Deutsche Bank AG

Thank you for joining us for our second quarter 2021 results call. As usual, our Chief Executive Officer, Christian Saving, will speak first, followed by our Chief Financial Officer, James Von Mulca. The presentation, as always, is available to 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 you over to Christian.

Thank you, Your Honor. A warm welcome from me as well. It's a pleasure to be discussing our second quarter 2021 results with you today. We are now over halfway through our transformation journey, and we have continued to deliver against our milestones. For the second consecutive quarter this year, we have delivered significant profit improvement driven by growing strength across our businesses. We generated 1.2 billion euros of pre-tax profit and 828 million euros of profit after tax. And that's including a negative impact of around 230 million euros from the German Federal Court ruling or BGH ruling on consent for changes to consumer contracts, which we will discuss later in further detail. Despite a more normalized market environment in the quarter, revenues remained robust at 6.2 billion euros, down only 1% compared to the previous year. This demonstrates regained franchise strength at Deutsche Bank. We also continue to make progress on costs. We reduced our adjusted costs excluding transformation charges and reimbursements for prime finance from 4.8 to 4.5 billion euros year on year. And we continue to invest in the execution of our transformation agenda with more than 90% of our transformation projects now in the implementation phase. They are key contributors to our cost reduction progress. Risks are well under control And so we continue to make progress towards achieving sustainable profitability. This quarter, we generated a 5.5% return on tangible equity. The headway we made across all business in the second quarter reinforces our confidence that we will be able to meet our profitability targets. Finally, we delivered another quarter of progress towards the goals we outlined at our sustainability deep dive in May. Now let me take you through the highlights of what we have achieved in the first half of this year on slide two. Our performance over these past six months shows that our 2022 targets and ambitions are well within reach. Refocusing our business around cost strengths is paying off. Revenues of 13.5 billion euros for the first half of 2021 fully support our trajectory to the 2022 revenue goal. We've reduced adjusted costs excluding transformation charges by roughly 4% year on year. Coupled with provisions for credit losses down 89% on the year to 144 million euros or seven basis points of average loans, we continue to see an improvement in our operating environment. We also reduced our cost income ratio to 78% from 87% for the same period last year, which represents significant progress towards our 2022 target of 70%. And in the core bank, the cost income ratio is even lower at 73%. Let's now turn to profitability on slide three. Our relentless focus on delivering transformation is reaching the bottom line. We delivered a 92% year-on-year increase in our adjusted profit before tax in the core bank for the last 12 months to the second quarter. And once again, all four core businesses contributed and are either in line or ahead of their plans so far. At the same time, we have substantially reduced the capital release units losses in the course of our transformation. Once again, we are ahead of our plan for de-risking. And we remain committed to minimizing the P&L impact of de-leveraging efforts by the unit. Let me now turn to underlying shareholder returns on slide four. We remain committed to our 8% return on equity target for 2022, and we see a clear path to that goal. For the first half of 2021, the group reported 6.5 post-tax return on tangible equity. This would be 7.6% when adjusted for transformation-related effects and 9.2% excluding the impact of certain external factors outside our control, such as the BGH ruling and the decision to increase the size of the singular resolution fund. In the core bank, we are already in line with our 2022 target with a 9% post-tax return on tangible equity on reported basis and 10% on adjusted basis even before the impact of the unforeseen factors. This level of profitability combined with a robust capital position gives us confidence that we are on the right path towards our ambition to return capital to shareholders from 2022 onwards. Now let me too take you through some divisional highlights on slide five. The corporate bank continues to offset interest rate headwinds through repricing strategies and growth initiatives. We also regained the position of Germany's number one corporate bank in the recent poll published by Finance Magazine. This demonstrates the regained trust of corporate clients and provides a very good basis to grow over the next years. The investment bank continued to benefit from our refocused business model with another strong quarter of performance in FIG. We made market share gains in origination and advisory where we were number one in Germany in the quarter. We expect markets to continue to normalize in the remainder of 2021, but we remain confident that a substantial portion of our investment bank growth since 2019 is sustainable. As a result, we are keeping our full-year outlook to show a 2021 revenue number in line with 2020. The private bank was also successful in offsetting interest rate headwinds with continued business growth, with €14 billion of net new business across assets under management and client loans in the quarter and €29 billion in the first half year. Closed. to its full-year target of more than 30 billion euros. The private bank also completed its first trial migration of a set of post-bank customers onto Deutsche Bank systems. Implementation is running in line with plan. In asset management, assets under management grew by 39 billion euros to 859 billion euros, a new record high, including record quarterly net inflows of 20 billion euros. In short, the dynamics in all four core businesses show that our refocused business model is paying off and that our clients are supportive and believe in our capabilities. Successful execution is increasingly visible in our revenue performance in the core bank as you can see on slide six. Revenues in the core bank for the second quarter of the year spent at 6.2 billion euros down only 1% on the year. As we guided to at our first quarter results, this is in line with the market normalization and seasonality we expected, despite an additional impact of approximately 100 million euros from the BGH ruling. Revenues in the investment bank are 2.4 billion euros down from the same period in 2020 as a strong performance in credit trading and financing, partly offset more normalized volumes in core rates, emerging markets, and FX. Both our corporate and private banks successfully offset headwinds with either continued deposit repricing or business growth, despite some unexpected items for the private bank in particular. Asset management delivered revenue growth for yet another quarter, boosted by management fees and strong inflows. On a half-year basis, core bank revenues have grown by 13% since the beginning of our transformation strategy in 2019, showing significant revenue improvement. In summary, all our core businesses have proven the strength of their franchises, putting our 2022 objectives well within reach. Now let me turn to costs on slide 7. We reduced adjusted costs excluding transformation charges and the reimbursements for prime finance for another quarter to 4.5 billion euros. We continue to strongly advocate for a reduction in the size of the single resolution fund, which would result in lower bank levies. However, we now expect this to remain unchanged for next year. Together with higher than expected contributions to the German deposit protection scheme, These unforeseen external items are now expected to add approximately 400 million euros to our expense base. And as previously discussed, we do not believe it is sensible to further constrain investment spending to offset these externally driven expenses. On the cost items we can control, we are keeping our absolute cost discipline and focus, and the second quarter has shown that we are in full control. despite the fact that volume-driven expenses and investments in controls represent some pressure. To offset this pressure, we are introducing a series of new cost reduction initiatives, including further workforce optimization, accelerating real estate reductions, further systems rationalization, and streamlining internal processes. Against this background, we reaffirm our commitment to the 70% cost-income ratio target, Supporting our cost-income ratio target, we now expect revenues to be better than we discussed at the investor deep dive. Based on the resilience we have delivered in the first half of the year, business growth and an easing of interest rate headwinds. Moreover, we now see provision for credit losses in a range of around 20 basis points of average loans in 2021, ahead of our previous guidance, and we expect some of this benefit to carry over into 2022. The bottom line impact of these factors helps us offset the cost headwinds from the unforeseen items, and we continue to remain committed to an 8% return on tangible equity in 2022. With that, let me now turn to risk management on slide eight. As you know, strong risk discipline is the central pillar of our strategy across credit, market, liquidity, and non-financial risks. And as discussed, provision for credit losses was 144 million euros this half year, or seven basis points of average loans on an annualized basis. We continue to manage a high-quality and well-diversified loan book with strong underwriting standards, and we remain vigilant. Both our market and liquidity risk controls contribute to robust risk management practices. Importantly, we continue to strengthen non-financial risk management. This is of the highest priority for management and we have made significant investments in improving our controls over recent years. At the same time, the demands on anti-financial crime continue to grow, not just for Deutsche Bank, but for the entire banking sector. Therefore, we announced a fundamental reorganization of our AFC function to become more effective, more flexible, and more holistic. Now let us turn to capital and balance sheet on slide nine. In line with the guidance we provided with our first quarter results, we did see a reduction in our common equity tier one ratio to 13.2% this quarter, primarily due to the impact of around 70 basis points from regulatory items. We maintain a buffer of over 270 basis points above regulatory requirements. Our leverage ratio increased to 4.8% in the quarter, reflecting actions we took to strengthen our capital position. Our liquidity coverage ratio is at 143%, 67 billion euros above regulatory requirements. As a result, we can deploy our capital and liquidity strengths to support clients in what is still a somewhat uncertain environment. Let me now give you an update on our progress towards our sustainability targets on slide 10. In our sustainability deep dive in May, we outlined a series of targets for the group and for each business. We accelerated our target of over 200 billion euros in cumulative ESG financing and investments, from 2025 to 2023, and we set a target of at least 100 billion euros for the end of this year. I'm very pleased to report that at the half year stage, we are already approaching our 2021 full year plan. We have been able to generate 99 billion euros of volumes across our businesses, and all three of our other wholly owned businesses contributed to this total. As a reminder, this excludes asset management as DWS is a separate entity with its own sustainability targets. Nevertheless, asset management captured more than 3 billion euros in inflows of ESG investments in the quarter. And finally, in April, Deutsche Bank became a founding member of the Net Zero Banking Alliance. Before I hand over to James, let me now summarize our progress this quarter on slide 11. As we promised you at the Investor Deep Dive, our focus remains on executing our transformation agenda while supporting our clients. Our top priorities are managing to a 70% cost-income ratio and to deliver 8% return on tangible equity in 2022. Our first half results this year reinforce our confidence in our path. We have made clear progress in client momentum, which is visible through our revenues, and the macroeconomic backdrop has improved relative to the outlook we gave you in our annual report, strengthening our operating environment. We continue to advance on our key deliverables to support our cost reductions, despite the impact of external factors. We remain strict and conservative with our risk management framework And we are absolutely committed to further strengthening our control environment. Last, but certainly not least, we are making strong progress on our path toward our accelerated sustainability targets. In short, after two years, we are well on our way to meeting our 2022 strategic and financial ambitions. With that, let me now hand over to James.

Thank you, Christian. Let me start with a summary of our financial performance for the quarter compared to the prior year on slide 12. We generated a profit before tax of 1.2 billion euros, or 1.4 billion euros on an adjusted basis. Total revenues for the group were 6.2 billion euros, down 1% versus the second quarter 2020. Net interest income has declined by 143 million euros versus the prior quarter, as the one-offs I flagged in April have normalized. The resulting net interest margin held broadly steady at 1.2%, but we expect this to trend down slightly as the remaining rate pressures feed through. We expect net interest margin to stabilize at slightly over 1%. While rates have been volatile in recent months, we planned on a conservative basis and still see a modest tailwind to the numbers we shared with you at the investor deep dive in December. Turning to costs. non-interest expenses were down 7% year on year. Our provision for credit losses stood at 75 million euros or seven basis points of loans for the quarter. In line with our previous guidance, we saw a decrease in our CET1 ratio to 13.2%, which was mainly driven by regulatory items, notably the impact of the final targeted review of internal models assessments, partially offset by net income generated in the second quarter. Leverage ratio has increased to 4.8%, up 15 basis points compared to the previous quarter. Tangible book value per share was 24 euros and 6 cents, up 86 cents, or 4% in the year to date. The tax rate for the quarter was 29%. Let's now turn to page 13 to look at our core bank's second quarter performance more closely. Core bank revenues are 6.3 billion euros for the quarter, down 1% on the prior year quarter. For the first half of the year, our revenues in the core bank were 13.4 billion euros, up 5% compared to the same period in 2020. Non-interest expenses were down 3%, mainly driven by lower litigation expenses, as well as reduced restructuring and severance costs. This takes our profit before tax to 1.4 billion euros, up 90% on the prior year. we have delivered a 4% year-on-year increase in our post-tax return on tangible equity for the quarter to 7.8%. Our cost-income ratio for the quarter stands at just under 76%. Let me turn to costs for the group on slide 14. In the second quarter, adjusted costs decreased by 6% year-on-year, with reductions across all major cost categories. We saw lower compensation and benefits costs, reflecting workforce reductions, although this was partially offset by a prior year one-off credit from a change in estimate for certain deferred compensation awards. We saw a decrease in IT costs, largely from lower hardware expenses. We also achieved a reduction in professional service costs, primarily reflecting lower legal fees. The decline in other costs was largely driven by lower bank levies, as changes in the input assumptions made by the Single Resolution Board led to additional charges in the prior year quarter. Our second quarter adjusted costs, excluding transformation charges and reimbursements from Prime Finance, were 4.5 billion euros. Transformation charges were 99 million euros, down 15% sequentially. As we mentioned in the first quarter, we faced an unexpected increase in our contribution to the German statutory deposit guarantee scheme, which we will continue to incur on a quarterly basis going forward. As we indicated in April, we expect this incremental contribution to be roughly 70 million euros in 2021 and approximately 60 million euros per year thereafter until 2024. It remains too early to determine if incremental contributions to the voluntary scheme will be necessary. As Christian mentioned earlier, we will continue to retain our cost discipline to manage tightly all the components we can control as we remain committed to the cost-income ratio target of 70% for 2022. Let us now move to slide 15 to discuss our provision for credit losses. Our Stage 3 provisions reduced more than expected this quarter compared to our previous guidance to 111 million euros, reflecting releases in the corporate bank and fewer impairment events across all our businesses. These were offset by 36 million euros of net releases in our Stage 1 and 2 provisions from portfolio improvements. While an improved macroeconomic outlook would have resulted in a further release of provisions in Stages 1 and 2, we implemented a conservative management overlay that more than offset this release. In addition, as in the first quarter of this year, we retained a portion of the management overlay we established in 2020 to account for future uncertainties in the outlook, particularly for the private bank portfolio. We will continue to be focused on prudent risk management and, as Christian mentioned, we would now guide to provisions in a range of around 20 basis points of average loans for 2021, lower than our previous guidance, with positive scope for improvement for the balance of the year if current trends persist. Let me now turn to capital on slide 16. Our CET1 ratio decreased to 13.2% during the quarter, broadly in line with the expectation we outlined in April. This reflects a decrease of approximately 70 basis points due to risk-weighted asset inflation from trim decisions and the CRR2 go-live, 10 basis points less than our previous guidance. Looking at the balance of the year, we now see a remaining net impact of approximately 20 basis points on the CET1 ratio from further regulatory items, such as the new EBA guidelines on the definition of default, the implementation of which was delayed and is now expected to follow in the second half of the year. Within this 20 basis points guidance, we also reflect benefits expected from completing our remediation efforts on certain historical ECB findings. As before, the ultimate timing and magnitude of these regulatory items remains uncertain and subject to final ECB decisions, but we see no deviation from our long-term trajectory and we remain committed to a CET1 ratio greater than 12.5%. All in all, we expect to end the year with a CET1 ratio of around 13%. The second quarter CET1 ratio includes a deduction of an additional 275 million euros of common share dividend on top of the 300 million euros we deducted last quarter. Our fully loaded leverage ratio increased by 15 basis points to 4.8% this quarter. The increase was largely driven by additional Tier 1 capital into issuance and net income. Our pro forma leverage ratio, including ECB balances, was 4.3%. With that, let's now turn to performance in our businesses, starting with the corporate bank on slide 18. Profit before tax in the corporate bank was 246 million euros, a more than threefold increase versus the 78 million euros in the prior year quarter, while adjusted profit before tax rose to 274 million euros. This equates to a 6.5% reported and a 7.4% adjusted post-tax return on tangible equity for the quarter. Revenues were 1.2 billion euros in the quarter, 8% lower on a reported basis and 6% lower year-on-year, excluding the effects of currency translation. In the current quarter, the impact of episodic items was approximately €98 million lower than in the prior year, evenly split between lower benefits from recoveries related to credit protection and portfolio rebalancing actions. Adjusting for these effects and currency translation, underlying corporate bank revenues would have been essentially flat, as deposit repricing and other business initiatives offset interest rate headwinds of approximately 80 million euros. At the end of the second quarter, charging agreements were in place on approximately 87 billion euros of deposits, which resulted in revenues of 85 million euros, well on track to generate around 300 million euros on an annualized basis. We continue to expect the combined effects of the moderation of interest rate headwinds based on current interest rate curves the increasing quarterly contribution of deposit repricing, as well as business momentum to support our revenue outlook for subsequent quarters. For the full year 2021, we expect revenues to remain essentially flat compared to the prior year, which was our expected jump-off point for 2022 as we guided in our fourth quarter results. Non-interest expenses decreased by 10%. Adjusted costs excluding transformation charges declined by 5%. reflecting headcount reductions, non-compensation initiatives, and benefits from currency translation, partly offset by the non-recurrence of a benefit from a change in the estimate related to certain deferred compensation awards in the prior year. The current quarter included significantly lower litigation charges compared to the prior year quarter. Compared to the first quarter, loans and deposits remained essentially flat, while the year-on-year increase in RWA mainly reflects regulatory inflation related to TRIM. We released €20 million of provisions for credit losses in the quarter, driven by unusually low impairment events, compared to provisions of €144 million in the prior year quarter. Turning to revenues by business segment in the first quarter on slide 19, corporate treasury services revenues were 10% lower year over year on a reported basis, or 9% excluding currency effects. mainly driven by lower benefits from episodic items. Interest rate headwinds were partly offset by charging agreements and other business initiatives. Institutional client services revenues were essentially flat, excluding the effects from currency translation, but were 4% lower on a reported basis. Institutional cash management and trust in agency services grew on an underlying basis, while security services declined. Business banking was 7% lower year on year, with underlying business growth more than offset by a revenue decline in contributions from episodic items and interest rate headwinds. I'll now turn to the investment bank on slide 20. Revenues for the second quarter of 2021, excluding specific items, decreased by 10%. Our trading businesses were impacted by the reduced market activity during the quarter compared to the heightened levels seen in the second quarter of 2020. Compared to the second quarter of 2019, investment bank revenues are up 31%, with both FIC and O&A significantly higher. Non-interest expenses were essentially flat year over year, as were adjusted costs, excluding transformation charges. The investment bank generated a pre-tax profit of 1 billion euros and a return on tangible equity of 12.5% in the second quarter, both an increase on the prior year period. The cost income ratio for the quarter was 56% and continues to be well ahead of our full year expectations. Our loan balances reduced year on year, primarily driven by the repayment of revolving credit facilities. However, versus the prior quarter, they are up, driven by activity in our financing businesses. Leverage exposure was higher, impacted by increased lending commitments. The year-on-year increase in risk-weighted assets reflects the impact of regulatory inflation, primarily from trim, with underlying business growth essentially flat. The improving credit environment and near absence of impairment events led to materially lower provisions across businesses compared to the elevated levels of the second quarter of 2020. Turning to revenues by business segment on slide 21, Revenues excluding specific items in fixed sales and trading decreased by 9%. Financing and credit trading revenues were significantly higher, driven by a strong performance across financing, and within trading, our distressed business continued to perform very well. As expected, revenues declined across our rates, FX, and emerging markets businesses, as market conditions normalized when compared with the heightened levels seen in the second quarter of 2020. In FX, revenues were significantly reduced due to low levels of volatility and compressed spreads. However, our franchise strength was evidenced in the recent Euromoney 2021 FX survey, which saw Deutsche Bank ranked number three globally, up from fourth the previous year. In emerging markets, revenues in Asia were impacted by lower client activity, specifically in the first half of the quarter. This was partially offset by growth in both the Semea and Latin America regions as those refocused businesses continued to perform well. In May, we also launched our new institutional client coverage model, starting in European rates and European investment grade credit. The new model is underpinning and driving our quarter-and-quarter electronic market share gains in those two businesses. Revenues and origination advisory were essentially flat versus prior year, while in our home market, we regained our number one rank. Debt origination revenues were lower. Materially higher leveraged debt capital markets revenues were more than offset by a reduction in investment grade related revenues as issuance levels normalized versus the extreme levels of the second quarter 2020. ESG continues to be a focus area. We rank third globally for the year to date on ESG related debt products. Equity origination revenues were slightly lower year on year, predominantly driven by lower follow-on activity, which reached record levels in the second quarter of 2020. Significantly higher advisory revenues reflected the continued growth in M&A activity. Turning to the private bank on slide 22, the private bank reported a pre-tax loss of 11 million euros, reflecting a negative impact of 222 million euros related to the BGH ruling in April 2021, essentially disallowing negative consent related to fee changes in consumer contracts in Germany. The €222 million effect reflects two components, €128 million of litigation provisions, mainly for potential client reimbursements, as well as forgone revenues of €94 million related to suspended fees, of which €93 million in private bank Germany. we expect this temporary revenue impact to continue into the third quarter and to a significantly lesser extent in the fourth quarter when we expect the majority of pricing agreements to have been accepted. Adjusted for this and specific revenue items as well as transformation and restructuring and severance expenses of 133 million euros, the private bank would have achieved a profit before tax of 309 million euros and on an adjusted cost-income ratio of 80%. On the same basis, the adjusted post-tax return on tangible equity of 7% would have been in line with the last quarter. Reported revenues were 2 billion euros, up 3% year-on-year, or up 8% if adjusted for the BGH ruling, as interest rate headwinds of approximately 100 million euros were more than offset by continued business growth in an improved market environment. The prior year quarter also included negative impacts related to our strategy execution. Business volumes grew by 14 billion euros in the quarter, with 10 billion euros of inflows in asset center management and 4 billion euros of net new client loans. With this, the private bank attracted 29 billion euros after only six months into the year, against a full-year target of greater than 30 billion euros. Adjusted costs, excluding transformation charges, declined by 4% across both compensation and non-compensation costs. including savings from the execution of our strategic plan. Provisions for credit losses were 19 basis points of loan, or 117 million euros, and reduced by 48% year-on-year, reflecting tight risk management, the extension of moratoria in Italy and Spain, as well as the high quality of our loan book. The prior year quarter was also impacted by the macroeconomic outlook at the peak of the COVID-19 pandemic. As shown on slide 23, revenues in private bank Germany declined by 1%. Adjusted for the temporary impact of 93 million euros from the BGH ruling, revenues in PB Germany would have increased by 7% year on year. The prior year quarter included negative impacts of approximately 45 million euros arising from the German legal entity merger. Continued headwinds from deposit margin compression were more than compensated by growth in loan revenues and fee income from investment and insurance products in recovering markets. The business achieved net new client loans and net inflows in investment products of 2 billion euros each in the quarter. In international private bank, net revenues increased by 9% despite headwinds from continued deposit margin compression and negative FX translation effects, reflecting continued business growth in recovering markets. Net new business volumes were €8 billion, including €5 billion of net inflows into investment products. Growth was especially pronounced in Germany and Asia. Private banking and wealth management revenues increased by 10%, excluding specific items and FX translation effects. Sustained momentum in investment products and loans, in part supported by previous hiring of relationship managers, offset headwinds from lower interest rates. Personal banking revenues increased by 6% if adjusted for the one-off re-hedging charge in Italy in the prior year. Growth was supported by higher investment product revenues in the current quarter. As you will have seen in their results, DWS had another successful quarter compared to the previous year. To remind you, the asset management segment on page 24 includes certain items that are not part of the DWS standalone financials. Assets under management of 859 billion euros have grown by 39 billion euros in the quarter, driven by positive market performance and positive net flows. Net flows in the quarter were a record 20 billion euros, driven by substantial inflows across all product pillars and regions. Positive flows continued in targeted areas of passive and alternatives, with cash reversing some of the outflows observed in the first quarter. The business also attracted 3.8 billion euros into ESG products during the quarter. Profit before tax of 180 million euros in the quarter increased by 59% over the same period last year, driven by improved revenues. Revenues grew by 14% versus the prior year, primarily due to a strong increase in management fees of 76 million, as improvements in equity market levels and consecutive quarters of net flows more than offset the impact of continued industry-wide margin compression. Non-interest expenses decreased by 5 million euros, or 1%, with adjusted costs excluding transformation charges up 3%. The increase in costs was driven by higher variable compensation resulting from the DWS share price increase, platform investments, and higher asset servicing costs due to the increase in assets under management. Non-operating costs reduced significantly as the prior year included severance and restructuring charges for organizational and executive board changes. The divisional cost-income ratio improved by 10 percentage points to 63%. Turning to corporate and other on slide 25, corporate and other reported a pre-tax loss of 39 million euros in the quarter compared with a pre-tax loss of 165 million euros in the same period last year. The loss included 60 million euros of funding and liquidity charges not allocated to the businesses, consistent with our prior guidance to remain at around 250 million euros in 2021. The year-on-year improvement in valuation and timing differences was driven by non-recurrence of adverse movements in interest rates in the prior year period. This was partly offset by a smaller benefit from lower-than-planned infrastructure costs that have not been charged to business divisions. We can now turn to the capital release unit on slide 26. The capital release unit recorded a loss before tax of 258 million euros in the quarter, a significant improvement to the prior year. Revenues were negative 24 million euros this quarter, down from negative 66 million euros in the same period last year. De-risking, risk management, and funding impacts were partly offset by positive revenues from the prime finance cost recovery and from reserve releases reflecting market conditions. Adjusted costs excluding transformation charges declined by 45%, reflecting lower service costs, the absence of incremental bank levies that were recorded in the second quarter of the prior year, and lower compensation costs. Compared to the second quarter of 2019, adjusted costs excluding transformation charges have been reduced by 61% ahead of our internal plan. Leverage exposure was 71 billion euros at the end of the second quarter, down 30% compared to the prior year quarter, and reflecting a 10 billion euro reduction from the previous quarter. These reductions were primarily driven by de-risking and lower prime finance leverage. In addition, we saw a lower than expected impact from the implementation of the standardized approach for counterparty credit risk. RWAs were 32 billion euros at the end of the second quarter, of which 23 billion euros were from operational risk. We saw reductions in credit, CVA, and market risk, bringing us to a 24% decrease versus the prior year quarter. We continued to make good progress on de-risking the portfolio in the second quarter, focusing in particular on complex or illiquid positions that we were successful in eliminating. Since the second quarter of 2019, the division has reduced leverage exposure by 71%, or 178 billion euros and RWA by 50% or 33 billion euros. Looking forward, we expect to be at or ahead of our 2022 targets for RWA and leverage exposure by year end 2021. This includes completing the transition of our prime finance platform. We expect this transition to release approximately 25 billion euros of leverage by year end. Migrations of client balances are already underway and will accelerate over the third quarter. For the remainder of the year, we expect negative revenues in the capital release unit. We are on track to hit the cost reduction targets we set out in the investor deep dive. Turning to the outlook on slide 27, Christian talked about the continued execution of our strategic agenda and the progress we've made this quarter as we look to our 2022 targets. Beyond the improvements to our control environment mentioned earlier, Our top priorities remain managing to the 8% return on tangible equity ambition and a 70% cost income ratio. On revenues, the improved trajectory in the core bank shows that we are operating at a level that puts our goals well within reach and we see continued momentum in our client franchise. We remain focused on diligent cost management, notwithstanding the unforeseen and uncontrollable items which led to our target adjustment for 2022. we do not think it is prudent to starve the company of investments to offset these items. However, our 2021 pre-tax profit expectations have improved over the course of the year, despite higher expenses, reflecting stronger revenues and lower credit provisions. We have been and will be disciplined on risk management and will continue to manage the balance sheet conservatively. As discussed, we have revised our guidance for provision for credit losses to around 20 basis points of loans for the full year 2021, and we see a positive trajectory if current trends persist. We reiterate our target of a CET1 ratio greater than 12.5%, and we continue to target a leverage ratio of approximately 4.5%. We remain focused on our capital return objectives. We have deducted 575 million euros for dividends from first half 2021 earnings under standard ECB rules, in the consolidated CET1 capital calculation. We will continue to assess capital distribution options for 2022. With that, let me head back to Ioanna, and we look forward to your questions.