Ladies and gentlemen, thank you for standing by. I am Mia, your Chorus Call operator. Welcome and thank you for joining the Fourth 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 and good morning to everybody from Frankfurt. I would like to welcome you to the 2017 fourth quarter and full year earnings call. I'm joined today by John Cryan, our Chief Executive Officer, and James von Moltke, the Chief Financial Officer. John will begin with some of his opening remarks and then James will take you through the analyst presentation, which is available on the external website www.db.com and afterwards we'll be happy to take your questions. We do have a lot to cover today and unfortunately I need to enforce hard stop at 9:30 CET as John and James need to move to the Annual Media Conference here in Frankfurt. So it's particularly important for the sake of efficiency and fairness to questions. Please limit themselves to just questions, so that we can allow as many people as possible to participate in the call. Let me also provide the normal health warning, that you pay particular attention to the cautionary statements regarding any forward-looking comments that you will find those statements at the end of the investor presentation. With that let me hand it over to John. John?

Thank you, John, and good morning everyone. I'd like to start by giving you an update on the progress we've made so far with our modernization program here at Deutsche Bank. I also want to cover where we stand in relation to recent development in the regulatory environment and in light of the recent US corporate tax reforms and what impact these have on the bank. I then like to share with you my views on the outlook for 2018. So let me begin with the summary of the bank's report card on progress so far. Our financial results for 2017 are most impacted by the 12% year-on-year decline in reported revenues. That decline reflected not just the operating environment, but also the strategic decisions we made in 2015 and 2016 to trim the scope of our businesses. James will discuss this in more detail when he reviews our results. Nonetheless, our operating profitability did improve year-over-year and had it not been to the year-end write down, the value of our US deferred tax assets. We'll be reporting a net income today just under €1 billion. This would have reflected more accurately the overall performance of the bank in 2017, while this would not have represented an attractive return on the banks capital. It would have shown that 2017 was another year of progress. We remain on track towards building sustainable and acceptable levels of profitability and attractive returns to shareholders. As it is, we're reporting a post-tax loss of €0.5 billion on the pre-tax profit of around €1.3 billion. We make progress on costs last year as reported noninterest expenses declined by €4.1 billion largely as a result of lower non-operating expenses. However, €500 million reduction in 2017 in adjusted cost also contributed to that result. The bank's other…

Thank you John. Good morning and thank you all for listening today. Let me review our results starting with the group financial summary on Page 3. The reported 12% year-over-year decline in revenues was affected by number of significant one-off items and non-operational charges as well as the impact of asset and business sales. Notwithstanding this, 2017 clearly was a challenging year particularly for the corporate and investment bank which faced a weak revenue environment and for the private and commercial bank that continued to confront headwinds from low interest rates while simultaneously making investments in the business. And while cost remains a challenge, we did make some progress last year, that I will address shortly. And if not for the write-down of our DTA, due to US tax reform we would have reported positive full year net income rather than a loss. Our pre-tax profits also improved with €1.3 billion of reported EBIT following pre-tax losses in each of 2015 and 2016. And our reported EBIT included an additional €1.3 billion of non-operating items like DVA, restructuring, litigation and impairment. Demonstrating the operational profitability in 2017 was not fully represented in our reported results. That said, we're certainly far away from acceptable levels of sustained profitability and returns and have much work to do, to get there. Finally we continued to manage our credit exposure well in 2017 with provisions for credit losses declining nearly €1 billion. Page 4, highlights the impact on our reported revenues of major non-operational items like DVA, the impact of movements in owned credit spreads and that of disposals that we made as part of our strategy. These adjustments result in a 5% year-over-year decline in revenues. And while declines in our core businesses are never welcomed, it shows that our performance was better…

[Operator Instructions] and the first question is from the line of Stuart Graham with Autonomous Research. Please go ahead.

Two questions, please. One strategic and one in numbers. On the strategy I appreciate that you're confident that Plan A to deliver a return on tangible will still work, but being open minded. My question is, what are signals you would be looking for that is not working and that you would need to consider a Plan B, that's the first question. My second question is on the numbers. Can you tell us the bonus part please both the staff view [ph] the equivalent figures the last year's €500 million and the P&L charge, the equivalent figure for last year's €1.3 billion and also could you just confirm with no repeat of the €1.1 billion special retensionable [ph] of last year. Thanks.

Good morning, Stuart. It's John. Maybe I'll take the first one and then hand you over to James for the second one. You're right I talked a lot in my remarks about dynamic management of the business and I think that was aimed at answering or anticipating your questions. I clearly in most of our businesses, we don't actually face much in the way of breaking some headwinds, the easy ones would be asset management, wealth management, private and commercial bank in Germany and particularly relatively un-impacted by the regulatory changes the Basel community has recommended. We're not just driven by regulatory change, but we do need to look at the prospects of earnings this sort of return on tangible equity, the 10% target from some of our other businesses and particular as they've balance sheet intensive in the past. What we're trying to do particularly as we improve our data, improve our systems. We're trying to work out which businesses have a strategic feature, which today are actually earning these returns and which adjust masked in our accounts to some extent by the fact that we've got this inherited book which is you know in some areas of the bank makes the loss. We also of course have to be mindful of the fact that the markets are changing too. So if you look at simple product such as cash equity, secondary trading of cash equities. A lot of the growth volume has moved away from banks in total. So we need as I said in my remarks try to come to a business judgment as to whether last year was indicative of future years. I think in the number of areas I would say, particularly in interest rates because I think we will see an improvement in Euro…

So just to summarize, it sounds like you're talking about evolution of Plan A rather than revolution of Plan A, is that right?

If you'd read my speech for the German media a bit later, that's. I used those two English words in German to say exactly that. It's quite hard, a revolution in such a huge company. It's actually quite hard and we do have to evolve, but we're trying to do that. Again as I said on the basis of the use of technology and using data we're capturing now oodles more data than we ever could, our old systems just didn't have the capacity. As we move onto these modern platforms, the data and metadata that we can capture is a complete paradigm change from where we were and we want to transform the company into something that looks more like a tech company and that's not, to try and change the rating of the company that's actually I think the answer to lot of the questions and challenges that we do face. Is using data much more effectively because generally when banks have lost market share, it's been people who can use data more freely, more effectively and to greater benefit of clients.

Thank you.

And Stuart, it's James. On our compensation question, I don't want to jump ahead of the disclosure that will come out with the annual report as you know, accounting for compensation especially deferred compensation is complicated and as we sit here today, the number's that we've reported represented a provision. So I'll ask you to wait for that final disclosure, but to give you some sense of the line in our financial statements that captures this. It's less than 20% of the total compensation and benefits that we report on the face of the supplement, to give you a sense of order of magnitude. The other number I'll perhaps give you is that, is the amount of swing that represented on a year-on-year basis which was €750 million from what it was severely restricted year as you know last year. So the compensation is clearly up year-on-year considerably and largely driven by that line, although they're offsets in the year, in salary expense and of course in the accrual for prior year awards again given the relatively low level of variable compensation that was awarded last year.

Thank you and there's no repeat of the €1.1 billion special awards, this year.

That's correct.

Got it. Thank you. Thanks for taking my questions.

Next question is from the line of Kian Abouhossein with JPMorgan. Please go ahead.

You mentioned at the end of the presentation that cost [indiscernible] and cost focus is going to be 2018 major item on your list. Can you talk a little bit more in detail of how you think about this part of the equation on the P&L considering you're giving guidance of €23 billion and also beyond that, how should we think about cost development and how much of the €900 million of disposals targeted disposals are still online so to say and how much are scrapped in total? In that context, can you also talk about Basel IV and the potential impact on Basel IV and has it impacted your dividend guidance, no guidance at this point. And how should we think about Basel IV and the ranges that could be in terms of outcome and how should we think no statement on the dividend, please?

It's James. I'll start with the first couple of questions and maybe tag team with John on the last. So on expenses obviously we think very intensively about expenses every day and I think my comment was really directed at the need to look at the structural cost base in the company because we clearly have to operate these businesses at wider margins than we do today and cost is a significant part of the equation especially in an environment that we face like in 2017 of revenue pressures that exceeded our expectations. So the work as I think around quietly going after structural expenses and decisions that we make every day that's painstaking work and is detailed work and that's where we're focused. I don't want to draw some contrast with the work that's been going on over the past couple of years as I mentioned I think we're showing progress in managing adjusted cost in a number of different line items, but of course the pressure arises both as you see inflationary factors some of which are out of our control and as you see a revenue environment that remains challenging and that we need to partially offset. As I mentioned about M&A, that's obviously been a significant swing factor since the March guidance that we provided. As you've seen I think we've made actually very good progress over the course of 2017 in some complicated transactions that do a lot to simplify the company but had relatively lower impact than our original expectations on expenses in 2018. We're continuing to work on our M&A perimeter and that will take time, so I can't tell you exactly how much of that €900 million will ultimately come out as we shape the company going forward, but we remain focused on executing on our plans, focused on simplifying the company through those M&A actions.

Kian on the dividend, the long and short of it is, for this year 2018 we did say that we would pay some sort of proportional divided, we called it competitive. Therefore 2017, I think the decision that we announced supervisory board will make in March is one that doesn't really hang on much at all, it certainly wouldn't be driven by the new Basel roles because I mean without giving too much guidance we've paid nominal dividends before, we've about 2 billion shares just over, so we're not talking about very much in cash terms. So this wouldn't drive a decision in 2025 and whether we could accommodate the new Basel rules. It will be driven by other factors. The dividend point I mean it's always an emoted one. Financially for the company it's not particularly material and isn't driven by those factors. Those factors could be important. They're very, very difficult to gage though of course they're so far out, they're awfully end of our planning horizon and sitting here today we have no clue what our book will look like in five, six, seven, eight years' time against which we will need to measure the capital impact. Of course we have go through impact assessments, the commission before it puts any of this into law or into CR3 [ph] we'll be doing impact assessments and of course we'll manage the business in the interim to mitigate the impact of that assessment. So we will be working obviously closely with the commission and the with the regulatory community. We'll be doing the types of stress test and quantitative impact studies and AQR's that we do in the normal cause, but it's incredibly hard to give you guidance today on what impact those rules will have on the book, whose shape and content we can't really guess that today.

Thanks. If I may just follow-up on the cost side. If I look at your revenue base. Just in fixed income you're still doing extremely well actually compared to some other peers. Is there an underlying issue in the banks that you're not able to say I'm going to cut 500 net of cost, is there. I'm just trying to understand conceptually if you have a cost base of €23 billion, why is it so difficult to say €500 million of cost [ph], which is easy to say for an analyst, but what is underlying, is there an underlying issue on your organization that you [technical difficulty] not cost out?

Can I have a go? And then James can have a go. We can cut cost and the easy way to cut costs is not spend €2 billion this year on fixing the banks. It's cutting bank on compensation and making people feel miserable. I mean obviously have a very large and reasonably fixed cost base. We have software we need to amortize, we've real estate that's not very flexible. We have a large number of people, we have to keep the lights on. So it's tons of stuff which you get with Deutsche Bank. We're a large global bank with huge reach and we're going to have a big cost base. At the margin though, it's relatively easy to cut costs. However I think one of the many root causes of where we are and where we have been, is that we did manage get the company for short-term gain. And last year a lot of the miss, if you want to call it that on costs, we didn't set any guidance was actually investing and it's investing in fixing things and it's investing in building things. And I'm afraid we're still investing in fixing things. So one of the big impacts we saw in Q4 is that we felt and we felt a bit pressurized, but we felt that we needed to get a move on fixing all of our KYC stuff. It's been taking a little bit too long. It's very complicated. We're off boarding lots of clients most of which were dormant or not relevant to the company anymore, but we've hired lots of people in our client data services area together move onto to get this fixed. Now we won't need all of those people long-term because once everyone's probably onboard as in properly documented,…

Thank you very much.

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

I've two questions, please. So the first one is on the John is on your comments on the impact of the US corporate tax reform. Can you just give us a sense dynamically how do you expect the US effective tax rate to evolve following the US corporate tax reform for Deutsche? And if you could clarify whether the tax base effect applies also to your branch assets or whether it is specific just for the assets that you have in the IAC.

James, want to answer that one.

Perfect. And the second question I have is, you hinted both in the context of the US as well as you were making comments about certain parts of the investment bank and if I heard that correctly notably about your cash equities operation, that you might take another look at some of this operations from a strategic perspective. And I was just wondering were you trying to say that if the US corporate tax reform stays as it is now, if there's no amendment for the financial institutions that you might consider resizing the scope of that operation again. Thanks very much.

Jernej, it's James. I'll take the first question on taxes and the impact on corporate tax rate. in the US a few considerations, firstly the federal tax rate obviously goes to 21%, you retained state and local taxes that then feed into your US effective tax rate based on business mix. The tax rate applies to our US taxpaying entities in total which includes the operations that are booked in the branch. Full firm, the tax as I think we said or alluded to, the tax reform would give us 2% to 3% of a reduction in the effective tax rate overtime, so that moved us into the lower end of the previous range that we'd established that's obviously to the company in the long-term and as you think about then about the base erosion and to your abuse provision, knows as BEAT. Clearly that's something we've got to manage through as John mentioned we've done the work to take a view that in the medium term we would not be liable for BEAT related tax payments, but that takes some structuring and other work to ensure that's the case. And in the very near-term we may find ourselves liable for BEAT payments.

Jernej, on the.

Sorry, apologies. In the near term, we find ourselves liable to BEAT payment, so the effective tax rate in the US, in the near term goes up.

No, it goes down even if you on a blend of what you would ultimately pay against pre-tax profit, even if you're captured in BEAT.

All right and it's just to confirm one more thing, so Deutsche Bank files for the purposes of tax accounts you filed both the IAC and the branch together in the US.

Yes, it's actually it is slightly broader tax group then that, but those are the two important parts of it.

All right, okay.

And Jernej on that question of what's changed in the secular fashion? What's changed cyclically and what's changed seasonally? Plus I should have chosen more than one business. I wasn't suggesting that cash equities is anything other than a business that's been commoditized and has changed significantly over the past 10 years. It used to be a trading venue that was dominated by banks, now longer is. There are other areas where there has been definitely secular change. One area would be non-linear rates. Any banks rates business today is writing much less as a complicated stuff that was written 10, 15 years ago but it doesn't mean rates is not an important market. Companies, institutions, bond issuers will always want banks to help them. Hedge interest rates by writing interest rates swaps on options, but the long dated and quite high margin business that was written in the first decade of the century just isn't a business anymore. Of course there are some insurance companies and some pension funds that will write reasonably complex rates contracts, but they're relatively rare and they're not as high margin as they used to be. So lots of business and not too much necessarily just commoditizing, but they're changing a lot and we have to be responsive to that change. So it's an appreciation for how technology can change a market that's so key to future capital allocation and to investing in the systems and the people we need to be in specific businesses. It extends too to banking. It's not just in the brokerage area. It extends too into asset management. Where we are also to some extent reallocating resource to much more modern forms of retail and institutional asset management product. So we just need to be a little bit more dynamic and breakaway from a slight tradition that we've sensed it, Deutsche Bank. Which is we, we do what we used to because it used to be successful. And get the sense that we need to be much more forward looking and much more judicious about resource allocation in terms of capital investment in future systems and investment in people. That was all. It's not a statement about any of our businesses, we have to manage all of them dynamically and have a view in each and every one of them of where that business is going.

Thank you very much.

Next question is from the line of Magdalena Stoklosa with Morgan Stanley. Please go ahead.

I've got two. One is more strategic and I suppose we're continuing the discussion we had, what we had over the last half an hour, already. But when you reflect on your current market performance this year in second equities and that's from both perspective the underlying kind of market conditions versus your more strategy kind of perimeter decisions that you have taken. How do you see it going from here? I think that what interest me really is what would be your kind of strategic imperatives in CIB going forward. So that's the first one and the second one, is really about PCB and the cost because we have seen them up kind of 7% on the clean basis versus flat revenues and again going forward. How do you see 2018 cost base in that division? Particularly as the savings on branches and FTEs that we have seen kind of completed this year should come through. Thank you.

Well on the - let me take the perimeter and then we can address the PCB question. On the perimeter, I think Jernej referred earlier to that €900 million of costs that attached to businesses that we had ourselves earmarked for sale or divestiture one sort or another. And those businesses are not core to us and they remain not core. And for each and every one of them it's inappropriate to go into details. So there's a reason why the disposal or whatever action we were going to take is delayed. But we do expect the causes of those delays which are not normally ours, they're the potential buyer universe, so those to go away and we would intend to continue to proceed with the plans we originally had. But the timing has been impacted. On the rest of the footprint, it's sort of what I just said in response to Jernej's question. Which is that we have to dynamic, but basically what you see today is what you get other than the areas which we earmarked for disposal and those areas are not core to Deutsche Bank. The vast majority of our customers possibly wouldn't even know we had these businesses that we're earmarking for sale and when we sold them, we wouldn't feel any different to anyone. So there's nothing material other than the two big projects which we got underway. One is obviously the combination of Postbank and Deutsche Bank in Germany and the other is the partial IPO of DWS. Outside of those two big ones, it's a lot of tidying up, which we intend to do, but there is nothing material, but we will be dynamic is capital allocation.

John, if I may follow-up a little bit on this because of course we have concentrated on the cost impact on the kind of the business parameter that you're kind of going forward. But we have also, but what would be - also the revenue one as well. I think that I suppose, what we're grappling with the, is the I know it's a funny word to talk about the kind of normalized revenue power of your CIB business because in the end of the day, you look at the group and they literally and those revenues account for literally 55%, 57% of your total. So of course what is happening there is absolutely key for us to kind of to look forward and I think that's to a degree, I suppose what we're grappling with as well.

Yes and that's understandable. I mean if you look at what is probably still our core business which - it's our biggest business. Which is our fixed income sales and trading area combined with our financing business. If you look at the coalition data for the first three quarters last year, we're number three. Now even if you aim off for the fact that we're not number three by very much. We're still resolutely top five. Notwithstanding the fact that we've seen revenues decline. We've actually gained market share and question, whether that's actually part of our strategy, it's just what happened. We've lost revenues, but others have lost more revenues. And it's because there's been change in those markets. Question is, does that come back? And I think a lot of it does. But maybe some of it doesn't and some of it's just seen commoditization of pricing. Now one of the reasons I think it comes back is that there has been some margin erosion, no doubt about it. But we also suffered volume erosion. Now did we suffer that because of idiosyncratic Deutsche Bank issues [ph]? I don't think so anymore. Because we're more than open for business. So I think volumes have dipped and they may have dipped because people aren't doing anything Euro rates for example until rates start to move, that's what we found in the US Dollar before the Central Bank started changing rates. There wasn't much activity when the rates started to move, we saw a pickup in activity. The price implies volatility is very low, that tends not to drive volumes. So our derivatives businesses have just seen lower volumes. But when we look at the market data and we tend to trust coalition I think it's the industry standard and…

So on the expense question related to PCB. It's James. As we look forward to 2018 inside the planning that gets you to that €23 billion number, you'd see a slight decline in PCB expense. Now within that, there are lots of moving parts there's the beginning of merger synergies from the Postbank integration. Their investments, that we're making and we've alluded to in our prepared remarks and there's investments in future revenue growth that we're making in technology and other areas. So lots going on under the surface in PCB. One thing that I would say that applies to PCB and the other divisions and not just the CIB. Is that part of the increase and expenses that you saw in PCB in the fourth quarter was also a catch up on variable compensation. So in last year's decisions on compensation it wasn't only CIB that was captured in that, but the other divisions as well, so you see an increase in fourth quarter expenses they're too because of that compensation decisions of this year.

Great. Thank you.

Next question is from the line of Daniele Brupbacher with UBS. Please go ahead.

Just sorry again on the cost outlook. I mean listening to your remarks, is it fair to assume that you still feel comfortable getting closer to €21 billion in 2021 given a lot of just timing differences within the trajectory. And then just briefly on this famous NII slide, I think it's Slide 24 this time. The NII sensitivity I mean my understanding that this is basically the banking book and obviously there's lot of assumptions behind that. Would it be just possible for you to give us a little bit of sensitivity in terms of second order impact on trading, trading revenues? Is that significantly less or more than these levels which you show on that slide that would be very helpful? Thank you.

Sure. I'll try to take both and John may add to my comments on net interest income. So on cost outlook for 2021. We're still very focused on achieving the original targets that we laid out for 2021. Of course the uncertainty around the how much of that originally targeted M&A perimeter leads to a variation around that number, which can be both up and down and will reflect some of the strategic thinking that we make from here. It's also a long way out and so the revenue trajectory that we actually achieved to the earlier question will also clearly influence the expenses out that far. But in our current planning, we're continuing to keep those long-term targets very much front and center in our minds. On the net interest income front as you saw and it actually increased a little bit, our asset sensitivity in the quarter which I think is positive given the greater expectations now of rate increases in Europe, perhaps a little earlier than was originally thought and that greater sensitivity frankly reflects growth in our deposit books which you saw in the quarter. it is the banking book as you say and that has a bunch of assumptions built into it, in terms of a static balance sheet, the contractual positions that you have appointed in time, but I think it's directionally useful in understanding the future revenue benefit that importantly comes with no additional costs, given that it's built into the balance sheet and frankly the cost basis, I think stand today. The second order impact are always hard to gage, as John said to in response to the earlier question activity in a number of the markets businesses depends on their being more than one view in the marketplace as to the pace and the extent of interest rate increases overtime. And I think one of the things you saw in 2017 was frankly too unified point of view and the marketplace as to how that was taking place and obviously impact on liquidity of Central Bank actions. So as that begins to shift to a different environment, in general you would think the volatility and rates markets would pick up and the second order impacts would generally be positive in the trading books in addition to positive, in the banking books.

Thank you.

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

Couple of questions. So the first one, some of your balance sheet guidance and targets a bit dated now and a lot has changed. I appreciate involves some estimations and I just wondered if you could give us your current expectation for where you think RWAs might be in 2020 and also what you're thinking equivalent number might on a fully loaded Basel IV basis. And perhaps while we're having that conversation you could also give us an idea where you expect your leverage exposure to be in 2020. Then my second question much more specifically. It looks like on the comp accrual that you took almost the whole of the variable comp accrual in 4Q last year. It looks like there is very little accrual, as we went through 1Q, 2Q and 3Q and it was pretty much more than 4Q. I wonder if you could talk a bit more about that, is that correct? Why was that? And will 2018 be [indiscernible] differently?

So Jeremy, I'll take both. I'd say too far out to think. Obviously we have our planning for both RWA and leverage exposure into 2020, but to comment on it publicly. It's probably too far out. I think in RWA terms directionally no question but that it is up, even on the existing business, we simply see inflation factors around regulatory technical standards and interpretation, rule changes and the work that we're doing to prepare for the implementation and things like FRTB. So our thinking is, that it is up even for the business that's on the books today. And how much depend on a lot of developments. One is, what business we're writing a couple of years from now and the second is, our ability to mitigate and offset some of those RWA inflationary factors. So that's an area of intense focus in our organization essentially to manage the balance sheet and capital efficiency as best we can. I would say in the leverage exposure world, that actually counts in some ways double. I would be seeking to manage the company as much as possible at or below the leverage exposure levels that we have and we do believe there is additional efficiencies that we can build in terms of use of the leverage balance sheet overtime. So I can't say precisely, but directionally up in RWA and I think directionally flat in leverage exposures ideally down. In terms of the comp accrual, we did accrue as you'd expect in the first three quarters of 2017 for expectations around compensation or variable compensation awards at the end of the year and so you see in Q4 two effects, one is, decisions we made that went beyond the year-to-date accrual that was based on planning assumptions, but as we looked at the businesses and the decision to invest especially in light of the decisions of the prior year, it resulted in a higher accrual and that accrual then compared to a year in which the decisions in the opposite direction if you like, especially impacted the fourth quarter compensation and benefits at line. So you see two decisions reflected in the fourth quarter, but absolutely accruals throughout the year as you'd expect us to do.

Thank you, just on the first point. About the RWA guidance. I guess I'm noting that lot of your peers are giving guidance either on what their RWA numbers are estimated to go up to or if they're not doing that, they're giving guidance around how much quantum of, CET1 capital that expect to need. So I guess for the latter, if you prefer to do that, would you still reason in terms of leverage ratio partly because it looks like the binding constraints and partly because it's a more knowable sort of frame of reference, is that how you would guide us to expect your capital requirements?

Yes, absolutely. We do want to just reiterate that nothing has changed in terms of our capital goals, which is to build overtime to a leverage ratio of 4.5 and to preserve the CET1 ratio at comfortably above 13. And so to your point, as we look to the future and build in expectations about balance sheet usage, RWA inflation and other factors. Clearly we have to - we've built expectations and informed our actions based on that forward looking view of RWA and leverage exposure.

And do you specify the CET1 component within that 4.5 leverage ratio targets?

Do we specify? I mean I just think of it as mathematically it's the same numerator for practical purposes. So as I think about that you're managing a different denominator. When you look at the two ratios.

So 4.5 pure CET1 not including AT 1?

No, no it's a Tier. Yes it's Total Tier 1 capital in that ratio. Frankly, the AT 1 is in part to me an outcome of capital structure that's driven by the regulatory level or standard. So you'd expect to see us manage to basically the required if you like levels of AT 1 and subordinated debt in the capital structure. So I think of that as, put it this way reasonably mechanical as I think about numerator.

So is that way around rather than necessary to having to be 3.7, 4 north or anything on that leverage ratio is driven by the stack more broadly?

Yes. And we think of it as glide path and as I say, we don't, while I know there is discussion about the leverage ratio and I've made some comments about cash and liquidity as well as pending settlements in our leverage ratio. We feel comfortable with where we are and the glide path going ahead.

Okay, thank you very much.

And we have time for one more question. Andy Stimpson of Bank of America Merrill Lynch. Please go ahead.

Just one clarification question and one on net interest income. When you said January was best, I just wanted to check whether that was a year-on-year comment or whether that was just quarter-on-quarter? and then on the net interest income guidance obviously that's up again but I just wanted to check how you think that's going to come through within the business units because PCB's net interest income is actually up year-on-year and hasn't performed too badly despite all the layer, right? I know you said that deposit costs or deposits have been worst, but actually that's been offset by that alone. So really the big decline in net interest income group level has come from CIB. So with that slide of the back of the deck saying how rate sensitive [indiscernible] is that really, are we expecting that to come through mainly in the CIB division and then also have we seen any benefit from the higher US rates [indiscernible] through this year? Thank you.

So couple questions [indiscernible]. So first of all we do break out by division where we expect it to new net interest income to arise in a rising rate environment and it's split between the divisions because of course in CIB there is a banking book on the liability side largely in GTB and on the asset side both in GTB and the banking businesses and markets businesses. As I think two - of the questions, markets NII is frankly very hard to predict, at the best of times. It depends really on how transactions are booked and whether revenues appears, commissions or as net interest income or carry. So we focus mostly on the bits of it that are accrual and you know and predictable. If I think to your question about performance year-to-date, as John said a month is early, we were seeing solid performance really across all of our businesses year-to-date. It's early but their comment is really more if you like a sequential comment. The fourth quarter was unusually quite across really almost all market businesses and especially in the case of the fourth quarter on a year-on-year comparison and I think it was encouraging to see the typical seasonal rebound and January, if you look like a more normal month again. It is as John said and probably just a touch behind last year, but last year was a strong first quarter so hopefully that gives you all the reference points that you're looking for.

Great. Thank you.

On the interest of time. We have just stopped the Q&A session and I hand back to John Andrews.

Operator, thank you. And thank you everyone for dialing in. And apologies to those who we left in the question queue, but as I announced before we do have another obligation that John and James have to get quite importantly. Obviously the IR team is happy to engage with all of you and respond or any follow-up questions and we wish you a good rest of the day and weekend. 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. Goodbye.