Ladies and gentlemen, thank you for standing by. I am hereby our Chorus call operator. Welcome and thank you for joining the Second Quarter 2017 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. [Operator Instructions] I would now like to turn the conference over to John Andrews, Head of Investor Relations. Please go ahead.

Operator thank you very much and good afternoon from Frankfurt. I'd like to welcome everyone to our second quarter 2017 earnings call. I'm joined today by John Cryan our CEO, and James Von Moltke our newly minted Chief Financial Officer, who's bravely undertaking this call three and half weeks into the role. John will start today with some opening remarks and then James will take you all through the bulk of the analyst presentation, which is been available since this morning on our website www.db.com. As always, I would ask for the sake of efficiency and fairness to questioners please limit themselves to their two most important questions so that we can get as many analysts chance to participate in the Q&A session. Let me also provide the normal health warnings to pay particular attention to the cautionary statements regarding forward-looking comments that you will find at the end of the investor presentation. With those formalities out of the way, let me hand it over to John.

Thank you, John and hello everyone. Let me add my welcome to you to our second quarter earnings call. We've continued to make steady progress on the implementation of our strategic turnaround plan and the many changes we've made so far starting to bear fruit. The bank feels very different today from how it was just two years ago, but for all the change we've made there is still much to be done. The results for the first half of 2017 show relatively little impact from charges relating to our legacy, compared with what we experienced in 2015 and 2016. Nor are they yet impacted by the financial effects of the post bank merger details of which we still expect to announce towards the back end of this year. In the second quarter, we were operating against a macro economic back drop that was actually quite constructive for us. Growth expectations for Europe were improving and have now overtaken those for the USA for 2017. Geopolitical risk may have increased, but it's contained to certain hotspots, North Korea, Qatar, Brazil to name a handful. The revenue environment for us on the other hand was more challenging. Client activity across many of our business remained muted. Extremely low levels of price volatility, notwithstanding the geopolitical backdrop drove low volumes of trading. Even exceptionally low price of volatility and many asset classes failed to entice corporations and investors to trade. Persistently low interest rates in the euro area and the C change in inflation expectations in the USA both acted as brakes on our revenue in the quarter. Overall, operating revenues fell short of our own expectations, although the bank is now well positioned to benefit for an uptick in interest rates, in volatility and in client activity. In the quarter, we…

Thank you, John. I'm very pleased to be hosting my first investor call as Chief Financial Officer of Deutsche Bank. Let me start with the financial highlights on the page three. For the second quarter, the group reported income before income taxes or IBIT of €822 million and net income of €466 million, both up materially from last year's second quarter. While the revenue environment was challenging in the second quarter as John noted. Lower noninterest expenses drove the increase in profitability. Quarterly net revenues of €6.6 billion were 10% below last year. This decline was driven by a number of factors notably the market environment and the strategic and business decisions we have made. In general we will speak to our reported results. Nonetheless it is important to understand the underlying operating performance in the quarter, because we incurred a number of non-operating items. For example, we recorded over €340 million of charges in the second quarter from the impact of our credit spreads tightening and for a loss and cumulative currency translation impact related to a business disposition. The comparison to 2016 was also affected by the absence of some one-off gains in last year's second quarter, the largest of which was the €192 million gain from the sale of our interest in Visa Europe. Even giving the effect of these non-operating items the challenging environment contributed to a significant revenue decline especially in our Corporate & Investment Bank segments. The group's noninterest expenses in the quarter were significantly improved over the prior year, by approximately €900 million, reflecting both our cost control efforts and the absence of an impairment recorded in the prior year, a small net release of litigation reserves compared to a build last year and much lower restructuring and severance charges. We are making…

Operator if we can start the Q&A, and if I could remind everybody two questions please.

Ladies and gentlemen, at this time we will begin the question-and-answer session. [Operator instructions]. And the first question is from the line of Kian Abouhossein with JPMorgan. Please go ahead.

Yes, thank you for taking my two questions. The first question is relating to your page 24 guidance that you have given, outlook statements on CIB. You indicate that revenues will be slightly lower in CIB, if I look at first half year-on-year you were down about 10% if I look at the third quarter last year relative to the second quarter run rate this year, so already €900 million better. So I am just wondering what is the driver in the second half that you're seeing which has to result in a material pickup in revenues in order to be slightly down year-on-year. Than the second question is if you can dig slightly more detail into the Equity Sales & Trading numbers, and in that context if you can explain a little bit the prime brokerage improvement that you're seeing is this new accounts, is this cash, whether is derivative if you explain it a bit more? And in addition to that if you can also explain why you have not participated so well in corporate derivatives which you haven't mentioned, which has been a big revenue driver for some of the U.S. peers considering your strategy is more to go towards more of a corporate driven franchise.

So, it's James, I'll take the first part of the question and perhaps part of the second and then pass it on to John. Firstly on an outlook basis, I have cautioned you that outlook is hard especially about the future but as we look at our numbers on a forward looking basis, it's important to bear in mind that there is also the year-on-year comparisons that you will see in the third and fourth quarters of the year. And especially obviously the fourth quarter where Deutsche suffered declines in revenues given idiosyncratic issues around the company. In the - just to answer your equity question and particularly Prime Finance we are looking at balances that have recovered round numbers 15% since the end of the year and the end of the year represented more or less the low point, was a little bit up from the low point in the fourth quarter, but more or less the low point. As I mentioned in the prepared comments there is a lag from regaining the balances to seeing the full impact of the revenues from a covering clients. And lastly generally on clients, it is largely or mostly clients coming back to Deutsche Bank and that's obviously encouraging in terms of the signal about the client franchise.

Yes I think Kian on the outlook for the full year, we have to write something and it is quite difficult to what to write sometimes because the drivers of our revenues particularly in sales and trading area are largely driven by client volume and that's notoriously hard to predict. We are not reading too much into July to-date, but there hasn't been much of a change in the environment from what we saw at the end of the second quarter. So volatility is still very low I mean the risk was pluming new debt in the past few days and client activity levels tend to be driven a little bit by volatility. You raised the question on corporate derivatives, I agree that they seem to have picked up in U.S. we did okay in Europe in corporate derivatives, but we were sluggish in U.S. comparatively. But I think on the outlook it's really just a question of activity levels and we just don't feel confident that we see them coming back with any particular timeframe attaching to them. But longer term we do think they will come back.

And if I may just one more follow-up very quickly John, you mentioned at the time taking over Deutsche that you wanted to reinvigorate so to say the sales trading franchise at Deutsche equities. Is that something you had that is happening, is that something you have to shelf considering market conditions or also things have happened in the meantime which impacted your business, how should we think about that that equity franchise?

Yes, it's a good question. Obviously in the second half of last year, we did point out that Prime Finance had been a driver of the reduction in performance in that division and that's because there were questions about our credit worthy so forth you know the story. As James said, a large proportion of that has come back, but it's comeback during the first half and it's not as active as it was this time last for us yet. Where I think there is a gap to the market, and I said this I think a couple of quarters ago is in the area of electronic trading. And so there we do need to invest to catch up a little bit in the technology that supports sales and trading in equities. And then we are investing in people. And we've had to reconfigure that business quite a bit as its commoditized and as it's become much more machine based we proportionately need fewer traders doing voice trading and more in a way of specialist sales and distribution. So we've been slightly changing the focus of the Equities business and we were a bit hamstrung by the overall impact the company went through last year. But we determine to get back there, because that's clearly core to even the corporate led investment banking idea.

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

Yes, hi. Good afternoon from my side as well. I have two questions please. So the first one relates to the exemption from the German Bank Separation Act. In regards to the integration of Deutsche Postbank I think that at the time of the rights issue, John you expressed an expectation that this would be obtained I think the wording was quickly. And then I think the previous year those stated on the last conference call that the expectation is for this to happen over the course of the second quarter. And I was just wondering if you can give us an update on that front. And then secondly on Basel IV, obviously lots of moving parts and lots of meetings that didn't produce an outcome that was expected a completion of Basel IV over the course of the second quarter. What is the expectation of Deutsche Bank on this front? Should we treat you previous guidance as a worst case outcome or as a base case outcome, where do you think Basel IV ends up for Deutsche Bank?

Let me take the - what you call the German Bank Separation Act. Yes, can I ask you a question because on that there were two aspects of the German Bank Separation Act; one was related to Prime Finance and the other I suppose has a tangential application to the merger with Postbank. I mean, I answer the merge with Postbank but whether you were referring to the other issue as well, which was the question of whether Prime Finance in the investment bank was going to be an issue? Was it both or…

No. I think so. I think I'm asking the same question for three quarters. So for the third time now it seems the rights issue was announced. The question relates to…

The weighs are on large exposures.

Yes. So the question relates to whether Deutsche Bank will be able to use the liquidity of Deutsche Postbank for the purposes of the group treasury before the merger is legally completed before the legal entity is extinguished.

Okay. Well on that one, we've rather moved away from applying for the waiver, because the waiver will be all rolled into an approval for the merger. So we'd like to grant rather effectively the Deutsche Bank subsidiaries ability to have its excess liquidity counted towards group ratios.

Right.

Because it didn't seem to make much sense we go through a process of doing something for Postbank when; A, we didn't need the liquidity and we don't need to show stronger ratios because there are already very, very high. So we would leave it just until we get the approval for the merger.

May I just ask? So do you - so we should expect this to happen…

Yes…

By the end of this year.

Yes. No one is losing any sleep over that. Well, yes we wouldn't announce the merger and if we didn't have approval for it. So I guess we seem to be on track to do it this year. Although I shouldn't deprive regulators have their own jurisdiction to decide when make us think like that but I would expect it this year. On Basel IV, I think there's still a whole variety of topics within Basel IV which are open. The first I guess is FRTB and I think the draft year legislation has been issued although we then read the U.S. treasury paper and we're not sure the U.S. is actually that in amative FRTB anymore. So we need to see how quickly Europe actually implemented. From our perspective we had a project running for quite a long time to make sure that we're ready for it, but that's the best I can offer you there. Likewise a little bit of uncertainty on operational risk, as you know we're one of the few banks left using the advance measurement approach and the new Basel replacement proposal the standardized SMA it's called I think is not yet agreed by Basel. So again we're not really sure where we're heading on that one. But we do assume that the AMA model at some stage is replaced by more a standardized approach. On credit risk again we're aware of these discussions in relation in particular I guess to the output flow and as we said would impact us in two ways one, it would have an impact we assume on low credit risk assets predominantly German mortgages. And then it would have an impact on the counterparty credit risk that's embedded in our derivative contract. And on that one there still seems…

It was €100 billion without Deutsche Postbank right?

Yes I think it was, that's right although at the times of the writes issue, we didn't refine that number. So I guess the impacts on Deutsche Postbank would impact the mortgage book there. But we did stress the derivative book although the legacy book does take a while to run-off, it does run-off overtime. And don't forget there's a number that we did was run-on a QIS from a book that's now probably it doesn't look much like the current book. I mean a lot of the contracts would have run-off and we're actually in the context of running off the NCOU would have got rid of some of the more offending contracts.

Thank you.

Next question is from the line of Jon Peace with Credit Suisse. Please go ahead.

Thank you. So my first question is about fixed income trading and I wonder whether you could just comment were there any sort of lumpy negative trading revenues in the quarter that might have made your sort of underline run rate a little bit stronger than what was reported? And then second question is on the outlook for leverage assets and how quick - first of all how do you think those should develop going forward is there some things that you can do to bring your leverage assets down? And how quick do you want to get to your 4.5% target knowing that there might be some relief beyond 2020 are you giving yourself more time to get there? Thank you.

Thank you it's James, I'll take both of those questions. On FIC, I would say there are lumpy revenues in FIC in both directions, which is obviously not a typical and I think as we called out we had a very strong quarter in credit products. And so positive results in net book offset some lumpy items in the other direction. But to your question I think therefore our performance in the quarter relatively well reflects what you call the underlying performance to your question or the way it was phrased. Our leverage exposures I think yes, you answer the question we do give ourselves time to work towards the 4.5% target that we've set for a number of reasons, but I'll fight a couple first I noted the pending settlements treatment. So, some of the sort of backward motion in the second quarter, we do expect to recoup overtime. There is also a lot of optimization that we think we can still do in respect of leverage exposure and the sort of prudent management of the balance sheet again overtime. And so we do think there is opportunity there in the years to come. You asked I think a near-term outlook question that's something we sort of work on every day. We're hoping and expecting markets to normalized over the back half of the year and if that happens you would see RWA and likely leverage exposure growth into the year. And because we're not accumulating capital based on the 100 dividend payout ratio assumption I mentioned in my prepared remarks. You would consequently see both the CET1 and likely the leverage exposure or leverage ratio decline into the year-end. But those are predictable events largely driven by market growth.

Right, thank you.

Next question is from the line with Stuart Graham with Autonomous Research. Please go ahead.

Hello, thank you for taking my question. I had two questions. The first one is on the Q4 call you mentioned €750 million to €1 billion revenues that left the bank last year and should be returning. I think on the Q1 call, you said €100 million is returned I think mainly in prime broking. So can you give an update for how much more returned in Q2 in CIB, please? And then the second question is on the €64 billion leverage ratio reclassification, I'm bit confused because I thought the whole point of the Basel leverage rules because they were identical irrespective of which gap you're on. So didn't matter whether you are U.S. GAAP or IFRS. I mean that number feed straight into the FSBs, GSIP math [ph]. So it should be consistent across all banks. So, just wondered why you were reporting on a different basis. Thanks.

I think James is offered to take the second one first on the leverage ratio but we're competing over it, so I'll let him do it. It's his first call for us.

We're completing talk about leverage ratio, on the pending settlements, there are different practices in the marketplace in terms of how it's treated and that's in line with the relevant reporting standard. So, some banks report on a gross basis, some banks report on a net basis. And in respect of that calculation it is inconsistent globally reflecting how each jurisdiction treats it. I point out the U.S. broker dealers treat this on a net basis given the view that there is relatively little risk in the positions in regular way settlements. So, that's on leverage exposure.

I am sorry, when you say broker dealers, you mean the money centers?

Yes, exactly. That in the money center accounting within the broker dealer balance sheets. Yes, it's treated on that basis and again each firm is managing it consistent with their accounting practices.

Just generally we need to disabuse you of any notion that leverage ratio is a comparable across institution I mean just two areas past, we still have a big add on for our rates business. And the second is another idiosyncrasy about which is that no matter how much net income we pay this year, it doesn't get credited to our CET1 because of the ECB rule that says that given our situation last year of having paid that national dividend, the minimum dividend against the loss that leads to us having to assume that all of our net income this year is paid out as dividend, which is not the intention, but it doesn't get added to CET1. So, unfortunately other the intention was to create something simple and comparable across jurisdictions and across institutions from our perspective at least there is nothing of the sort. On the revenue lost and regained I am not sure that there was much of an uptick in the Prime Financing revenues attributable to the balance able to come back Q2 versus Q1. But let me give you one of my favorite examples of demonstrating how and when balances come back don't necessarily have much of an impact initially on P&L account. In our Transaction Bank our liability balances year-on-year are up 25%, unfortunately I think they are mostly in euros because they are not having any impact at all in a positive sense that's for sure on the revenues there. So where we're seeing these balances come back they haven't come back with commensurate activity or net interest margin pickup yet although it's clearly much better that they are back than not back.

So you still feel confident that €750 million to €1 billion will come back at some point in time because it feels quite a long time ago now.

Yes it does, well there comes a point where there is no point in worrying about what we had and what we have got now because we should just be out there trying to win new business rather than win back business from people we used to do business with. So it's hard to say, but I wouldn't be anywhere near as bold as to say that we have got a high proportion of that lost €750 million to €1 billion of revenues.

Okay, thank you.

Next question is from the line of Jeremy Sigee with Exane BNP Paribas. Please go ahead.

Hello, thank you. Two questions please, so one is just coming back to a point you touched on which is the GTB revenues rebating down, and I just wanted to be clear that what we're seeing for that 2Q number the 975 that's the new base level it's not burdened by a full half years' worth of adjustment so that's the base level. And if it is the case is there any claw back on that accounting treatment or is this just what it is going forward, that's my first question. My second question was a bit more sort of conception in a sense which is how do you evaluate your cost progress against the backdrop of lower revenue outcomes. Because obviously those low revenues helped your costs to pick under some of lower revenue related and weaker revenues more than offset the benefit of the lower costs. And your cost income ratio on an adjusted basis is unchanged versus 2Q last year at 83%. So how do you evaluate your progress and I guess leading on from that do you at some point consider restating your target if the revenues remain weak in the way that you are describing?

So it's James, I'll take certainly the first and probably a part of the second. On GTB revenues as I said in the prepared remarks there were a number of different factors around funding costs and parameter especially and also to a certain extent also risk appetite in that business. I would say short answer to your question the second quarter represents reasonably good base for comparison some of those funding costs that we referred to were held in the C&A segment in the first quarter. And so effort was undertaken to push those out to the businesses GTB received a significantly amount for a number of reasons methodology related, but now that that's in there that's a good basis. I will say part of those liquidity - part of those funding costs reflected much higher liquidity we're carrying. And so overtime as we optimize and manage that liquidity there could be some improvement, but the goal of funds transfer pricing obviously is to recognize in the segment the funding costs and liquidity charges that are inherent in the business. So some but modest benefit likely to come to GTB overtime. Your second question about expenses, I think it's very early for me to make any new statements about our costs especially accelerating beyond the €22 billion commitment for 2018. This is a commitment I understand I am inheriting and one that's shared by the whole management team, I certainly signed up for it. To your question though about the variability of costs relative to revenues, I think we are all acutely aware of the need to make the costs basis flexible as possible. But that is a significant challenge especially in areas outside the sort of transaction related costs and to some degree compensation. So we are aware of it, but it'd be too early for me to make any new statements about that.

Jeremy, I know you guys like me to be appropriately note you every now and again but on the costs if I could just give you some stats on where we are for example on technology because we set some targets for you, which were non-financial, but were related to the complexity of our systems. You recall when I started back in mid-2015 we had 45 different operating systems. And we set a target getting that just down to just 4 in 2020, and we're currently at 33. So it's down I think that's 27% or something. So there is a plenty of room to go there. So that's operating systems, but they host application systems. And at the time I started we had over 1,000 reconciliations a day between operating systems. We've got that down by about a third and our target is to get it down to about 300 or so by 2020. So plenty of scope for simplification there and cost reduction. On private clouded option, our plan is still to reach at least 80% by 2020, and we're not even halfway there yet. So there is room for improvement there. And on our vendors, you remember we had more than 56,000 vendors which was some feed for 100,000 people in the company. And we've got that down by almost 30% or so. But there is still a lot of progress that we want to make in reducing complexity. And I'm still of view that there is a recently good correlation between complexity reduction and real cost and wastage reduction. So I'm not changing the guidance for what we're targeting and just remember the extra €1 billion after 2018 that we're looking for but we do see there is scope to bring down the cost from the run rate that we're currently seeing.

Thank you. I think it's interesting to hear those other stats, because it's sticky just to interpret the P&L cost line given the revenue length. So thank you.

It is. And don't forget that and again not to exaggerate the point so we wouldn't want you going away thinking we're going to half our cost. But we've made redundancies in Germany through the horizon program, the cost branch reduction program. That's been taking place through the first half it's as I said in my remarks it's almost done 11 branches or something still to do. And the full weight of that won't come through until the quarter or two or even three. Having said that, I also said we need to spend at least €2 billion a year to fund this modernization program, otherwise we'll slip in market share again.

And sorry, just on that point, because you flagged the need to investment I don't know if you're referring that the equity things I noticed you're referring to that. I mean, is that additional to - is that included in your plans and budgets or is that an incremental thing that you're going to have to find savings to fund?

I think the truth is it's probably a little bit of both will accommodate some of the cost of doing that within the general change the bank budgets, which we sort of refresh every year. We've been prioritizing, triaging we've obviously focused on not just efficiency gains but we've really focused in the past two years on controlling improvements as well as efficiency gains. And we need to start investing more in sources of competitive advantage for the bank. I think in the retail banking well we've done a good job with the digitalization we've got mobile payments up and running in Germany which is new. We've even got voice banking if you use Siri. So we're stepping ahead in Germany. I think we need to invest a little bit more in CIB outside of just GTB, which is always been a business that is driven by competitive advantage from technology. We've got to apply a little bit more investment to our sales and trading area to help leverage the people there.

Thank you.

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

Good morning, everyone. So first question is on net interest income, the idea that net interest income would go up if rates do ever go up and Europe has been powerful concept for the whole sector. When I look at your net interest income so far this year, so first half '17 on first half '16, and it's down by €1.4 billion already. And how should we be thinking about that line going forward in the near-term. I know we tend to talk about revenues in terms of product lines, but clearly, this year that's definitely been a focus on net interest income. So maybe you could talk through how if rates don't up for the next year in Europe how that works out? And then secondly, I thought the stats you just gave on technology were extremely helpful. You've made some progress so as you said so far and there is plenty to go. Is there a delay between making the progress say on the move towards cloud adoption and the costs actually coming through. Because clearly there is sometimes different between making the progress on the IT and then retiring the old systems, which is where you really get the cost saves. Thank you.

Sure it's James on the NII question there are a lot of moving parts in our NII line items. Two that I would highlight are the RMBS exit and also Abbey that are in our historical numbers, but not in the current quarter or forward-looking numbers. So that's a feature that makes the comparability tough. I'd say the other thing is again I mentioned higher liquidity costs as we have built liquidity and there are also liabilities that we've been carrying and put on during the period of stress last year. They've resulted in slightly higher funding cost and we'd expect those to roll off overtime. If I look forward a few things without wanting to give specific guidance at all, but you mentioned the interest rate sensitivity that we've published and provide again on page 24 of the investor deck. We would expect overtime some of that to flow into our income statement, but of course it's anybody guess when the market rate environment and Central Bank actions especially in Europe really would lead to that outcome. In the meantime a number of our businesses the liability businesses of course are suffering continued margin compression and interest income declined from longer hedges that roll off. And that's a process that's not yet complete. So on a total revenue basis the businesses work hard to offset that pressure from interest income, but in the interest income line it's still a headwind for the at least the near-term.

Okay thank you.

On the question of costs, I think there's not a great deal that I could add. I think most of the opportunities actually probably beyond 2020, because if we reach our target operating infrastructure by 2020, which we're reasonably on track to do, we need to take stock again then of what the competitive landscape looks like. Because technological improvements are being introduced at a rate of knots and it's very difficult I think to predict anything three or four years out. What I would suggest though is that to the extent we reduced the cost of running the bank, we probably have to ship some of that cost into the change budget so where I can say we keep the €2 billion at least for the period up till probably 2020. After that it maybe that the banking world just have to continue to invest in technology to keep pace, very difficult to say, but the competitive environment will come from outside the banking sector, I think particularly in retail banking.

Yes agree. Thank you very much.

Next question is from the line of Julia [indiscernible] with Morgan Stanley. Please go ahead.

Hi and good afternoon and thank you for your presentation. Two question from my side one on the revenues and one on dividend. So on the revenue side, I just wonder how is the competitive market evolving in Germany? And your strategy of rationalizing the branch network is that affecting your pricing power, are you losing customers obviously we hear competitors of yours that is quite keen on gaining new customers. So if you can give us an update on that? And then on dividend so I know that obviously you're accruing more than you plan to pay, but I was wondering if you can provide an update on how you're thinking in terms of a normalized payout from 2018 and beyond? Thank you.

Yes well let me take responsibility for the margins and revenues in the German market. At the time we announced the rights issue we had seen an improvement over the mid of last year. As soon as we mentioned that there hasn't been any further improvement. So the situation I think is pretty stable. And you're right there is always competition for customers, which has always been as intense in Germany as it has been in other markets. So we've 20 million clients across our two banks and that's again an addressable market of something like 60 million. So if we can't make money from that competitive position then something really wrong. So I think we are well positioned, we need technology to produce better net margins, because I don't think Germany will ever be a market that's classified by very high gross margins and that's partly because as you have seen from our credit numbers, credit losses are not really a hallmark of the market. On losing customers I guess in retail banking we do that all the time, but where our customer numbers are reasonably stable, we have as you know from some of our marketing we have been trying to appeal to the younger customer with some of our more modern technology interfaces and that's remains the focus. The only other thing I would say on retail banking is that we continue to review the brand and we continue to review the pros and cons of advertising. And I guess in 2018 that's something we need to turn our attention to. On the dividend, there is actually some news on the dividend, which is not from us, I think it's an environmental change, which is that I believe that in the last day or so a new…

Okay, thank you. So you would consider zeroing the dividend for fiscal year '17 to be paid in '18 if this goes ahead?

I think the better phraseology is it is now again an option for us, but we will see how the year looks. Our capital ratio is obviously quite strong.

Yes I would assume.

Yes okay.

It is for zeroing in fact I was asking if you were planning to start doing higher dividend but it doesn't seem the case.

Well we came with this deliberately unclear statement as a competitive dividend payout ratio for the financial year '18 paid in '19 at the AGM then so I think we stick to that.

Okay, thank you.

Next question is from the line of Andrew Coombs with Citi. Please go ahead.

Yes good afternoon, two follow-up questions please, one on IT and then one on the leverage ratio. On the IT thank you for the data that you provided. What I wanted to ask was could you provide any indication of the size of your overall IT budget as a function of your cost base. And secondly you made the point about moving away from run the bank cost to migrating more to change the bank costs overtime, is there already some evident of that coming through and a lot of the maintenance spend you have indicated you may be able to reduce, but the €2 billion investment it looks like your capitalized balances have been going up somewhat. So does that mean that we are just going to see that flowing back through the P&L as a higher amortization charge in Q4? Second question on the leverage ratio, if you take your numbers now even if you give back the 20 basis points of benefit it looks to be the lowest of any of the large global CIB peers. With that in mind how much of a competitive issue is that? And more broadly the 4.5% number that you target previously that was a 2018 target, is it now fair to assume that is now a longer dated target. Thank you.

I might take the second question first if I may. And then ask John to respond on the IT front. We did not set a specific date for the 4.5% target. So I want to correct that impression. You're correct that on a relative basis compared to the peer group, we would show up at the low end. As I mentioned earlier, in response to another question, I do think there are sort of optimization improvement sort of opportunities ahead of us. We have as an institution focused more on optimizing the risk weighted asset sort of load on the balance sheet. And as we look forward in time, I think we will devote more or perhaps equal attention to leverage exposures. I mentioned also that we are carrying some excess liquidity. If you put just the liquidity and corporate bond portfolio against our leverage ratio it represents a reasonable sizable component of that ratio. Again it's relatively not risky, but as we optimize around a number of items including the corporate liquidity portfolio, we do see some upside there.

On the IT costs, I direct you - I don't know if you've got in front of you page six, which is the adjusted cost schedule. You'll see that the IT cost run just below €1 billion per quarter. So that's pure IT cost, and there will be an IT element within professional service fees for examples and then obviously within comp and ben. That would be to run the bank budget plus to change the bank budget. But in non-comp and ben expense, IT would be a large proportion of our costs. Because real estate is I guess the other one. So that's sort of indicative of pure IT costs, I think some quarters last year it was €1 billion it runs between that sort of €900 million to €1 billion per quarter. But there would be professional service fees, there would be a bit of occupancy maybe for some datacenters and so forth with a bit of comp and ben. They're probably running €5 billion a year I guess.

And I guess my question is if you take the OpEx I mean the €97.16 [ph] you add a bit on to the professional services fees some of the compensation, you could be getting up to 25% but that's prior to capitalization number. I guess my question is even if you bring the OpEx number down is the capitalization number going to creep up.

Yes. The cost on the software amortization number you get to a run-rate at some stage. I mean it does plateau out. But you're right, I mean, IT should be one of our major costs. We are an applied technology company, and that's the way you need to see ourselves going forward.

Next question is from the line of Alevizos Alevizakos with HSBC. Please go ahead.

Hi, thank you very much for taking my two questions. So question number one, going back to prime brokers. I was wondering we were focusing a lot on the revenues that were lost on prime brokerage. But could you give me an indication on the revenue multiples that prime brokerage has go to the remaining equity businesses, i.e. what are the revenues that there were lost in the cash business and derivatives business because of the prime brokerage AUM reductions since the last quarter of 2016? And then on the second question, we focused a lot on the cost, but I would like to focus a bit on the revenue. If you were to select the three businesses, which will offer the largest revenue CAGR through 2020, what those three would be? Because we have seen competitors highlighting importance of business like GDP and wealth management, but to be fair you've underperformed in those two businesses. So I just really want to hear like your thoughts about the top three areas. Thanks very much.

Sure. On prime brokerage, I think we'll take that as a follow-up. I couldn't to hand really create a link for you between the cash and derivatives, revenue declines and the specific balance items in Prime Finance. What is market, what is idiosyncratic and what has to do with sort of the customer engagement around the Prime Finance business and hedging if you like in other activities. On the revenue side, one thing I'd point out, so one business that I think performed very well in the quarter is asset management. And so there we are participating along with peers in a strong market. In wealth management, that business is undergoing a significant repositioning and as you say the revenues are down adjusting for the recovery, the large recovery in the quarter. And I would say that over time, it will take us time to fully invigorate that business. And so we would see the trend to be negative for a number of quarters while we rebuild and invested in that business to drive future profitability. And lastly GTB, as you point out there are number of business that the bank see as strategic in the new regulatory world we would look at GTB no less so. As an attractive strategic business and one which Deutsche Bank is well positioned. There as I said and answer to an earlier question, I actually do think the question was well put in terms of the quarter representing a basis against which to compare future performance. As John cited it's a business that we will what we need to continue to invest in to preserve and grow market share, but there I would looking forward think about revenue development with some optimism in GTB given our competitive position and market offering client based.

Thank you.

Our last question is from Andrew Lim with Societe Générale. Please go ahead.

Hi, there. Thanks for taking my questions. You talked about accounting changes in GTB, which drove funding costs more to that business. Could you explain a bit more about why that happened why you made that change how much they amounted to? And what other businesses they came from? And then secondly, on the CET1 capital if I look quarter-on-quarter it seems like it actually went down a little bit even though you had positive earnings, is that the correct observation there? And could you explain exactly what happened?

Sure again on the last question of the CET1, as we've noted we are based on the ECB guidance showing our ratios and CET1 capital on the basis of an assumption of 100% dividend payout ratio. And that's because there are three tests, which you apply one of which is the prior year's dividend and given we were lost making in 2016, but paid a dividend in respect of '16 that assumption is 100%. And so that underlies John's earlier comment that we really do not accrue capital for CET1 or regulatory purposes during the year until in 2018 our actual dividend sort of declaration is made. On the funding charges in GTB, there were a lot of different items that went into it so I don't want to talk to individual sort of by amount and driver, but first of all it's not an accounting change. It's really an internal methodology change for how the businesses are rewarded and charged for their balance sheet usage. And GTB in the sort of the reallocation of firm wide funding charges had a net drag. One of the contributors was a change in our methodology for thinking about inter day liquidity usage in the businesses and there GTB had a higher charge that was partially offset by on the other side of the balance sheet liability benefits as we recognize the value of liability providers in the bank. So there is really a net item flowing through there as I say I'd correct you in terms of an internal methodology verses an accounting change.

That's great. Thank you very much for that.

So we have no further questions. I hand back to Andrew.

Great. Thank you very much everybody for listening in call today. We obviously standby and the IR team to answer any follow-up queries you may have. And we wish you a good rest of the day and rest of the earnings season. Thank you.

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.