Ladies and gentlemen, thank you for standing by. My name is Emma, your Chorus Call operator. Welcome, and thank you for joining the Third Quarter 2018 Analyst Conference Call of Deutsche Bank. [Operator Instructions]. And I would now like to turn the conference over to James Rivett, Head of Investor Relations. Please go ahead, sir.

Thank you, Emma. Good morning, and thank you all for joining us today. On our call, our CEO, Christian Sewing, will speak first; and then James von Moltke, our CFO, will take you through the earnings presentation in more detail, which is available for download on our website, db.com. After the presentation, we'll be happy to take your questions. [Operator Instructions]. But before we get started, I'd just have to remind you that the presentation may contain forward-looking statements, which may not develop as we currently expect. I therefore ask you to take note of the precautionary warning on the forward-looking statements at the end of our materials. With that, let me hand over to Christian.

Thank you, James, and welcome from me. It is my pleasure to host our third quarter results call. Before James takes you through the details of the quarter, I wanted to update you on the progress that we have made this period. Overall, we are on the right path, and we are moving in the right direction. Costs and balance sheet are under control. Focus is now on the top line. We delivered quickly and in a disciplined manner on what we promised and what is under our direct control. We have been delivering on costs and further improved our already strong balance sheet. We are confident that we will meet our target for adjusted costs of €23 billion for the full year. And this also means that we are on track to be profitable this year for the first time since 2014. We have made considerable headway on several strategic initiatives this quarter. In our Private & Commercial Bank, the integration of Postbank and the Private & Commercial Clients business of Deutsche Bank is progressing well in terms of daily execution. And what do I mean by that? We are moving forward with the consolidation of our head office and infrastructure as well as the harmonization of product management functions across the new legal entity, which will be announced internally shortly. And at the same time, business activity in terms of loan growth is encouraging. And finally, the sale of our Polish operation is on track to complete before year-end. In the Corporate & Investment Bank, we have completed the restructuring of our front office in line with our original target. Further workforce reductions, as we said in July, are now more focused on infrastructure and support functions. This enables us to now focus on profitability and returns also…

Thank you, Christian. Turning briefly to a summary of our third quarter results on Slide 6. We generated net income of €229 million and profit before income taxes, or EBIT, of €506 million in the quarter on revenues of €6.2 billion. On a reported basis, revenues declined by 9%, or 5% excluding specific items, which are detailed on Slide 18 of the appendix. Noninterest expenses of €5.6 billion included restructuring and severance of €103 million and litigation costs of €14 million. Tangible book value per share of €25.81 is broadly flat compared to the prior quarter. For the first 9 months of the year, we generated €750 million of net income and EBIT of €1.65 billion. Slide 7 shows our adjusted costs for noninterest expenses, excluding restructuring and severance as well as litigation and excluding the impact of FX translation, which had a modest impact on both the sequential and year-over-year comparisons this period. Adjusted costs were a little under €5.5 billion in the quarter and declined by approximately 1% or €60 million year-over-year. Compensation and benefits increased by 2% or €46 million, reflecting higher charges for deferred compensation. We offset the higher deferred compensation with declines in other cost categories as we execute on our plans to optimize spend, in particular, with external vendors. IT costs were broadly flat as we continue to execute on our core investment objectives. Compared to the second quarter, adjusted costs were €110 million or 2% lower, driven by lower compensation and benefit costs. As Christian said earlier, we remain on track to reach our adjusted cost target of €23 billion this quarter and to reach €22 billion in 2019. Slide 8 shows our workforce trends. We ended the quarter with approximately 94,700 full-time equivalent employees. We reduced our workforce by approximately 1,450 in…

Thank you, James. Emma, can we open the line to questions?

[Operator Instructions]. First question comes from the line of Giulia Miotto from Morgan Stanley.

A couple of questions from me, please. So the first one on PCB. Could you please give us an update on the merger? You said, of course, that the legal merger is proceeding ahead, but I'm more interested in the merger of the platforms. So do we understand it right that you're planning to migrate both banks into a new core banking system? And what's the timing of that? Or do you require further investments to achieve that? And then the second question is actually on CIB. So if I understood it right, at the moment, you have completed the deleveraging that you were targeting, but yet profitability remains quite low. So do you think now the bank is right sized? Or do you see potential to trim further in order to ultimately increase the profitability of this division?

Let me take the first question on PCB. So the integration after the legal entity merger is running according to our plan. Actually, we have certain issues where we accelerated, for instance, in the cross-selling of products to both brandings, i.e. Postbank and Deutsche Bank and vice versa. On the operations and platform integration, we always said that this will come after the legal entity integration and after we have moved the head office and the infrastructures together. There will be an announcement at the - in the fourth quarter. So we plan to have further platform integration in the years 2019 and 2020, and we will stand to our synergies which we set to the market earlier of €900 million from this integration.

On the CIB question and rightsizing, we have completed the front-office footprint refinements that we announced in the second quarter. At this point, obviously, as Christian said earlier, the focus is on stabilizing and growing the revenue base from the target client footprint but also driving efficiency in the platform. And that when we talk about infrastructure costs, it goes beyond that. To talk about just the efficiency of delivery, the technology infrastructure that we deploy and other areas from which we think there's continued cost savings without changing the client footprint, hence, our confidence about rightsizing but also more leveraged from that business going forward in terms of operating leverage.

Next question comes from the line of Kian Abouhossein with JPMorgan.

The first question is related to your targets. So you're clear about clearly this year and next year's target on cost and the 4%-plus ROE target. Can you look a little bit further? You've clearly taken this 10% aspiration target out in 2021. It's now a longer-term operational target, and you've done that, I think, already last quarter. Your cost guidance of €21 billion, is that still intact? And how should we think about ROE progression beyond 2019, beyond that 4%-plus? The second question is related to GTB. And can you explain a little bit why GTB isn't performing better? I know you outlined some of it, but it also looks like you're still losing market share, and I'm just trying to understand if I'm correct or not in that. And the last question is related to, basically, the market business, Sales & Trading. And here, you indicate that you're performing in line with the market, but when I look at your numbers against peers, either quarter-on-quarter or year-on-year, it looks weaker. And if I look at one of your competitors who've just reported today in Europe, the first one besides you, you also look weaker. So I'm just trying to understand why you're confident that you're in line with market performance.

Thanks, Kian. It's James. I'll take the questions. So on the targets, first of all, whether the normalized environment that we all expect to come, particularly around interest rates, is 2021 or thereafter is really the uncertainty. We continue to build our plans towards our 10% target on RoTE and drive the businesses towards that target. But the timing whenever you think about a normalized operating environment is the uncertainty that I think we face, and that is part of our market environment. But as Christian and I said last quarter, we are focused for the time being on delivering our near-term targets on changing the trajectory of the businesses and building from there towards those long-term targets. In GTB, as I said in the prepared remarks...

Okay, just to - sorry, just to interrupt, the €21 billion, is it still a target?

So what we want to do is step away a little bit from the absolute expense targets and move towards, as I said in June at the investor conference, more towards the cost/income ratio of managing the business. So we think the absolute targets are good for this year and next. Our full expectation is to remain on a strong downward trajectory in terms of costs thereafter. In GTB, as I said in the prepared remarks, we were disappointed with the performance this quarter. It didn't meet our expectations as we closed out the second quarter. As I mentioned, there are episodic revenues which in some ways are part of the business, in particular, credit insurance recoveries which flow through the revenue line, which we've had as part of recent quarters and, frankly, we expected to be part of this quarter. We were unlucky in a small number of items, which could have added €20 million to €40 million in the quarter. Our underlying growth was actually more or less in line with our expectations at around €20 million to €25 million in the businesses. We think that could have been stronger, and frankly, our expectations were for a little more in underlying growth. And it has to do with, if you like, the capture of our pipeline, which is running slightly less than had previously been our experience. That's something we're heavily focused on and working to, to ensure we turn around and capture the full pipeline and something we'll work very intensively now with Stefan Hoops to execute on. And finally, in Sales & Trading, all banks are different in terms of the spread of our businesses, the markets that we're operating in. We - what we pointed out was that based on what we had seen so far in terms of peers reporting, our quarterly trends, so the sequential trends were much more in line with where we think the market has been than the year-on-year. And to us, that's encouraging. We're focused on turning the corner here in terms of the revenue development, stabilizing the platform and building from here. And as I say on that sequential performance, we see some signs of achieving that.

Kian, potentially, I can add one thing on GTB because that is very important to me. And I think James said everything that, of course, just by the headline number, this was then a disappointing quarter with the revenue decline, but he explained why. We are winning mandates, actually, more mandates than we also have certain business attrition, which you see, which is good. In all the client meetings I have, GTB is considered as world class business. And now we have a person where we do exactly that what you asked in July in the analyst call that we are even further integrating the coverage between Transaction Banking and the Fixed Income. I think that is the strength of Deutsche Bank. With this client feedback we have, with the mandates we win, I'm very confident that we can turn that over time into increasing revenues, so I'm not nervous about that one.

Okay, that's very helpful. If I may, very briefly, you have a €70 million investment in PBC but you don't indicate this is a one-off. Can you just tell us is this ongoing, what that is? I mean, you explained it, but I misunderstand why is it not a one-off, why is it in the normal numbers.

Sure. Look, it's a comparison to last year's third quarter and reflects just how much more we're investing across the businesses. So as we called out, the German domestic merger is costing us in a ballpark of €40 million to €50 million more than was the case last year. But as I've called out in other sort of public forums, we're also investing in our Italian and Spanish businesses. We're investing in Wealth Management both in infrastructure and in bankers, as Christian pointed out earlier. So there's a significant program across the businesses, and we called out that, that represents about €70 million on a year-on-year comparison, meaning that the underlying expense progress that we're making is better than the headline numbers. The other thing, so to answer your question, a fair amount of that is recurring for now, but we'll begin to generate the benefits in terms of cost savings and synergies for the merger that we'd expect. The one other item I'd call out is we are also spending to manage the transitions of our Portuguese and Polish operations out of the company. Those expenses will be transitional, if you like, and come to an end next year.

Next question comes from the line of Andrew Coombs of Citi.

One just numbers question and then one broader question on revenue opportunity. So the numbers question is restructuring charges. You've previously guided to €800 million for 2018 and another couple of hundred million for 2019. You're running at €380 million to 9 months '18, so it looks like it's coming in well below. And as you mentioned, the CIB front-office restructuring is done, so should we assume lower restructuring charges going forward compared to your prior guidance? Second broader question on revenues, could you - it comes in 2 parts, I'm afraid. But deploying excess liquidity from September, could you just give us an idea of how much of a drag the excess liquidity currently is to what revenue opportunity from redeploying that is? And then secondly, you talked about recapturing market share. I know previously, you've given a 42 basis point number for the Prime and repo balances that you've lost. That points to about €300 million revenue attrition. Presumably that has now played out, I just wanted to check, is there any second-order consequences that you've seen from that as well?

Sure. Thanks, Andy. I'm just taking some notes here. First of all, on the restructuring charges at the - as I said at the end of my prepared remarks, we're now calling for a lower number than the original €800 million, at around €600 million, which would imply €200 million-odd in the last quarter of the year of restructuring and severance. There are a number of drivers as to why our current expectation is lower than before. Frankly, we've been able to achieve the repositioning that we intended more efficiently in terms of those restructuring and severance charges. It doesn't - it hasn't changed, if you look, the scope of our repositioning but that we have done it more cheaply than we originally expect. Of course, when you come up with numbers, they are always very assumption-driven in this area, and we've just done better than our assumptions in terms of the repositioning. In terms of revenues from excess liquidity, if you look at what we disclosed publicly in liquidity reserves, they run around €270 billion as we closed this recent quarter, and that's a level that's reasonably in line with the past few quarters. Of that, about €200 billion is in cash, so it doesn't take very much in terms of incremental, if you like, risk tolerance to move the needle pretty significantly in terms of what our strategic liquidity reserve is throwing off in revenue terms. So if you like, for every €10 billion of investment of that cash, we think we can generate 50 to 100 basis points of additional yield without taking really a significant risk or certainly well within our risk appetite in terms of OCI credit risk that we take there. Remember that a lot of what that cash is simply sitting at the Bundesbank earning negative 40 basis points, and it's that drag that we can, I think, do more to offset. In terms of the restructuring, as we said, it's complete. Have there been impacts in the third quarter? Absolutely, as we called out. The deleveraging we noted would represent the relatively lower-yielding assets on the balance sheet, particularly in Prime and repo. We have, of course, seen that impact in the third quarter. At least to date, we don't see significant second-order impacts. We - as we've said before, we're very focused on stabilizing the franchise, on working with our clients, on regaining the market share with our individual clients. But to be honest, leverage has not been a big part of those conversations.

Next question comes from the line of Jeremy Sigee with Exane.

Just a couple of questions both on CIB, please. So firstly, just coming back on this question about franchise stabilization, I just wondered, can you give us any rough numbers on the revenue give-up and the cost saves that you've achieved now from the U.S. Rates shrinkage and the CEEMEA Equities closure? That would just help us understand, I think, the underlying trends a bit better. And then secondly, it was striking that you talked about leveraged loan business gaining market share quite significantly, which I think comes at a time when a lot of people are getting quite cautious about overheating in that marketplace. And I just wondered if you could talk about your perceptions of that and how you're making sure the business you're doing is kind of safe business, if you like.

So I'll take the first, and Christian will take the second piece of that. Look, it's hard to really parse out in detail the impact of the specific actions, in particular, in the Rates business in the U.S. There's obviously a lower book that we carry there, the lower repo that we outlined, and so there's, if you like, some degree of programmatic loss of revenues. In terms of market position where we remain, again, that's hard to parse out. What I think we would call out is that if you think of the geographic mix of revenues, especially in Rates, in the quarter was more favorable in the U.S., and so I think on a relative basis, we gave up some market share because of that geographic distribution.

Yes, let me take the second one. I think in particular, our structuring expertise and the expertise we have in the leveraged and structured business is one where Deutsche Bank has ranked top for the last 10 to 15 years and both with the underwriting skills we have on the business side but, in particular, also with our expertise we have on the credit side. You know that I have seen that in my previous job for a long time, we certainly are not increasing our risk appetite. We are doing the underwritings in line with our existing risk appetite. I think the market sees our strength in the business. If I look at the underlying diversification of the portfolio, if I look at our syndication and sell-down successes we have, I'm absolutely confident that we are not taking undue risks. I think we are seen as one of the better banks in this business, and therefore, we see increasing volume. And again, with the expertise we have both on the front office but, in particular, also on the credit side, we feel absolutely confident.

One additional item, Jeremy. It's James. I think I'm reminded that you might have erroneously thought we were exiting CEEMEA Equities in the way you phrased your question. I just want to be very clear. We have not and are not exiting CEEMEA Equities.

The next question comes from the line of Jernej Omahen with Goldman Sachs.

I have three questions, but I'd just like to pick on this liquidity management point. So if I understood this correctly, you basically think that you can run with a lower liquidity buffer, so you can run down some of your liquidity coverage ratio and essentially save the negative 40 basis point deposit rate at the central bank. Is that right or not?

Well, no. Liquidity is a complicated area, Jernej. The - first of all, what I really was referring to was a redeployment of liquidity buffer that we currently hold in cash into securities with a reasonable risk in terms of the credit risks, the duration of the securities we hold. On a comparative basis, our liquidity reserves are much more compared - we're conservatively managed than our peers, so it's removing some of that, if you call it, excess drag from a very conservative liquidity management sort of profile that we have. We do - on the buffer side - just let me finish, Jernej, for a second. But on the buffer side, we do think there's room to remove some of what we'd characterize as very conservative buffers and assumptions in the way we've been running liquidity for the past couple of years. As you know, some of our liquidity management had been in reaction to the idiosyncratic position we found ourselves in at the end of '16. And we've worked through a lot of those, that modeling and the buffer construction. And yes, we do think there's some opportunity to do more on the buffers, but we'll be prudent and cautious as we take that action.

Yes, I mean, I was just about to add that we too are under in the impression that the buffers went up after October, November 2016. And I just wonder, so do you think the rating agencies would feel comfortable with a lower liquidity buffer or a differently invested liquidity buffer? You don't think it makes a difference?

So we discussed this liquidity as well as, obviously, capitalization and a variety of topics with the rating agencies. Yes, we think they'd be comfortable. We go through our modeling and our assumptions in detail with them. And again, if you look at our relative ratios, you can see that they're conservative compared to peers, giving us some room to run slightly less conservative buffers and, if you like, help the revenue line.

Okay, wonderful. Okay then, just two one-liners. So one, what's the expectation? So there's been no litigation - meaningful litigation charge this year. What's the expectation for Q4? And the second question I have is, we now have the full year - a full quarter of the S&P downgrade. Just looking at the deposit number, it seems to be €7 billion lower Q-on-Q, but I think you grouped customer deposits with interbank. And I was just wondering, had the S&P downgrade had any impact on either customer activity or in the customer deposits?

Sure. So on litigation, you - your - you've seen obviously in the recent quarters that we struggled to forecast it and, typically, are concerned that litigation numbers will come in higher than they actually do. It's based on, frankly, individual events in a portfolio of matters that we're addressing. And the trend recently has been for us to have settlements inside our expectations and fewer new matters coming through. So we're encouraged by the way, that, that's run. Fourth quarter is always a little tougher, so we would give you the outlook that it would be higher than, if you like, the average of the first 3 quarters this year. That isn't based on specific items that we see that necessarily look out of trend with recent. So much is the possibility that there can be a downside surprise. Connected with the fact that the fourth quarter is just a long quarter until we close the books for the year, you go into late February or early March, and so we have events that can run that long. In terms of the S&P downgrade, in certain businesses, there has been client reaction to it. It obviously reinforces the focus we have on improving our ratings. And incidentally, just going back to the earlier question, the rating agencies' main concern is not about balance sheet, solvency and liquidity, it's about profitability. And we think we're helping our case by driving profitability in this way. But back to deposits, there were in certain businesses, there was some reaction, but it was reasonably isolated and not something that causes us any concern. We can win back those - that business as customers get comfort, and we move forward in time.

Next question comes from the line of Stuart Graham with Autonomous Research.

I had two questions, please. The first is on risk-taking in CIB. Your VaR is very low. CIB average VaR were down 3% again Q-on-Q. And I think you keep saying you can take more risk, and yet it doesn't happen. So I guess if I was running a trading desk at Deutsche, I can only think of two reasons why that would be the case. I mean, either I'm thinking, why bother, I'm not going to get paid anyway; or my funding costs are just so high, I can't make a decent return in taking that risk. So I wonder which of those you think it is, whether there's a different explanation. That's the first question. And then the second question is, on the €21 billion cost target for 2021, maybe I'm the last to it, I just - but I didn't realize that was now officially dead. But I think you said that you expect cost to keep coming down, and you're targeting €22 billion in 2019. So two years out, I kind of would've thought €21 billion was still the right area to aim at. So I'm just confused on what message you're trying to send us here because I guess we're all anchored on you that you're going to hit cost, but this is kind of telling me that it doesn't feel like you think you can hit that cost number. Maybe you could reassure me on that.

So I'll go in reverse order, Stuart, and thank you for sticking to two questions, which hasn't been the discipline so far this morning. I want to get away from absolute cost targets, but the reality in stepping away from the €21 billion is we don't think €21 billion is good enough, looking forward to that to be on track for our return targets. So the short version is we'd hope we'd be doing better than that, but we'd start to express that in a cost-to-income context. Again, our mission from here is pretty simple, it's grow revenues and reduce expenses on a trajectory that creates the operating margin that we're all looking for. And hence, our trajectory to '21 and beyond needs to be to build that margin.

Sorry, James, can I just challenge you on that? I mean, you've got a - culturally, a cost problem at Deutsche. I mean, I don't think the way to beat - in my opinion, the way to beat €21 billion is to take €21 billion away. Why don't you just set - say it's €20 billion and just keep beating your people up? I mean, cost/income ratios, how does - how do I, as a desk manager, manage your cost/income ratio? If you can give me a hard cost target, I can manage that much better.

And Stuart, you're pointing out a difference that - in between our communications with you and the market, so externally, versus internally, where we build plans, hold people to their commitments and are working to drive efficiencies in the company over several years. And with - we are seeing a real change in the culture and the determination around the company, which is encouraging. We've pointed out our sequential decline in adjusted costs was €100 million that in - just since the second quarter. So that annualizes to €400 million of savings that we've achieved over that period. And I think it's demonstrative of the work we're doing and the path that we're on. So we are doing what you suggest, which is working intensively with the managers on what they can do but also what the organization as a whole can do in sort of removing excess cost in our processes around the company. Going to your question about risk-taking in CIB, I won't restrict myself to two reasons why that might be the case. We are being disciplined about sticking to, if you like, return hurdles. Funding costs play a role in that, but I wouldn't say necessarily an overwhelming role. We - the third quarter is seasonally a slow quarter. And as it happens, we had some ebb and flow, if you like, of the Corporate Finance committed deals just run off as we close the quarter. I don't think of that as a trend. The other movements in risk-weighted assets were frankly more about a derisking in the nonstrategic portfolio and, frankly, OpRisk and some model and data improvements. So we don't think it's necessarily representative of the underlying business. Of course, we'd like to see more. And we were encouraged there as, if you like, a leading indicator that loan growth ticked up in the quarter. And I'd like to think that's green shoots for continued growth in loans and the associated net interest income, but there'll be more to talk about in the future quarters on that.

And Stuart, potentially, I can reiterate on both sides. James is right, we shouldn't restrict to two reasons. I mean, look what kind of restructuring we have done in CIB in Q2, partially also in Q3, this is now completed on the front office. This always has an impact and effect, so I wouldn't take just the two reasons you cited for the low VaR. Number two, with regard to cost, honestly, I think we have to show you credibility, first of all, this year and next year. This is what we are focusing on, and we will deliver. James was pretty clear that our further trajectory is also clear, it goes further down, it goes materially further down, and we are managing that on a weekly basis. But the most important is that we regain your credibility this year and next year, and that is where our focus is on, and everything else is managed internally here with pretty absolute hard numbers.

Next question comes from the line of Andrew Lim with SG Corporate and Investment Banking.

So I was wondering if you could be a bit more specific on the LCR and liquidity buffers. I'm not quite sure whether you're saying that you can reduce your LCR of around 148% or not or where - whether you're merely swapping cash into government bonds with no impact there. And together with that, I'm wondering why it's taking so long to redeploy those liquidity buffers and why isn't it simply a case of taking cash out of the Bundesbank had minus 40 basis points and then just buy income and securities. That's my first question there. And then secondly, you've talked about your expectations for revenue weakness versus 2017. Compared to your prior expectations, I think they were flat. Could you be a bit more specific about how much revenue weakness that would entail? Are we talking about low single-digit percentage points down or more like mid-single digits?

Sure. On the gain on liquidity reserve, the answer is both, so swapping cash into securities but also becoming more efficient, if you like, optimizing the use of liquidity on the balance sheet and, over time, managing that LCR down. Excess liquidity is expensive. Why did it take so long? We've been managing it deliberately and prudently over the years since our idiosyncratic experience in 2016. We think that's appropriate. But as we've improved our capabilities, our reporting, our modeling, our governance and really gotten a strong grip on it, we feel more confident in the ability to do that. The other thing is that the investment environment in - with Rates, where they are, just hasn't been attractive to put investments to work. We think that's improved a little bit, but frankly, in a low-rate environment, we don't like the OCI risk and haven't liked it over the past couple of years of putting on long investments in fixed-rate securities. On the - yes.

So can I just ask then what kind of LCR you'd be comfortable with, 120% or so?

Look, if we think about peers, they will tend to cluster it about that level, so that gives you a sense of the scope that we might have. I wouldn't think that happens in the near term. I think we'd go prudently and steadily to again improve the efficiency of balance sheet usage. LCR, which is why I said in connection with Jernej's question, managing liquidity is sort of a complicated field that has to do with how your legal entities are structured, how you manage, if you like, the fungibility of liquidity around the organization in addition to your investment choices and, incidentally, the modeling that I pointed out earlier just, if you like, behavioral modeling of the balance sheet. We've got a lot of work to do in the years to come. I think there are significant improvements that we can and will target, but we do so in close cooperation with the regulators so that they see the progress that we're making and that it's being executed on prudently. In terms of the guidance, I would say we moderated guidance just a little bit this quarter versus last to really reflect a slightly weaker third quarter than we'd initially expected, so yes, the - where we are as we sit here today. We have internal rules on how we set that, and we wanted to be a little bit cautious about where we are on the - if you like, the boundaries there, but no sort of dramatic message. I wouldn't - won't go into particular percentages. We want to be careful about giving you quarterly guidance given that parts of our revenue base are - is market-driven. But I wouldn't read too much into that guidance signaling given that it's only one quarter as we were thinking about how we look at the balance of '18.

Next question comes from the line of Jon Peace with Crédit Suisse.

So my first question is on the PBC business. The adjusted PBT in the first nine months of this year is running at about half the level of last year. And I just wondered, what sort of synergies are you expecting for 2019 from the head office consolidation? How quickly can that business sort of return to its former run rate? And my second question is just around the RWA outlook. You indicated some upward pressure due to TRIM exercise. What's your outlook at the moment for sort of organic RWA growth across the various businesses? And is there any update at all on Basel IV?

Sure. That was a long list of questions. Look, we're not giving specific information about the synergy numbers in PCB, certainly not in a short-term horizon. As you know, we've been very clear about working towards the €900 million that we announced when we first announced the merger of those two banks, and we're well on track to achieve that. As Christian said earlier, we actually are now seeing those synergies both on the revenue and the expense lines, and we think that progress will continue. And as you pointed out, the head office integration is to come, and we expect to see benefits from that. That's all baked into our 2019 expectations. In terms of RWA, for us, it's, I would say, single-digit sort of redeployment in RWAs as we work with the ongoing businesses to seek out good client opportunities, good return opportunities in our numbers. There is still some runoff of, if you like, nonstrategic or legacy positions that helps us. And as I mentioned, we have operating risk and other changes in RWA that, if you like, are apart from the underlying trends. On TRIM and the other regulatory assessments, frankly, it's too early to say. We've gone through a bunch of reviews, both TRIM and otherwise. We get initial feedback. We engage, I think, in an interactive process with the regulators on those reviews. What the final results and final answers will be, in particular, for TRIM, which is a horizontal review across the industry, so our initial feedback then gets, if you like, combined with an industry-wide view and results in final feedback from the regulators, hence, the uncertainty that we communicate to you. But we've given out a range of ratio impact over the next several quarters, and I think that's the best we can do for the time being.

The next question comes from the line of Al Alevizakos with HSBC.

I'm going to stay in the regulators and capital, but I'm going to move slightly to leverage. I asked the question last quarter whether the target of 4.5% is still valid. And also, James, there was recently a proposal by the BIS regarding the treatment of clear derivatives. And given that you've got a big derivatives book, I was wondering whether you have any initial analysis for us on what it would mean on your Tier 1 leverage ratio. And as a second question, do you see the G-SIB buffer that you've got in your capital ratio reducing as the balance sheet is shrinking?

Sorry, Al, I didn't get the third question while you were talking. What was the third question?

The third question was about whether the G-SIB buffer could actually be reducing as the balance sheet keeps shrinking. Where are you in that part of the calculation? Because other banks have actually been growing the same time you've been reducing your balance sheet about €100 billion in the last three quarters.

Got it, okay. G-SIB, I didn't hear you acoustically. So on leverage, absolutely, the 4.5%, we will continue answering your question in the same way, which is that 4.5% is our target, and we intend to build to it over time. There's a numerator and a denominator in that calculation, and we'd expect to grow the numerator over time and manage the denominator. To your point about the BIS in both clearing and also, by the way, netting sets on the balance sheet, there are efficiencies that we can achieve in how we measure and manage the leverage exposure associated with the underlying client activity. And that's something we're investing time and resources in to be able to manage that so as to again have an efficient balance sheet that we run, which is, I guess, a similar impetus as on the liquidity side. In terms of the G-SIB buffer, we do look at it. We - as you know, we were close to the boundary to move down one bucket at the end of last year. But given that the domestic - so the D-SIB is, at this point, our binding constraint at 2%. Even if we move down a bucket on G-SIB, it would not change the G-SIB surcharge that we live with, which, as you're pointing out over - in the early 2020s will become part of our leverage ratio and add to the required level at half of the G-SIB surcharge, so 1%.

Next question comes from the line of Anke Reingen with RBC.

Just two follow-up questions. First, on the €23 billion cost for - target for this year, given you're running at - if you could actually beat it. At the €23 billion, what could you potentially do better? Or would you use any buffer to make additional investments? And then coming back to the capital impact from that of the 20 to 40 basis points, which is very much appreciated on a standard uncertainty. But I just wonder, in the past, you said about - it could be about 20 basis points from the guaranteed funds. Is that sort of like included in that 20 to 40 basis points? And could you assume then the rest, i.e. 20 basis points, is TRIM?

Thanks for the questions, Anke. So look, I think Christian and I both want to be in a world of under-promising and over-delivering. We - as you can see mathematically, we've positioned ourselves to be on a good path to hit the €23 billion or potentially beat the €23 billion. Mathematically, at about €5.6 billion of ACB in the fourth quarter, we would be there. We'd like to see sequential improvements quarter-on-quarter, but there's always some degree of variation and, if you like, yes, bookings in the fourth quarter that can take place. And so we're cautious about being more aggressive on that but certainly very confident of the €23 billion, and we would be keen to deliver a beat on that. And also, our focus is really, at this point, on setting ourselves up for 2019 and our €22 billion target. So I mentioned in response to an earlier question, we think the progress we made in the third quarter is important in terms of delivering the path that Christian outlined earlier towards that €22 billion. On the 20 basis points of guaranteed funds, you're correct. That was in our earlier outlooks kind of in first quarter and, based on our current expectations, has gone away as a near-term headwind. And that's based on our expectations now that the matter will be addressed not in Q&A but in the CRR over time. And in the CRR, it will have a transition period and play out over potentially several years, so that's less of a near-term consideration for us at this point.

So the 20, 40 basis points is basically just TRIM?

TRIM and other regulatory assessments.

Next question comes from the line of Amit Goel with Barclays.

Yes, two follow-up questions from me. One, just again on costs, I'm just curious, you gave fairly kind of specific guidance at a conference during the quarter in terms of where you'd expect to land for Q3. And obviously, you've come in slightly better, maybe about €70 million, €80 million better. So just curious, basically, how much visibility you have on the costs and/or where did you find the incremental savings in the period? And the second question, just on the litigation, again, on the contingent liabilities and the comments about some new matters offset by reclassifications. Just curious what those new matters were. And also within that, just curious if there is any risk from any corresponding banking relationships.

Sure. I'll take them in reverse order. Look, to be clear what I was saying is that we have fewer new matters rolling into our litigation, if you like, portfolio. And so there's nothing significant that is new that we would call out. Obviously, we provide extensive disclosure in our interim reports and annual reports on what is there. And if you look at it, you won't see new matters, which hopefully answers the totality of your question without going into any detail. On the cost guidance, you're right, we thought we'd be rounding down rather than rounding up to €5.5 billion, so to us, that's a pleasant outcome. We're talking in the tens of millions rather than €70 million or €80 million, frankly. There's always some degree of variability as you close the books for a given quarter or a given month. I think some of what we saw in September was, frankly, pull forward from the fourth quarter, hence, a little bit of caution to Anke's earlier question about what we expect the sequential trend to be in the fourth quarter. But we saw evidence essentially of the discipline that Christian referred to in his opening comments that we simply manage now expenses week-by-week on a run-rate basis, and whether that's compensation, noncompensation expenses across the board, bringing a great deal of scrutiny and focus to it. And that's something we'll continue not just in the fourth quarter but the years to come.

There are no further questions at this time. I would like to hand back to James Rivett for closing comments.

Thank you very much, and we will speak to you all very soon.