you expect your average risk rate to be on the EUR, so it is around 37%. I was just wondering what that number is now given the extensive litigation numbers. We get to around 32%, which would make Deutsche Bank now the lowest risk rate investment bank or universal bank in Europe. And just finally very briefly you said that the market multiplier is now closer to peers, and I was just wondering who is in that peer group when you calculate the market multiplier, who are you closer to. Thank you very much and apologies for the focus on capital, but I guess it is a sign of times more than anything else.
Okay, I was short on the capitalization question and try to reconcile for you the big deal and no big deal. And let me say the following, for us it is always different levels of answering the question. The first question you asked me is it technically difficult for Deutsche Bank now after we have taken this HCB impairment. So we are fine to technically provide capital to the United States. The answer is no, because we had so much inter-company debt in the United States at our subsidiaries that obviously with the debt to equity stuff we can provide for the capital.
This is a technical piece of it. So – and the reason we prepared ourselves to do it, so in terms of what technically needs to happen is you correctly point out that that is not the point, the point is what repercussions would it have to free capital movement in the world, and what we expect other regulators to react to it, and how will a global financial system work under a restrictive and ring-fenced national capital guideline, what will we lose, Anshu will say something to that effect.
In terms of the other technical impact like the DTA, there is a much reduced DTA that's because we have been profitable in the US and we have been using these loss carry forwards. So we have moved this significantly down. So it is not something that concerns us and as we expect our business plan and our strategy implementation in the US, our business is profitable.
When we talk about reducing some of our activities in the United States, obviously we will not reduce highly profitable businesses, which of course then would have been an impact on our ability of using this loss carry forwards in the future, but we were looking at like you can see in our group results that we have done significant derisking in reductions, and we will also be able to further reduce our balance sheet without material and significant impact to our P&L. Yes, think about some of the business we provide will then no longer be possible anymore that it is done in terms of not being high return on asset type business.
So in terms of our business plan shows the recoverability of the DTA, it is fine in the United States, yes, and we can continue to use them up, and obviously our view is that until the point of 2015 when we have to supply. So the point is not – to clarify for your, the point is not the technicalities around getting the job done if this is the final outcome is not worth it, what you said is a smaller deal.
The repercussions now that you allude to it is an important thing. We completely would understand the Basel 3 will react to this, yes, you know, I think they have to. I think that therefore obviously what we can't anticipate how will this reaction look like in terms of financing, because obviously that is the part where now we say we can't tell you at this point in time how this is exactly going to impact the group. Maybe, Anshu I can ask you to say something before I answer all the other questions if you want to say something about this.
Sure Stefan. And I think the question goes to the heart of an issue which is not just important for Deutsche Bank but indeed for the entire global financial system because if we were to extrapolate what we have seen in this proposal. I think in some way the clients counter to what we have been told was critical as part of the FASB work, which is the International Harmonization of Financial Standards, and indeed if the US were to move ahead unilaterally you have to assume it is not just about them but every major regulator then will move toward the new norm, if indeed this is in the norm of gathering capital and gathering liquidity.
This is not just a question for European bank, the Deutsche Bank. You should then be asking questions of our US competitors in terms of how efficient their operation is going to be on a global basis because I can't imagine Asian regulators will happily stand back and not follow the same standards.
So I think this is going to rapidly escalate into an industry issue, and indeed with very significant global GDP and growth consequences because you cannot at that point assume that global capitalization of banks as they stand today, which relies upon the efficient redeployment of balance sheet liquidity and capital as business cycles wax and wane across different countries. If you're saying more risk this proposal leads to the end of that. That is called systemic consequences for our entire industry.
I think what Stefan's point to you is that you can rely upon Deutsche Bank to optimize our operations’ capital liquidity business model to this change but I would definitely use this opportunity and others to point out that this is going to have significant ramifications for the entire system.
So now to you other questions, the risk-weighted assets under Basel 2.5 is currently 28, and you can see it on page 45 of our presentation today, and the ratio under Basel 3 fully loaded is about 33%. But also take into account that we are reducing our highly weighted exposures, namely obviously the securitization pieces which do not use much balance sheet, but are highly risk weighted, often at 1250%. So you need to consider that. The second, in terms of reconciling for you why our leverage doesn't move while our risk weighted asset move, if you consider that for example when you look at our cash that has significantly increased that carries no risk weight of balance sheet with our high cash (inaudible) which right now do cost us in terms of leverage would be easy to just get rid of our cash and how you put leverage numbers. This is how we continue to believe that leverage is a wrong number to look at but if that gets regulated we have to get rid of our high liquidity with us. So in that sense this is the relationship you have to look at assets that don't carry high risk weighted assets to solve the dilemma between the two ratios. I think we have answered all your questions, if I am on track.
Jernej Omahen – Goldman Sachs
Maybe just the last one on the market multiplier is that suggestion ...
We can only estimate our current estimate for peers is 3.5% on average, but you know, the Basel framework includes the 3% guideline. So in order to – we expected that Basel 3 gets implemented that that will be then the standards to be applied 3%. Okay.
Jernej Omahen – Goldman Sachs
Thank you very much. This is all very helpful. Thank you.
The next question is from (inaudible).
Hi good morning, and thank you. I am not going to go on about this US thing, I have just a question on the market purchase demand, I mean there is a very sharp rise about 1.3 billion in demand. You said we should expect something similar going forward and what does something similar mean, do we talk about a similar ratio per quarter or per year and the second question and the second question is on compensation cost, can you give us an indication as to what kind of awarded compensation ratio you're aiming for in the investment bank, and a then for the rest of the bank. Thank you.
Very quickly, we have no compensation cost to target. I think that would be at this point not right. We're not giving out a target. We want to continue obviously to lower it, which obviously is also the intention of much of the regulation that is clear on the one hand but on the other hand we also have to stay within the market parameters. So I think to target a ratio here is difficult. So we have to set competitiveness versus obviously reduction.
We put on an ongoing basis on the market repurchase plan, there's also some good news in this, obviously the improvement of the market in the United States. It has certainly lower losses around it. We do still have some – and we expected in the near future that the trends to continue. Obviously we expect to get some more but as we move, you know, and time moves by, and obviously these losses are lower than anticipated and mitigated. Obviously we expect also some good moves on that over time. But again this is something very difficult to predict because these are decisions from people outside of the bank circle, but what is important that so far I think our case-by-case solution of the issue is important.
We will stop the Q&A right now. Please Mr. Muller continue with any other points you wish to raise.
Yes, thank you. I am afraid we have to stop it now because our management needs to jump over to the press conference that is starting soon. So any questions you have remaining please come to us, and we're more than happy to answer everything that you need and with that I would like to thank you for your interest in Deutsche Bank and have a good day. We will see you on the road. Bye.
Ladies and gentlemen the conference has now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Good bye.
Copyright policy: All transcripts on this site are the copyright of Seeking Alpha. However, we view them as an important resource for bloggers and journalists, and are excited to contribute to the democratization of financial information on the Internet. (Until now investors have had to pay thousands of dollars in subscription fees for transcripts.) So our reproduction policy is as follows: You may quote up to 400 words of any transcript on the condition that you attribute the transcript to Seeking Alpha and either link to the original transcript or to www.SeekingAlpha.com. All other use is prohibited.
THE INFORMATION CONTAINED HERE IS A TEXTUAL REPRESENTATION OF THE APPLICABLE COMPANY'S CONFERENCE CALL, CONFERENCE PRESENTATION OR OTHER AUDIO PRESENTATION, AND WHILE EFFORTS ARE MADE TO PROVIDE AN ACCURATE TRANSCRIPTION, THERE MAY BE MATERIAL ERRORS, OMISSIONS, OR INACCURACIES IN THE REPORTING OF THE SUBSTANCE OF THE AUDIO PRESENTATIONS. IN NO WAY DOES SEEKING ALPHA ASSUME ANY RESPONSIBILITY FOR ANY INVESTMENT OR OTHER DECISIONS MADE BASED UPON THE INFORMATION PROVIDED ON THIS WEB SITE OR IN ANY TRANSCRIPT. USERS ARE ADVISED TO REVIEW THE APPLICABLE COMPANY'S AUDIO PRESENTATION ITSELF AND THE APPLICABLE COMPANY'S SEC FILINGS BEFORE MAKING ANY INVESTMENT OR OTHER DECISIONS.
If you have any additional questions about our online transcripts, please contact us at: email@example.com. Thank you!