Deutsche Bank AG - Analyst/Investor Day

 |  About: Deutsche Bank AG (DB)
by: SA Transcripts

Unknown Executive

Good afternoon, and welcome to Deutsche Bank's 2012 Investor Day. It's a great pleasure to have you all here. And on behalf of the entire GEC, I would like to welcome you all to this Investor Day, both everyone who's in the room, but also everyone who's joining us on the webcast.

Today marks the first day after our 100-day strategic review. We promised to you that we'd come back, have our management presenting to you the vision, the financial aspirations we have for the bank. Our Co-Chairmen are here to do that today to present that for 2015 and beyond. We will do the follow-up session basically tomorrow on how we are going to deliver against our ambitions.

First of all, before we start with the Co-Chairman, I'd like to remind you about the cautionary statements regarding forward-looking statements at the presentations as usual. And with that, I think we go straight into a presentation with Co-Chairman, Juergen Fitschen.

Juergen Fitschen

Thank you very much. Good afternoon, ladies and gentlemen. It's a pleasure to relay to you what we have come up with over the last 100 days. It started right after the new management team took its seat. And we felt that given the almost unprecedented situation that we are faced with regarding the changes in the external environment, we need some time, and you are the second audience that we now like to share our results with.

Anshu and myself, we have divided the work. I will like to carry you through our thought process, what is it that we identify as the drivers for what is significant in our industry, how to position ourselves. And then Anshu is filling it with real life on the operational front and also shares with you the ultimate result of all our deliberations. At the end, we'll meet again when we talk about a very topical issue, the culture theme.

I did already indicate that it's no exaggeration of mine that we are faced with unprecedented challenges because there's hardly anything that remains unchanged going forward. First of all, we have seen the worst financial crisis, and our industry has to respond to that. Now it is obvious that response will not come from the hope we can pin on an earlier recovery. We have looked at macroeconomic developments. We're at home in the one continent that gives probably more concerns to us than any other region. But we also have to state in the rest of the world, there's a noticeable slowdown in economic development.

Against that background, we are privileged to have a home here in this country that is still doing fairly well compared to the rest of Europe, will not stay unharmed by what happens in our neighborhood but gives us certainly an advantage to base our future on. We will not neglect Europe, but we'll have to address the reduced opportunities in the way we conduct our business. And Anshu is going to give you details on that. At the same time, we still believe that in Germany, we can strengthen our presence in the marketplace, also with regard to the weakness that our colleagues in other institutions are suffering from.

We have unchanged confidence in an early recovery in the States despite the fact that we are aware of the unresolved issues [indiscernible] the term deficit, the fiscal cliff come to mind. And yet our ambitions are unchanged in establishing ourselves firmly in what is going to be the most significant single market for our industry for a long time to come. Obviously, we are still in line with most observers that the emerging market world is going to show above average growth. However, we have to be aware that adjustments will also occur in certain regions.

Taking all of this together, it is no exaggeration to say that we are faced with fundamental challenges, which we are prepared to accept. As a result, we have to go through quite dramatic adjustments in order to become one of the winners as the crisis is unfolding.

We have looked at other megatrends, as we call them, that paint a slightly different picture, that give us more hope going forward. And while we adjust to the prevailing fundamentals, we do not want to lose sight of the fact that there's life after the 3-year period, which we address. We chose that period to make sure that we have a fairly good grasp of what we might have to anticipate. And at the same time, it's long enough to effect changes as they come through.

So some of these megatrends will give us new opportunities. Urbanization will mean that a new class is emerging in a limited number of places around the globe that will foster the development of new financial markets, which will give us opportunities unheard of in the past. Something that raises eyebrows and creates problems from a different perspective, i.e., the demographic changes, will also provide us new opportunities as the wealth creation and the preservation are proving to be challenging for our clients, and we will have to offer solutions.

Given all of that, we have to strike a fine balance. And actually, I believe that it's wise to describe the next chapter that we're opening now as an interim period. But we have a clear objective to address the changes that we cannot influence, but at the same time, elevate ourselves to a platform from which we can enjoy increased optionality once we are prepared to open the next page, i.e., 2016 and further on.

I don't have to go into detail here. You are very familiar with the regulatory environment and its implications on our industry. We have no option but to cope with what regulators are giving us as a framework under which we operate. We are very comfortable so far that we are not put into any disadvantageous situation here, but we are also cognizant of the implications the regulatory framework is having and is bound to have even further as we move forward and see them unfolding in the full scope.

So we have to be aware of depressed business volumes in certain categories because the client behavior is changing. We have to reckon for the capital requirements and the implications resulting from that. We also are aware of the fact that margins will be depressed and cost of funds are going to be higher than we're used to in the past.

As a result of that, we have reviewed the situation at a level of granularity that allows us to differentiate going forward. And as you see in the upper left-hand corner, there is a need to do that because even at regional level, not everything will be the same. We have also seen that as a result of that, there is some long-term trends that will change the pattern of the earnings mix for various institutions, and all of that will clearly demonstrate that there's an interesting mix waiting for us between these near-term charges and long-term opportunities that I'll try to address too.

Let me jump to the next conclusion, what does it mean to our industry? What does it mean to Deutsche Bank at the end of the day? We'll see here that on the right-hand side, the implications can be brought into various categories, some write it as pressure, unprofitability, which in turn, results in the need to address the way we use resources in order to maintain the sufficient level of profitability given the lack of growing on the revenue fund across the board.

We will also have to look at the need to look at fundamental business structures, i.e., we have to answer at the end of the day how, given this environment, we can still develop a client-centric model and retain an attractive level of profitability and, by doing so, maintain at any point in time adequate capitalization and liquidity levels.

To make matters worse, our industry is faced with an unprecedented negative judgment the public at large has arrived at. This is something that is of great concern to us because it's very obvious that our future is very much dependent on enjoying the trust and confidence of our client base, in particular, but of the public at large as well. Without that, you will see all sorts of sentiments coming up. And maybe particularly here in Germany, we are seeing witnesses for that attitude emerging every day. And we'll have to fight that development because it's going to be detrimental in the long run.

So against this environment, I think it's wise to anticipate that we'll see history repeating itself. Because whenever we had crisis in the past decades, we can go back to 1928, we have seen that the number of participants is shrinking dramatically. And at the same time, we see consolidation efforts that will produce winners and losers. The most recent examples, not to follow obviously, are in Japan. The Asian financial crisis has produced similar developments.

And already we can witness that in the Eurozone, some banks that until very recently were head-on competing with us have basically given up. They had to surrender. Some were merged. Some went under and dissolved. There is no end to this yet, and we believe that this in itself is also producing opportunities for us as long as we get our act together. That's what we are determined to do. We will move on to benefit from this development and turn out to be the winner in the category of banks that we like to compare ourselves with.

During the crisis, you have already seen that some have been acting, and by doing so, strengthened their relative market position. In our case, this happened particularly here in our home market. We are not yet at the end. We do believe that the time ahead of us is giving us unprecedented opportunities to even further our leadership position in our home market despite what you might read about competitiveness, difficulties to emerge as a winning team. We have every hope that we'll distance ourselves from our competitors to an extent Deutsche Bank has never seen in its history. We'll come up with more details next month when we produce our detailed plans for our coverage here in Germany.

As a result of that, we would also benefit, as the chart suggests, from a development that is giving the winners an ever-increasing market share. That's exactly what we associate with our ambitions to be one of: the winners, the leaders in our category. We do believe as we maintain this aspiration, this ambition, we are well advised to base all our actions around our clients. That is quite normal for what tries to be known as a client-centric institution. It's not that difficult. After all, we have stated and we restated time and again, that proprietary trading is no longer there to make a contribution to our bottom line.

So what else do we have? We only have client-related activities. It's almost a no-brainer. But the devil is in the detail. The devil is seen in the way we execute our responsibility whenever we make this statement. And the good news is our clients are also faced with tremendous challenges. They also have to respond to the global world as it is unfolding and challenges their presence. And those who refrain from accepting these opportunities and the challenges that go with that will fall behind. So we find enough. We have convinced like-minded clients in the real economy, to use that term, to accompany them in their global activities, and by doing so, become a trusted and well-respected partner. I don't have to go through all the details that we have identified, but there's hardly any area where you could not imagine that the aspiration we have is going to make us the preferred partner for our client base, both corporate institutionally, but to a growing extent, also retail clients. And that is good news for us.

What is all of this leading us to? Well, the external environment to assess that is not good enough. We have to match that with our current capabilities and our future capabilities as we are going to change the way we operate. Let's start with the weaknesses. They are part of such a self-assessment. It shouldn't come as a real surprise that we restate that we are, relative to our peers, weak on capital while complying with all regulatory requirements comfortably and not having to ask for any help. This is obviously something that we're going to address. When Anshu goes through the details, you will see that we have quite aggressive plans here to overcome this perceived weakness.

We have to admit that on one front, we have not yet delivered. And the new team now has no excuse but has to make things different from the past, our ambition to come up with cost efficiencies that make us second to none. We have stated this on various fronts, but the current performance is not yet supporting that we have been highly successful in this respect. Hence, it is our aim today here to demonstrate to you in an incredible way that we are not only serious about it, that we are going to deliver and make us also a competitive player when it comes to deployment of resources and compare ourselves with those that we see as the leaders in this regard.

And we have singled out Asset and Wealth Management is not used anymore because we have already announced that we bring these 2 units together to make sure that the underperforming development that we have seen in the past comes to a definite halt, and that we also produce sizable contribution from this field to the overall bottom line of the bank.

Bringing all of this together leads us then to the description of what sort of bank you should expect from us going forward. And nothing sensational about it. We stick to what we have always believed in, our presence as a universal bank, to continue as a universal bank with a global footprint. Since the foundation of Deutsche Bank, that has always been part of our DNA, nothing sensational, nothing terribly new. We are well positioned to make that statement wholeheartedly and with conviction. We do reemphasize maybe more so than the past, our presence here in this market because we enjoy being at home. Here, we consider it a privilege and benefit from the fact that the country is doing better than others.

And I did say beforehand, we also believe we can do better and contribute even larger proportion and have done so during the crisis also without interruption. Last but not least, all of this should lead us also to a level of profitability that finds it acceptable expression in the return on equity; something, I think, that is particularly close to your heart.

How do we get there? We have asked ourselves what kind of levers in which categories do we have to use, and Anshu is going to address each one of them later on. Obviously, as the clients have been [indiscernible] to put the client first, but it's more than just a statement that pleases clients, if we ever graph this chart. We do mean it.

And this ties also to the last topic, the culture change. How do you demonstrate that you are a credible client-centric institution? And the simple answer is, well, it depends on what you do for your clients and how you do it. The how is very significant. The what is easier because you are given all the signals from the outside world what is no longer acceptable. I did say proprietary trading doesn't exist anymore not because it was inherently bad business, because with very exceptions, it always contributed a very significant event on to our overall profitability. Why should that be any different in the future? Well, that question is no longer on the table. It's over. And whatever we do has to pass the test of being perceived as delivering value to the clients, hence, for the economy and society at large.

We will still, despite the adjustments that we will announce in addition to what we have already done on the compensation front, still want to be a place where talented people love to work. Again, it is important for us that we make this such a place to them so that while we do address the issue of compensation in a serious way, they still find Deutsche Bank as an employer of choice. No small achievement once we have done that, but not easy to communicate what it actually means. However, we have also, by serving our colleagues, the strong conviction that being the front-runner in this field will place a particular value on talent to choose Deutsche Bank because we do not believe that our recognition of the need to make changes here is getting lost also for the talent as it's looking for new employment.

And last but not least, on capital and cost, while I did mention the recognition of a weak position today, we have all the confidence that our plan would catapult us here into a situation that shared belief can also establish that we are able to manage this area pretty convincingly.

With that, I would like to hand over to Anshu, who's carrying you through the rest of the divisions. And later on, we'll share the topic on culture again.

Anshuman Jain

Thank you, Jürgen, and good afternoon, ladies and gentlemen. This relationship obviously is a pivotal one for myself and for our management team, so we appreciate this chance to address all of you directly. I would like the clicker. Thank you.

So before I get going on Strategy 2015+, let me talk a bit about what we chose not to do because Jürgen put it very well right at the top of our presentation. If you look at a 10-year horizon, you come to very different conclusions than if you choose a 3-year window. 10 years out, the megatrends look actually very positive for the banking industry, serve people the wallet side of the argument. You look 3 years out, you come to 2 conclusions, most of what's coming is unpleasant and the visibility is not very clear. There's major developments that could take place in the next 12, 18, 24 months, each one of which could really create havoc with carefully laid plans.

So the conclusion we came to was to use a 3-year window. When you use a 3-year window, conservatism becomes the byword. Flexibility and remaining nimble and preserving a certain level of optionality that comes de rigueur. And really what you play for then is, as Juergen pointed out, that inevitable consolidation that will take place, and you focus on getting your own portfolio fit and ready to be a winner when that next phase comes along. So recalibration really is the buzzword that we are going for.

Now we could talk to you about a lot of different variables and trying to optimize -- you can't run a complex bank like this without looking at a host of measures. But equally, you can't unite the culture of a group around too many measures, so we've decided to focus on 3. Are these 3 the most important? Not really. They happen to be our 3 weaknesses. So I would throw out to you the notion that funding and liquidity is critical; having global capabilities, vital. Banks would give their right arm to have the dominance we have in our home market or to have the global investment bank we do. So if I were standing here for another organization, building market share would have been one of my key goals. Liquidity and funding might have been one of our key goals. Instead, we want to unite our 100,000-plus employees around 3 key targets, and those are the ones we expect to be judged on. Those are the ones we know are important to you. Because every time I have met you, what are the 3 things you have said? We don't like your core Tier 1 ratio. We think your cost income ratio is too high, and we think your post tax RoE is too low.

Well, we're listening. You can see the promises we're making and today really is the day where all we do is make lots of promises to you. But we know we have to come stand in front of you again. I've known many of you for a decade or more. And I'm putting my personal reputation on the line, as is my team, in looking to deliver some fairly ambitious targets. The numbers speak for themselves. So 10%, 65%, 12% are the 3 numbers we've arrived at and we expect to be judged on.

How are we going to go about doing this? What at first sight may seem like an overly simplistic chart, I think actually offers a real key to why we're being as ambitious as we are on recalibration. And let me make that point now very explicitly. So 4 business decisions -- divisions as opposed to 2 run along global lines. You can see them there, Retail; Investment Banking; Asset Wealth; and GTB. The formation of a new division, the Non-Core Operations unit. Regional Management, which runs like a global spinal cord through our body. And Infrastructure, which deliberately this time is one integrated group.

So what's different? What's interesting? What's different and interesting is that we are truly one team, and this is not some nice virtuous-sounding management-speak concept. It's the way we intend to go about our business. We grew this bank in silos. Why? It was the right way to build. It's very difficult to build the capabilities we needed to. We were nowhere in investment banking. We were flatlining [ph] in GTB. We didn't really have an Asset Management business outside Germany. So 10 years ago, 15 years ago, 20 years ago, our predecessors created a structure, which was rather federal in nature. In addition to that, the desire to keep a separation between church and state meant infrastructure was at a great distance from business and in itself consistent of multiple silos. So silo busting to be at the heart of what we are trying to do, thereby driving efficiency at Deutsche Bank, which might be a somewhat unique phenomena here, is something we expect to take very seriously.

And for those that doubt it, can I please point to you our track record with Integra. We stood in front of you 2 years ago. We made a number of promises. We've come good. Rainer Neske stood in front of you and talked about what he intended to do with Deutsche Bank and Postbank, and I'm happy to tell you that's going really well. So the fact is this structure realignment is something which we are counting on, not just to deliver value to us and to you, but to also deliver a better service to our clients. What was notable to me about Integra was not only were we able to cut cost of coverage, improve our risk-weighted asset efficiency, when I went calling to see particularly our corporate clients, they were really grateful that as opposed to having 5 teams from Deutsche Bank jostling with each other, not knowing whether the other one had just been there that morning, we now had a cohesive single-front offering.

Geographically, our bets are what you would expect them to be. Juergen pointed this out. I think it's a very good point. Our acquisitions were largely, almost exclusively, geared towards buying stable business streams in Germany, Sal. Oppenheim, Postbank leading the way. We needed Germany to do well. It is doing well. We're very lucky. We're very fortunate. We want to increase the size of that bet, yet we can improve the efficiency of that bet. And I know that Juergen has that at the top of his to-do list.

Continental Europe, we always said Europe will survive. Many of you came to me and I've had those one-on-ones with you, where I know our American colleagues, particularly in some of our British competitors, have been very strident in saying the euro will fall apart and have given lots of reasons why that might happen. We felt that the will to keep the euro together was very much in place. That is now looking more likely that it was a little while ago. But equally, we realize that the magic panacea of growth is not about to show up in Continental Europe any time soon. We are overinvested.

What does that mean? We feel we can keep our market dominant position in Continental Europe. Don't forget, all our competitors are shrinking, not the least by the way domestic banks are shrinking. But there is that golden mean where we can keep a lot of our margin, maybe not all our clients, but most of our clients, particularly the ones that we have long-term partnerships with, while significantly reducing some of the resource allocation that we put there.

The U.S. to us has been a critical part of our strategy for the last decade. It's brought a great deal of upside. It's brought a great deal of pain. That, I think, is the fate of most organizations that choose leading banking market share in the United States. We've had a very strong experience in terms of building market share. We've had few challenges as well. We remain cautiously optimistic about our business in the U.S., which basically means we're looking to grow market share but not willy-nilly. Focused growth is what you can expect from us.

Asia. You've got every one of my peers standing in front of you saying the same thing which I'm about to, so I'll spare you the "Asia is going to grow fast" story. Let me instead point to 2 things which Juergen said, which I think are critical. We're looking at the subtrends in Asia. It's a big area. We'll actually be pulling back resources in Japan. Not just Japan, there'll be other locations in Asia which we think we can optimize further. However, we're looking at the underlying trends. Urbanization being a very critical one, the switch in spending in China being another one, and there's many others. And we're committed to exploiting the local markets opportunity, not just being the best foreign bank in these locations. But net, you can expect growth.

I made -- I touched on this point earlier. Let me draw upon it a bit more. Because later on when we talk about cost efficiency and big jumps in optimization, you're right to be skeptical. The heart of all of this lies in the fact that we don't think we need to acquire a whole bunch of new clients. Deutsche Bank is very happy, very blessed with the diversity of clients, with the global nature of our clients. We think we know who we need to do business with, and they've known us for a decade or much longer. We don't think we serve them particularly efficiently. We've gone through a very ambitious project in CIB, but we haven't done that on a bank-wide basis.

And if you particularly look at the ultrahigh net worth coverage model, the Swiss firms and Goldman Sachs, to name 3 of our competitors, do a far better job. Their wealth management and their investment banking proposition to the ultras is totally synchronized. Ours isn't, and I can see it both anecdotally and in numbers that there is huge upside. Juergen's got passion in saying that our client delivery in Germany can be improved. I mean, there we are. This is our home market. We're as efficient as we could be. And yet when it comes to client optimization, we haven't done as much as we could. So lots of upside.

The thing what you can really count upon Deutsche Bank to do, which we haven't done particularly well in the past, once again, is to ask ourselves 4 questions. And you have to keep it very simple, every time we're looking to allocate assets or decide where resources should go. How does the business add value to clients? Does it meet performance criteria? How well does it align itself to the long-term outlook that you've seen before? And does it contribute to balance? 3 greens, not much debate but a lot of resource in. 4 greens, double up. I'm saying that likely not literally. 2 reds or more is where management really has to get to work. And frankly, we think about the alpha that can be generated by either retooling those businesses or exiting them. That, again, lies at the heart of what we're about to promise to you.

Let's get real and take a look at some examples. You can see the businesses that we're looking to exit. That's fairly clear. It's the turnaround businesses where we see huge opportunity and the invest businesses where we see huge opportunity. And really, in some ways, if you think about the asset reallocation whether it's costs, it's operation spend, it's capital, it's manpower, it's management time and attention, we don't think we've been as disciplined here as we intend to be in the future. You can argue whether we've got the bucketing right. That bucketing is dynamic. All I can promise you is that we are committed to constantly doing this analysis and reevaluating our bet size.

Okay. So now let me step through our critical businesses. I have to say many of you would think that PBC has one of the easier tasks in front of it. And candidly, before we began the 100-day review, Rainer did not get as much empathy from me perhaps as he does now. As we now look deeper into the business, yes, it's the business which is least effective. That's true. Of our 4-business portfolio, it's the same management, and the outlook is not terribly different. But it's not an easy outlook.

So if plummeting interest rate environment, which is likely to remain low for a long period of time, securities markets where both volume and direction are not our friend, represent 2 of many challenges. A strong and vibrant position in Italy and Spain add to our challenges. All against a backdrop of creating this integration between Postbank and Deutsche Bank, which is why I think it's all the more impressive that Rainer is confident that he will affirm his EUR 3 billion target in 2015, which is up EUR 1 billion from 2011. It will have to draw upon more optimization and synergies and cost management than it will rely upon revenue growth.

Again, are these numbers dramatically different from what we had? No, they are not. Will he benefit from infrastructure realignment? No doubt about it. So the front office side of PBC is basically reaffirmed, with a few more incremental steps, significant dividend to be gleaned from the infrastructure running more efficiently than it has in the past.

CB&S is 3 things for Deutsche Bank. It's our global face. Once you travel outside Germany, particularly once you travel outside Europe, really, it's what carries our flag globally. In Asia, it's been anywhere between 90% to 120% of our profitability. Take the investment bank away, Deutsche really isn't -- GTB then is the only other business which can claim to be truly global today. Without AWM functioning the way it does, we need the investment bank if nothing else for that.

But much more fundamentally, our view is that the services investment banking provides are crucial to clients. We have had a bad case of mission creep, as Juergen says. Now when you go back to the core mission, turning savings into capital, moving securities from one place to the other, providing trusted advice, helping clients hedge, can you really imagine civilized society without those services? Not really. Who's best provided? Who's best set up to provide those services? Is it the shadow banking sector? Or is it, in fact, a tighter regulated, well-capitalized global universal banking model? And if the answer is latter, we're convinced as a market leader, the RoE is bound to follow. What's required is for us to really, truly embrace the change which is needed in this sector, and that change has to come at all levels. Our business model has to go through a significant recalibration. Some of the bets, we call them luxuries, that we carried around, which were businesses which had a cost income ratio, which was higher than it ought to have been but was effectively cross subsidized by other more profitable businesses. Pre-Basel III, we could carry some of those businesses because clients felt there was a conglomeration premium. Now we have to ask ourselves much harder questions than we used to.

And there's many other things that need to be done, particularly when it comes to the operational efficiency of this business. We have to focus on platforms. We have to focus on delivering platform capabilities efficiently. Most crucially, the burden of cultural change will fall disproportionately on the investment bank. It is the area which has given the group the greatest number of challenges. It's also the area where the profit sharing between investors and employees has been the most asymmetric. And now as we stand in front of you with our Basel III capital requirements going up, particularly for this division, that ratio has to change. And as that ratio changes, we're hoping to be able to get some of that efficiency to bolster what would otherwise be a suboptimal and maybe unacceptable return on equity.

So the main point I'd make to you and, again, Rob and Colin will spend a considerable time on this topic tomorrow, our thinking on investment banking is very simple: services badly required; Deutsche Bank, global market leader; major room for operational efficiencies. We want to lead the way, particularly when it comes to cultural change. We'll talk more about that. But fundamentally, it has to be a business which gives you, the investors, an adequate return on equity. It's a volatile business. I don't agree with regulators who say over capitalize in investment banking and you'll be more than happy to receive a high single-digit RoE return. Why would you? I wouldn't be recommending to you if you came to me for advice, telling you to buy a pure play investment bank for a 7% RoE. And if you won't, eventually, margins have to go back to a level that you consider acceptable. We want to be one of the winners.

Asset and Wealth Management is where we expect the greatest amount of skepticism from you. We're making a very big promise. That skepticism is entirely justified. You would not be doing your job if you weren't handicapping the promises that we're making you in this division quite considerably. I'll just draw your attention to 3 things when you look at our AWM chart. A, I always ask myself, how are the well-run firms doing? And the answer is they're doing really well. If we attain this target of EUR 1.7 billion IBIT by 2015, in unchanged wallet environment, it would make Deutsche Bank #5 in the world. History tells us most things we set out to do, we wind up becoming top 5 in pretty quickly.

Well, let me move on. We are consolidating 3 divisions into one. It's not just combining Asset Management and Wealth Management. It's also taking a substantially profitable and rapidly growing passive Asset Management business inside the investment bank, which was built without any of the benefits of the fiduciary wraps and labels that are now available. It's a 3-way merger. Tremendous duplication of functions, which can be eliminated.

We're not telling you a big revenue story of the EUR 1 billion turnaround that we see in the next 3 years. The burden sharing between costs and revenues is 70-30, EUR 700 million of cost reduction, EUR 300 million of revenue enhancement. No great assumptions on wallet increase. I'm actually not that optimistic, particularly when it comes to institutional Asset Management. We can't stand here and tell you we expect a low interest rate environment, a challenging securities markets environment and tell you a very bullish story in terms of margins or volumes. We're telling you a story about rationalization and cooperation within the bank.

And the final point I'll make here, by the way, is the cooperation between the investment bank and wealth management particularly is something which we think we can mine, which is not cross-selling products into wealth management lest you think that's what we're looking to do. It's approaching clients together and more cohesively.

GTB, we're making a bold promise as well. But the reason we show you some history here is to remind you that these bold promises have been realized in the past, a business which was founded by Juergen Fitschen, I'll be happy to point out. He laid a very solid foundation, brought a global thinking, brought a desire to invest in technology and a desire to make it an efficient platform. That was Phase 1. Phase 2, Werner Steinmüller put his own stamp on the business, put his management team in place, realized that if interest rates would be low and low for long, he needed a business model which was much more focused on fee income than it was on net interest margin. Did that really well. Stage 3, Integra. Along we come, we smashed these 2 divisions together, and we reaped significant benefits. Stage 4 is really a case of investing for growth. So unless you think that this recalibration phase is all about efficiency, cost-cutting and taking resources away, we're not afraid to identify opportunities where we see a clear room for margin expansion, clear room for higher volumes and also, candidly, a business which is geographically very well set up for the picture that we see developing. Big base in Germany, very strong base in Asia, particularly India and China. In each one of these areas, it's got low tail risk, high return on capital. It's a business which is under-invested in, Deutsche has a gap to the best, and we intend to close that gap.

So what does the overall business portfolio of bets look like? Very simple. Our 2 best divisions, and I mean that qualitatively, as well as quantitatively, for the last decade have been Investment Banking and Retail. No debate about that. They have been market dominant in their categories and have contributed mightily to the group's profits, some would argue too significantly. In both of those divisions, the revenue outlook looks challenging, Investment Banking more so than Retail. But in neither of the 2 businesses do we feel comfortable standing in front of you, telling you a very bullish revenue story. So instead, it's going to be a significant cost story. It's going to be a significant capital story. In Asset and Wealth and GTB, you can clearly see what we're looking to do. The allocation of resources will follow the projection that we see in terms of the health of these businesses.

This point I made before when I talked about GTB. But even more broadly, I would hasten to point out that while the medium-term outlook looks very, very grim, the fact that things are challenging for our clients as well mean we see tremendous opportunities coming our way as well. And we are not shy in terms of grabbing them. The reason we've been able to generate adequate returns and we continue to think we can fund this capital development is because our competition is suffering at least as much as we are, if not more. And our client is still needy for good solutions and good advice.

So then let me move to the specific topics, which I suspect you'll have the deepest interest in. Clear statement, we recognize, as Juergen said, that our capital is not where it needs to be. We are convinced we will get there organically. And we are raising our guidance versus what we've communicated to you in the past, 7.2% by the end of this year, greater than 8% by the first quarter and above 10% by March 2015. Those are very clear goals. We intend to get to those goals largely through de-risking and through retaining earnings. We don't think we will have to resort to capital supply measures in order to get there, and we're not making very heroic assumptions in terms of business circumstances or revenues in order to be able to portray those numbers to you.

So the reality is we would be irresponsible to you, our investors, if we chose the easiest route for us in management is to do what a minority segment amongst you has been telling us consistently. What does it take to go out there and do a rights issue and dilute our existing shareholders? Not very much. We are not sure that would be in the best long-term interest of the group. And now that we have done our detailed 3-year forecast, our confidence that we can get there organically, higher now than ever before.

Central to establishing our capital goals, to reaching our capital goals is the establishment of a Non-Core Operations unit. A couple of words on this. The size of the asset transfer from an RWA standpoint will be very high to many of you. We understand that. EUR 135 billion is a significant chunk of our risk-weighted assets.

Let me make a few points which I think are vital to note. These are now for the most part seasoned, well-performing assets. They've actually been making a pretty reasonable contribution to our IBIT candidly for the past many years. We felt that they would be reasonable. We didn't want to sell them, and they've proven to be reasonable. Unfortunately, they no longer support our client relationships. They have very little to do with the production of ongoing revenues. And with the introduction of Basel III, the risk-weighted asset utilization is going to go up dramatically.

The balance sheet consumption of these assets actually is not very high. It's almost a one-for-one ratio between our IFRS footings and the RWAs. So the definition is straightforward. It's all about assets which no longer drive customer revenues for us. Stefan Krause, our CFO, will oversee this unit. This unit's got one purpose: to de-risk and derisk rapidly, but do so in a way which is prudent and manages that balance between what is best for our investors and what creates capital the fastest. Clearly, we are reliant on orderly securities markets and an orderly world environment in order to be able to get there.

The other very positive attribute of setting this unit up in our mind is it gives you clear transparency and visibility in terms of how our ongoing operations are working which, particularly for PBC, who are just contributing assets via its Postbank portfolio, and much more so for the Investment Bank, are vital. Very difficult for us to keep this EUR 100 billion of risk-weighted assets saddled inside the Investment Bank and for you to be able to judge how our foreign exchange business is doing. Very hard to do that. So if we are going to be transparent, it starts with the formation of this unit.

One other very important point, no tax holidays for anyone. So if you think that the movement of these assets mean that the operations on an ongoing basis will be able to make bonus claims or performance claims having divorced these troublesome assets, you needn't have that apprehension. The tax will go straight back to the divisions which originated those assets and indeed their expertise in helping us de-risk will be drawn upon significantly. The moral argument there, by the way, is a very straightforward one as well. You cannot inherit a world-leading fixed income currencies and commodities platform, Colin, and feel -- and by the way, he's been the leader in saying this -- and wish the legacy assets away. They're part and parcel of the same growth story.

So dedicated governance is critical. I made that point already. We're making now a very straightforward commitment to you. We are starting with EUR 135 billion. We're looking to take it down to EUR 90 billion by March. So the bulk of that de-risking will happen on a front-loaded upfront basis. Delighted to tell you that the journey has begun extremely well. We've managed to cut approximately EUR 14 billion off that EUR 45 billion target in the last 2 months. And so far, we've done it without a material dent to our P&L. We've taken a loss but it's not been a significant loss. Now on an ongoing basis, do we think we can annualize that pace? No, we cannot. But we remain comfortable and confident that we'll get there.

Our risk discipline is something which I have to draw your attention to. Of all the problems that Deutsche Bank has suffered, and I really knock wood fervently when I say this, a number of our competitors post 2008 have had one market risk issue after another. So for us to maintain a market-leading Sales & Trading franchise and not incur a major market risk problem is something we take as a very good thing. And we're committed, Stuart Lewis and his team, to making sure that we keep that very strong ratio between earnings capacity and GAAP risk and manage that very carefully.

The next slide which I know is going to get a tremendous amount of questions and analysis from all of you because it's a big bet we're making. It's an operational excellence bet. We're aiming to save EUR 4.5 billion on a run-rate basis 2015 onwards. For those that are wondering if this is all back loaded, let me assure you that's not the case. You will get approximately 1/3 each year, not quite, but very close to 1/3 each year. So roughly EUR 1.5 billion in savings a year for the 3 years, culminating in a run rate savings of EUR 4.5 billion.

Now there was a lot of questions whether this is a gross or a net number. It is a gross number. What we've reported to you back in July with our ad hoc was a net number. But remember, the difference between gross and net is a reinvestment of costs, which we can choose to make or not make depending on whether we are meeting our other goals. We promised you a nimble responsive management strategy, and part of that is going to be the reinvestment for growth. So if you will, that's the part which is back loaded. We're not looking to spend that upfront.

The next question which I would anticipate, and then I'm sure you'll have many more, how can you go about saying you can cut EUR 4.5 billion in costs and not weaken your earnings capacity or your value proposition to clients? The answer to that is pretty straightforward as well. We feel our past structure was so silo-driven and had enough gap in it that we can identify a lot of that. Now in cases, we will have to give up ambition. In some cases, we will shut our businesses down. In some cases, we will cut our ambition in terms of how many clients we want down as well. But we're not getting there by exiting whole scale operations.

Critical to recognize that we will spend EUR 4 billion as a one-off cost to achieve. Why is that ratio relatively strong? Because candidly, we're in touch with a whole range of things that can be done, which are non-personnel related. So in our experience, the slowest, most expensive restructuring comes when you let lots of people go. Will we wind up reducing headcount? In all likelihood, yes. But 6,000 legal entities, 600 IT applications inside Asset and Wealth Management, entirely too much infrastructure staff sitting in expensive locations in New York and London, and I can carry on. Our 100-day review has identified enough such issues that we know we can identify and remove them without long-term IT development or huge severance spend, which is what tends to weaken that efficiency ratio.

So in summary, what are we looking to do? Fairly straightforward, we're looking to go from a 6% or below 6% Basel Core Tier 1 ratio to 10%, cost income ratio from 78% to 65%. You can see the RoE change on a post-tax basis. One very quick comment. Post-tax because the reality is you cannot say that capital is all important and be reporting pretax numbers. The only way you'll create capital is on a post-tax basis, which is why we think changing group think to that. Divisional aspirations, we're not putting out a CB&S target. Why? We don't really have visibility on revenues. We're controlling what we can control, which is costs and capital. We let the revenues float within reason to where they go. And very clear targets in the other 3 divisions and, frankly, significant growth in those other 3 divisions.

What are we really trying to do? I think Juergen hit it right upfront. All I'm doing is repeating it, which is if we can achieve operational excellence, if we can create a market peer group capital organically while retaining this incredible breadth of businesses, this terrific DNA that we have, this very good global presence that we have, at that point, the strategic flexibility we'll have. And we've thrown out 3 teasers on the right side of the chart. There's many more. We will have any number of options to play with inorganically if we choose to. At this point, we have to remain very disciplined, not be beguiled by any of those opportunities, stay the course, fix the bank.

So that then brings me to the most critical topic of all. I'll kick it off. And as Juergen said, I'll then hand off to him. Two things I want to say when it comes to culture. It's easy to now blame every single thing which has taken place. Let me remind you that as recently as the mid-1990s, which is when many of us came onboard, when Deutsche Telekom decided to privatize or to go public, Deutsche was not initially even on the shortlist of firms that were brought in to do that IPO. As Paul Achleitner keeps reminding me, Goldman Sachs was in the lead because we were not deemed to have a good enough equity department of global distribution capabilities.

Over the last 2 days, I'm proud to tell you that we have been stabilization agent, joint global coordinator for the largest follow-on ever done in the U.S., $18 billion AIG. Who was the client? The U.S. Treasury. Something good happened here in the last 20 years. And there's no doubt that our performance culture, entrepreneurial spirit, our cultural diversity are all things which would be the envy of our competitors.

Equally, we made mistakes. Now I can tell you those mistakes were made by the entire industry, but that's not good enough. The reality is those mistakes have been very personal -- have been very painful for me personally and painful for us at the group level. So a rebalancing of those values toward a longer-term orientation, greater client focus and a real emphasis on teamwork and partnership are crucial. Those though are just words. We recognize we need to take very clear steps in order to get there.

We also recognize we need to keep the best talent in the world anchored at Deutsche Bank, and we're not the only firm in our industry. There's others as well. Best place to start is for the senior management team to make a commitment, and it's made that commitment. We're going to move the Management Board, the GEC and all direct reports to the GEC, which is approximately 150 employees to a 5-year cliff vesting stock program. What does that do? It does 2 things. It anchors them to the long-term performance of the stock, and it allows us to claw back 100% of that deferred compensation, if their individual behavior is not up to good standards or indeed if the bank fails on the metrics which we're committing to you.

Now the first statement which I'll make, and the banking industry gets no credit for it, even before this move, the industry leads every other industry. I can't think of any other financial services organization or indeed industry which ties its management for quite that long with clawbacks. Within that industry, it positions Deutsche now at the very top. It's not just a commitment towards increasing vesting schedules. We'll make a commitment to you when it comes to the quantum of bonuses to performance, so-called payout ratio. It's got to go down.

I cannot stand here in front of you and tell you we're taking the RoE targets down and not tell you that the employees are willing to make their share of contribution as well. They will and they must. It goes beyond compensation. We need to link our values to behavior. And that comes 2 ways. The criteria on which we promote cannot just be a stock culture where we recognized our performers but people that create sustainable value, people that create teamwork also have to be put in positions of authority. Perhaps just as crucially, we have to find the miscreants who have done the damage to the bank that we suffered from in the past and punish them and really make sure that examples are made. And I think on both of those fronts, we will do a whole bunch of things more stringently in the future than we have in the past.

So with that, I'll hand it back to Juergen to continue the culture discussion. Juergen?

Juergen Fitschen

Thank you very much, Anshu. It would have been easy for Anshu to conclude, but we decided that we'll use the culture theme to demonstrate also in a visible way we are both standing behind it and that includes all the gentlemen sitting in the front row. Because as Anshu said, this is not about one particular area. We want to demonstrate that there is a one-bank culture in place that allows us to mend all the broken ties with society in a very convincing way.

Anshu has already talked about compensation and what has been done. Obviously, by being the frontrunner, we do run a certain risk. And I think we want to demonstrate to you that we're aware of it but that we share the confidence that we can also turn this frontrunner status into something that differentiates us from both our competitors and from other parts of industry so that we can become a kind of role model and, by doing so, enjoy a very privileged status also in regard to the way that clients decide to allocate their business going forward. We believe that this is a tremendous opportunity that's unfolding here in front of our eyes.

The desire to enhance transparency in a way that shared belief is easily established has led us to one other thought that we are going to report on in more detail, again, supporting the view to create a new awareness of what culture means. We have decided to establish an independent panel that is going to support us in defining the principles under which we do perform regarding compensation in the future. And we can already state today that we have found the individual who is heading this panel, and we have not decided yet to disclose his names because we want to complete the panel first. But you can respect us for a little bit of a moment in this respect, I would think, and have some patience before we then come forward with the full composition, which is a good mix of expertise in various fields of society to make sure that we have a very comprehensive review established for us and, thus, derive the best value out of this initiative. It is more than what some people might hold against us, just a marketing gimmick, a onetime effort to basically serve as an alibi. We want this panel to stay with us, be critical and help us in defining the best way forward regarding this critical issue.

This brings me to an end. But before opening the Q&A session, let me just introduce a gentleman you see in front of us. I admit, there's one fundamental weakness that we have not been able to overcome during the 100-day period, however hard we might have tried, and that's a lack of gender diversity. We did mention this. We're also taking it serious as part of our culture. We weren't able to attract female talent. And hopefully, one of these days when we get together with you, there's a more colorful mix of ladies and gentlemen then ready for your questions. All of them will participate tomorrow when we have reserved another full day for you. And we have trust and confidence that given the way they are prepared for that meeting with you, you will, by the end of tomorrow, have a very comprehensive picture supporting what Anshu and myself have tried to convey to you as the opening presentation.

And with that, I would like to open the Q&A session. Thank you for your attention.

Question-and-Answer Session

Unknown Executive

Thank you, Juergen and Anshu. So for the Q&A, I would like to invite Stefan Krause, our CFO, to the panel. And I think we then just jump into the questions, please.

Kinner? Can you please say your name and your company. That would help a lot.

Kinner R. Lakhani - Citigroup Inc, Research Division

It's Kinner from Citi. So I had 3 questions. First one was on leverage, where I think the gap that you would find in common equity Tier 1 ratio would be even greater relative to your peers. So even if I assume that you lost EUR 135 billion of assets, I'd still find compared to your closest competitor in Europe 1/3 less equity. And clearly, the leverage in the U.S. is even lower than the European is. Number two, just trying to better understand the cost of deleveraging, so again pointing to Slide 27, both in terms of the upfront costs when you reduce those RWAs. So other banks that have been doing this over the last quarters have been experiencing some hits along the way. But also in terms of giving us a better sense of what happens to the recurring revenues, to what extent do the deleveraging and restructuring plans impact the revenue line? And the final question was on regulation. Clearly, we're expecting something from the Liikanen commission before the end of the month and wondering what kind of impact that might have. What have you thought about in that sense, if you had some kind of trading reprint or trading book reprint?

Anshuman Jain

I'll take the first 2 questions. So on leverage, it's really a funding question. And Deutsche's funding is about the strongest of any of our peers. We don't take leverage lightly. But candidly, we are ahead of the regulatory hurdles that we need to be. And we are funding extremely well. So as Core Tier 1 improves and we build up shareholder equity, we're not looking to increase our notional balance sheet substantially, so you'll see our leverage ratios improve. But we also feel that, here, you have to take into account the fact that some of these peers you're referring to are in a considerably disadvantaged position versus us when it comes to access to funds and cost of funds. Cost of deleveraging, all I can tell you is that it's actually very straightforward. We have it built into our model. So when we lay out our 3-year vision, when we lay out our capital accretion, there is a cost to achieve on the deleveraging as well. We have started on a very, very positive note. We're not pretending that, that's going to continue. But you can expect that we will constantly be calculating the opportunity cost of holding it versus the cost of creating equity. And that's the algorithm that we will be using in order to keep on deleveraging. There are clear estimates that we have, and those are the ones that we expect to follow. Juergen, do you want to take the question on Liikanen?

Juergen Fitschen

You're right. Everybody is waiting for the results of the Liikanen commission. Some people get very excited about the prospects of hearing very dramatic things. Others stay more relaxed. We belong to the second category. Not that we underestimate certain ideas that have been floated within the group. But regarding our business model, based on the universal banking model, we have strong indications from Berlin and Brussels, the business model that they are supporting of. And we believe that also clients, despite the occasional exception that you can also hear, by and large, are very comfortable with this business model. So we did actually concentrate on the assumption that this is going to be the principle that we can adhere to. And we believe that it is wise to focus on what is most likely going to be the accepted business model going forward. Now if we should be caught by surprise, things will not change overnight, and we will have the flexibility to adjust and respond correspondingly.

Anshuman Jain

Can I just jump in one, Juergen? Stefan does point out to me that we are disclosing our cost to achieve the first EUR 45 billion and that's EUR 500 million.

Juergen Fitschen

And maybe we can add. Can I get back on the mic? We can add we have so far de-risked EUR 13.5 billion in total capital demand and had a gain of EUR 15.6 million. Just to give you a feel, and that why it's very difficult to estimate what -- how this can go very well or this can obviously generate some cost. But I think these 2 data points give you some...

Anshuman Jain

Well, having been involved with some of that de-risking, I would hasten to add that please do not extrapolate and think that we could gain a significant amount and sell EUR 200 billion of assets.

Unknown Executive

Let's move on. Derek?

Derek De Vries - BofA Merrill Lynch, Research Division

It's Derek De Vries from Bank of America. Just to touch on some of the things you were just talking about. You have your after-tax ROE target at 15% at a group level and then -- 12% at a group level and 15% at a divisional level. So there's a pretty big difference between some of the divisions and the group. And I guess that means you're going to lose EUR 1.5 billion as you delever and have a very expensive corporate center or something. I was wondering if you'd give a little bit more color on that because as we get out to 2015, I wouldn't have thought there'd be such big losses from the legacy positions.

Anshuman Jain

The difference is Non-Core Operations. That is the...

Derek De Vries - BofA Merrill Lynch, Research Division

So it's a EUR 1.5 billion loss then?

Anshuman Jain

Bank levy and...

Juergen Fitschen

Bank levy and then consolidation between the segments. And then, obviously, we have between our core and our mark-to-market accounting on the treasury side, we always have quite substantial numbers. So these are the components of that. So it's conservatively planned, to be honest, but we wanted to build in some cushion to deal with it. And let's not forget that we also will have obviously litigation-related charges in that period. So that's what this amount covers.

Derek De Vries - BofA Merrill Lynch, Research Division

You're not going to add the bank levy back into the divisions, so they're getting a free tack [ph]. Because I thought one of the things you said was you're going to look at them after-tax because that was sort of a fair way to do it, but the bank levy is different?

Juergen Fitschen

At this point, we don't allocate the bank levy to business divisions. We looked into the general practices. It's quite split in our comparatives. So at this point, we don't allocate, no. That's why these numbers we have provided on an unallocated basis.

Unknown Executive

Dieter and then Fiona.

Dieter Hein - Fairesearch GmbH & Co KG

Dieter Hein from Fairesearch. I have 2 questions. Firstly, some month ago, you planned to reduce the biggest part and to sell your biggest part of your Asset Management unit. Now you canceled this plan and it's for the core business. So why did you cancel the sell plan? Could you give us maybe some targets for the units you wanted to sell, what they should achieve as a return or pretax profit contribution to 2015? And secondly, if I understood you right, you expect cost savings of EUR 4.5 billion per year from 2015 onwards and you expect no revenue losses by the cost reduction. Is it right? Or what do you expect on the revenue side there?

Anshuman Jain

Let me take the Asset Management question first. You're right. We did review -- the previous board, of which Juergen, myself, Stefan were all part did review and were part of the decision to sell those businesses. It was in a very different context. It was in the context of a siloed Asset Management division, which did not have the synergies with the businesses we are moving over from the investment bank. It did not have the cost-saving benefits that we envisage for the platform going forward. And it also did not have the cross-selling benefits potentially that we have with Private Wealth Management. So the new management which has come in has finished its review of the operating divisions and has come to the conclusions that those are better businesses to turn around than the sale price that we were looking at. So you have no sale price built in to the assumptions that we are making. The numbers that you see are inclusive of a holistic Asset Wealth Management strategy, of which the divisions which were up for sale now play, frankly, not the most significant part, but a part. Michele Faissola will be presenting to you tomorrow. I would very much recommend that you listen to his detailed vision on all of that. But that, it has to be looked at in a different context than it was in at that point. So your second question was...

Dieter Hein - Fairesearch GmbH & Co KG

Revenue losses.

Anshuman Jain

Revenue loses. Well, absolutely, there'll be revenue losses. There's no doubt about the fact we have a number of 100% cost income ratio business, which when you exit or you radically change, it's not as if you don't lose revenues at all. But as long as the revenues that you're losing are at that 85-or-higher cost income ratio, you're benefiting the CIR of the group overall. So if you go back to the 4 check box that we have, a number of the businesses that we will deemphasize are not 0 revenue businesses but are very inefficient revenue businesses. And all of that is built in. So when we lay out our 2015 journey, there's a number of businesses, there's a number of locations, there'll be a number of clients that we may choose to put less emphasis on in the future than we have in the past, which means we'll have lower revenues but much lower costs as a percentage.

Dieter Hein - Fairesearch GmbH & Co KG

Could you give us a feel...

Unknown Executive

Take the mic, Dieter.

Dieter Hein - Fairesearch GmbH & Co KG

You gave a figure, a concrete figure regarding the cost savings. Could you give a target regarding revenues producing...

Anshuman Jain

We're not providing that disclosure. All I can tell you is that we are providing you the guidance at the group level overall. So when we cut costs, there is an assumption of lost revenues. We're not breaking that out at this point.

Unknown Executive

Fiona is next.

Fiona Swaffield - RBC Capital Markets, LLC, Research Division

I'm Fiona Swaffield, RBC Capital Markets. Three areas. I just wanted to check on the cost because I may have misunderstood. So the EUR 4.5 billion is gross, and so does that mean then it's EUR 3 billion net? So it's the same number as you gave 6 weeks ago. So we're still running at EUR 24 billion absolute. I must admit I'm not quite getting all the moving parts. The second area is the financial impact of the deferral. So you're obviously changing the policy. Is that within -- I can't see it, but is it one of the moving parts? And how significant is it? And then the last question is Slide 27. You give 2 boxes on capital supply measures. I mean what would -- I'm just curious as to why you didn't look at the EUR 1.2 billion and include it? I think it's 30 bps or something or what would make you use that and how does that relate to the costs at all? I don't know if those are...

Anshuman Jain

I'll take the first question, and Stefan will take the next 2. The EUR 4.5 billion is very straightforward. It's a gross number. When we spoke back in July, we had the possibility of having an incremental spend, which, at this point, we don't envisage. So no, you should count on a EUR 4.5 billion reduction from the EUR 27 billion run rate, which we had in 2012. So double first half of 2012, minus EUR 4.5 billion. If the Management Board decides that we want to pursue growth and we want to start investing and taking the cost base up further from that, that's a lever we can choose to pull. What we're promising you right now is a EUR 4.5 billion gross reduction. Stefan?

Stefan Krause

Yes. And let me start with your first question here which was the impact of the increased deferral time. Let's not forget, it's 150 employees here. And the deferral changes from -- these were already highly deferred employees, only the difference is that we have a cliff vesting after 5 years versus a 3-year slice-type deferral. So in total, obviously, relatively thin. I will have now to accrue 20% for every year of this deferral of the 5-year base, while in the other scheme, I was front-loaded. And in the first year, I had around 60% of it. But when you really apply that to the numbers because it's only this 150 top employees for your models, I think the impact of these deferrals will be really minor. It's not material or substantive that it cannot change our P&L significantly. And EUR 1.2 billion supply measure suggest an indication for you of what we could do. Because obviously one of the concerns we assumed that you have is as we're going to the significant deleveraging of the bank and cutting risk-weighted assets, we have made the decision to put forward to you also in our toolbox what other flexibility do we have, see it as a little bit of an insurance. So if any of the other outlined measures -- and I will go into more detail tomorrow in my presentation on these measures, if we were not able to execute them for whatever reasons and let's not forget that some of it is for example also approvals from regulators that we need to get timely. We just wanted to show you that we have enough room or flexibility in our toolbox, yes, that we could then replace measures that we do not achieve, yes, with other measures. And we wanted to give you also and disclose to you the size of about these measures to you. Don't get concerned that we will not achieve our 8%.

Unknown Executive

Next question. Stuart?

Stuart Graham - Autonomous Research LLP

Could I ask a few questions on compensation, please? On Slide 38, that 11% payout figure, what do you think that should fall to? You said that should go down as the ROE target has come down. The second question was, I mean, you're obviously one of the leading players in investment banking, do you think you can get to a situation where people accept less to work for you because of that leading position? Or do you think you always have to pay the market rate for people? And the third question was for those people on the 5-year vesting, if we look 3 years down the road, you've tried your best but you haven't made the 2015 targets. Do you still get your bonuses paid out? Or are you all in, if you miss those targets, you don't get your bonuses paid?

Stefan Krause

Okay. Yes, let me start with the first one. We have no target for that number. With the chart, we just wanted to show you the development and how significantly this piece has come down. So we're not setting any target for that number. But already, the level has reduced quite significantly, so we also had to keep within our competitive set and be accepted obviously as a much more significant reduction. At the pace that we're going, it's probably not going to happen. And can you pay less than market? I'll defer that to...

Anshuman Jain

I'll take that. Why don't you take the third one.

Stefan Krause

Should I go with the third one?

Anshuman Jain


Stefan Krause

Well, the compensation program is the clawbacks mainly is tied obviously to the fact if the group has a loss, then we lose this cliff vested amount. Second, of course, if you leave as a bad leaver to a competitor, you will lose this amount as well. So it does bind the people to [indiscernible]. What we have not done yet with one of the tasks ahead is to now clearly define the other planned routes. The other planned routes will be discussed in our compensation committees. And as you know, we have also set up an external remuneration committee. So we have to ask to you to bear with us here in terms of how we finalize because the size of the bonuses, of course, will be tied to performance, but these metrics we haven't worked out.

Anshuman Jain

So let me just pick up the tail end of what Stefan said because there's an important point here, Stuart, I'd like to make, which is if you look at value to employee, VTE is what we call it, which is cash, which is salary plus the cash percentage of your bonus plus the stock, it's in recognition for what you achieved in 2011, which is now being deferred out for 5 years. The question that you're asking is what happens if we don't meet these targets? Surely, that should be hurting your future bonuses, not the bonuses in the past. So clearly, the clawback is triggered if you behave badly, which is the thing which we are most passionate about, not just in the criminal fashion but, frankly, in an unethical fashion. And we've done this now in a variety of situations. And I feel that, that's a much better balance of risk versus reward, so that will happen. But the targets we've just given out to you that we are very happy to be measured against and equally are being cascaded down into the organization will affect the future bonuses of employees, not the clawback provisions, which I think is only fair. Your second question is the toughest one for us, which is what if we are the only ones to take these measures? Because as we've said, we can't think of too many other banks, which are putting their senior management into the 5-year cliff vests that we've asked for nor are they committing to lower payout ratios. Can we go it alone infinitely? The answer probably would be not. We would have to start exiting businesses if every other firm decides to stay with its current compensation ratio. Now clearly, there will be a quota [ph] of people that want to work at Deutsche Bank for a whole variety, and we really hope to encourage and increase the reasons that you'd want to stay on. We haven't talked about that. Can we count on, particularly outside Europe, to be the employer of choice in investment banking, which is, in the end, a mobile labor market if we're the only ones? It will be a tremendous challenge. Every sign I see tells me we will not be the only ones. We can't afford to be. And frankly, I really want to recruit everyone in this room to make sure we're not the only ones because we're taking a step in the direction that you wanted us to take. Please, please, please, now go see my competitors. Go see the boards that come to you and ask them this question as well. I know many of you will write tomorrow, we haven't gone far enough. Perhaps fair enough. What about the other 8 firms that are doing nothing at all? Let's level the playing field. It's in your best interests. It's in our best interests. And I would even go far enough and say it's in society's best interests.

Unknown Executive

Okay. Kian?

Kian Abouhossein - JP Morgan Chase & Co, Research Division

Yes, a few questions. Slide 15, you give some CAGRs on revenue growth and I get to back of the envelope about 3% growth per annum. Does that sound about right for kind of assumed revenue growth in your numbers? The second question relates to Slide 27. I just wanted to reconfirm the July Basel III guidance that you gave as a result of EUR 465 million risk-weighted assets as of the 1st of January and EUR 33 billion of capital, if that still holds. And in particular, I'm interested in the EUR 45 billion of reduction in risk-weighted assets because if I add up the EUR 29 billion that you gave in July and I add up the CIB workshop numbers of runoff, I get to roughly EUR 50 billion. So is there any new number in the EUR 45 billion from what I knew already from CIB, plus the EUR 29 billion additional numbers that you gave? And lastly, you mentioned further capital supply measures, dividend and authorized capital. What would trigger for you to use those?

Stefan Krause

So let's start with the first one to answer. Your CAGR number, we don't give specific revenue target numbers, but we broadly expect to be within the market in the 3% to 4%. That was the assumption we've made underlying for our plan. Slide 15 refers, obviously, to IBIT growth, yes, and not to a revenue growth, only to clarify this. And that's all before our consolidation and other adjustments that we have. On the guidance, I just have to look up my numbers since you're quoting numbers here. You'll remember that, number one, obviously, the risk-weighted asset number also changes with currency. So that's something that we also have slight changes in that number. And we did tell you the additional EUR 25 billion -- EUR 20 billion in cuts that we decided to do in Q2 that the program has progressed quite well. We told you that we've already achieved EUR 14 billion in that number. So let me -- and the planned number as you had corrected for the 1st of January is EUR 435 billion in total. But let me reconcile these numbers here out of my numbers and then I give you an answer a little bit later. Yes? And then the authorized trigger.

Anshuman Jain

The authorized trigger is a complex question, and it would depend on a whole set of circumstances. We definitely want to give ourselves the leeway that if we happen to miss an interim target by a small margin but our outlook remains unchanged, we will stay the course. But clearly, if we had a totally different view, I mean, Juergen laid it all out in the beginning. If our assumptions on the world are completely different, then, obviously, that will change everything. But clearly, we will give ourselves a level of leeway versus the promises that we are making to you.

Kian Abouhossein - JP Morgan Chase & Co, Research Division

If I can, one more add-on question. Strategically, why didn't you consider merging transaction banking into the IB? And so considering this benefits from a Prime Brokerage perspective and I assume the client base is very similar, is that something that was considered? And why did you not go that way?

Anshuman Jain

We merged our marketing, a structure which the organization is now adopting a year later, which I commend greatly. So we did merge the client acquisition and the client management process. But frankly, the culture and the product development that takes place in investment banking and GTB is different. You're very right in saying there's aspects of the investment bank, what we call the platform businesses. You mentioned one. There's many others, the money market business, the financing business. You mentioned anything which involves collateral movement does have strong synergies with aspects of GTB. Having said that, we feel that the cost base, the front office culture and so on and so forth has really benefited from having the deep focus that we have from a product standpoint in GTB while melding the marketing. So in our opinion, we've got the best of both worlds by now having a unified distribution force, which is paid for through self-production credits and then cost transfers back to GTB, enormous success -- enormous demonstrable success. GDP marketers are now marketing capital market products and something which we never thought was going to happen. We've got investment banking salespeople, corporate financiers, routinely now plugging us in and getting us GTB opportunities. So we've extracted the bulk of the synergies. You're right. Are there some unexplored synergies in product creation? There are. But in our opinion the cost and culture benefits of keeping a united global product offering outweigh the benefits.

Juergen Fitschen

I'll take the other one.

Anshuman Jain

The other one -- you've run that business a long time.

Juergen Fitschen

There's one other aspect. I believe that you appreciate to differentiate between the nature of earnings in GTB and accord a higher multiple to that than you would accord to the rest of the Investment Bank. If you tell us that it's the other way around, we might reconsider actually.

Stefan Krause

Okay. Kian, I have -- can I go back? Okay. I have the numbers now for you. So on the 1st of June 2012, the Basel 2.5 figure that we have, EUR 373 billion in risk-weighted assets. We have now Basel III effect after targeted management. Actual testing has increased. It's EUR 109 billion. Then obviously our capital demand measures that we will implement by the 31st of March 2013 is a negative EUR 85 billion, which we have also increased. So our 31st March 2013 risk-weighted assets will now be EUR 397 billion. At the same time, our June 30th capital on the Basel 2.5 was EUR 38 billion, which gives you the EUR 10.2 billion quota. We will have a Basel III impact of about EUR 6 billion in capital. Our dividend accrual and our cost in the additional management action, about EUR 1 billion further reduction our capital net off. So we have our 31st March of 2013 capital being at EUR 31 billion. And then obviously, we need to grow this number to EUR 32 billion to achieve our 8% by the 31st of March of 2013. EUR 14 billion of the EUR 45 billion reduction in Non-Core includes, obviously, actions that we had in previous publications. Additionally, we had already published the EUR 20 billion from CB&S that we have told you. We had the EUR 5 billion from Actavis and EUR 3 billion from BHF. And there's EUR 17 billion in additional measures that we put in. So there had been some changes to the plan. But I'll be talking in detail -- I'll repeat these numbers tomorrow and give you some more information around it.

Unknown Executive

Philipp and then Chris.

Philipp Zieschang - UBS Investment Bank, Research Division

Philipp Zieschang from UBS. Three areas to cover, please. The first one is deferred compensation. Just thinking about it, you've increased the deferral rate on your 2011 bonuses from 49% in 2010 to 61%. Which deferral rates do you expect for the future? In that context, it's obviously, on the one hand, the alignment with shareholders' interests; on the other hand, to maintain maximum cost flexibility. Which year would you expect the amortization of deferred comp to come down which is then probably the easiest cost save to achieve? And is there any part of your restructuring costs reserved to accelerate the vesting of deferred comp to achieve that reduction earlier? This was one area with a couple of questions. Now the second one, just a brief one on Slide 20, reading your risk-weighted asset numbers for the Investment Bank, it says, I think if I'm not mistaken, EUR 244 billion for the Investment Bank under Basel III, excluding the legacy assets. And then it comes down to below EUR 200 billion by 2015. Could you just touch on that reduction? Because you've mentioned that actually your notional balance sheet, which is very much driven by CB&S, could go up a bit based on your earlier comments given the strong funding position. So what areas are you actually reducing while on the other hand, increasing your notional balance sheet? The third area, it's just a bit of a reconciliation of an area we already -- you already covered with another question at 15% post tax RoE for operating businesses versus the 12%. Am I right that the 15% is based on an 8% Core Tier 1 ratio which you mentioned on Slide 20 and hence, basically, given that you want to move towards 10%, that the difference is just more equity? And in that context, again, I'm remembering and please forgive me if I don't have the definition from the top of my head, but I remember that the average active equity was introduced to net of the realized gains in the industrial holdings. So is there any material difference to be assumed between average active equity and just shareholders' equity going forward? It's more than 3 questions, I'm aware of that. Sorry for that.

Stefan Krause

Okay. Let me start with the first. Your deferred -- your questions around the deferred comp ratio, and I feel a little bit bad because I don't want to steal the thunder from Stephan Leithner's presentation tomorrow, who is going to disclose to you what deferral expenses for the next couple of years are. And we're going to have a more detailed discussion around it, and we will provide you complete transparency around it. We have not set a specific target around what our percentage ratio is because, obviously, that's competitive driven and we also have to certainly watch the market. It has come down, as you correctly say, but there is no targeted number. For your other questions on the deferred comp, I would really like to defer to tomorrow. We'll give you the numbers. You will see the cost and you'll see the development of those numbers. They obviously will include -- those numbers will include what we have assigned to employees so far, so you would see a run-off schedule. On additional ones that's coming on top, obviously, we have not made a projection. And therefore, obviously, we can't tell you to your question when it will become to decrease. But if you look at the EUR 4.5 billion program and as this is certainly also underpinned by a reduction in headcount overall, you can assume that obviously as comp levels in general will come down. And therefore, also, if comp levels in general will come down, also, obviously, deferral components will come down as well. So there will be obviously, at some point, a lower reduction. What we all suffer from, and we agree with you in that sense, as good as deferrals are from in terms of one keeping employees and being able to get your employees focused on the longer term, you do have a burden for the future years that despite all the reductions that might happen will stay higher than in the precrisis level. That's just the system. And the longer that the deferral time frames go, obviously, the longer you will have past expense projected into the future. I think that's a matter of time. On the risk-weighted assets are below EUR 200 billion, while the notional balance is flat. Well, the reduction in CB&S is due to further portfolio optimization, rollout of advanced models, let's not forget that whenever you roll out advanced models, your balance sheet stays flat while your risk-weighted assets go down. It has to do with the cleanup of the data that we can use. As you know, under the IRBA regime, we have to go to 92% of model approval by end of the year. And that's why you have this effect that the cleanup in the models, the approval of the models, that the reduction like, for example, in operating risk-weighted assets, et cetera, is strong. While your credit risk-weighted assets are strong, the balance sheet does move accordingly with your risk-weighted assets. Is there material difference between average active equity and shareholder equity? No, there's no material significant difference, it's principally just the dividend accrual and then just a small adjustment related to your other comprehensive income in the calculation. But for your purposes, it's not a material difference. Did I miss any of the questions?

Philipp Zieschang - UBS Investment Bank, Research Division

Basically the 8% -- is the investment or the target, is it based on 8% CET ratio?

Stefan Krause

Yes, it's based on a target of more than 10% because it's 2015, and in 2015, we have told you that it's 10%. So it's based on 10%. Yes, on greater than 10%, as we've said. And then I remember now your CtA question, whether we have reserves in that sense, so you asked then, the answer to this is yes, because, obviously, we have accelerations of deferred awards to the extent that, obviously, we have exits of employees. But only to that extent. We have not planned for others. It's just -- it will be reduced for the employees that leave the organization.

Unknown Analyst

Yes, a couple of questions. The first one, just on the capital targets. I just wondered what you'd overlaid into those targets in terms of the U.S. business because while you've not had to comply with the Collins Amendment, I think that the FSOC is looking at non-bank financial institutions. It's hard to see if they are systematically important and, obviously, I think you'd be disappointed if you weren't systematically important. I'd just like to say whether they should apply the similar capital rules to those businesses as are applied to bank holding companies? I just wondered -- well, I mean, it looks like they're going to get you eventually in terms of beefing up your capital. I just don't see how you'll sidestep that. I'm just wondering how you're going to deal with that in terms of you have the capital, but it's not necessarily in the right place. That's the first question. And the second one, I was amused when Anshu's eyebrows raised when he talked about selling the Investment Banking products to wealthy clients. And I actually thought that one of the things I was going to hear today or tomorrow, which I'm sure I will, is about a much closer cooperation between PWM and Investment Banking, and I assume that was a two-way street, both are obviously working with the wealthy clients to give them Investment Banking solutions, but also selling them good investment solutions. Is -- am I sort of missing something here, something you're very concerned about in the new environment in terms of trying to be seen to behave with -- and obviously the sort of corporate standards that you're talking about?

Stefan Krause

So let me start with the famous Taunus question around the U.S. that has kept everything. The current status of Taunus, Taunus is a deep bank unit and according to current regulation, of course, doesn't have to fulfill regulatory capital requirements. But you're correct in saying that depending on how the rules come out, Taunus could be seen as a significant financial institution and therefore, put back under -- only to explain it to everybody here -- to be back under a CtA regime and be subject -- even being a non-bank holding company, being subject to capital requirements. Our current plan in the United States is pretty clear. We understand that, and I will say this long-term, with the ambitions that we have in the United States, we have to put our U.S. business on a good footing on both on the capital and funding side. It's very clear. We need to access markets in the United States. We need to secure our U.S. dollar funding that currently, by the way, is in a very good shape. I will show you tomorrow in my presentation that we are doing quite well in terms of U.S. dollar funding and our access to market and the funding that we have done so far. On the capital side, of course, if the case comes to fruition, that we would have to capitalize Taunus because it's a bank company, we would have to reallocate capital within the group, which we have an ability to do, yes. And certainly, we would have then to look at the time frames that we'll be allowed to do this allocation. We would have to use capital capacity and dividends that we have in other subsidiaries of the group across the world to then supply. Let's also not forget that all the entities that are part of the Taunus group and are doing client business are today already sufficiently capitalized, so we'll have to, at that point in time, look into optimizing our capital position in the United States. You've seen other banks doing this, yes. At the end, you can write a check to the U.S. and to allocate it as capital. The Fed, obviously, main focus is to -- which is understandable -- to secure any large operation of a bank in the United States. And, therefore, we would be prepared or we would have to, at that point, put it in place. Our -- we are waiting on final language. We are waiting on how the regulation is going to look. And then, obviously, at that point, we would have to make a decision on how to cope with regulation. But it is the objective of the management team to put the U.S. on a good standing in capital and funding position.

Anshuman Jain

Chris, good catch. You're totally right. But let me begin by first clarifying that a large part of the synergies that we are hoping to reap in Asset and Wealth Management is through much closer cooperation between AWM and the rest of the group. It's been run very much as a silo unto itself without the interaction we want. However, the synergies are different from the ones you might expect, at least at Deutsche Bank. I'll list 2 or 3 to give you an example. The product manufacturing, the so-called structuring, the research, there's any amount of duplication inside private wealth management and to an extent, asset wealth -- Asset Management as well, which we think centralizing those functions in the Investment Bank makes more sense because we have a market-leading product offering. We've already talked about how the cross-linkage from a coverage standpoint in emerging markets align when you travel across India, China, Russia, Indonesia, a lot of these countries, our biggest corporate clients also have the largest disposable assets and the highest investible assets in a personal capacity. That integrated client relationship management is one, which we've said, our competition does, frankly, a lot better than we do. We've approached them almost completely independently thus far, and this is not even a cost of coverage point. The kind of relationships you build are much stickier and far superior when you go in together. Where you were right in picking something up is we are a bit gun shy of having too cozy a relationship of selling products into a wealth management effort. Of course, through open architecture, Deutsche Bank could be one of the service providers when it comes to that. But given all the cultural issues and all the cultural questions that have been raised, we would rather err on the side of giving up some revenue and giving up some opportunity, but to not have too many questions raised about the independence of our Asset and Wealth Management divisions. Having Dick Walker on our GEC, he was actually a Senior Counsel, has been a real boon in that regard as well. He's making some very clear calls in terms of what's appropriate and what's not.

Unknown Analyst

[indiscernible] Managers. I've got a question on the cultural part of your presentation. On Slide 37, you say that a key action for you is a critical review of some of your business practices. Could you give a bit more flavor on which business practices exactly do you intend to review and what criteria will you be using?

Juergen Fitschen

Well, we will not tell the panel exactly where they have to see their limitations. They will be free to look at the principles under which we link compensation with performance, how we use it as a tool to change behavior amongst our colleagues. Obviously, it will also be looking at the quantum and, in particular, it will compare ourselves with our peers in our industry. And possibly, we don't want to prejudge, also with the behavior outside our industry in order to create some lessons learned. There is no solution that is carved in stone for our industry. It happened to be that our industry was outstanding in certain aspects of compensation. It made it very attractive for some people to join the industry. But I would not exclude that given the changes that we anticipate, we'll be more looking like other partners in our industry, maybe even force them to catch up with what we have in store. So the Terms of Reference, they will be worked out with the Chairman, obviously, and we like to make it as broad as possible, but stop where it goes down to the performance evaluation of individuals and the ultimate decision on allocation of bonuses to our colleagues. That's where they will not get involved in.

Anshuman Jain

The question was also on business practices in addition to compensation, so maybe I can just jump in on that. It's a very fundamental review of the businesses we're in, so the suitability -- so in the past, there was too much of an emphasis on whether a business was legal or not. We are increasing and raising the bar on the kind of deals we do and the kind of deals we don't do, the kind of clients we adopt and the ones we don't adopt to a standard, which is far higher and far more rigorous. And there's a whole set up inside the bank in terms of [indiscernible] risk committees and so on and so forth, very strong involvement by regional management. Juergen's fond of saying and I've seen him do this in action in the last few weeks where he gets involved and will say no to deals which have been approved because they were legally considered to be okay. So this is much more fundamental and goes way beyond compensation. The very nature of our business model is being altered to fit a higher standard.

Jernej Omahen - Goldman Sachs Group Inc., Research Division

Thank you for the presentation. I thought it was a very good presentation. I just have 2 questions left. It's Jernej here from Goldman Sachs. I have 2 questions left. The first one is on Page 13 and your post tax return on equity target. So you're targeting 12%. But as you show us on Page 27, basically, more or less on twice the capital base that you had in the past. So your simple arithmetic, I guess, tell us that if we gross this up for the previous capital levels, you're looking at a 24% return on equity by historic standards. And I was just wondering, over the course of the past decade, even in the peak periods of 2006, 2007, how many times has Deutsche Bank made more than a 24% return on equity? And the reason I ask this question is because I would just like your judgment on how ambitious you think your return on equity target actually is. The second question I have on returns is, do you think that the 12% RoE that Deutsche is targeting is going to be an industry-leading return? Do you think that we are looking at low-teen ROEs for the Investment Banking industry? And the third question I have, and I just can't help myself, I mean, I've had this conversation with Stefan so many times. On your simple average, and again, Stefan, I'm using your numbers as of the fourth quarter. U.S. GAAP risk-weighted assets Core Tier 1 ratio, Deutsche Bank is 38x levered. And actually, when I was listening to your explanation, you brushed it aside, and you said, "Look, this is a funding issue." And I sort of had this flashback of Crédit Suisse in my head, which had the same debate with Crédit Suisse and Brady Dougan for the past 3 years. They were 40, 43x levered. They were funding even cheaper than Deutsche. And then the Swiss National Bank, who's not even the regulator, stepped in and said, "You know what, we don't want to have the most levered large banks in the world in Switzerland, so delever." And I was just wondering, so I take your point on funding. Now you have, frustratingly for U.S. Investment Banks, you have very, very low funding costs, but what is the risk of your regulator, BaFin, turning around and saying, "You know what, we don't want the largest bank in Germany and the largest bank in Europe to be 38x levered full stop because these are extreme times, and you could incur a loss on every single unit of assets that you have."

Stefan Krause

Okay, you're right. Let me give you some numbers on how we calculate it because it's not quite there. Our precrisis ambition was the same as 25%, right? And taking our tax guidance, this translates in about 17% post that target, you're seeing our tax rate guidance I set, and this was obviously, given in a time of Basel II. This was based on the Basel II capital, which now we have to adjust to about EUR 20 billion of additional capital. So our like-for-like post-tax RoE would be a 12%, which is exactly the number we're projecting today. So first of all, I would answer to you, our 25% after-tax ambition in the past is very comparable to our 12% ambition that we have now in the Basel III world. I would, second, tell you, yes, we achieved this. We achieved it a couple of times. And this was, as we had admitted now, not with a good cost base and with many businesses really not delivering and supporting that case, but the bank did achieve that return. We have several of our business that have been significantly above these return numbers. Regretfully, we had a couple of businesses that we were in a build-up mode and a couple of our acquisitions that were not performing. They were pressing down and, obviously, we believe that in the new regime, our tolerance for nonperformance, as Anshu has said it in his presentation, our tolerance for substandard returns has to change, and our tolerance for luxuries around the cost and around compensation has to change. If I take that all into account, does the business model have the ability to deliver this 12% that are comparable to the alternative? My answer is clearly, yes. Is it more challenging than in the past? My answer is also clearly yes, but the clean-up is very likely, and the clean-up has to happen. It is an industry that for way too long has allowed itself too much luxury just to stay this way, and I think we -- Anshu, I think very impressively, demonstrated it in his presentation. And yes, our tolerance has to go down. So I think that any, let's say, competitor that is giving up higher numbers, we see those as very ambition because if you already then take this comparison to our model and, obviously, there are always some difference in the model, and maybe if you have some more private wealth, you may be in a different position, but substantially different numbers, I -- if I were you, would certainly question, yes. And I'm going to hand off, so Anshu tracks what I haven't managed to do to give you the -- why leverage is not a problem story.

Anshuman Jain

Let me actually add to the comparative RoE point because we spent a lot of time debating what the right RoE targets ought to be. And we note that some of our competitors are both offering you 12% Core Tier 1 ratio and 18% RoE. Please, if you think that's achievable, that's a fantastic place to be. But you've done a very clever calculation, which says the new 18% is the old 36%. All I see is our very high capitalized competitors vastly disappointing and promising to the future. I think in the end, gravity will play a role. And you cannot, in my opinion, let me make a bold statement, have all these various finishes, the Swiss finish, the U.K. finish and take a bank up anywhere above 11%, 12%, 13%, 14% Core Tier 1 ratio and attain these sort of ROEs unless your business model is heavily geared toward Asset Management, Wealth Management and GTB. If your model is geared towards Investment Banking, if your model is geared towards retail, let's be clear. Investment banking profitability is driven by fixed income. Corporate Finance and equity are high RoE, very low EBIT businesses. You can't run a global industrialized Investment Bank with high RoE, Corporate Finance, equity businesses. They've got incredibly high cost income ratios, stubbornly high, and you can't really take them down. Fixed Income is what you need to get that average cost income ratio down, but Fixed Income post Basel III is going to be a drag on your return on equity. So choose between stable businesses, which are PBC, Fixed Income, which have a relatively high level of predictability, stability and scale, but don't offer you great RoE. We make no bones of the fact that we are and will continue to be a PBC-heavy, Fixed Income-heavy organization, which means you're going to get scale, you're going to get predictability. Those will be drags on our relative RoE. Now compared to the past, when [indiscernible] GTB business on the [indiscernible] Asset and Wealth Management business, those doubling that we are promising you will be hugely accretive to our RoE, and the only way we can get to RoE is if those 2 divisions deliver what they need to. Colin Fan, Rob Rankin can do whatever they want. We cannot impose a high RoE hurdle upon them. Look, leverage, you're right. Less leverage is better than high leverage, but you have to ask yourself the question, what are you leveraging? Our capital markets business has always had a huge repo book. We do large amounts of government bond financings in an overnight market, both the assets and the liability can disappear overnight if you want to, and we'll have between EUR 150 billion to EUR 200 billion of it. Why do we have it? Our clients want us to do that, and they do other business with us even though it's a business on its own, which is not tremendously profitable. There's no doubt about the fact that over the next 3 years, you will see notional leverage come down. Please don't think we are sanguine or relaxed or ignoring leverage completely. If I had huge amounts of illiquid U.S. dollar positions funded overnight in wholesale markets, you would have the right reason to be concerned. So clearly, there are aspects of your leverage that you have to be more sensitive to than other places. Our leverage has come down dramatically in the last 4 years, will continue to.

Unknown Analyst

I just had a question on the phasing of the risk-weighted asset reductions. So the first part is, is the advanced models part and portfolio optimization, is that more geared to the Q1 '13? And if so, given your confidence in achieving your targets for the end of this year, how advanced are you in talks to sell your sort of non-core assets? And how supportive is the current market in achieving that?

Stefan Krause

We're quite comfortable on the near-term objectives because these are -- some of them are long-term work that we have been already doing. Let me start with the different components. There's the first component of the sale of assets. We have reported to you we gave additional target. We gave an additional budget for the selling of those. This was the EUR 20 billion we gave to CB&S. CB&S has done an outstanding job in overachieving the time line that we had set out and the numbers we have set down. I think we commented on the EUR 14 billion. It's a small profit that we have achieved so far. So we are very confident towards here and we can continue with the targets that we have set out. The second group that we've been very successful with, if you remember, which is part of that is the Postbank legacy portfolio, is the Postbank structured credit portfolio, we've been very effective and also Postbank is ahead and PBC are ahead of schedule in terms of producing their share of this risk-weighted assets. The large part towards year-end will, obviously, be moving to our 92% model approval. And, obviously, there, we are contingent on work that we are doing together with our regulators that needs to be completed. We are in September, we have to be done by December. So you can assume that a large part of the work is done, large part of the clarification with our regulators has been done and the working level agreements are in place. I don't see, at this point, anything that makes me concerned that we will not meet this component of it. As we then move to our sales, we have Actavis sold. The contract is in a process of closing. We will have, hopefully, before year end, the closing as soon as we get all the necessary approvals, which are mainly anti-trust approvals in several countries that we have to get because a competitor is acquiring Actavis. But so far, the process indicates that we will be able to close and we have not found any big issues. And last, but not least, obviously, we do have a contract in place that we have signed with -- for the disposal of BHF. There, we also are now awaiting passing approval and hopefully, this will be then also given prior to year end. So that's why when I run down the different buckets where this is coming from, we feel very comfortable on the initial part. The second part, which is then the part we're going to do in the year of 2013, of course, the farther away, it gets a little bit less precise, let's say, although we have started already the work on some of it. But based on the good track record we have, I'm very confident that then, as we have then made the first big step, which is the EUR 45 billion, with quite a good level of confidence, that then for the year 2013, the target we have set ourselves of another EUR 20 billion seems very realistic and doable in that context. Now I do want to disclose to you, let's not forget, Basel III application and enforcement is not clear yet. We are not in all cases working on very clearly defined rules of application that we will be confronted with. So we could, for example, find ourselves that when Basel III is finally decided and written and the guidelines on how to apply the rules, that we might have positive or negative surprises, and where we could -- and I estimate that they are about the same on both sides. On the [indiscernible], we might have a very positive supply -- surprise to lowering risk-weighted assets, on others, we might have negative surprises. And that's why we're disclosing to you the capital toolbox that we could enact in case that we have any deviation on any of those plans. I will talk a little bit about this tomorrow, but basically, that's the gist of the statement for tomorrow as well.

Unknown Analyst

Just a few questions. Firstly, I may have missed it, but what's the phasing of the EUR 4 billion of restructuring charge? That's the first question. Secondly, at what stage would you consider increasing potentially the dividend? Or at what capital level will you feel comfortable increasing it? And lastly, can you just give us an update as to how Q3 Investment Banking revenues have been so far?

Anshuman Jain

The phasing of the costs, I mentioned in my presentation, is going to be approximately 1/3 each. So not exactly, but very close to 1/3, 1/3, 1/3. Sorry?

Unknown Analyst

Restructuring charge?

Anshuman Jain

The restructuring charge will be similar as well. So we have not yet decided exactly what percentage of that is going to be best. That's not completely fleshed out yet, but it will also be done gradually over the 3 years. Yes -- which is heavily done by 2014. You want to go ahead and go through that?

Stefan Krause

Yes, I can. We can give you quickly the numbers. They will be in Henry's presentation tomorrow as well. It will be EUR 600 million for 2012; EUR 1.7 billion, 2013; EUR 1.5 billion for 2014 and about EUR 200 million for 2015.

Anshuman Jain

Question regarding dividend is a critical question. And I have to say, on this, again, the GEC is united, which is once we hit the targets that we promised all of you that we will hit, we definitely want to wind up being a high dividend-yielding stock. There's no way that banks can afford to make a value proposition to clients, which does not have a strong cash flow return to all of you in return for the long patience you would have had in allowing us to accrete our capital ratios to tolerable levels for a long period of time. That's a clear promise we will definitely make to all of you. Q3, we made a statement this morning already that -- you asked about the Investment Bank. We've had a solid third quarter so far, solid relative to our expectations, which is last year, as well as plan. Despite, by the way, achieving the restructuring, which Stefan talked about, restructuring of the assets.

Stefan Krause

Any further questions? Okay, then I think that concludes the formal part of today. Thanks, all, for your participation. I think we're going to have a lively discussion tomorrow when we disclose much more detail to you. With that, I'd like to thank everyone also on the Web, and thanks for your attention.

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