Ladies and gentlemen, thank you for standing by. I'm Mia Valle, your Chorus Call operator. Welcome and thank you for joining the second quarter 2015 analyst conference call of Deutsche Bank. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question-and-answer session. I would now like to turn the conference over to John Andrews, Head of Investor Relations. Please go ahead.

Operator, thank you, and good morning and good afternoon and good evening to everybody. Thank you very much for joining us. On behalf of Deutsche Bank, I'd like to welcome you to our second quarter analyst call. This morning, I have the pleasure to be joined by our new Co-CEO, John Cryan, and our new CFO, Marcus Schenck. John will open momentarily with some brief comments, and then Marcus will take you through the analyst presentation, which is available on our website. Then we'll be happy to respond to your questions. Let me also provide the normal health warning that we air to you to pay particular attention to any – to the cautionary statements regarding forward-looking comments that you will find at the end of the investor presentation. With that and without further ado, let me welcome John and Marcus to the earnings process, and John, let me hand it over to you, please.

Thank you John, and let me add my welcome to everyone today. As John said, I will keep my remarks brief. We continue to develop the implementation plans for our Strategy 2020, which the Bank announced in the spring. We aim to provide you with a more detailed description of the steps we're taking to execute our strategy, at the latest, by the end of October. Our second quarter results show both the strengths of and the challenges facing Deutsche Bank. The potential earnings power of our businesses is evident in the solid top-line results in all four of our core operating segments. These results support our contention that in broad terms, we're on the right strategic path. As announced, we've been making adjustments to our portfolio, including pressing on with the deconsolidation of Deutsche Postbank. We're also making headway in trimming the balance sheet usage of CB&S, including exiting some business lines and tightening our perimeter. My belief is that our principal challenges are not strategic. Our challenge has been and continues to be the unsuccessful execution of our strategic intent and the continuing burden of costs relating to past events. We have a structural cost problem. That's obvious to all of you who've followed the Bank for some time. We will not succeed on our own terms until we simplify our overly complex operating model. It stifles efficiency and it frustrates and delays decision-making. I believe we understand the principal root causes of our inefficiency. We must overhaul our antiquated, fragmented and incomplete technology platform. We have to wean ourselves off an over-reliance on manual processes, and we have to rectify our poor record of managing significant infrastructure investments. We will be strict in eliminating businesses, exiting countries and terminating client relationships, especially where they generate costs, complexity…

Thank you John. Good morning and good afternoon also from my side. It's a great pleasure for me to speak to you on my first quarterly call. And as John pointed out, this call is about the last quarter, so let me go straight into the content. Page two summarizes the key financials for our second quarter, which I would describe as solid from an operational perspective but still burdened by litigation charges. Net income of €818 million is up by €580 million relative to prior year. Whilst ROE is up, it is at a disappointing 4.5%. Core reason for this is an unacceptable cost/income ratio of 85%, driven by €1.2 billion litigation charge. As John pointed out, we actively managed our risk-weighted assets, which strengthened our CET1 ratio to 11.4%. Tangible book value per share, however, declined to €39.42, driven by lower shareholders' equity and a slightly higher number of shares outstanding. The decrease in shareholders' equity despite positive net income results from the €1.3 billion payment of dividend and AT1 coupon as well as a circa €1.8 billion of negative OCI results, which has two components, €1 billion of currency translation and €0.8 billion of unrealized losses on AFS assets, mainly driven by the interest rates in longer tenures. Before I move into the divisional results, let me cover four topics: drivers of net income change; a quick review of our cost base; I'm going to give you some backgrounds to the litigation charge; and then finally, we'll take a closer look at the development of our capital position. Chart four gives you the bridge for our net income of the quarter relative to prior year. This quarter was yet another, I would say, typical Deutsche Bank quarter, where we see robust top-line performance across all segments, but…

Ladies and gentlemen, at this time, we will begin the question-and-answer session. The first question is from Kian Abouhossein of JPMorgan. Please go ahead.

Thank you for taking my questions. The first question is more of a general one. Could you just give us an overview, John, of your first impression of running Deutsche Bank? I'm sure you had a lot of other offers to become CEO since you left UBS. Why Deutsche? The second question is related to leverage. You have given a very detailed divisional slide on leverage, which is very helpful. If I assume a Tier 1 of 11% in the IB, your leverage ratio, 11%, and allocate capital, your leverage ratio in the IB is about 2.6%. And as you know U.S. peers are at 5%-plus. So I'm just wondering how do you think about the IB franchise in light of almost double the leverage of some of the peers. And in that context, the 5% leverage ratio target for the group, is that still a target which you aim to achieve or would you say that is too high and unnecessary? And the third question is on cost. It sounds to me very much this first upfront cost before we see any costs synergies. By October though will we have a union agreement where you can actually tell us details of how many people will leave the Bank, and hence a net cost saving plan? And lastly if I may, just on international retail Europe, what is your view around those operations? Thank you.

Kian, hello. It's John. Let me at least take the first one, given that it was addressed to me. I think you know that I've been on the Supervisory Board at the Bank for a couple of years, and I was in the position of Chairing the Audit Committee and I sat on the Risk Committee. So the transition into the management team was reasonably logical when an opening came up. And I do feel that although as a non-executive director you get an exposure to the Bank and sitting on the Audit Committee you never get much good news, it was nevertheless fairly logical and seamless in the transition from Supervisory Board to the management. Why the Supervisory Board? Well after I'd left UBS I spent some time, not literally, on the beach and thought that I'd gained some experience that might be helpful elsewhere, and the opportunity at Deutsche Bank came up and I took it. So there was nothing untoward, and it all was very seamless and took place over two or three years. On the other points, Marcus, do you want to take the one on leverage?

Yeah. Kian, on leverage, I guess what I would say is, as we I think already announced in April, there are going to be some material reductions in leverage in our Investment Bank, in total to the tune of, when you look at the gross number, about €200 billion, which obviously is not yet reflected in full in those numbers. And we will certainly scrutinize all businesses and see where can we be even more efficient, and John was, in his introductory remarks, referring to that as well. So we're not saying that we're going to be at the 5% in the very near future, but this is what we are long term striving for and the planned reductions will take us a long way. On cost, yes, there will be upfront cost, and just technically that is you can't avoid that. As you pointed out, the moment you have an agreement with employee representative unions on for example potential head count reductions in Germany, you will have to book a provision for that, so you have sort of the full cost in one go, and then the savings only kick in over time. Will we have those by October? We cannot comment on this at this stage. We're in discussions on several items and we'll give you an update on that. On your last question regarding retail Europe, I don't know, John, you want to take that?

Yes. Well, we obviously don't want to steal our own thunder from what we announce in October, but we're clearly looking at our retail operations. Germany is absolutely core and we will retain the blue bank. I think that goes without saying. The other operations in Europe vary in their maturity and the market share and their self sustainability. But we will be taking a look at that and we'll give you more details in October when we speak to you.

And just to follow up on the CB&S asset reduction, on my calculation I think I get to about €140 billion net when you announce the restructuring plan or the 2020 plan, and ex the currency impact you've already done €50 billion roughly. Should we assume that there is a lot more juice in there after your initial assessment?

I would not say that there is a lot more juice, as you pointed out. I think I would at this stage want to leave it at first, we will see the reduction, and as we also pointed out in April, the way this is going to work is yes, there shall be growth, but first, there shall be reduction. Yeah? So we're going to do that first. You're going to see the growth impact first and once we're there, then we will start to partially reinvest where it makes sense. And in the meantime, yes, we will indeed see where there are further possibilities to optimize the balance sheet in a sense that, as John pointed out, that we really focus on the sort of higher-return activities in that space. But at this stage, there are no more details that we can share with you on that.

And if I may, one more, and apologies for, but please, this is important. Just, John, you mentioned you see the potential clearly in Deutsche taking the top job. What do you think the IB can make in terms of ROE, i.e. what do you see as cost of equity for CB&S?

I think we generally don't like to comment too much on the divisional cost of equity. We like to look at our cost of equity as a group as a whole because you can't buy CB&S in the market, so you can only by Deutsche Bank. It's a core to our business. And the question that we ask ourselves is how to run it better, not what targets to aim for. We do think that it can substantially improve its returns. But I said in my opening remarks, some of our issues are to do with our operating costs as much as to do with our financial costs. So I think that's not quite answering your question, but it's the most I think that we could say on a divisional basis.

Very helpful. Thank you for your time.

The next question is from the line Omar Fall of Jefferies. Please go ahead.

Good afternoon. Firstly, looking at RWAs and the €10 billion decline in market risk, can you just give us some more detail here, please? And how much of this, if any, was a function of the Credit business and CB&S being weak this quarter and how much was actual active reduction of exposures? I guess I just want to know if there's any more of this we can expect in coming quarters, as it would clearly be a helpful buffer to all the RWA headwinds you highlight. Secondly, in PBC, you mentioned the negative impact on revenues from non-operating activities. Apologies if I missed this, but what exactly does this refer to, please? And are these elements non-recurring? And then finally, just a broader question for John. There is clearly a very popular thesis in the market that you have the most challenging role of the raft of new CEOs in the sector because there's no element of shrinking to greatness here, because even if the restructuring is successful, what you're left with at the end will barely cover its cost of capital in terms of ROE. You obviously disagree with this, so I guess you would not have taken the job. What do you think all these people are missing here, please? Thanks.

Okay. Maybe I'll start with the numeric questions first. Market risk RWA, I was alluding to sort of three core drivers and I'm also happy to provide the breakdown there. €5.5 billion of the €10 billion are due to reduced securitization inventories that we have, lower VAR contributes about €2 billion, and then we have reduced default risk exposure of another €2.5 billion, which makes up the €10 billion. In PBC, it's actually – I mean what happened there was in the first quarter of 2015, we had six or seven items which in total add up to something like €70 million, €75 million, which I would categorize as sort of one-off items that will not see themselves repeat. And that is what I was referring to when I said when you look at the quarter-on-quarter development in 2015, it looks like there is quite a material decline but it's actually, when you then compare it also with prior year, Postbank is kind of very stable. It was Q1 that stands out and it stands out because of those roughly €70 million, €75 million of one-off items that we had in the first quarter. John, on the third one?

Yeah, on the third one, Omar, it's a good question, but I think the answer, to me at least, is clear. I am familiar with the approach of looking at banks from the perspective of a cost of equity and the return on equity, and I think that is the right way to look at the Deutsche Bank that was and is, but we've got to change Deutsche Bank so that you can look at it in a different way. And I think in each of our core divisions, we have the ability to wean ourselves off, as I said earlier, this overreliance on balance sheet, and we can earn revenues which don't necessarily always have to attach to the fact that we've put onto the books a risk position. And so in each of our four core operating segments, there is the opportunity when we're building new technology, because we know that we, as I said our technology is pretty antiquated, when we roll out new technology, we can reconsider how we conduct those businesses. And I think we can reengineer our cost base to the point where it becomes less of a constraint on our businesses. At the moment, our operating leverage is so high, it's difficult to break into the circle of where you invest, because we're constantly – with an 85% cost/income ratio, we don't leave ourselves much flexibility to make working capital investments. And we've got to take that courage to reengineer our businesses so that each one of the four of them can be much less reliant on us putting balance sheet risk on. And so we'd like to be able to persuade you at some stage in the future, as we probably could today on our asset management business, that return on equity versus cost of equity is not necessarily the only way of looking at the Bank. In asset management today even it isn't the principal metric by which you should think about valuing that business, in my view. And so we just need to get ourselves into a position where we can increase the proportion of fee and other income and reconsider the way that we establish a cost base, so that, yes, there will always be a relationship on the balance sheet between the cost and the return and that will drive a price-to-book equivalent. But there are other ways of us generating revenues, and we don't have to spend 85% of them on costs. So I think that's the opportunity for us, and I think the Bank is up for it, so that's why I'm here.

Great. Thank you. Sorry, just one very quick follow up. I know you can't give numbers, but could you tell us whether the rates business in CB&S was up sequentially Q-on-Q? I just asked this as I'd like to get a sense of whether the strong performance there was in spite of the leverage exposure decline in the quarter. Thanks.

The answer to your question is yes. I think we even highlighted on the page that indeed both our FX and the rates business have been performing quite well in the second quarter, whilst we didn't see a great quarter on the credit side.

Got it. Yeah, you've got rates up year-on-year. I was just wondering if they were also up sequentially Q-on-Q, but that's fine. Thank you.

It's more or less flat is the answer.

Thanks.

Thank you. Next question is from the line of Jernej Omahen of Goldman Sachs. Please go ahead.

Good afternoon from my side as well. Welcome to Deutsche Bank, John. I would just like to – I'd like to start with the following question. So I think you gave as comprehensive answer as you could, John, on why you took the job. But can I ask you, sort of a few weeks into your job, what is the one business at Deutsche Bank that you think is exciting and you think could make a difference going forward in the new strategy? The second question I'd like to ask, probably directed to both of you, relates to pages seven and eight. You show a litigation reserve of €3.8 billion and then on page eight, a long list of issues which is still to be settled. And I was wondering, when you think about the future litigation charges, to what extent do you think that this €3.8 billion figure might fall short? And the reason why I'm asking the question, just for the purposes of being transparent, is that you, John, offered some very strong statements on the need, or rather, no need for Deutsche Bank to raise capital. I guess to make that statement you would have to have a very clear idea as to what the potential scope of future litigation would be as well. And I'll just leave it at that. Thank you very much.

Well, on your first question, I learned this a long time ago. The biggest constituency that's listening to this call is a way over 100,000 people we have working in the Bank at the moment, and so if I were rather like a parent to choose a favorite child, all I do is upset everyone else. So it's a difficult question to answer. So I have to say I love all of my offspring. I think on each of our businesses there are ways that we can develop them and make them different from how they are today. Some of them are more challenged than others. I read things in the press that I'm pro-investment banking because I used to work at an investment bank or I'm now against investment banking because I left an investment bank. It's all very confusing. Essentially, I want Deutsche Bank to succeed, and there are businesses we should deemphasize because they don't work anymore, either because the market has gone away or the rules of the game have changed and they're no longer viable. But I think all of the businesses that we, in Strategy 2020, for which I do take a degree of responsibility – it was not my invention, but I was on the Supervisory Board at the time, and the Supervisory Board did not object to it, which is what they were asked, whether they did or not. And so I do buy into it. It's a pragmatic view anyway. It's where we start from. And obviously, over time, we will develop our businesses and we may find new ones to build up and we will find other ones over time we deemphasize and we should be managing and recalibrating our business as time goes on. But there are plenty of…

Yes. So – no, but I think it is a clear answer. If I understand you correctly, your message is it's the wrong thing to do to raise capital at this point in time but circumstances could change that would force you to change your view, particularly on the (46:16).

That's correct because if external impacts are of a sufficient magnitude, we won't be able to recalibrate our business. We won't be able to reduce our risk engagement rapidly enough to free up capital, so we would possibly have to resort to the market, but that's not what we're thinking at the moment.

Perfect. So I promised John Andrews I'd be brief, but I can't help myself just to add one more question, which is, you endorsed the 2020 strategy if I understand it correctly. Are you endorsing the targets in that strategy as well? Or are those under review?

Well, if you know me from the former life, I'm very loathe always to give hard and fast targets, particularly when our biggest business is trading business where I've quite frankly, I couldn't predict what's going to happen in the rest of the third quarter, because much of what we recognize is a fair value of things we carry on the balance sheet, and our results are very much exposed to the value of assets. It's exposed to the volatility of assets. It's exposed to client activity levels and volatility levels, and we can't predict any of those. What we need to do is take management judgment as to what generally we think our business can produce, roughly, over a period of time. That then helps us to set a budget for our costs. And the reason that we do financial planning in the Sales & Trading business is not to try to predict what our revenues are going to be, because you can't do that; you need to come to a management and business judgment as to the capacity of the company to earn revenues. Once you've alighted on that, you risk assess it and then you calibrate a cost base that generates a return so you'd vaguely know how much you can afford to invest in the business. Then you set a course for where you think strategically businesses are going to be successful in the future based on what you had today and then you allocate capital accordingly. And so I think what we'd much rather do in October is tell you in a fair amount of detail what it is that management intends to do and generally give you a direction of travel for what we think the impact of that will be, but there's no…

Okay. Thank you very much.

Next question is from the line of Kinner Lakhani of Citi. Please go ahead.

Yes, hi. So my first question was really to again talk about the cost structure. I just wanted to get a sense that at this stage do you have a view on the net cost savings that are attached to the €3.5 billion gross cost savings target that was set about in Strategy 2020? And maybe separately, we're really seeing a trend across the space of elevated regulatory spend. Obviously Deutsche is no exception. So I wondered if you could help us kind of quantify the kind of regulatory spend that is ongoing today and also help us understand the profile of that, so how long it can be elevated for? Here I guess I'm talking about things like the resolution and recovery planning, Basel IV, et cetera. And then just on the capital side, I appreciate your frank comments. Just on Postbank IPO, which I guess is the other side of the coin to raising capital, in light of the weaker trends that we're seeing from Postbank, obviously because of pressure from lower interest rates, how confident are you that the previous assumptions that we made on the Postbank IPO as part of the capital plan are still intact? In other words, do you see any risk of impairment on regulatory capital as part of whatever price you get for that? And finally on litigation, which I know is a sensitive topic, I guess the words that kind of intrigued me on the Russia issue, which has been added onto the list, is the kind of many of which cleared in U.S. dollars, I guess you see those as higher risks. And I just wanted to get a sense if you think that has a knock-on effect on other cases like OFAC? Thank you.

Let me start with your first question on cost structure and the reference you made to what was announced in April. Obviously, my answer is going to be disappointing, but please really be patient with us. We'll give you really – we think we are going to give you details on this in terms of what is the gross impact, our inflation assumptions and net savings that we're targeting by October, but let us work through this as John said. Number two on the reg spend, I don't have a total number like if I looked at the last 12 months. There are obviously some big jumps we have this year in particular in the context of the bank levy that I highlighted. When I look at this year and then probably also the periods 2016, 2017, and maybe even into 2018, I think we and likely many other banks are still going through this process of a lot of in a way projects that we have that are caused by regulation we have that in particular in the U.S. where we're setting up the IHC, where we're going through the CCAR processes. And what you see there is obviously a material increase in our cost. Part of that I would expect to disappear when we get into say 2018, because some of the costs we currently have is really putting systems in place or there is a lot of, as we call it, change the Bank activity in that. But yes, we will also have sort of a certain cost block, which I can't quantify for you now but it's something where we'll probably try to be more granular next time. Part of the reg spend is going to be sustainable, i.e. there is going to be a material run-the-bank portion of our total reg spend. Postbank IPO, I cannot foresee this to have a negative impact on our reg capital. What it will do it will definitely improve our CET1 ratio.

Sorry, I meant it more in terms of the impact on the numerator, just on the capital. Could there be an impairment? I understand the RWAs will obviously come off, but it was more the price relative to where the asset is carried today.

Yeah, look, I mean we're planning to sell the asset either by way of an IPO or a trade sale and let's see what the outcome is, and then we will see whether or not that will bring about an impairment. I can't judge that now. I think your last question was on the Russia case that we highlighted. I don't know. John, do you want to take that?

I do, but I'm not going to say very much unfortunately. I think we've highlighted that there is a U.S. nexus to this matter, and I think we should leave it at that.

Great. Thank you.

The next question is from the line of Stuart Graham, Autonomous Research. Please go ahead.

Hi. I have three questions, please. The first one is I'd like to get a sense of how you think about the goal of the 10% ROE in 2020. How would you categorize it? Do you see it as a stretch target in your mind, the bare minimum a group like Deutsche should target? How would you describe that? The second is maybe, John, you can talk about your pay incentives because looking at the last annual report you only own I think 5,500 shares of Deutsche, I'm guessing that's changed when you were made CEO so you've got more skin in the game. Maybe you could update us on that. And then the third question is Deutsche has been trying to cut costs for as long as I can remember. And we've had some good people trying their best; it hasn't worked. What concretely is going to be different this time around that we already believe that you will get those cost savings out?

Stuart, hello, we were just debating who should answer your first question and the one about my pay. The 10% ROE goal, well, I think, we'd like to think it was a minimum, but as I said earlier in response to one of the questions, I would like to be in a position where ROE wasn't the only metric by which you look to Deutsche Bank as well. We do need to move away from just earning a margin on assets on the balance sheet and liabilities on the balance sheet. So it is a target. We thought in the context of Strategy 2020 that was the right number to put in, because the model showed that that's where we could get to. But if you're asking whether or not we'd be satisfied by getting there and we'd then stop and reap the benefits, the answer is no. We will try to improve it.

Okay.

On my pay and rations, I'm not entirely doing this for the pay and rations. I don't actually think I own any Deutsche Bank shares. What you may be referring to is I think on the Supervisory Board the very modest remuneration that I enjoyed there I think was in part deferred and deferred by some synthetic exposure to Deutsche Bank, but it was a very small amount and your number of 5,000 doesn't ring a bell, but it might be the right amount. Again, that's not a role you do for the sake of your own personal finances.

But I think shareholders like to see...

And I am I think obliged on the terms of the normal contract for board members to accumulate a stake in Deutsche Bank, and I think the rate at which I meant to accumulate it exceeds the net pay that I'm likely to receive. But I will try to expose myself to the Bank, but if you think that I will only come into work the 18 to 20 hours a day I've been doing recently because I'm going to earn lots of money and invest it in Deutsche Bank shares, you don't need to worry about that. I will be as committed as I can whether I own shares or not. But I do understand the point and I will hopefully, over time, be able to afford to buy some Deutsche Bank shares or perhaps at some stage maybe even given some as part of my remuneration.

Okay. And on the costs?

What would make us credible on the cost side? I think both – the whole point about efficiency. I think what I've learned over the years is that if you just horizontal slices out of costs you don't get anywhere, you just irritate people. So I think what we said we are going to have to look at businesses, however you define them, sometimes that means markets, sometimes it means product types, it can mean all sorts of things, and take a long hard look at them, at their current condition, at the likely future development of whatever business it is or whatever product it is, look at it on a risk basis, so make an assessment of the operational risk, the likely change in regulation, all of that former business judgment, and determine whether or not it makes sense to continue in that business. And normally it won't because the cost base attached to it, or the regulatory spend, or the investment required to make it, run to a standard that we expect is such that we don't think we'll get an attractive return. So we are prepared to change our historic view, which is to give up on the optionality of holding lots and lots of businesses open and we'll close them, and that should have a disproportionately positive effect on us because we'll reduce costs to a greater degree than we reduce revenues.

If I can maybe add one point, John. Obviously whether or not we will be delivering against the cost targets, you will only be able to judge after the fact and not just by what we're going to tell you. But I think one thing that we can highlight is that – and John in a way explained it when he was talking about how we see an overall economic model for the Bank, maybe trying to figure out what is a cost base in a way that in total we should be having. So our focus will be not so much on, hey, here's a cost save and we will continue to report against the costs save. What we will be doing is we will be targeting also some absolute costs targets that we're trying to achieve. And hopefully that will give you also a better way to then really track how we are performing against that. But more to that in October.

Okay. Thank you.

Next question is from the line of Jon Peace of Nomura. Please go ahead.

Yeah, good afternoon, John and Marcus. Thank you for taking the questions. I'm afraid I have one more on costs, and I realize you're still working through the specifics. But Strategy 2020 was the first five-year plan we'd had from Deutsche for many years, rather than three years, and I just wondered do you think it's going to take that long to squeeze out meaningful cost savings or do you think we might see some return earlier than that? I'm just trying to think of a profile of the cost improvements? And then I just a second question on capital planning. How should we think about your dividend policy, both in the short term and in the longer term as you approach your leverage goal? Thank you.

On your first question on the cost targets, I don't think we actually said in April that all these metrics we want to achieve in 2020. It was the name of the, you know, what we called our strategy was Strategy 2020. What we're obviously striving for is, in particular on the costs side, to see that we can become more efficient rather sooner than later. Now today we're not in a position to give you details on this, as we highlighted, but it is certainly not our objective to achieve material cost savings only in the year 2020. We want to definitely see a material improvement way earlier than that. On the second question, John, you want to take that?

On the outlook for the dividend, there's not much to say at this stage. I think we've made it relatively clear that although we are not planning to raise new capital as part and parcel of our strategy, I don't think we're giving impressions that we feel over endowed with capital at the moment. And we do need to start investing in order to be able to achieve these cost savings that Marcus just mentioned. And so I think it's finally balanced and we should leave it at that until we see the outcome for the rest of the year, but we are planning a lot, and the accounting impacts and the uncertainty for the rest of the year will weigh on that.

Sure. Thank you.

It's not going to be 89% payout ratio. That I would dare to say.

I think you already said earlier, yes, but you're right. It won't be an 89% payout ratio.

Thanks.

Next question is from the line of Huw van Steenis of Morgan Stanley. Please go ahead. Huw J. van Steenis - Morgan Stanley & Co. International Plc: Thanks as much. Two questions. One for John. As you've been on the board for two years, what have you learnt about why Deutsche has not been more successful in cutting costs so far? Now, I hear you mentioned in a prior answer you talked about running too much optionality, but I'm even struck over the last three years, Deutsche has actually added even more personnel to the group head count. So what is it – what's your diagnosis and therefore, maybe give us some hints about what you're going to do differently? And then secondly, in the quarter, Deutsche got a two-notch downgrade from one of the agencies. I was just wondering what impact that may have had on collateral agreements and any sort of prospective view on what you're doing to mitigate any potential impact? Thank you.

Huw, just so I understand, you mentioned on the two-notch downgrade. Huw J. van Steenis - Morgan Stanley & Co. International Plc: Yeah.

The impact on what is it – was it collaterally? Huw J. van Steenis - Morgan Stanley & Co. International Plc: Sorry. On any collateral agreements or any sort of impact on the financial arrangements you have with counterparts?

Okay. Sorry. It was just to clarify what you'd said. Should I take the first one first? I think I might give you two perspectives on the cost base, and these go back for a decade or more, but I have a sense that in the past, where we have found that we have cumbersome manual processes that we have – and you probably know this from the way we're structured – we've had a tendency to move that manual process offshore to make it cheaper, and that has two or three consequences. The first is it casts in concrete that process because you've moved it offshore and for a while, you feel you've ticked the box. The second is that it doesn't fix the fundamental problem, which is that you probably shouldn't have been doing it manually in the first place and you should've computerized the process. The third piece being, if you had computerized it, you probably would have reduced the process in operational risk, but moving it offshore introduces operational risk because you've got to move things around the world. And we've a lot of very complex operations and process flows that I think over the years have led to this complexity that I talked about earlier. And so it takes a little bit of courage to go back and re-engineer those processes. Now, the good thing is when you're computerizing things these days, you can do it relatively quickly because of advances in technology, and you can do it relatively cheaply because hardware doesn't tend to cost that much. And at the moment, we're running in a state of quite, as I used the phrase earlier, it's a little rude, but antiquated computer systems. They generally need a lot of manual intervention. So where they've lost…

On your second question, overall, actually the impact on the incremental collateral posting so far has been pretty marginal. Obviously, several contracts are being renegotiated also in light of the downgrades, which, by the way, just as a reminder, is not a DB-specific one, but one that has affected the entire industry. So there is not a special Deutsche Bank topic here. It did have some negative impact on our P&L. The biggest portion of that to the tune of around €100 million we've actually seen in DVA/FVA. And yeah, I think that's probably what we can say to that. Huw J. van Steenis - Morgan Stanley & Co. International Plc: Great. Thank you. That's very helpful.

We could refer to you some of our fundraising and the average spreads. In Q1 we raised just under €17 billion at an average spread over the relevant floating index of around just under 50 basis points, 49 basis points or so in Q2, which wouldn't have reflected all of the downgrade. We raised less and actually didn't need it less, €5.5 billion and just under 60 basis points, about 59 basis points or so. But it's hard to define what proportion of that is actually due to a downgrade and how much is due just to general spread widening. We think there is general spread widening anyway, so I would imagine we would see our spreads continue to widen for a while. And Marcus, I don't know if you've got a sense for what – where they are today.

Yeah. I think we'd probably now be more in the 80 basis points.

All right, thank you. Huw J. van Steenis - Morgan Stanley & Co. International Plc: Thank you John. Thanks a lot.

The next question is from the line of Jeremy Sigee of Barclays. Please go ahead.

Hello. Just a couple of follow-on questions. One is to continue on costs, but actually more about the one-off costs. I thought it was quite a striking feature of the April strategy the amount of CtA and investment spend. I think it is €8.5 billion or something that you're planning which is quite an impediment to profitability and to capital build. And I just wondered what your thoughts on that are, John, whether you take more time with some of that spend or whether you think you have to crack on and do the necessary things and incur the spend regardless. So that's the first question just on execution of the strategy. The second question was much more of a numbers clarification. The €1.2 billion litigation charge in 2Q relating to U.S. mortgages. Was all of that for the civil cases? Or was any of that for a potential DOJ settlement that may be coming?

All right. Well, Marcus and I can answer your first question. I think you addressed it to me, so I'll have a first go. On – first of all, on our investment in fixing the Bank, we've already started. So as I said, we're already in implementation mode. As Marcus mentioned in his address, IFRS guides us to some extent as to the timing of one-off charges for restructuring. We haven't in the second quarter posted those. As a consequence of developing our strategy, particularly in developing any reduction in our footprint, there will be almost inevitably a time when we are required to post specific restructuring provisions. So they will by definition which is the way the accounting works, be to some extent front-loaded. So as soon as we identify in specifics where those cost savings and where those investments in cost savings occur, then we are required to make a provision. Marcus, I don't know, if there is anything you want to add?

Yeah. Maybe it's worth highlighting one point which we think was partially misinterpreted and maybe that's probably our fault because we haven't been clear enough in communicating part of what was announced in April. The €8.5 billion that you are referring to in terms of investments was technically correct. What we, for example, did not wanted to imply is that we will now on top of our existing cost, add another €1 billion in digital, €1 another billion in GTB and another €1 billion in asset wealth management, those €3 billion we view, they have to come out of our ongoing cost position, which at the same time we want to improve. So it's not that we're saying take an 85% cost/income ratio and add on top of that €3 billion. I mean that is not what the game plan is. I think this was really more meant to highlight that these are the areas where we want to invest but do not expect us – invest in the sense we want to grow there. But do not expect huge upfront cost in those areas. That is definitely not our plan. On your second question, details on the €1.2 billion litigation charge, really be patient with us. I think we're trying to be really more transparent on this item because it is a very important topic. But I think we would be ill-advised to provide the details on what exactly we have provisioned for. I highlighted that U.S. RMBS is a material point in this. But we don't want to go into more details there. I'm hopeful you're understanding.

Okay. I fully understand. Thank you very much.

Next question is from the line of Andrew Stimpson, Bank of America Merrill Lynch. Please go ahead.

Thanks. Hi guys. One more on litigation. If you can't answer that's fine and I do appreciate the transparency you've given already today. But just what, if you are allowed to tell us what the trigger was, for you to be able to provision this quarter? Like, what was it that changed? Was it payer provisions? Or was certain talks more progressed, there was a particular court case? Any particular color there would be welcome. And then secondly on repricing, some of your peers have spoken about repricing starting to come through in leverage-constrained products and just wondering if you guys are seeing the same? And if you are, would you say that repricing is significant enough to justify those businesses? Or is the repricing coming from such a low base that many of those products just don't make sense any longer? And then following from that a more philosophical question, I suppose. What do you think the future holds for some of those products long-term as all banks are seeming to want to exit the same products. And you say there you want to move maybe some of those products to a more balance sheet-like model. But if Deutsche Bank is not doing it, then maybe no one does it in the end. So just wondering what do you think of a market in the end, ends up looking like and whether do corporates and clients just do, just hedge less risks because the economic advantage ends up being below the cost you and the industry needs to charge to make that, to make those products worthwhile for you and the shareholders? Thanks.

Let me start with the litigation question. Look, there are several effects and I can't go into the details but it's obviously looking at other cases we see in the industry. There are on some of the matters, obviously, there is ongoing discussions that we have with authorities and findings from those. We always need to reflect upon and they then find their way into our balance sheets. And that's probably as precise as I can be at this stage.

Appreciate that.

On the repricing, on the repricing points I would say early stages. The area that where we have seen some is maybe in FX, but not terribly pronounced. I would say it's still early stage and as far as I'm aware we haven't really seen a lot of repricing.

Now, Andrew, all I'd add there is that for some products, which currently aren't really very viable given the change in the – the manner in which capital is required to be put up against them, there's essentially no means of repricing them that then makes them attractive to a counter-party. And that's why there are products which were only viable when they were capital light. And so it's a bit asymmetric how to reprice for products that are socially useful and real clients need. But there's still a lot of competition between banks and other providers. And so we don't see much in the way of repricing. Where we've seen more esoteric products in the past that have been of a more proprietary nature which are now capital-heavy. They're just not viable if you reprice them to cover a cost of capital to produce an attractive return. So I think that asymmetry is important. That doesn't mean there is no flex in all products. But at the moment, banking still is competitive as it ever was.

Sure. Okay. Thank you.

Next question is from the line of Andrew Lim of Société Générale. Please go ahead. Andrew Lim - Société Générale SA (Broker): Hi. Good morning, John and Marcus, and thanks for the call. I've got a few questions, please. First of all, just a bit of clarity on the return on tangible equity target of 10% or greater. I think given that we don't have clarity on the cost/income ratio and the payout ratio and so forth, is that something that you're saying we should like step away from for the time being and that you'll come back with a new target later on in October? And then secondly, on the Strategy 2020 plan, there was a lot of focus last time around on the CET1 ratio target of around 11%, but the leverage ratio target of 5% or greater and the implied conclusion there of potential RWA inflation. I was just wondering what your thoughts were on that topic. Is that something that we should be thinking about? Or should we step away from that as well? And then thirdly, on the leverage ratio, the previous management used to say that issuance of AT1 capital was restricted to about 150 basis points on risk-weighted assets, so not much more capacity to issue, more AT1 capital from where it currently stands. Is that still something that you hold to as well? And then lastly, just a little question on the NCOU. You've had some gains there on the sale of maybe €100 million. Is there more low-hanging fruits there that you can achieve gains on? Or is that it for the time-being? I'm just wondering also what the quarterly run-rate for the NCOU revenues are going forward? Many thanks.

Okay. Let me start maybe with the last question on NCOU. Actually, I think our guys there wouldn't necessarily agree with the fact that there are low-hanging fruits. They're actually doing a very nice job in trying to drive this down. But having looked into the portfolio that is still there, it's not an easy portfolio to work through. That said, we do have some ambition to see how we can really eventually then anyway also come to a point where at some stage we no longer have to report about an NCOU. But that obviously will still take some time. But no, there are no low-hanging fruits. It is a difficult portfolio, but we are very actively working through this and expect further decline in the coming quarters. On the first question, the ROTE targets and is there going to be an update, look, again, we ask for patience. We'll come to you in August – sorry in October, and give you details which will be more focused on the things that we believe we control, which is, to some extent, our balance sheet and is our cost position. And then obviously, we will translate that into an ambition level that we have on the return side and the 10%-plus as John highlighted, that's certainly the minimum we're targeting there. I'm not entirely sure I understood your question two. Yes, we did mention RWA inflation to the tune of about €100 billion that we expect, in particular, for the period 2018/2019, so not in the near future. This is really driven by basically Basel IV and there is this debate if this is already going to hit in 2018, is it more a 2019 topic, so it's kind of in that time window. At this stage, we would stick to the numbers that we highlighted. We have no further insight that would suggest that these numbers ought to look different from what we communicated in April. And then I think your third question was on AT1... Andrew Lim - Société Générale SA (Broker): Yes. Did you...

Can you repeat it maybe. You were mentioning, sort of, can you just repeat the question? Andrew Lim - Société Générale SA (Broker): Yeah. What's the maximum AT1 capital that you can issue? Is it restricted to a maximum 150 basis points on risk-weighted assets?

Yeah. Okay. Yeah. Andrew Lim - Société Générale SA (Broker): Or will you have more capacity to improve your leverage ratio through this angle?

Well, you should – basically you should always expect that there is some buffer on top. We've not taken any decisions with regard to AT1 volumes beyond this. And basically we think that there is still some room we have on the AT1 side.

And, Marcus, I think the only other point that I would add on AT1 and actually on the core equity Tier 1 is that it's important over the plan period that we're talking about up to 2020 to shift the focus from just the core, the group consolidated ratio to some of the more important booking centers we have. And I would encourage you to look at the IHC because in the context of having to set up the bank within a bank, there's, of course, the potential demand that we are receiving AT1 out of our U.S. business. Or at least constructing a form of AT1 internally that will essentially offset the parent company AT1. So when we look – the reason that we're not being obscure on these, but on the way SREP works, we have to look at legal entities as well as the group consolidated picture. And so although we've been, in the past banks have been generally relatively open on the group consolidated number, one of the things we have to take into account is where the capital is as much as how much we have on a group consolidated basis. And it's difficult for us to speak to that in more detail until we've alighted on the ultimate structure of the group and where our risk assets are, where our CRD 4 leverage is, and then where the SREP and equivalents set the target and trigger ratios for individual entities within the group. And so that the 1.5% of RWA that you mentioned, I imagine it's the amount that you are wondering about whether we could issue that into the market at rates that give us at least an ability to leverage the return, whereas we're thinking of AT1 in a much more granular fashion within the group as well on a legal entity basis. The other point on AT1 that we should highlight is the potential for rulings that allow us structural and statutory subordination of existing unsecured term debt, to reconstitute it by operation of statute as effective AT1. Andrew Lim - Société Générale SA (Broker): Right. Thanks a lot for that.

In TLAC terms specifically I'm talking about rather than issued AT1. So if a role of AT1 is effectively to be a contributor to the TLAC and the TLAC is a very large number, then the core TLAC may be met by existing debt.

I mean, just to avoid any misunderstanding, yeah, there is – you should not have – if that was kind of the background to your question, you should not have the expectation that we're going to come out with significant AT1 issues here, yeah? And in a way the same also holds true here for other questions that we answered before; focus is on managing the balance sheets rather than throwing capital at the situation.

And we should give the health warning on AT1 that we gave on core equity Tier 1, which is that we are not minded at the moment to issue unless the rules of the game change or unless there is an exogenous event that causes us to do that. Andrew Lim - Société Générale SA (Broker): Thanks very much. In your answer, you touched upon an important topic for Deutsche Bank, and that's the FBO issue. And I mean structurally you've got a lower leverage ratio in your U.S. operations than you do elsewhere, and I was just wondering if you had any thoughts about how you might address that in your overall strategy? Whether that would necessitate reallocation of capital from other parts to the U.S. or maybe designating businesses as non-U.S., say to the UK or Mexico?

Yes. And part of the Strategy 2020, one of the underlying factors that we were building into it were the FBO rules and the need to capitalize our IHC and have it up and running initially by 2017 and then fully fledged by 2018. And we would expect to meet the capitalization requirements of the IHC, which on a leverage basis, could actually, where I think we'd expect will be marginally higher than the group net-net to meet that through internal allocation of capital.

Although the leverage targets actually only kick in, in 2018.

In 2018. That's correct.

In the FBO and we've tried to basically create all that through internal funding.

Yes. But bear in mind, we have not been through the CCAR process yet for the IHC and so the outcome of that is uncertain. Andrew Lim - Société Générale SA (Broker): Right. Thank you very much for that.

In the interest of time we would like to announce our last question for today from Fiona Swaffield of RBC. Please go ahead.

Hi. Most of the questions have been answered but I just wondered if you could comment on the compensation ratio, particularly in CB&S, which historically has gone up over the quarters, starts very low then creeps up. Do you think there is any prospect of changing the way that you accrue for variable compensation potentially so that it looks a bit less back-end loaded? Thanks.

Fiona, I think the compensation accruals are driven just by the accounting and there are no plans to make fundamental changes to the way that compensation is structured. And as you know, compensation is now relatively heavily regulated, so the latitude we have to change our compensation basis is relatively low.

Okay. Thanks.

Since we are running out of time this was our last question. We apologize to those who don't get to ask. I would now like to hand back to John Andrews.

Operator, thank you, and again, let me extend my apologies to the small handful of you left in the queue. We have some tight internal scheduling and Marcus and John have to move on to another event. Obviously I and the IR team will be available for all of you with any of your follow-up questions. Otherwise, thank you very much for attending and have a good day and evening.

Ladies and gentlemen, the conference is now concluded and you may disconnect your telephone. Thank you for joining and have a pleasant day. Good-bye.