Deutsche Bank AG

Thank you all for joining us for our preliminary fourth quarter results call. As usual on our call, our CEO, Christian Saving, will speak first, followed by our Chief Financial Officer, James von Malka. The presentation, as always, is available for download in the Investor Relations section of our website, db.com. Before we get started, let me just remind you that the presentation contains forward-looking statements, which may not develop as we currently expect. We therefore ask you to take notice of the precautionary warning at the end of our materials. With that, let me hand over to Christian.

Thank you, James. A warm welcome from me as well. It's a pleasure to be discussing our fourth quarter and full year 2020 results with you. This is an important milestone in our transformation journey. In July 2019, We said that execution over the first six quarters would be critically important. We hit all our targets and key milestones in 2020 and over the last 18 months, despite the challenges of COVID-19. We are now moving into phase three of our transformation, delivering sustainable profitability. That means growing our businesses while remaining disciplined on costs and capital. Our performance in the fourth quarter and the full year confirms and strengthen this picture. We told you we saw sustainable growth in our investment bank as clients have re-engaged and our strong performance in January further supports this. The private bank and corporate bank have successfully offset the interest rate headwinds they are facing. We delivered 12 consecutive quarters of year-on-year reductions in adjusted costs, excluding transformation charges and bank levies. And despite the challenges we faced, we were profitable on a pre- and post-tax basis in the fourth quarter and the full year. For the full year, at group level, we have reported pre-tax profit of €1 billion and net income of €624 million. The improved profitability in the core bank offset the continuing transformation effects, higher provisions for credit losses, and continued de-risking in the capital release unit. We have also put aside any doubts that we can self-fund our transformation. And while the environment is likely to remain challenging, our strong capital and liquidity ratios position us well to continue to support clients. Let me now go through these items in more detail starting with the delivery of our 2020 milestones on slide two. We hit our 19.5 billion Euro adjusted cost target, a 3.3 billion Euro reduction in two years. This was in part driven by headcount reductions with our workforce down by 8% over this period. We have demonstrated our strong risk management, Provisions for credit losses of 41 basis points of loans are in the middle of the range that we estimated in April at the start of the pandemic. We aimed for a year-end 2020 leverage ratio of 4.5%, and we ended the year at 4.7%. At the investor deep dive, we said we expected a CET1 ratio of around 13% at year-end. In fact... our ratio is stronger at 13.6%. The stronger ratio reflects in part a delay in certain regulatory items and in particular outperformance against our de-risking plans in the capital release unit. The capital release unit ended the year with 34 billion euros of RWA below the 38 billion euro target. We have made good progress against our sustainability targets with over 40 billion euros of financing and investment volumes at year end compared to our 20 billion euro target. Simply put, we have continued to deliver against all our financial targets and milestones in 2020. Delivery against these targets is supported by the ongoing disciplined execution of our strategic agenda as we detail on slide three. In July 2019, we identified the transformation effects that we would take by the end of the 2022, and with 85% of these already behind us, we continue to make progress. Most recently, we signed a multi-year partnership with Google Cloud, which will elevate our IT infrastructure to a more efficient cloud-based environment. We also signed and closed the sale of postbank system, which helps accelerate our cost and workforce reduction. In the private bank, we agreed balances of interest with our employee representatives, which will allow us to further rationalize our head office and operations in Germany. We also extended our insurance partnerships with Talangs and Zurich Insurance which will generate additional fee income. The creation of our German business banking and the corporate bank will drive greater focus on serving our 800,000 small business clients. Overall, we have achieved more than 300 key milestones and over 100% of the cost savings anticipated from our core transformation initiatives in 2020. Being on track, or ahead of our objectives so far gives us the confidence that we will achieve our 2022 goals. Our businesses have also made considerable progress against their strategic objectives, as we show on the next slide. The corporate bank is working to offset interest rate headwinds in several ways, as we discussed with you in December. On deposit repricing, we are well ahead of target. By the end of 2020, we had charging agreements related to accounts with a value of 78 billion euros, up from 68 billion euros in the third quarter. These agreements generated an annualized positive revenue impact of more than 200 million euros. We also grew business volumes. For example, 20% growth in payment volumes with our fintech, e-commerce, and platform clients. and we captured a 4% increase in the Asia-Pacific region. The investment bank grew revenues by 32% in 2020, a very strong performance in both FIC and origination and advisory. In the second half of the year, we have outperformed the industry and the average of our US peers in year-on-year growth terms. Yes, markets have been favorable, but we see our growth to be more than market-driven. We refocused our business around areas of strength, and clients have engaged well with this model. As a result, we saw double-digit year-on-year growth in FIC, and this trend has continued in January. Client re-engagement has also helped underpin the strength in revenue performance in FIC. As we explained at the investor deep dive, we see a substantial portion of investment bank growth as sustainable, even as markets normalize as we expect in 2021. The private bank was also successful in offsetting interest rate headwinds with growth in volumes and fee income, including benefits from repricing initiatives. Combination of higher account fees and other repricing initiatives has added 100 million euros to 2020 revenues. In 2020, we grew net new client loans by 13 billion euros and achieved 16 billion euros of net inflows in investment products, including converting 5 billion euros of deposits. These conversions are part of our strategy to grow fee and commission revenues. In asset management, DWS delivered €30 billion of net inflows in the full year, of which €9 billion were in ESG assets. Assets under management rose to €793 billion at year end, €25 billion higher than pre-crisis levels at the end of 2019. In short, The dynamics in all four core businesses show that our refocused business model is paying off. This execution is increasingly visible in our revenue performance, as you can see on slide five. When we launched our transformation in July 2019, we set out to stabilize, then grow revenues, and that's what we did. We have increased group revenues by over 850 million euros in 2020, as growth in our core businesses more than offset the exit from equities trading. Core bank revenues have increased by 6% to 24.2 billion euros. This puts us close to the plan of 24.4 billion euros that we laid out at the investor deep dive as part of our path to the 8% return on tangible equity target in 2022. As discussed earlier, this growth has principally come from our refocused investment bank, which was able to capitalize on favorable market conditions and to deliver on the strategic transformation of our FIC business. The corporate bank and private bank successfully offset headwinds primarily lower interest rates to keep revenues essentially stable year on year, and we would expect underlying growth to feed through the top line as interest rate headwinds soften, consistent with the current forward curve. Asset management was slightly lower due to the non-recurrence of certain performance fees in 2020. In summary, all our businesses executed on their strategic objectives. Slide six shows the progress we have made in reducing adjusting costs. Excluding transformation charges and bank levies, we have reduced adjusted costs year on year for 12 consecutive quarters. In 2020, we reduced adjusted costs excluding transformation charges and expenses eligible for reimbursement related to prime finance by 9%. This puts us on a good path to our 2022 target of 16.7 billion euros, including targeted investments this year. Discipline execution is becoming increasingly visible in our results, as you can see on slide seven. As I said earlier, the next phase of our transformation is to improve sustainable profitability. That means generating positive operating leverage by growing revenues and at the same time reducing costs. We have generated positive double-digit operating leverage in 2020 at both group and core bank levels. The operating leverage has driven significant improvements in core bank profitability. Adjusted for transformation charges, specific revenue items goodwill impairments as well as restructuring and severance pre-taxed profit in the core bank is up 52% in 2020 to 4.2 billion euros. The improved core bank performance has increasingly offset the negative impact of the wind down of the capital release unit. And over time, more of the core bank's profitability should flow to the group's bottom line as we continue to make progress on our transformation agenda and provisions for credit losses normalize. The strength of our balance sheet at year end, which we discussed on slide eight, also positions us well to further grow our businesses. Our common equity tier one ratio was at 13.6%, flat year on year, and approximately 315 basis points above regulatory requirements. Our liquidity reserves were 243 billion euros. Our liquidity coverage ratio was at 145%, which is equivalent to a buffer of 66 billion euros above requirements. As a result, we can deploy our capital and liquidity strengths to support clients in what is still an uncertain environment. Finally, as we explained both in December and at our risk deep dive in June last year, we have benefited from a high quality loan book and a disciplined risk framework that enabled us to deliver within guidance on provisions for credit losses. Our transformation is fully on track on every key dimension and our performance in 2020 gives us good visibility towards our 2022 targets. Before I hand over to James, let me sum up where we stand after six quarters and our outlook for 2021. Our refocus strategy is clearly paying off. Clients are re-engaging and our employees are motivated. Trust by our clients is at the highest level since 2012. This allows us to navigate well through the operating environment, which we expect to remain challenging and volatile. This also offers opportunities which we will continue to make use of. At the investor deep dive, we highlighted that our business set up positions as well to benefit from the fundamental trends we expect to see in the coming years. These trends include the increase of global financing demand, wealth preservation, increased localization and sustainable financing. And they are already visible in January. Momentum is strong and points to sustainability of revenues. Our focus on cost reduction remains a top priority. Delivery against our cost targets alone will put us close to our 2022 return on tangible equity target as restructuring and transformation costs fall away. For 2021, the cost reduction combined with our planned investments are consistent with our 2022 group adjusted cost target of 16.7 billion euros. Our plans assume provisions for credit losses decline this year compared to 2020. but will remain elevated compared to the pre-COVID-19 periods. We will continue to manage our balance sheet conservatively. Our strong capital and liquidity position us well to meet any challenges. As a result, we feel well placed to achieve our 8% return on tangible equity target in 2022 and capital distribution to shareholders. With that, Let me hand over to James.

Thank you, Christian. Let me start with a summary of our financial performance compared to the prior year on slide 10. As Christian said, we are focused on delivering sustainable profitability by growing revenues and reducing costs. Operating leverage was strong in the fourth quarter at 23% on a reported basis. Revenues increased by 2% and non-interest expenses declined by 21%. principally reflecting lower transformation and restructuring and severance charges. Results in the fourth quarter included a negative impact of 120 million euros related to the sale of post-bank systems. This had a negative 104 million euro impact on revenues and 16 million euros of restructuring and severance charges. Consistent with our comments at the investor deep dive, we believe that this transaction helps to accelerate the decommissioning of our legacy infrastructure and reduces the risk of stranded costs in the long term. Adjusting for specific revenue and cost items, which are detailed on slide 32 of the appendix, operating leverage was 12 percent. On this basis, we grew revenues by 4 percent and reduced costs by 8 percent. Provisions for credit losses were 251 million euros in the quarter, equivalent to 23 basis points of loans. we generated a pre-tax profit of 175 million euros, or 621 million, excluding transformation charges, restructuring and severance, and specific revenue items. The tax benefit of 14 million euros in the quarter was mainly driven by the release of non-tax-deductible litigation provisions and share-based payment-related tax effects due to positive share price movements. Our adjusted core bank return on tangible equity for the fourth quarter was 5.8% and 5.7% for the full year. Tangible book value per share was 23 euros and 19 cents, a 1% decrease. This reduction is driven by negative OCI, mainly due to FX translation effects, partially offset by a lower share count. For the full year, we generated a pre-tax profit of 1 billion euros or 2.2 billion, excluding transformation charges, restructuring and severance, and specific revenue items. Provision for credit losses was 1.8 billion euros for the full year, in line with our expectations at 41 basis points of average loans. The full-year effective tax rate was 39 percent. Now let's turn to page 11 to look at the specific drivers of adjusted cost reductions. In the fourth quarter, we reduced adjusted costs, excluding transformation charges, by 413 million euros, or 8% versus the prior year. Adjusted costs include 81 million of expenses eligible for reimbursement related to prime finance and 207 million euros of transformation charges, which are excluded from our targets. On this basis, adjusted costs were 4.6 billion euros in the fourth quarter and 19.5 billion euros in the full year. We continue to make progress in reducing costs across all major categories while continuing to invest in our IT and controls. Now let's move to slide 12 to discuss our provisions for credit losses. Consistent with our prior guidance, provisions for credit losses remained at more normalized levels in the fourth quarter. Provisions were 251 million euros in the quarter, equivalent to 23 basis points of loans on an annualized basis. The decline for the fourth quarter is driven by releases in COVID-19 related stage one and two provisions, reflecting positive changes in consensus macroeconomic outlook since the third quarter. Stage three provisions declined by 14% in the quarter, but remain more elevated in the private bank and the investment bank. We retained the management overlay we established in the third quarter, given continued uncertainties in the macroeconomic environment. including the provisions taken in the fourth quarter, we ended the period with 4.8 billion euros of allowance for loan losses, equivalent to 111 basis points of loans. Turning to capital on slide 13. As Christian highlighted, our CET1 ratio was 13.6 percent at the end of 2020, above the guidance of 13 percent that we provided at the investor deep dive. Approximately 20 basis points came from lower risk-weighted assets, notably faster-than-anticipated reductions in the capital release unit and slightly slower deployment in the core bank. A further 20 basis points of the outperformance came from a series of numerator benefits, including higher-than-expected net income and higher-than-expected benefits from regulatory changes relating to software intangibles and other items. The balance of 20 basis points came from delays in regulatory inflation, principally the targeted review of internal models, which we expected to conclude in the fourth quarter. €4 billion of RWA inflation related to TRIM is now expected to occur in the first quarter of 2021, which increases our full-year regulatory inflation assumption to approximately €20 billion. Nearly all of this RWA inflation is expected to occur in the first half of 2021, equivalent to approximately 80 basis points of CET1 capital. This takes our pro forma CET1 ratio to approximately 12.8%. With this inflation behind us in the first half of the year, we expect to see a much more moderate impact from regulatory items in the second half of 2021 and for the full year 2022. Our leverage ratio improved by 24 basis points to 4.7%, reflecting the positive regulatory-driven and other capital effects I just described. Our pro forma leverage ratio, exclude including ECB balances, was 4.3%. This puts us well on track to meet our leverage ratio target of 4.5% by year-end 2022, taking into account a further 10 basis points from the transfer of our prime finance business which we will finalize later this year. With that, let's now turn to performance in our businesses, starting with the corporate bank on slide 15. Profit before tax was 561 million euros for the full year. Excluding specific items, transformation charges, and restructuring and severance, the adjusted profit before tax was 714 million euros, with stable quarterly contributions including 211 million euros in Q4. This equates to a 5.8% adjusted post-tax return on tangible equity for the quarter. Excluding specific items and the impact of FX translation, full-year revenues of 5.2 billion euros were flat on 2019. The corporate bank offset interest rate headwinds largely through charging agreements. At year-end, Charging agreements were in place on accounts with approximately 78 billion euros of deposits, generating revenues of more than 200 million euros on an annualized basis. Non-interest expenses declined by 13% for the full year and 24% in the quarter, principally reflecting lower transformation charges and restructuring expenses. Adjusted costs excluding transformation charges declined by 2% for the full year and 6% in the quarter, reflecting cost initiatives headcount reductions, and FX translation benefits. This produced operating leverage of 1% for 2020. Loans were flat year on year on an FX-adjusted basis, while deposits were slightly lower, reflecting management actions to optimize the deposit base. Provisions for credit losses were 73 million euros for the quarter and 366 million for the full year, driven by a small number of idiosyncratic events. we're pleased with the relative performance in the corporate bank in 2020 and the trajectory of our 2022 objectives. Although performance in 2021 will be closer to 2020. Turning to revenues in the fourth quarter on slide 16. Global transaction banking revenues declined by 6% or 3% on an FX adjusted basis. Cash management revenues were essentially flat, excluding the impact of FX translation as interest rate headwinds offset deposit repricing and balance sheet management initiatives. We saw positive underlying momentum in this business, with corporate cash management volumes improving both sequentially and year on year. Trade finance and lending revenues were also essentially flat, excluding FX translation, with solid business performance in lending, particularly in Germany and EMEA. Security services and trust and agency services revenues declined as a result of interest rate reductions in key markets. Commercial banking revenues, excluding the impact of the sale of post-bank systems, increased by 6%, supported by the further rollout of deposit repricing and net movements in episodic items. Turning to the investment bank on slide 17, full-year revenues, excluding specific items, increased by 32%, driven by strong market activity and the benefits of our strategic transformation, as well as strong client engagement. Non-interest expenses declined by 15% in the full year and 19% in the fourth quarter, reflecting lower adjusted costs, reduced restructuring and severance, and lower litigation. Adjusted costs excluding transformation charges declined by 9% in the full year and in the fourth quarter, reflecting lower allocations, disciplined expense management, and FX translation benefits. As a result, the investment bank cost-income ratio declined to 58 percent in 2020, with operating leverage of 41 percent. The investment bank generated a pre-tax profit of 3.2 billion euros in the year and a post-tax return on tangible equity of 10 percent. Loan balances declined, reflecting disciplined risk management across the portfolio. Leverage exposure increased compared to the prior year principally driven by activity in fixed income sales and trading to support clients. Risk-weighted assets were higher year on year, principally due to regulatory inflation. Provisions for credit losses increased in 2020 to 688 million euros, or 89 basis points of average loans, primarily reflecting higher COVID-19-related impairments. Turning to fourth quarter revenue performance, excluding specific items, compared to the prior year period in the investment bank, on slide 18. Revenues excluding specific items and fixed income in sales and trading increased by 21 percent. The investment bank continued to benefit from client re-engagement following our strategic repositioning. Credit trading revenues were significantly higher, driven by strong client engagement and constructive market conditions. Our FX business performed well, reflecting higher volatility and strength in our derivatives businesses. Rates revenues excluding specific items were flat year on year, as the strong performance in Europe was offset by a general reduction of client activity in the US. Emerging market revenues were higher across all three regions, driven by continued improvements in the macro flow business. Financing revenues were essentially flat, excluding the impact of FX translation. Revenues in origination and advisory increased by 52%, the fourth consecutive quarter where our revenue growth has outperformed the fee pool. Importantly, we regained the number one rank in our home market. Growth in debt origination reflected increased activity and market share gains in investment-grade debt. Equity origination revenues were significantly higher, driven by a strong performance in special purpose acquisition company activity. Finally, advisory revenues were also significantly higher, driven by increased activity mainly in EMEA. Turning to the private bank on slide 19, we made substantial progress in 2020 on our objectives, with revenues excluding specific items broadly stable and a continued reduction in costs. The private bank generated a pre-tax loss of 124 million euros in the full year, absorbing approximately 650 million euros of transformation-related effects. Adjusted pre-tax profit was 493 million euros, stable compared to 2019, despite a more challenging market environment. Full-year revenues excluding specific items were flat as we grew volumes and fee income, including benefits from repricing to offset ongoing deposit margin compression and negative impacts from COVID-19. Non-interest expenses declined by 7%, driven by operational improvements as well as higher transformation-related effects and litigation charges that largely offset the goodwill impairment in the prior year. Adjusted costs, excluding transformation charges, declined 6 percent year on year, primarily reflecting ongoing synergies from the German integration and other structural and organizational measures, including workforce reductions, to below 30,000 at year end. Consistent with our previous planning, the cost synergies from the German merger reached 400 million euros for the year. We also agreed balances of interest with our employee representatives, which will allow further rationalization of our head office and operations in Germany. Flat revenues and cost reductions led to operating leverage of 6% in 2020. We achieved the fourth consecutive quarter of net inflows with 16 billion euros in investment products, and we originated net new client loans of 13 billion euros. Provisions for credit losses were 711 million euros, or 31 basis points of loans. The increase year on year mainly reflects impacts from the pandemic, The prior year included higher beneficial impacts from portfolio sales and model recalibrations. For the fourth quarter, revenues excluding specific items were broadly flat, while adjusted costs excluding transformation charges declined by 10%. We now turn to the revenue details on slide 20. Revenues in the private bank in Germany increased by 4% in the quarter, including a negative impact of 88 million euros related to the sale of post-bank systems I highlighted earlier. Growth in lending revenues and higher commission and fee income from investment and insurance products offset negative impacts from deposit margin compression. Business growth continued, with net new client loans of €3 billion and €1 billion net inflows in investment products in the quarter. In the International Private Bank, net revenues increased by 2% on a reported basis and declined by 4%, excluding revenues related to Sal Oppenheim workout activities. Private banking and wealth management revenues, excluding specific items, declined by 2% on an FX-adjusted basis, as the impact of COVID-19 and lower interest rates was partly offset by business growth and relationship manager hiring in prior periods. In personal banking, revenues declined by 3%, mainly reflecting headwinds from continued deposit margin compression and the impact of the pandemic on business activity. The International Private Bank attracted net flows of €2 billion in investment products and granted €1 billion of net new client loans in the quarter. As you will have seen in their results, DWS performed well and had a successful year. To remind you, the asset management segment on page 21 includes certain items that are not part of the DWS standalone financials. Adjusted profit before tax of 586 million euros in the full year increased by 9% as management actions to reduce costs more than offset the reduction in revenues. Revenues declined by 4% versus the prior year, predominantly due to the absence of performance fees for multi-asset and alternatives earned in 2019. Management fees were stable at 2.1 billion euros, as improvements in flows offset the continued industry-wide margin compression. Non-interest expenses declined by 185 million euros, or 11%, with adjusted costs excluding transformation charges down 10%. The reduction in costs was driven by lower variable compensation and ongoing efficiency initiatives, combined with a reduction in certain operating costs due to the reduced travel and marketing activity as a result of the pandemic. Asset management posted operating leverage in 2020 of 5%. Assets under management of 793 billion euros have grown by 25 billion euros in the year, driven by net inflows and positive market performance, which more than offset the negative FX impact. Net inflows were 30 billion euros for 2020, reaching record highs for DWS, including 9 billion euros into ESG products. Net inflows in passive, cash, alternatives, and active equity were partly offset by outflows in other active businesses. With that, let me turn to Corporate & Other on slide 22. Corporate & Other reported a pre-tax loss of 930 million euros in 2020 versus a pre-tax loss of 246 million euros in the prior year. The higher loss was driven by a negative contribution from valuation and timing differences compared to a positive result in the prior year from mark-to-market moves associated with the bank's cross-currency funding arrangements. Corporate and other reported a pre-tax loss of €333 million in the quarter. The performance reflected higher than planned infrastructure costs, principally technology, which have not been charged to the divisions. The results were also impacted by higher funding and liquidity charges, which are also not allocated to the business divisions, as we've discussed in prior calls. Consistent with our prior guidance, we expect these funding costs held in corporate and other to remain at around 250 million euros in 2021. Shareholder expenses, as defined in the OECD transfer pricing guidelines, were around 100 million euros in the fourth quarter and approximately 400 million in the full year and are likely to remain at similar levels in future periods. We can now turn to the capital release unit on slide 23. The capital release unit finished the year by delivering another quarter of sequential reductions in risk-weighted assets, leverage exposure, and costs, outperforming our 2020 targets. Risk-weighted assets decreased to 34 billion euros, 4 billion below our year-end target. We reduced credit and market risk RWAs by 48 percent to 10 billion euros at year-end, with the balance in operational risk. The division decreased leverage exposure by €55 billion, or 43% in 2020, to €72 billion, €8 billion below the year-end guidance. Loss before tax of €2.2 billion improved by €1 billion compared to the prior year, as reductions in costs more than offset the loss of revenues from the exit of equities trading. Non-interest expenses in 2020 declined by 1.5 billion euros, or 43%, reflecting lower adjusted costs as well as lower restructuring and severance and litigation charges. Adjusted costs excluding transformation charges declined by 861 million euros, or 33%, reflecting lower service cost allocations, lower compensation, and lower non-compensation costs. Negative revenues in the capital release unit were 225 million euros in 2020. This was significantly better than the guidance we gave at our 2019 investor deep dive, principally reflecting outperformance against our original de-risking expectations. For 2020, we will continue to execute towards the risk-weighted asset and leverage exposure plans that we laid out in December. We expect risk-weighted assets in 2021 to decrease year-on-year and leverage exposure to be significantly lower. However, compared to the fourth quarter 2020, we expect leverage exposure in the capital release unit to increase in the first half of 2021. This increase reflects an approximate €10 billion allocation of central liquidity reserve, as we outlined at the investor deep dive, plus a further increase from the implementation of the standardized approach for counterparty credit risk. These increases do not impact our 2022 leverage targets. The transition of our prime finance and electronic equities clients and the associated leverage exposure and risk-weighted assets is on track to complete by the end of 2021. Christian talked about the outlook for 2021, which, when combined with the performance in 2020, puts us on a solid path to our 2022 targets. We remain committed to our 8% group return on tangible equity target and our cost reduction trajectory leaves us well positioned to achieve this. Consistent with the targeted investments that Christian discussed, we would not expect cost reductions to follow the same linear path in 2021. These investments, combined with our disciplined focus on costs, put us on a path to reach the 70% cost-to-income ratio and 16.7 billion euros of adjusted costs in 2022. We remain prudent in how we manage our capital and our CET1 target remains greater than 12.5%. And as with 2020, we will aim for our leverage ratio to remain at approximately 4.5%. Before I conclude, we have another important disclosure today. Our head of investor relations, James Rivett, will be moving to another leadership role within finance. He'll be succeeded as head of IR by Ioana Patrinić, a senior member of our debt capital markets team in London. Ioana has been at Deutsche Bank for 11 years and brings a wealth of experience to her new role. She will continue to be based in London and will take up her new responsibilities with immediate effect. I hope you'll all take the opportunity to get to know Ioana in the very near future. James joined the IR team in 2014, and he became head of IR in 2018. In that role, he has steered us through the launch of our transformation strategy, our first ever virtual AGM, and two investor deep dives. not to mention our regular reporting, investor conferences, and many investor meetings. That's an impressive set of achievements, and all the more so in the past year against the backdrop of a global pandemic. James has seen the company through multiple challenges over the last few years, and that's no easy task for an IR officer. And speaking personally, I've depended on his advice more times than I care to admit. Christian and I want to say a huge thank you to James for all his support and guidance. James has forged many good relationships on both buy side and sell side and with many fixed income investors. That includes a lot of you on the call now. I know you'll want to join with us in wishing James every success in his new role. With that, let me hand back to James and we look forward to your questions.

Operator, let's open the line to questions.

Ladies and gentlemen, at this time, we will begin the question and answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. First question is from the line of Andrew Lim from Societe Generale. Please go ahead.

Hi, good afternoon. Thanks for taking my questions. What I've done in investment banking and the ECM, I was wondering if we could talk a bit more about the SPACs business and whether you see that as being in a structural growth trend or whether we've just seen maybe one or two quarters of strength. And then also with that business, is that purely a fee business or does Deutsche Bank invest some of its loan balance sheet in SPACs? And then secondly, I think I might have missed this earlier, but could you explain why the CDT1 capital increased significantly as much as it did. I think it was a 1.7 billion increase, which can't be fully accounted for by net earnings. So if you could explain the movements there. Thank you.

Well, thanks, Andrew. Let me start with the specs business. Clearly a business which in 2020 grew and has shown a strong growth. Also with us, we have an excellent expertise in that business, and therefore we took obviously the opportunity of the market to help our clients, to advise our clients. I think in the specs business, it's all about actually working with the right sponsors. In this regard, we can say for us that we work with high-quality sponsors. As I said, a lot of expertise, and yes, to your question, it's in particular obviously a fee business. But what we can see, it's not only the initial spec business. There's a lot of add-on business with the D-specs with also some financing behind that, and therefore it turns actually into a business where there is a lot of incremental and cross-selling. we are monitoring that business quite closely. Clearly, the market has grown. That also always means that you need to stay close to it, and that's exactly what we are doing, not only from a business point of view, but also from a risk management point of view. And that's what I would add to this.

And, Andrew, it's James. On the CET1 capital, the driver was overwhelmingly the software intangibles technology. rule change that was implemented in the quarter. So that was in total about 1.6 billion of CET1 capital. There was an offset from the NPE backstop, which is also implemented in the fourth quarter. So there is a netting effect. But by far the biggest single driver was software intangibles. It represented about 43 basis points on the ratio.

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

Next question is from the line of John Pease from Credit Suisse. Please go ahead.

Yeah, thank you. So first question, please, is on costs. Sorry if I missed it, but did you give a figure for adjusted costs in 2021, or was the indication just that it wouldn't necessarily be linear between 2020 and 2022? And then a question, please, on capital return. I saw a headline on Bloomberg that you intended to pay dividends this year. Does that mean that you would be accruing something in capital to pay out in 2022? And then of your five billion of capital return for 2022, what's your thinking there at the moment between dividends and buybacks and how quickly that five billion might actually come back to shareholders? Thank you.

John, thanks for the questions. Starting with adjusted costs, look, we're not going to tie ourselves to the mast on a target for 21, but we did provide in the investor day what I call a plan number of $18.5 billion, same definition as this year. And, of course, we're going to work to meet or improve on that number. And as you say, we've been trying to indicate not linear, meaning of the $2.8 billion distance that we need to travel between 2020 and 2022, of course, less of that is achieved, you know, call it a billion in 2021 than is in 2022. One other thing I just note on that point is that does assume or build in the assumption on the single resolution fund assessment this year, which we called out as an assumption where advocacy was still ongoing, in December and remains true today. On the capital return, yes, we would need to accrue for that expected dividend amount. over the course of 21. At this point, it's too early to say exactly the path or the ramp up of our capital distributions. Of course, we want to implement a dividend. And then where there's some flexibility, we would certainly look at stock buybacks, particularly given where our share is today. The $5 billion is somewhat open-ended, but as we said in December, you know, we see that as achievable within the five-year planning window that we have. And we'd certainly hope and expect that it will ramp up starting in respect of 21.

Great. Thank you.

Next question is from the line of Jernay Oman from Goldman Sachs. Please go ahead.

Okay. So good afternoon from Goldman. from my side as well. And thank you, James Rivett, for all your help that you've given us over the years as well. I have a number of questions, but I'll limit it down to two. So the first question I'd like to ask is, when all is said and done in about the 2020, the bank made a return of 0.2%. And I was just wondering, so when one thinks about the opportunity set, which was clearly challenging on credit risk side, but very favorable on the revenue side, what levers are available to Deutsche Bank if fixed income revenues swing back to a level to where they were, for example, in 2019? Because I guess that potentially it's all good to look at the structural improvements that are undeniable that you've achieved on costs, but revenues, I guess, are not that much within your control. And then the second question I want to ask is on this 5 billion buyback that you've mentioned. So 5 billion is broadly 10% of Deutsche Bank's total shareholder equity, tangible equity today. If Deutsche Bank hits the 8% return on tangible target, the 5 billion return of capital to shareholders, I guess, would equal around 60% plus of those profits over the course of two years. And I was just wondering, you know, to what extent do you think various stakeholders like the rating agencies, how they would react to a potential reduction of the capital base of that magnitude? And perhaps just finally, this is really short. James, you mentioned that the tax was positive because there was a release of a non-tax deductible litigation reserve. Can you just please let us know what that relates to, where there was positive resolution? Thank you very much.

Yoni, let me start with your first question. First of all, obviously, The way to our 8%, which you indirectly ask, is a function of further stabilizing and growing our revenues. It is clearly our delivery, which I think we have shown quite well over the last 12 consecutive quarters, that we can manage and reduce costs, and we will do this going forward. And then I think everybody will also buy in that we will see a normalization of credit losses And I think we have shown in 2020 not only that we are in control of that, but that we are also spot on with our forecasting. Now to your key question, revenues. I'm very confident that we can deliver the growth rates which we showed you and demonstrate you in the so-called stable business, corporate bank and private bank, as well as DWS. If you think about DWS with, I think... an expected revenue in 2022 of 2.4 billion. If I look at the run rate right now, then we are very close, if not already there, shows me that there is underlying business. The momentum is clearly there. We have hit all internal targets in our plan in 2020 for those business which had the interest rate headwinds, and we have the underlying measures and action taken in the private bank as well as in the corporate bank to further boost our revenues there in the corporate bank, in particular in the payment area. Furthermore, you know that we are continuing to charge the deposit rates to our corporates. Versus the end of the third quarter, in the fourth quarter, we added another $13 billion of charging, which obviously helps us. And then you may also have seen our initiatives for the German business banking sector. where in my view we underserviced that in the past and we clearly came out with another initiative. So all the revenue initiatives in the stable business, and I could go on for the private bank, are ongoing. Now, to your question on the investment bank, first of all, I hope that we have shown extensive disclosure last month in December on our FIC business and how we see that. I think page 8 of Ram Nayak's presentation is telling the story, and that really gives us the confidence that a good part of the outperformance, which we have seen in 2020, is sustainable. I mean, we are clearly, at the end of the day, benefit from the execution work we are doing in the rates business. Ram talked about that. We are the house which is, I think, benefiting very much from the recovery in credit and The sustainability and funding cost is clearly there and also that we said. So simply saying we fall back to 2019 levels is, in my view, something which we don't see and where we see simply from the evidence, from the re-engagement of the clients and also rating upgrades or outlook upgrades, which we have seen, are helping us, obviously. We don't believe that this is happening and, therefore, Our internal plan that a good part of the outperformance is sustainable, we firmly believe in. And to be honest, Jörn, this is exactly the momentum we see also now in the new year. I mean, if I look at the last five weeks, exactly that what we described to you four weeks ago or six weeks ago is happening, and I can see the momentum in the business. So falling back to 2019 levels is, in my view, something which is – more than a downside. And hence, I can only tell you from the initiatives we took that our base case in this regard is a firm one.

Yerne, on the dividend payout, it's an interesting question. I'm reminded of the U.S. banks in the early part, middle of the last decade, where there was a similar debate. Can payout ratios rise you know, 30, 60, 50, 100% over time. And, you know, it's a dynamic of is the industry generating profit that goes beyond its asset growth. In our modeling, you know, we need to build in anticipation of the Basel III final framework effects. And so that's really the main constraint in terms of our payout that's built into the model. But we think the assumptions are reasonable. Of course, they're going to be subject to regulatory approval and all of those discussions that go with it. But we think they're reasonable as expectations. Briefly, on the tax item, it was a $14 million benefit on the tax line driven by really three things, litigation, as you mentioned, share-based payments, and also a true-up of the tax rate during the year. I don't want to go into the specifics of the litigation item, but what I'd give you kind of for color is very clear event that drove that release, and it's a partial release associated with the item, and it was in Europe, if that's helpful to your line of thinking.

Okay. Thank you very much.

Next question is from the line of Daniela Brubacher from UBS. Please go ahead.

Yeah, good afternoon and thank you. I actually only have two smaller clarification questions. James, when you talked to, I think it was slide 15, the corporate bank, you said that the performance this year, so 2021, probably will be more like 2020. Just to be clear, is that referring to the top line or pretext? So that's one. And then on costs, I mean, obviously, you expect costs to go towards the 18.5, around 18.5 this year, then further down next year. Is there anything we should be aware of in terms of quarterly pattern? And also in the past, I think you made reference to how much of that expected cost cutting is already, let's call it, in the bag, so kind of decided, and it will almost automatically – Well, it never happens automatically, but it is kind of decided on and it should come through with a very high likelihood. Yeah, that's the two questions. Thanks.

Yeah, Daniel, thank you for the questions. Look, it was really mostly the top line I was referring to, and it's the dynamic that we described also in December of relatively good underlying growth, both in the corporate bank and the private bank, from... the drivers that you'd expect, transaction volumes, flows in the private bank, some degree of loan growth, which in the recent past has been offset by the impact of the interest rate curve or deposit margin compression. We see that, as we've said, abating in 21 and also more dramatically declining in 22. And so the sort of what you'd think is a bit of a hockey stick that Stefan described is really a function of relatively consistent underlying growth, more of which is showing through to reported income or revenues over time. On the cost line, equally, I think we'd expect some improvement this year and then a more dramatic improvement in 2022. So I would expect to see the operating leverage go from 1% to something a little bit better this year and then quite a lot better next year in the corporate bank. In terms of costs on the run rate, you'll see in the quarterly chart that we show, we've been working hard to generate about 100 million sequential benefit each quarter over the last several years. We think that slows down a little bit. I'm not sure I'd commit to a specific sort of quarterly pattern. Our goal remains to keep it at least flat, if not somewhat down. as the year goes by. And as you point out, at a run rate of 4.6 billion, you annualize that and you quickly arrive at a fair amount of the work for the overall reduction we're planning for this year is already done. But as we've said, we've got a lot of work to do. We're focused on the technology path and on building, in a sense, the momentum on the action this year to ensure that we hit our goals for next year.

Thank you. Very clear.

Thanks, Daniel. Next question is from the line of Adam Terrelak from Mediobanca. Please go ahead.

Yes, afternoon. Thanks for the questions. I had one on NII and then a clarification on capital and accruals. On NII, clearly there's been a step-down queue-on-queue in both the private bank and the corporate bank. I was wondering if there's any sort of episodic items to worry about in there, whether you can call those out for both businesses, but also the outlook from here. Clearly, you're repricing deposits faster and faster, but that and loan growth hasn't been enough to defend the quarterly NII print. So whether the revenue mix going forward is going to be more skewed towards fees, as we've seen in this quarter. And then on the capital side, I just wanted to asked on the AT1, is that now fully accrued for the year in capital in the year end print, or is there a catch-up accrual to come through when that gets paid? I think it's May or whenever it is this year. Thank you.

Thanks, Adam. So, on NII, it's an interesting line. There's more noise in the NII line than one would normally expect. You're right. If I look at it on an annualized basis, we've looked at it essentially sort of adjusted and reported. And interestingly, the compression you had in both the private bank and the corporate bank is about the same, whether it's adjusted or as reported. So without having to walk you through all of the ins and outs, the direction or the quantum of travel, if you like, is more or less as you see in the financials. Looking forward, there is Still some compression ahead, but I think it slows, in part because, take the example of the corporate bank, we sort of lap the movement in U.S. dollar rates after the first quarter. And as I say, we're slowing somewhat in the private bank. And, of course, NIM stabilization is part of the goal of our hedging strategies. In 2021, there will be, again, some noise. I would call out in particular the timing of the TLTRO revenue recognition as being one item that will introduce a little bit of volatility into the line. On capital, fully accrued is the short answer, the AT1 coupon.

On the TLTRO, can you give any guide to the split between corporate and private banks?

Off the top of my head, no. You know, both participate. I think it's a little bit weighted to private bank, given the locus of the euro deposits. To give you a little sense of timing, we recorded at a – we sort of had a catch-up in Q4 to record at a 50 basis point rate, where, you know, we've been working with our auditors on the revenue recognition, which requires virtual certainty that you'll achieve the loan – balances that the scheme, that the incentive scheme provides. We think that, as we said last year, that we'll have a catch up in Q1 this year, as much as $125 million that we would see in Q1. And then in our expectations, the next point where we have a catch-up would be Q3, again, as we believe we'll get to a point of virtual certainty. So that's where the lumpiness, you know, is in the quarters. And back to the recognition, I think more or less 50-50 is what you'd expect to see in the businesses in terms of how they participate.

But to be clear, there's no bonus rate in the Q4 run, right?

There was a catch-up, not a bonus. We had not accrued at the 50 basis points in Q3, so there was a catch-up in Q4 to get to the 50 basis points, but not the 100 basis point inducement.

So the Q on Q is less than the 125 catch-up you're talking about for Q1?

The Q on Q would be a little less than that would be sort of more the 85 range of an increment in recognition. And then a step down. Thank you. Step down in Q2, back up in Q3.

Sorry it's so complicated, but as we said, there's a lot more noise in NII. Thank you.

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

Hi. Thanks for taking my questions, but first a big thank you from me for James Rivett, who I agree has done a fantastic job over the last few years. I had a few questions, please. Firstly, Christian, you mentioned that client trust is at its highest level since 2012. How do you measure that, please? And then my second question is on the EVA stress test. As far as I can see, the macro assumptions look very tough, even for Germany. The market risk shock looks extremely tough after the assumed hits to commercial real estate prices. So it looks harsh on your business mix, and the static cost assumption does you no favors either. So my question, therefore, is whether the EVA stress test creates any heightened risks to your $5 billion capital return ambition. And then the final question is a very short one. Within your guidance of slightly lower provisions in full year 2021, are you assuming any further releases of stage one and stage two provisions, please? Thank you.

Yes, sure. To your first question very quickly, this is a monthly survey we are doing with our private clients and corporate clients in Germany. and there we can see that we have now achieved a trust level in both segments, the corporate clients as well as the retail or private clients, as we had last seen in 2012, and that was what I was referring to.

And Stuart, on your two other questions, it's early days on the EBA stress test. We've been looking for the last week at the assumptions that were published on the 29th. We agree with you. It is a severely adverse case, stepping off as it does from already a sort of recessionary environment. And as you say, the commercial real estate and a couple of other portfolio assumptions are quite severe. That said, very early days in being able to get a sense of how we come out of that stress test, there are, as you know, a lot of rules and methodologies that depart from our typical stress testing, so we do essentially have to go through the process. I think it's even earlier to speculate how the ECB will incorporate the stress test results in their assessments of the banks. given, of course, the severity of the scenario and that we were obviously in an unusual environment, as we'd all recognize. In terms of stages one and two, at this point, very early in the year, but our planning would assume more or less flat in stages one to two, maybe either a slight build or a slight release. in the year. I will say, you know, that we don't yet know if and when we would reverse the overlay that we've talked about. So there's at least some uncertainty in that path based on the overlay. We feel good that it's conservative to carry that forward. But at a point in time when we see, you know, more certainty and clarity in the macroeconomic outlook, we'd have to revisit that decision. And that is in essentially stages one and two provisions.

Thanks for taking my question. Thank you.

Next question is from the line of Pierce Brown from HSBC. Please go ahead.

Yep. Good afternoon. I've got two questions, please. First of all, on revenues, I wonder whether I can just tease some revenue commentary out of you for 21. I mean, we've talked about the cost trajectory not being linear to 2022? I mean, should we be thinking about the revenue side being the same as that, i.e. lower year-over-year revenues, 21 over 20 before a rebuild up to the 24 target for 2022? That's the first question. And then secondly, just on the investment bank, I'm just thinking in terms of the cost-income ratio, 58% for a full year, what do you think we should be thinking of as a sustainable ratio? Thanks.

Well, on the revenue outlook, I think, again, also with respect to our investor deep dive in December, we show a stable development in the corporate bank, private bank, and asset management. We do think that the initiatives we are working on will show slight increases, at least being able to fully offset the interest headwind we have. And on the investment bank, I think we said very clearly that obviously 2021 will not see an outperformance overall in revenues, which we have seen in 2020, but that in the trading business, but also in the origination advisory, we clearly see that we gained market share, that we made momentum, and that all the structural changes we did to the businesses, sub-business like rates, credit trading, the emerging market business, they are starting to pay off. They started to pay off in 2020. And with the re-engagement of the clients, we are very confident that a very good part of that outperformance is sustainable for 2021. And that then obviously also explains then our run rate for the year and then for 2022. Again, January in this regard clearly supports this. And in this regard, we are confident to achieve our plan for 2021.

And, Piers, on the cost-income ratio, if I think back to the model that we described in December, the implication of the numbers that Ram and Mark went through would give you a cost-income ratio between, say, 55% and 60%. which we think is realistic, again, given the initiatives that we've been discussing around the technology investments, reengineering and simplification of our processes, and also efficiencies in the infrastructure areas that support the investment bank. So that's the ballpark that we're working to, and again, reflected in all of our initiatives and plans that we're executing on as we speak.

Do you mind if I just ask a follow-up on the IB? I'm just thinking, just in terms of overall resourcing, I mean, you're 30% up year on year on revenues, and the headcount is only up 3%. And some of the big wins in the fourth quarter coming in areas where we might not have expected them, namely equity origination. I mean, do you think there's areas of the franchise where you would need to add additional resource on the headcount side? I guess I'm thinking particularly of the equity businesses.

Well, let me put it this way. I think we have done on the front office side the adjustments which we committed to one and a half years ago. We always said that the further structural cost changes must in particular come from the back office side and from the infrastructure. Therefore, we invest heavily into technology, into the FIC reengineering in order to gain the efficiency here. I think we are well set up for the volume we have right now and which we have seen in Q4. And hence, we feel comfortable with the level of resources which we have given to the investment bank. And again, no further cuts were planned because we think we have now the right platform to act from.

Mr. Brown, are you finished with your question? Yeah, sorry. No, that's great. Thank you. Thank you very much. Very clear answers.

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

Hi. Good afternoon. Do you actually hear me well?

We can hear you 10 by 10, Magdalena.

okay great um uh thanks very much i've got i've got two questions and of course a huge thank you to um mr evett as well and all the best in your in your future roles as well so um so two things really um first the deposit charging because i think that um because we've seen the 85 billion that you've done uh this year of course vast majority of that in the corporate bank and of course it is a big part of the kind of defense of the NII. But my question really is, how far can you take the repricing from here? How much more of the either corporate or maybe kind of wealth deposits do you think you can continue repricing into 2021? So that's my first question. And my second question is really about the costs in the investment bank, but more from a geographical perspective. because you run quite a significant currency mismatch in your investment bank, I mean, similarly to other kind of global institutions. You've got revenues in US dollars and euros, and you've got costs in sterling and US dollars. So effectively, I think if you look at the structure of that business operationally two, three years out, how likely is it that you will concentrate more of the investment bank in the continental Europe particularly also given the fact that financial services ended up with effectively very little cover in the Brexit deal so far. Thank you.

Magdalena, let me take the first question on your deposit question. You're right, with $85 billion, actually we have done more in 2020 than we initially expected. And that gives us all the confidence that obviously we can continue both on the corporate side but also on the private banking side in order to selectively grow that ratio. You will not see a development like we have seen in 2020 that it simply doubles from 85 to 170. That would be unrealistic. But if I compare our deposit strategy Now, with that, what we actually wanted to achieve at the beginning of 2020, we are far beyond that point and we have the confidence that we can further increase. That will be done selectively in both businesses because you always have to look then also at the overall relationship. And hence, I can't give you a definite amount, but I can tell you that it's both in the private banks and corporate strategy to follow up there.

Magdalena, I'll just add, we showed in the investor deep dive, my deck in the appendix page 32, an update of the euro current account volumes or site accounts by business. And what you'll see, if we've repriced now accounts representing 78 billion in corporate bank, that was against 128 billion in total of, call it addressable deposits. which is a relatively high percentage, which underscores Christian's point about sort of more modest benefits from here. If you then look at the same schedule, and by the way, the number hasn't changed a great deal to December. If you look at the same schedule for the private bank, at around 8 or 9 billion deposits in client accounts against which they're charging agreements, you can see it's a much smaller percentage. But to Christian's point, the question there is, is how you advance through the various tiering levels. And also the interesting thing in both businesses, especially in the commercial bank and the private bank, it's a granular discussion with the client around the overall relationship, whether there's a tiering level, whether there are other business opportunities, or the clients can move from deposits into investment products. So it's a relatively rich dialogue. On your currency, which is why, by the way, of the $100 million that we talk about in repricing in private bank, a relatively small portion of that is actually interest revenues. Most of it's in the broader relationship. Currency risk in the IB is a feature. You're correct. We're not alone, by the way, in having a mismatch, particularly in the sterling expense base relative to sterling revenues. I don't see a dramatic shift necessarily in that relationship. Of course, with Brexit, we've been slowly migrating activities to the continent, and that will continue. But I don't see there being a wholesale or noticeable shift in the near future.

Great. Thank you.

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

Thank you. Firstly, clarification. When we're talking about capital planning, you said that you need to retain some of the earnings to fund the Basel IV step-up in 2024. I just wondered whether you expect to fund the whole of that RWA increase and need capital for all of that. or whether you can offset that partly by easing down the ratio that you're going to apply in a post-Basel IV world. So that's my first question. The second question was on costs in the private bank. You talked about the year-on-year reduction, but there was also a lot of reduction during the quarters, and the 4Q run rate was quite a lot lower, that sort of 16, 12 million, compared to 1Q to 3Q. So I just wondered if that's a representative run rate coming into 2021, can we base off that 4Q cost level in the private bank?

Great question, Jeremy. So, on the first, we do not assume a change in our ratio target over the, again, projection period. I think it's conceivable in the medium term that one might look at it, depending on what changes there are in the environment around us. But for our purposes, the 12.5% remains the planning assumption. As it relates to the private bank expenses, we do call out that there was sort of a one-time pension benefit in the quarter. So if I were to give you a run rate, I'd probably add back about $40 million to give you the step-off into 21%.

Fantastic. That's very helpful. Can I throw in another clarification? I feel like you're itching to be more specific about your January investment banking revenue performance. You mentioned that the trend has continued. I wondered what you meant by that. Do you mean the trend of growth, so we're also up again year on year in January, or do you mean the trend level that it's at a similar level to last year?

No, I would say be more precise and would refer the word trend to growth. And you have seen a growth in the fourth quarter. And if I say the trend continued in January, then I refer to that and potentially I'm even a bit more positive.

Fantastic. That's very helpful. And congratulations to James and to Joanna as well. Thank you.

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

Thank you. Three technical clarifications for James, please, if possible. The first, coming back to the adjusted costs and the $18.5 billion, I think the caveat you added was around the single resolution fund assessment. I know previously when you talked about that, You mentioned that if the fund size would go from $55 to $70 billion, it might be an extra $300 million for yourselves over the next two years. Can I just clarify what's in your base case, $18.5 billion? Is that assuming the fund size stays as is or it is upsized? That's the first question. Second question, a very quick one, but on the corporate center, the V&T differences, obviously some lumpy numbers there during 2020. I know that's linked directly to your credit spread, so anything you can give us in sensitivity there would be helpful. And then my final question, just on the CRU, I know you talk about the leverage exposure coming in $8 billion ahead of guidance, but I think originally your target there was the sub $50 billion before you changed it. You've also talked about another change in the perimeter in the first half, adding another $10 billion as well. So perhaps you can just elaborate a bit more on the perimeter changes we've seen both in 2020 and expecting in first half 21. Thank you.

Sure, Andrew. Let me take those. So the assumption on the SRF assessment is in a ballpark of $300 million for 2021. That would assume a change in the assessment basis from what the current expectations are, which is why we wanted to call it out. And it's, by the way, more consistent with the assumptions that we used a year ago. We had always assumed that with a declining and simplifying balance sheet, that would over time be reflected in our assessment. Of course, we didn't expect that the assessment would begin to float up based on higher levels of liquidity in the system. and hence the reason we called it out. What we don't want to do is make sort of radical changes and harm the company by attempting to offset that additional 300. And as I mentioned, we continue to engage on advocacy steps because we think it would be the policy – It does take a lot of capital out of the banking system at a time when I think the authorities would like to see it still in the banking system. So we'll see where that comes out. It would add, we think, about 300 to the assessment this year if it were to move to the 70 or stay at the 70 billion and the multiplier that was applied in 2020. Okay. In V&T, the sensitivity really isn't to own credit spreads, and actually most of the own credit spread sensitivity is in the businesses. The V&T sensitivity, for the most part, is actually FX basis, and that was what drove the year-on-year swing in V&T. To some degree, interest rates, but that is hard to give you kind of a DVO on because it does depend on the curve and the shape of the curve. As it relates to the CRU leverage exposure perimeter, we sort of reset the target in December, given all the things that we'd learned over the course of the year 2020, including, by the way, just an allocation change in central liquidity reserves. But it included, as we mentioned, 2020 being more focused on risk-weighted assets, a decision that the that the economic choice was to allow more of the leverage exposure to run off. And so, but was really that was the true up in December to new targets. The last thing we called out in the prepared remarks were SACCR or SACCR that does have an impact on leverage exposure in the second quarter, we believe. We're still working through sort of the estimates of what that could imply for the group of which the CRU would take a piece. But both of those changes were baked into our 2022 target for leverage exposure. Hope that helps.

Thank you.

Next question is from the line of Amit Goel from Barclays. Please go ahead.

Hi. Thank you. And also thank you to James Rivett as well for all the help you've given. So, yeah, two questions. Maybe both are a bit more follow-up. So I just wanted to come back on the NII trends within the private bank in particular in the quarter. So I just wanted to check, because in terms of the baseline or going forwards, so there was, I guess, a little bit of a catch-up or part of that catch-up in Q3 on the 50 bibs. In terms of, sorry, in Q4, in Q3, how much of a benefit was there? Because it just seems like quite a big step down and quite a big change in kind of reported trends. So just trying to understand those dynamics a bit better. And then the second question, also, yeah, just coming back to the FIC trends, I think at the investor day you also gave some color on year-on-year trends for each month of 2020. I think January you said at that time was up 49%, but we don't have the specific kind of starting point as such. So just trying to get a sense of how significant January was in the context of Q1 2020. Thank you.

If I go in reverse order, the first quarter saw relatively strong performance in January and February. And, of course, March was then heavily impacted by the crisis environment that we found ourselves in. I don't want to go into specific product by product area analysis of those months but the comparison at this point is to a point in time where the franchise improvement was beginning to show as it was already partially in Q4 of 2019 so again we feel like there has been an ongoing improvement in the franchise that's visible to us and I think Rahm spoke to in his monthly comparisons. In the PB margin, there actually wasn't much in the way of TLTRO. We were accruing at a rate of, I think, blended rate of about 17 basis points at that time. So the bump isn't TLTRO. I'd have to come back to you on what was sort of not straight line about the development that you see, the quarterly development in the PB line. As I mentioned, it's on a reported base a noisier line than you might expect, but we can follow up with you on what specifically fell in Q3.

Thank you.

Next question is from the line of Anke Rangen from RBC. Please go ahead.

Thank you very much for taking my question, and thanks to James and all the best for the future. Two more like follow-up questions. First is on the provisioning line where you gave us the guidance for 25 to 30 basis points in 2022. Now, I understand obviously it's quite hard to know where 21 comes in, but where you currently stand, is it more like a gradual decline or should be obviously the second half is more on the 25 basis points? What is your expectation for 21 on the current basis? And then secondly, about your variable compensation. Just looking at the investment bank, obviously very strong revenues, but compensation fled. I just wondered if you can share some light about, I think you said at the investor day, you're compensating stuff for performance and maybe you're not, or is there any change in the way you reward your stuff in terms of deferral or cash or fixed? I just wondered what the... the message here is umbrella compensation and performance. Thank you very much.

Thanks for the questions, Anke. So on provisioning, you may have thought it's odd to give a range for 2022 and not for 2021, but it reflects that, frankly, the outlook is still quite uncertain in 2021. As we say, we do think there is an improvement sequentially year on year. Whether that's, I'll go back to the use of the word linear, from 20 on the way to the normalized level remains to be seen. As I mentioned earlier, I think we're looking at it more cautiously optimistic perhaps than even a month or two ago. I will point out that the fourth quarter provision was just 23 basis points of CLP. which although we were in a pandemic environment and I think some of the CLPs can still be attributed to the COVID environment, that already is trending towards a normalized level for us. So all of which is to say at this point, hard to really judge exactly where 21 will be. But we're, as I say, cautiously optimistic on the improvements relative to 2020.

Look, Anke, on the compensation, like the standard process here, we are finalizing that over the next weeks when the final, final numbers for 2020 are then published, including the compensation report. But, of course, we stick to that, what we said, that we obviously must compare ourselves to the compensation report development in the industry and pay for performance. I think the financial performance as we all see has been significantly better than last year. And in this regard, on the one hand, we will make sure that we pay for performance. And on the other hand, as we have done in the past, we are very attentive and responsible also to find the right balance. We think also in this regard we are on the right path, but again, the final decision needs to be taken over the next coming weeks.

Thank you very much.

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

Thank you, Christian. Thank you, James. And thank you, everyone, for your kind remarks. You know where Joanna and her investor relations team are should you need her. And I hope to speak to you all very soon. Take care. Bye-bye.