Deutsche Bank AG (DB) Q3 2014 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by. I'm Mia, your Chorus Call operator. Welcome, and thank you for joining the Third Quarter 2014 Analyst Conference Call of Deutsche Bank. [Operator Instructions] I would now like to turn the conference over to John Andrews, Head of Investor Relations. Please go ahead.

[Audio Gap] Third quarter 2014 results. We have with us today our Co-CEO, Anshu Jain; and our Chief Financial Officer, Stefan Krause. First, as is typically the case, Anshu will provide you with highlights of our performance. Thereafter, Stefan will present to you the third quarter results in more detail. Following their remarks, as customary, we welcome your questions. By now you should have access to all of our publications on the website. Please be reminded of the cautionary statements regarding forward-looking comments at the end of the presentation. With that, let me hand it over to Anshu.

Thank you, John, and good morning, everyone. By now you'd have had a chance to look through our results. During the third quarter, we continued to work systematically through our strategic agenda, and some elements of this had a substantial impact on our results. Nonetheless, we sustained robust underlying performance in our core businesses. I'll say a few words on both these points. Turning first to our work on key points in our strategic agenda. As you already know, litigation provisions once again significantly impacted profitability. We're working towards resolution of outstanding litigation matters. We aim to resolve these as soon as possible. However, we recognize that timing in terms of resolution are not solely in our control. In addition, like many peers, we incurred costs related to regulation during the quarter. These included adjustments to compensation structures, specific onetime charges and investments in platform improvements as we continued to elevate our systems and control frameworks to best-in-class. We also continued to invest in business growth. In this quarter, these costs more than offset savings from our Operational Excellence Program, or OpEx. However, OpEx savings have now reached their original end 2014 target of EUR 2.9 billion, 3 months early. Turning to capital. Our Core Tier 1 ratio remains stable at 11.5%. RWA discipline was tight, and we reduced CRD4 exposures significantly during the quarter. We were pleased that we successfully met all criteria of the ECB's comprehensive assessment. The stress test confirmed that our capital buffer in an adverse scenario would have been among the largest of any bank assessed and the largest of all if our capital raising in June is factored in. We're also pleased to see that our AQR adjustment of just 2 basis points of total assets was among the smallest for any major European bank. All in all, this exercise was collaborative and positive. It has added important transparency and strengthened confidence in Europe's banking system and in its regulators. Let's turn now to underlying performance in our core businesses. Core Bank underlying profit in the quarter was robust, as we've said, at EUR 2 billion with underlying revenue growth in all core businesses and a healthy balance of earnings contribution across these businesses. In CB&S, FIC revenues grew by 15% year-on-year, thanks to strong revenue growth and financial performance in our Foreign Exchange business, a very well-diversified platform and an uptick in volatility towards quarter end. Equity revenues were up 13% with strong growth in Prime Finance. Corporate Finance sustained its top 5 global position and leadership in Europe. Both PBC and GTB continued to face headwinds from record low interest rates. Despite that, both businesses grew revenues. PBC achieved revenue growth in credit products, insurance and investment products, while GTB grew revenues on the back of strong volumes, especially in Asia Pacific and the Americas. Deutsche Asset & Wealth Management attracted positive net inflows of EUR 17 billion, our best quarterly inflows for several years and the third consecutive quarter of positive money inflows. This helped Deutsche Asset & Wealth Management surpass EUR 1 trillion in assets under management. In the first 9 months of this year, this business's pretax profit also rose 14% to EUR 662 million. Thanks to the team's efforts, our intensive restructuring of this business is now paying off. Looking ahead, as we work our way through Strategy 2015+, we see some fresh challenges and headwinds, but also new opportunities. We see the different blocks of the global economy moving at different speeds. Europe's economy faces intensifying headwinds, and those will impact business conditions. Increasingly, we see financial markets responding to a tougher outlook for Europe's economy. Regulation will also continue to evolve, and we will continue to adapt to it like many peers. Resolution of outstanding litigation matters will remain a priority for us as well the right culture going forward. That said, we have not lost sight of opportunities. In Europe, our universal banking model is becoming more of a differentiator as some peers scale back in investment banking. That is an opportunity for us to win business and gain market share. In addition, we've clearly communicated our aim to reap business opportunities from new technology, including digital technology. That's why as we approach the final year of our Strategy 2015+ agenda, we've made some changes to the roles and responsibilities of the management board, as you've seen. Our aim is simple. We're aligning our top leadership talents as closely as possible around our evolving challenges and opportunities. To be specific, Stefan Krause will assume a new role as Head of Strategy and Organizational Development with responsibility for delivering on our strategy, our cost targets and all major change initiatives. Stefan will also remain CFO until the 2015 AGM next May. Dr. Marcus Schenck will join us from Goldman Sachs as Deputy CFO and join the management board as CFO after the AGM next May. Marcus combines experience of being a DAX CFO with a distinguished international banking career, and we're delighted to welcome him. Henry Ritchotte, who continues in his role as COO, will additionally focus on capturing opportunities from digitization. Christian Sewing, currently Head of Group Audit and a 23-year veteran of Deutsche Bank, will join the board and assume responsibility for Legal and for our Incident Management Group and Central Investigation Unit. Christian will spearhead our efforts to work through outstanding litigation matters. Stephan Leithner, CEO of Europe x Germany and the U.K., will lead our efforts to strengthen our competitive position in Europe, leveraging our unique business model. He will also continue to champion our program of embedding cultural change within Deutsche Bank and retains his responsibility for Regulatory Affairs, Compliance and HR. Over the coming quarters, we will continue to work systematically through the priorities in our strategic agenda, completing our OpEx Program, aligning our platform to new regulation, completing our planned investments in business growth and, as I mentioned, resolving outstanding litigation matters. We will also focus on sustaining the progress we're making in our core businesses and reaping the benefits of investments to build on that progress. To put it simply, we remain resolutely focused on execution of Strategy 2015+. The new responsibilities of the management board and new appointments reflect our commitment. Now Stefan, before I hand over to you, let me say a few personal words on behalf of Jürgen and myself and the entire management board. You have a vital new role ahead of you, a role that's important for everyone on this call, especially our investors. We're counting on you to strengthen our organizational development and strategic delivery. Now you'll be with us for several quarters yet on these calls. But nonetheless, let me thank you for all your terrific work as CFO and to all of the organization. With that, over to you.

Thank you, Anshu and thank you for your nice words. But I have to say, I still have to work quite a while until I can then fully focus on the new roles and responsibilities that I'm very much looking forward to. So -- and good morning to all of you, and thanks for joining us. And let me start now with the more dry stuff, which is the highlights of our quarter. Group income before income taxes, as you can see on the first slide, was EUR 266 million, reflecting significant litigation expenses, which are not tax-deductible, leading to a net loss of EUR 92 million. The Core Bank IBIT, though, increased 8% to EUR 1.3 billion. The estimated fully loaded Core Tier 1 ratio was at 11.5%. Our leverage ratio was at 3.2% on a fully loaded basis based on the updated CRD4 rules that now reflect the BCBS rules that we have previously guided you on. Tangible book value per share was 2.5% higher than the second quarter of 2014. Overall, third quarter has been a quarter of managing lots of uncertainties, especially also around the AQR and stress test exercise as well as litigation. The revenues of our businesses grew in the quarter. At the same time, Deutsche Bank continues to take risks off the balance sheet and, hence, reduce leverage. The quality of the bank's revenues as well as the bank's balance sheet have further improved in the third quarter. Let me now address some of the key current themes that you might be interested in, which is the comprehensive assessment, capital as well as the litigation, before I dive a little bit more into the group results. If you turn to Page 4. As you know, Deutsche Bank successfully met all the requirements of the comprehensive assessment. First, the asset quality review did not identify any material impact with an aggregate potential adjustment of 7 basis points on the Core Tier 1 ratio at year-end 2013. Second, another baseline scenario of the stress test, the pro forma CRD4 Core Tier 1 ratio was 12.55% at the 1st of December of 2016. This exceeds the required threshold ratio of 8% by 455 basis points. Third, and now the adverse scenario of the stress test, the pro forma CRD4's Core Tier 1 ratio was 8.78% as of the 1st of December 2016. This exceeds the required threshold ratio by (sic) [of] 5.5% by 328 basis points. As a summary, the results underscore the solid quality of our assets as well as the comfortable level of our capital base. It is important to note that the minor AQR-related impact do not result in changes to our reported results or ratios. On a general note, Deutsche Bank undertook a monumental workload over the last months related to the AQR and stress test. However, the results of AQR and stress test have brought improved transparency. We welcome the results of the exercise, which we believe, are positive for the European banking system. After the exercise, we can now even more refocus on our strategy and execution. We move to Page 5. You can see that over the last couple of quarters that I talked to you about numerous uncertainties in the regulatory landscape, which may have material impact on our capital position. This quarter, we had conclusions on 2 of those material uncertainties: The first one, the AQR and stress test, where there was no impact on our third quarter Core Tier 1 capital or CRD4 leverage ratio; and second one was the revised European rules on leverage, where we published -- were published by the Europe Commission on October 10. This brings the leverage ratio calculation in Europe fully in line with the final Basel rules published in January this year, and we now calculate and manage leverage based on these final rules. However, there are still very significantly regulatory headwinds expected from the remaining uncertainties on the rules and the framework. In particular, and as I've noted before, the implementation of the EBA technical standards on prudent valuation alone will lead to a direct capital hit of EUR 1.5 billion to EUR 2 billion. Please note that the stress test results include a deduction of EUR 1.6 billion already. Furthermore, other uncertainties about EBA technical standards persist, notably in the area of CVA. Over the medium to long term, the ECB's upcoming horizontal review of the computation of capital requirements in Europe and the review of RWA measurements on Basel level may provide further challenges. Let's turn now to Page 6. In the third quarter, you see that Core Tier 1 ratio is unchanged at 11.5%. The ratio was not impacted by FX as RWA and capital movements were largely offsetting in ratio term. Still, reported capital and risk-weighted assets are significantly impacted by EUR 1 billion and EUR 10 billion, respectively. Adjusted for FX, RWA were down EUR 7 billion in the quarter despite further headwinds from model adjustments, notably EUR 4 billion in light of the new EBA guidance on derivatives counterparty risk as well as the further increase in operational risk RWA of EUR 5 billion. Still, we more than offset the impact of increased model adjustments through reductions in market risk and CVA RWA. Let me turn now to leverage on Page 7. As expected, the European version of the rights Basel rules on leverage were published this month, and we now manage leverage on a Basel equivalent basis. In the quarter, on the new rules, the exposure fell EUR 66 billion, excluding FX, but including exposure growth to support our M&A pipeline. Of that reduction, over EUR 25 billion came from deleveraging our securities financing activities. Within our derivatives portfolio, we have again worked to compress, innovate and restructure transactions to reduce exposure. This yielded more than EUR 20 billion in leverage exposure reductions. The third major area of activity has been in reducing our trading inventory by more than EUR 20 billion. Finally, we have deleveraged NCOU by EUR 7 billion. We have, therefore, substantially mitigated the impact of the revised rules. Move to Page 8. As you can see here, net litigation provisions increased by approximately EUR 800 million, largely in connection with certain ongoing regulatory investigations impacting NCOU and CB&S. There continues to be significant uncertainty as of the timing and size of potential resolutions for some of our larger matters. And so actual litigation costs for the balance of the year are unpredictable. Contingent liabilities decreased by approximately EUR 1.5 billion, largely as a result of establishing provisions for certain matters. As a reminder, under the accounting rules, we cannot have a provision and a contingent liability for the same claim. Further, for contingent liabilities, we disclosed the upper end of the range of outsourced, whereas provisions are required to be established at the best estimate within the range. Accordingly, there is not a one-to-one relationship when a matter moves from one category into the other. Mortgage repurchase demand activity remains benign, continuing a trend that began earlier this year. Let me move on to group results. As you can see on Page 10, group revenues were up EUR 190 million versus the same period last year. All 4 businesses have grown year-on-year. I will discuss our revenues in more detail in the business division section. On Page 11, you see that the credit loss provisions in the third quarter remained at very low levels. The significant reduction compared to the third quarter last year mainly results from lower credit losses for IAS 39 reclassified assets in the NCOU. In our Core Bank, we continued to record very low levels of provision for credit losses, reflecting the consistently strong credit quality of our book that you probably also saw evidenced in the data provided in the AQR. On Page 12, our noninterest expenses increased by EUR 113 million from the third quarter 2013 to EUR 7.3 billion in the third quarter of 2014. Let me move on now to Page 13. I think it's something you have heard from our competitors as well. The adjusted cost base was approximately EUR 400 million higher than the same period in 2013. Our OpEx Program realized savings of EUR 300 million in the third quarter. Our total OpEx savings' life today accumulates to EUR 2.9 billion. Cumulative CtA spend for OpEx is now at EUR 2.7 billion. We expect that some of the spend originally target for 2014 will shift into 2015. The overall committed spend of EUR 4 billion is unaffected by this shift. We continue to face headwinds from higher costs related to regulatory, audit and control requirements. These were more than EUR 400 million in the quarter. Of this amount, approximately EUR 140 million are attributable to the changes in our compensation structure related to CRD4. As we converted the majority of affected debt in the third quarter, this amount contains a true-up effect. The full year impact of CRD4 adjustments is still anticipated at about EUR 300 billion. Additionally, we have specific changes of approximately EUR 100 million, mainly related to specific regulatory investigations, which we expect to be nonrecurring. Further investments in IT and enhanced processes to meet regulatory requirements amounted to about EUR 0.2 billion. The remaining offsetting effects amount to an overall cost increase of about EUR 200 million. This includes about EUR 100 million in selected growth investments in our operating businesses. Additionally, the substantial U.S. dollar strengthening increased the cost base, and we highlight the impact from FX as in previous periods. We continued to anticipate regulatory induced costs and FX headwinds to remain strong for the remainder of 2014. Let me now turn to Page 14. As you can see, the pretax profit was EUR 266 million. Nondeductible litigation expenses in the quarter negatively impact our effective tax rate. And as a result, we report a net loss of EUR 92 million in the quarter. In the short term, our effective tax rate may continue to be negatively impacted by litigation and also, going forward, by changes in the bank levy. As both the impact of litigation and proposed changes to the bank levy regime remain subject to significant uncertainty, it is difficult to quantify the impact at this time. As we go through our planning process and the bank levy rules are finalized, we plan to update our effective tax rate guidance. Let's move on to Page 15. The underlying earnings power of the Core Bank in the quarter of almost EUR 2 billion has exceeded last year's quarter by roughly EUR 200 million. We are now at EUR 7.1 billion pretax adjusted IBIT for the Core Bank within the first 9 months of 2014. I think this continues to reflect the underlying earnings power of our platform even in difficult times. Now let me move on to the segment results. CB&S, on Page 17, delivered very strong revenues in the third quarter, continuing the trend that we saw in the first half of the year. Adjusting for CVA, DVA, FVA, CB&S revenues grew 12% year-on-year. Revenues reflected a strong performance in both Debt and Equity Sales & Trading and solid performance in Origination and Advisory. However, the reported year-on-year cost trend is obviously disappointing. While we continued to make progress on OpEx savings, costs were negatively affected by regulatory required spend, platform enhancement and the CRD4 pay-mix adjustments that we had highlighted earlier this year. Year-to-date, the CB&S posttax ROE, excluding litigation and cost-to-achieve, is 13.8%, broadly in line with our 2015 ambition. On Page 8 (sic) [Page 18], you see the Debt Sales & Trading revenues were significantly higher year-on-year, up 18%, excluding CVA, DVA, FVA, reflecting the diversification of the CB&S platform and an uptick in volatility towards the end of the quarter. While European revenues continued to face macroeconomic-driven headwinds, the U.S. saw higher revenues across most products. Foreign Exchange revenues were significantly higher year-on-year, supported by increased volatility in September. RMBS revenues were also significantly higher compared to a difficult prior year, while Credit Solution revenues were stable. This was offset by lower revenues in Rates and Flow Credit despite better year-on-year performance in the U.S. In equities, Equity Sales & Trading revenues are higher year-on-year, driven by higher client-financing levels in Prime Finance. On Page 19, you see that our Corporate Finance revenues were in line year-on-year as higher Equity Origination revenues were offset by lower Debt Origination revenues. Year-to-date, we continue to rank #5 in global Corporate Finance with record market share, driven by higher market share across all key regions. Continued momentum in the U.S. with year-on-year market share gains in the U.S. across all products. PBC delivered an IBIT of EUR 356 million, as you can see on Page 20, in the third quarter, slightly above last year's period. Adjusted for cost-to-achieve, the pretax profit was EUR 454 million, EUR 24 million up versus the third quarter of 2013. A positive development in revenues was driven by our volume momentum in lending products, especially mortgages. Additionally, fee income from our Investment & insurance business increased by 15% year-over-year. This is combined with net new asset inflows of roughly EUR 1 billion. On top of that, successful deposit campaigns at Postbank in PBC were launched with close to EUR 6 billion additional retail funding. The campaign of PBC continues. Noninterest expenses increased by 4% year-over-year, reflecting additional charges for loan processing fees similar to last quarter and higher technology investments, reflecting increased regulatory requirements. Cost-to-achieve were, as expected, slightly higher compared to the third quarter 2013 and the second quarter 2014. We expect the full year 2014 levels to be around EUR 600 million. Now let me quickly turn to the PBC divisions on Page 21. Private & Commercial Banking revenues increased primarily in Investment & insurance products compared to the third quarter of 2013, but were offset by higher costs from loan processing fees and infrastructure expenses. Deleveraging at Postbank continued with influence over revenues, while costs remain stable despite negative impact from loan processing fee charges. As a result, Postbank IBIT increased, also benefiting from lower loan loss provisions. Advisory Banking International delivered a higher IBIT compared to the third quarter of 2013. Both Europe and Asia performed well with year-over-year increased revenues in every single country. On Page 22, I turn to GTB. And I think we can all say GTB had another very solid quarter with an IBIT of EUR 338 million. The stable year-on-year revenue trend is encouraging with the adverse impact from low interest rate being compensated by strong volume, especially in Asia Pacific and Americas. Noninterest expenses increased year-over-year. This relates to higher expenses to comply with regulatory requirements and increased revenue-related expenses. Furthermore, we continued to invest in our GTB business and enable business growth. The remaining increase is driven by higher cost-to-achieve for OpEx. On Page 23, we see the results of AWM. In this quarter, AWM net inflows increased further to roughly EUR 17 billion, mainly across all business units, all regions and all client dimensions. Year-to-date, margins on fund inflows have exceeded outflow margins by 6 basis points. In particular, we saw a sustained success of ETFs, also supported by physical replication in Europe. We saw further sustained success of flagship products, including global infrastructure fund offering. As a result of net flows and market performance, invested assets reached EUR 1 trillion. Revenues increased versus prior quarter and last year, reflecting growth in recurrent revenues from increasing management fees and lending base. Noninterest expenses were broadly flat year-on-year as increased investments, CRD4 impact and increased regulatory costs partially offset savings from efficiency programs. On Page 24, we take a look at the NCOU. As you can see, the NCOU continued to derisk the third quarter -- in the third quarter and reduced total assets by EUR 3 billion, following further asset sales. In line with prior guidance, the pace of derisking has slowed, yet remains capital-accredited. However, as highlighted previously, the reduction of RWA from derisking was more than offset by model-driven factors, including an increase in operational risk and FX movements during the quarter. In terms of financial performance, the third quarter results includes a significant increase in current litigation reserves, as mentioned earlier. On Page 25, you can see that from a balance sheet point of view, the derisking perspective of this NCOU has successfully surpassed all targets so far. And obviously, we will continue now to focus on a further reduction of assets. Now on Page 26. Consolidation & Adjustments reported a pretax loss of only EUR 43 million in the third quarter of 2014 compared to a pretax loss of EUR 153 million in the prior year period, and the improvement largely stems from better valuation and timing differences. With that, I finalize, and Anshu and I would be delighted to take your questions now.

[Operator Instructions] And our first question is from the line of Kinner Lakhani of Citi Investment.

I've got a few questions. The first one, on PBC, where the cost base was EUR 6.7 billion in 2012. And if I look at the clean run rate for the first 9 months, it seems to be at EUR 7 billion. And at the same time, obviously, the -- in the original plan, there was a gross kind of cost savings target of about EUR 1.5 billion, I think, for PBC. It wouldn't be apparent to me that most of the regulatory spend would be in relation to this business. So could you explain why we haven't seen the cost savings or if we expect these to be very back-loaded? Second question, on litigation, just wondering if you could provide us with any color as to what was the driver of the litigation charges in the quarter to help us understand where the reduction in the contingent litigation risk is coming from. I have in mind nonagency RMBS and FXs, 2 critical issues that could be driving this. Thirdly, on NCOU, I can see that the outlook in the NCOU seemed to be different from the previous quarter, particularly in relation to fade-out as well as also the financial portfolio. So is this effectively a downgrade in expectations? Are you more cautious? And finally, if you could talk to us on TLAC, how you feel your position for what we know today, and what investments you think that Deutsche Bank needs to make ultimately to meet TLAC requirements in terms of subsidiarization, et cetera.

Okay. Thank you very much. On the NCOU, I'll have to ask again the question. We didn't quite get the point. The fade-out, our outlook toward fade-out. Okay. Fade-out, the fade-out or resolution of...

Yes. The outlook seemed to be different.

Yes. Okay. I got it. I got it. Okay. Let me start with PBC. And I think, in analogy of the group, we have the same effect that we still have significant cost-to-achieve that will burden 2014, as we've always said, and that's why you don't see how the net -- how the savings are really already impacting on the efficiency, and PBC is incurring. We have the same problem at group level where, I would say, our OpEx cost-to-achieve are obviously not helping us to show improvement. Now PBC is certainly less impacted by other costs like litigation and things like that. And therefore, most of it, and by far, most of it are the large programs like our Magellan program that obviously have still high expense phases. So obviously, we hope that to be reported then the lower cost base as our CtA phases out and this programs are then completed. You will see that our run rate cost base improves. On litigation, I'm really always sorry that -- and we have this discussion in the need of the market to get more transparency. But please understand that obviously, we are in the situation that we don't want to disclose details on our numbers for certain purposes. It is -- this quarter was several topics. It was not 1 large topic; it was several topics, in which we had seen new information throughout the quarter of settlements of other banks, in which we have seen progress in some of the investigations that are going on. And as you know, every time at the end of the quarter, we then reassess where we are. At provision levels, you saw a movement from contingent into reserves, which basically tells you that these are topics that we had on the radar screen already. And that obviously, by the fact that we got more concrete information, we could reserve for. Based on our current view, we are reserved for the nontopics. Some topics, obviously, are further down the process than others. FX is less down the process. Many other topics are further down the process. And that's all I can say in terms of our provision, but we feel very comfortably provided for what we know at this point in time. Now on NCOU, not really. We had declared the year 2014, as the year in which we wanted to dispose of operating assets mainly, in which we wanted the team to focus on that. Nevertheless, other derisking occurred also quite substantially. All was capital-accredited. We sold BHF. We sold Cosmopolitan Casino. We're working on our other operating assets still and, hopefully, to have progress in that. And we have guidance to say that yes, obviously, now we've got the more stickier stuff, the longer-term stuff. And therefore, the pace would decrease a little bit, but we hope to pick up the pace now again in the next year, and that's when we can start and focus on assets. We also will have the effect in the next year that some of our portfolios will just run off -- naturally run off in the next year, so you should see some effects from that as well in 2015. TLAC, obviously, too early to say. Obviously, the proposal is not yet specific and concrete enough, and there's a lot of work that still has to be happen in really exactly defining what these rules are. So it's really early to say. I've had this question, structural changes. Honestly, until we don't have final rules, it's very difficult to make any statement around it, and I think we are collaborating with creating here a useful number and a key metric that the market can have a look at. But it's just too early to tell. It's too many uncertainties and too many questions around definitions at this point in time. Thank you.

So could I just come back on the PBC point? Because I guess the point I was trying to make is I was looking at expenses on your adjusted cost base metric, which already excludes cost-to-achieve and other exceptional items. And that's where I see that the cost base was about EUR 6.7 billion in 2012, EUR 6.6 billion in 2013, and now it's EUR 7 billion.

Yes. No, you're right. Yes, you're right, but that's why I said that the efficiency that now connecting our new systems, that are being now financing quality, you don't see this in the numbers yet, yes, because, obviously, these projects are still ongoing. On top of it, PBC had to deal with a couple of one-off charges this quarter. We had some legal costs, some costs around fee processing, credit processing fees, where there was a decision made by the -- by a court in Germany, where we had to reimburse fees to clients and things like that. So you have to see it in that light.

And the next question is from the line of Kian Abouhossein of JPMorgan. Kian Abouhossein - JP Morgan Chase & Co, Research Division: Three questions. The first one is; can you just give us an update on Basel III rules' balance sheet reduction in respect to the leverage ratio? I couldn't see a slide in terms of where you are under your previous guidance on balance sheet reductions and how much more we should assume balance sheet will decline. And in that context, just if there's any change in terms of CoCo issuance target of the EUR 5 billion by year-end 2015 and how you're seeing beyond 2015 in terms of CoCo issuance. The second question is on fixed income. On our numbers, you're down 14% quarter-on-quarter, and that might look a bit weaker than some of the peers. And I was wondering if you could give us some color of why that might be. And the last question is, any first views around CCAR? Because, clearly, some of the details have come out in terms of what the input assumptions will be, and just wondering if you could make a comment there.

Okay. Let -- if you look at the leverage details, they are laid out on Page 7 of the presentation. I think we put the previous rules and the new rules, and you see how the numbers look like. Our old rules shows us, at the end of the quarter, the 3.3% ratio. Under the new rules, we had the 3.2% ratio. You see that the exposure measure increased. And that obviously, the numbers I was referring to towards the new exposure measure, we had quite a successful derisking. Obviously, we're getting hit by the FX move. There's obviously a significant impact on our balance sheet. And therefore, I think you can get the effects in detail on Page 7. And on CCAR, we have no specific new information, to be honest. We're working towards fulfilling as a foreign banking organization the different CCAR targets that we have in terms of when we have to be ready and when we have to submit. We have a large IT project to be able to provide all the information as required, and that's ongoing, and it's in time and in budget, yes. We -- if you think about the target on -- going back to your balance sheet reduction, maybe you wanted to have a number of a target that we have set -- we did going back to the EUR 200 billion target. Kian Abouhossein - JP Morgan Chase & Co, Research Division: Yes, yes. Actually, you mentioned EUR 200 billion roughly.

It's about -- that's about the number. We did not want to give an imprecise guidance as we just implemented the new leverage ratio, and I'm sure we'll give you. But I think the size you just mentioned is the size that we will continue to work on because, obviously, as we have said, it's our view that we have to continue to reduce our balance sheet and to provide more buffer versus the 3%. And as we have said in the previous calls, we may expect even a change in the 3% as a target to be rather 4%, so I think the bank is just preparing for that as well. So we will obviously do the cut. In terms of your fixed income question, it's -- our view is that reflects the end seasonality. The year-on-year performance is in line, and we feel that we are slightly better than the peer set from our point of view. Year-on-year, we're up 18%. And this number, we obviously calculate excluding CVA, FVA and DVA. Kian Abouhossein - JP Morgan Chase & Co, Research Division: And just on CoCo issuance, any change from the EUR 5 billion target? Any new thoughts beyond 2015?

As you know, we have issued the EUR 3.5 billion of our total plan quite rapidly, and we have committed to do EUR 5 billion until year-end '15, and there is no changes. But obviously, we will continue to monitor the market for attractive opportunities. And now that all the issues around technicalities of this instrument are resolved, we would be able to react on short notice if required.

Next question is from the line of Jernej Omahen of Goldman Sachs.

I have 3 questions. The first one is on the foreign bank organization rules in the U.S. I think that the company subject or bank subject to FBO need to submit a compliance plan by the 1st of January. And I was just wondering whether Deutsche Bank has done this yet. And secondly, on that point, there was wide media reporting that a number of banks have requested for the deadline for compliance plan submission to be extended. And can you confirm whether Deutsche Bank was one of those institutions or not? The second question I have is on Page 4. And again, congratulations from my side as well for having passed the stress test with such a substantial buffer. I was just wondering if the leverage ratio was part of that stress test as a binding constraint. Let's say, set at 3%, I guess, would be the minimum. What would your -- I guess the question is, what was Deutsche Bank's poststress fully loaded leverage ratio? And the final question I have is on the noncore units. So the losses now in the noncore units are up 50%, so by half compared to this time around last year. And I was just wondering, I guess, in a sense, at what point do we see a change in trend in that division?

Okay. Thanks for your question, Jernej. Now let me go to the FBO rules. 1st of January, Deutsche Bank will submit its plan. There's no changes to us, and I think we also cannot confirm or I haven't heard any requests for delaying that. At least, Deutsche Bank will submit the plan requirement to the FBO, and we're working on it. On the poststress fully loaded leverage ratio, obviously, leverage ratio is always the number that we provided in the comparisons with our 2013 number. This is pre the capital raise that we did that brought us more than EUR 9 billion in regulatory capital, and that's obviously pre the balance sheet reduction action we've taken this year. That's why we have given the guidance that for year-end, we will be at the 3%. And therefore, from that perspective, we're fine. Obviously, now we can discuss stress leverage ratios and things like that, but this is -- we have no numbers for you in that regard and I think we would have to compute. At the end, the AQR adjustments to our leverage were about 2 basis points, so with very minimal adjustments on the numbers. So the ratio would have been 2.97%, if -- for the year-end taken. But okay, so the calculation, honestly, on the stress itself, that's all we can say to the stress ratio. The reason we don't have a number is that the stress assumes, obviously, a static balance sheet. It did not do any looks at what would happen at the balance sheet. And therefore, obviously, it's difficult to calculate some stress numbers. So to your other question, on NCOU, it includes, obviously, the volatility from litigation. And obviously, parts of our litigation is reflected in the EUR 1 billion loss of the NCOU. So the loss of NCOU would have been substantial -- substantially lower. If you go to Page 36, I've provided you always with the structure of the very difficult to understand P&L of NCOU. And on Page 36, you can see how we developed. If you look at the nonfinancial performance, it basically wasn't breakeven. And there, you'd see the losses. And you see that the large part of the losses was worth EUR 591 million, the litigation that obviously was legacy litigation and, therefore, gets booked in the NCOU. You see that our financial portfolio was -- had a small loss, and that the derisking activity even had a much smaller loss. Hence, we continue to be successful. So no change.

Okay. Stefan, just a short follow-up on the last answer. So the number I was referring to is net of litigation charges. So if you take the litigation out, NCOU lost EUR 530 million this quarter?

Yes.

It lost EUR 460 million the quarter before, and it lost EUR 350 million the year before?

Yes.

All right. So just -- so from your -- from where you sit, at what point does this turn?

At what point the underlying turn?

Yes, so it's about...

In our view, the NCOU is predicated on capital accretion, so we will probably continue to see -- as we have more difficult assets now, we will continue to see a loss pattern. What we are monitoring for is obviously to make sure that whatever action is taken, it's capital-accredited. We have one problem that I've made you aware in the past, that as we derisk assets, we have liabilities that still stand and costs. Some of these liabilities are old liabilities that carry a high coupon. And therefore, so that effect will rather increase than decrease as assets that were providing still profitability cannot help us to cover some of the costs of these liabilities. But overall, if the balance sheet of NCOU is reducing, we obviously then expect also to have losses from the asset side to be reduced, while losses from the liability side may stay. And we have to -- we will have to make a decision what we do with these legacy liabilities. Second, let's not forget the NCOU, to their sometimes complain; carry also group corporate allocated costs. They're part of, obviously, our overall organization. This part of that cost that burdens their profitability is a couple of hundred million. And obviously, over time, these -- as the NCOU gets smaller, the charge will be smaller. The allocation is based on balance sheet and other indicators. And therefore, obviously, that part of the loss should be reduced as well, so the burden of carrying operating expenses for the group.

Next question is from the line of Jeremy Sigee of Barclays.

Could I just ask a couple of follow-on questions around capital, please? And then thirdly, a question on rates business. So just on capital, I wanted to ask about the currency hedging. So you show some of the FX impact on both CET1 capital and RWAs and leverage, and it looks like the benefit you get on capital is a little bit less than the inflation you get on RWAs and significantly less than the inflation in leverage. And I just wondered if you can talk around that, the extent to which you believe you're hedged against currency appreciation that we've seen? Second related question and it's similar to the earlier question about your medium-term targets for leverage exposure. I wanted to ask the same thing about RWAs. You are sort of through the EUR 400 billion mark now, and the growth strategy would imply that continues rising. I just wondered where you saw RWAs settling a couple of years out from here. And then final question, in the slides, you said that Rates business was weak in the quarter, but your outlook comment suggested sort of a pickup in September, October. I just wondered if you're -- as well as in the FX business, whether you're seeing volatility in volumes picking up in the Rates business that gives you cause for more optimism on what's quite an important business for you.

Okay. Let me start with the capital. The hedging that occurred, not any financial hedging, it's just natural hedging; I want you to be aware of the ways that our denominations in euros and dollars are on both capital and our RWA, even it out. You see a EUR 1 billion in capital improvement versus EUR 10 billion in RWA. So technically, in that sense, we are just naturally hedged on Core Tier 1 ratio. And we've always been, so we have the right comparative amount of capital and RWA in the respective currencies. You make a very good point, and the very good point is that this changes when you think about balance sheet and leverage. They are obviously -- today; the natural hedge is not as good. And therefore, that -- obviously, that's something we will have to monitor and focus on because, obviously, there, the capital tends to sit more in euros, where the balance sheet tends to sit partially also, to a large extent, in dollars. So we are less protected, let's say, on a natural hedge basis on the leverage ratio. So something for us and for you to consider on a going forward basis. And on the -- your question about the midterm RWA target, I think I cannot give you. We went through the EUR 400 million. I tell you that obviously, the way we see, there certainly will be increases, for example, in operational risk RWA. I think this is known. There might be other new technical standards coming and changes, I think I talked about this in my presentation that we expect. On the other hand, we still have EUR 60 billion RWA in the NCOU that obviously we expect over the next couple of years to turn. There might be situations in which the increases have been sooner than we can manage our decreases. That's something I cannot exclude. Therefore, to now give you a number for our RWA on a quarter-by-quarter basis is more difficult. Longer term, we've always said that we expect to be at the EUR 400 million to EUR 450 billion RWA. And obviously, I say that, obviously, based on current currency mix, just to also clarify that because, obviously, we will -- based on where we see the dollar going, obviously, we will have and could have significant impacts on RWA as well, which will not influence the ratio, but which then you need to consider when looking at the growth of the number as well. On the Rates business, the FVA impact in Rates relates to the market movements and a calculation refinement. Excluding this impact, lower revenues year-on-year were driven by ongoing subdued client activity in Europe with low volatility and low volumes, continued to have uncertainty about the future direction of markets, and we see that clients, investors are keeping on the sidelines. This, obviously, was partially offset by the strength in our municipal banking book in the United States. In the third quarter '13, we saw elevated levels of new deals. So going back in the comparison, we had some special effects that we had much better client flow and higher volatility in the previous year.

And those comments about clients remaining on the sideline, I mean, I understand that in 3Q, but you're saying that persisted through September and October?

Yes.

Okay. Because I didn't think -- like I thought as we saw more of a pickup, but you're saying not in Rates.

In FX, we saw a pickup because of the Rates movement. But don't forget, in Europe, we tend to see less activity and still subdued activities certainly different in others.

Next question is from the line of Daniele Brupbacher of UBS Investment.

Just a quick follow-up on the RWA, Slide 6 there. I mean, you talked about the model increases, the EUR 5 billion and the EUR 4 billion, which almost equals the EUR 10 billion market risk reduction. Is that just a coincidence? Or is there more behind that? Is -- was it a deliberate decision to keep the overall number flat just in a quarter where there were definitely some opportunities towards the end? Just interested to hear your thinking around these moving parts. And then just to follow-up on the previous question. I think, in the past, you were saying that you would like to keep overall RWA flat at around EUR 400 billion. I guess, is that statement including or excluding some of the headwinds ahead, i.e., for example, the op risk RWA change you are foreseeing? And then just the second question, on litigation, on Page 107. The specific note on FX hasn't changed at all compared to the second quarter, the wording exactly the same. Can I read anything into this in terms of progress on that front? Has there been probably not much happening in the third quarter? Or is it just a Q3 -- or rather generic statement which you have on Page 107? Then maybe lastly, on the management change like these announcements, basic question there really, why now? Why does that happen now? Or why do you make this announcement now?

Yes. Thank you. So let me start. The RWA excludes, obviously, any further model changes, et cetera. We don't know. I told you that there are still some uncertainty around it. And again, I made you aware about the exchange rate effect on it as well. So just keep that in mind because we have a significant further strengthening of the dollar that will have an impact on that number as well. So take this number just as a guidance on today's view. RWA -- operational risk RWA, we all know, will increase. We don't know yet exactly how much it will be, but we know that it will be more and partially more. But don't forget, we are reducing, on the other hand, other types of RWA, as you can see now. The coincidence question, obviously, I would have preferred rather an increase of EUR 10 billion and a decrease of EUR 15 billion, so it is a managed number. We are working towards that. So it is not related to each other, it's just the numbers we get. We obviously manage and continue to manage our RWA down in the NCOU. And obviously, we're also managing RWA down that carries low levels of profitability. On litigation, don't take the comment, the comment on FX, and the fact that we wrote the same comment doesn't imply anything or doesn't tell you anything. This is an early -- and it's still in the process investigation that's going on. And we are providing as we move on and as we get new facts, and there are no things at it, so nothing to read into this. And I think that was your questions, and I'm going to...

Yes. It is, yes.

No, no, hold on. We have Anshu for your last question.

Don't you want the answer to your organization question?

Oh, yes, of course. Yes, yes, of course.

No. Look, I mean, we're very happy with the strategic direction that the bank is going in. But if you look back over the last 2 years since we put this new team in place, it's very clear that litigation legacy, coping with all of that, has proven to be more challenging for us and the industry than we would have thought. So the first thing we're doing is to give that a dedicated resource at the board level. Second thing, as you've seen with this quarter, and certainly, the way we look at the coming quarters as well, getting more efficient and dealing with the regulatory change upscaling and making sure that, that doesn't impact our cost discipline in a significant fashion, very important as well. And that has a lot to do with us asking Stefan to take a role which will really cut across the entire bank in a horizontal fashion, making us more efficient. So really it's an unchanged strategy, but widened bandwidth in terms of dealing with some of these challenges, which puts us, we believe, in a very good position to tackle 2015.

Next question is from the line of Huw Van Steenis of Morgan Stanley.

Stefan, first question, on the PVA adjustment, when would you expect to get clarity on that? Because I'm conscious that all the U.K. banks are already taking it through their balance sheets already. And then as a result of that, your leverage ratio really would have been EUR 3.1 billion today if we used the EUR 1.6 billion the EBA used. Again, does that put any tension on your expectations for hybrid issuance going into 2015? Because on consensus numbers, you clearly wouldn't get to a EUR 3.5 billion -- 3.5% rate target. And then second, slightly more broadly, as you move to your new role, what other implications are there of the U.S. Fed stress tests and subsidiaries in the U.S. in terms of the way you think about the size, shape and the way that you consider running the U.S. operations?

Yes. Let me first go to -- well, we are waiting just the final EBA paper, which is not yet final as the final on the DVA adjustment, and we just need to go into law. At the end, it needs to become German law. We honestly just built it into our projections, and we expect in the fourth quarter, that's how we think about it. But the fourth quarter is running off quite rapidly. If I can say, there's not much time left to year-end. So we'll have to -- we have to see. On the second question, sorry, I didn't quite get it. I mean...

So just on the first, though, so if you were to -- at 3.1% pro forma for PVA, are you likely to issue -- need to issue more than EUR 5 billion of hybrids to get to a 3.5% level?

No, no, no. That's why in our projections, we have always included the number and that's why I also referred to the fact that in the stress test, there was a number included also. So the EUR 1.6 billion was the number that was included for us.

Yes. And then the second one was on -- with the start of the Fed stress tests and it help creating a U.S. subsidiary, what other changes are you expecting to make to the U.S. operations in terms of the size of the business, the way you fund yourself, the way you construct yourself? Anything else that you're learning as you're going further into this process?

We -- as you know, first, there's all this technical build around setting up obviously our IHC. That's ongoing work. Then we have a time line on capitalization of this IHC, which, as we have told you, we feel very confident about and no change to our plans. At the same time, obviously, we are moving assets that don't need to be U.S. assets out. That continues as also an ongoing activity that's happening right now. And then we'll have to see to learn. And obviously, you are absolutely right that this is a little bit of a change of structure and focus in how we will run our U.S. business over time. But we don't really believe that this will impact our client franchise side or anything that's small. It's more on how we, in the background, run, fund, and technically run our business. So I don't think this will be having any market impact. So that's our view. We -- and then we have also strategically always made very clear that the U.S. is one of the great opportunities for Deutsche Bank and that we are willing to invest into. So we will put that plan together. But we are very confident that we have the capital we need and that we will be able to get the funding we need to run a healthy and profitable and very growing U.S. business.

And the next question is from the line of Fiona Swaffield of RBC.

I have 2 questions, please. Firstly, on the bank levy, I think you mentioned it was a bit too soon, but there has recently been, I think, a paper out on the resolution fund fee. Could you talk about the moving parts there, and whether we should be expecting a sizable increase in the current levy? And the second is just coming back to an earlier point on the leverage exposure. Could you update on exactly how much you think you've done? I mean, I think the plan was EUR 250 billion. And going back to the Q, the March presentation, you said you've done EUR 116 billion. And now obviously, we've had a bit of up and down. So should we be looking for another EUR 100 billion? I think you said EUR 200 billion earlier. I wondered if you could clarify that.

So let me quickly start with the last question. We've done about EUR 200 billion. So now we have to move to the new definition, and that changes this then obviously a little bit because they're obviously different now, the difference in the base measure. But if I go back to the old measure, it's about EUR 200 billion that we've completed by the third quarter, so quite well in line with what we wanted to achieve. The bank levy is mainly driven by a risk factor which is not yet known. And then, therefore, it -- we cannot really quantify how that measure is. It's the famous risk factor. We do believe that it's somewhat -- will be somewhat balance-sheet-based. And therefore, we will -- we expect -- we do expect an impact from it, and it could be several hundred million euros.

The next question is from the line of Al Alevizakos of KBW. Alevizos Alevizakos - Keefe, Bruyette & Woods Limited, Research Division: I've got 2 quick questions. The first question is regarding the leverage calculation once again. You showed that there's been a decrease in the trading inventory, which kind of makes sense, even though the end of the quarter was particularly strong. And I would like to know what's your standing position at the moment. So how much trading inventory you've got compared to your historic highs? And the second question was on the operational RWAs. One of your peers have also kind of had a large provision in the quarter, had a significant decline in the operational RWAs. However, I can see that your number went up during the quarter. And I'm just trying to understand, does that mean that there is some outstanding litigation that's not captured at the moment in the provisions and the contingent and liabilities? Or does it mean that basically, you got penalized because of the amount that you paid in the last 12 months?

So let me start. As you can see on Page 7, our trading inventory went down, and that management action that we took to reduce our trading inventory, I don't have a number here for you how much more can be influenced, and that obviously is something we'll manage over the quarters. But if I look historically, our trading inventory since the beginning of the crisis is one of the areas of our balance sheet that we have significantly decreased. And what obviously was one of the big factors there was just turn in the trading inventory was increased quite significantly. And therefore, we can -- we have been able to keep our profitability up despite the fact that our trading inventory has been lower. Now on RWA, you have to consider this ops RWA calculation does not, number 1, only include DB litigation, which has an impact on it, but does also include historic -- competitor litigation charges. And therefore, everyone when -- every time there is monumental settlements that you hear on, obviously, that will also impact our RWA. It will -- obviously, as they fade out, that will obviously then take pressure off operational risk RWA. And this is what we see developing over the next couple of years, that this number will stay quite dynamic and will be a model to a derivative number. So at the beginning, it will continue to increase. That's what we predict for the next couple of quarters. Before then is these type and these large settlements decrease both for DB and for the industry, which could be, in the longer period, will decrease. Our view is that all operational RWA for our peers also will be increasing based on the fact on how the math works. So our current situation is a combination of already booked charges and, obviously, the outlook that we have.

Next question is from the line of Andrew Lim of Societe Generale.

I've got a few questions, please. On the trading book review, I was just wondering if you could give some insights as to your participation in the BCBS's review, and how you stack up in terms of market risk rate inflation versus your peer group. My second question is on FX. We know that 6 banks are negotiating with the FCA on fines to U.S. and for European banks, but you are not one of them. And I just wanted to understand more clearly why that's the case, please. And then in the PBC clients business, you state that part of the reason why your noninterest expenses went up was -- is due to further charges from loan processing fees, and I just wanted to understand more clearly whether this is alluding to the fact that there's more one-off in nature.

Okay. So your last question, yes, it's one-off. There was a court decision. And obviously, we have claims back from clients. And this is more of a one-off nature. We expect a little bit more to come, but that's going to be it for the year. So I expect maybe a little bit more on the fourth quarter, but I think we will then have done all the repayments that this court decision requires us to do. On your FX question, this is obviously not our decision. And it always should indicate to you that everything we know right now and that the investigation knows now that our severity or our involvement in it is smaller. Otherwise, we would have expected to be amongst these -- well, we should be in this 6. And so I think this is -- you should clearly see as good news at this point in time. But the investigation is ongoing, and we will have to see and learn more about it. And on your trading book review, as you know, this is still subject to QIS and rules that are far from finance. Also, BCBS noted that the spirit is to enhance the calculations, but leaves RWA overall unchanged. That said, current proposals give a slight uptick. But it's too early to know.

Can you say how you fare versus your other banking peers?

No, we don't -- can't say. And again, on the trading book, there will be another impact study in 2015. And maybe at that point in time, there might be some more transparency on it.

[Operator Instructions] And the next question is from Robert Murphy of HSBC.

Most of my questions have been answered. I've got a few follow-ups. On the FX litigation, have you actually made any significant reserves at all so far this year? That's my first question. And then also on litigation, do you -- can you make a clear statement on if you expect any of the other issues to settle by the end of this year? On the PVA charge, is there any reason to expect a different charge versus what we saw in the AQR, the EUR 1.6 billion that you mentioned? And then on leverage, again, so it sounds like you're not expecting that much further decline in the leverage exposure from what you've said on the amount of reduction you've achieved, or is that the wrong impression? And then I guess the conclusion is, if so, then further improvements in your leverage capital will depend on retained earnings, plus Tier 1 issuance.

So wrong impression on leverage. Obviously, we are really working. We expect the reduction again in the fourth quarter, and we're working towards this reduction. So as you know, we're working on both sides of the equation. We're working on the capital side of the equation, and we're working on the balance sheet side of the equation. And therefore, a wrong impression for sure. And if you would hear some of our colleagues in the bank, there is quite some pressure on and quite some work and good work done on both sides of this equation. I'd also refer to the plan on AT, alternative Tier, 1 issuance still, et cetera. So you see that the bank is taking this seriously and is moving ahead to build also a buffer. Now on the FX litigation, as you know, we were not disclosing any details around the litigation. I please ask for your understanding. On potential settlements that the -- I can tell you, the management board would really wish that we can get this behind us as quickly as possible. But regretfully, that's not on our decision and our timetable. As you know, I did give you a guidance, a couple of quarters ago of the expectations that we expect further litigation expenses. But right now, obviously, the year is running by fast. I do want to make you aware, though, about one technical effect, as we don't close our books to about the 20th of March of next year based on the statutory sequence of our year-end close according to German -- the German procedure and German law, and we will have a large subsequent period. So there could be still a litigation resolution happening in the first 2 months in -- even in the first 3 months of next year that may impact our results. Now on your pru val adjustment, that was based on the EBA draft. I told you the number was EUR 1.6 billion. That's the number it was giving you, that that's a range of EUR 1.5 billion to EUR 2 billion. So the number was within that range, and that was used. So -- but we still have to wait on how it gets issued and how then in -- especially, the German wording of the technical things would really look like and how it's going to be put in place.

Great. And then just -- maybe just 1 follow-up on the new definition of leverage. I think you have a table in the report, and most of it's coming from SFTs. I mean, is that changing the -- your sort of outlook for the economics of some of your businesses? Or have you already anticipated that in your plans?

No. We obviously now changed to run it on this metrics. We had known. We had some idea, had given you some guidance previously of what we expect and what the definitions were. But we've looked at it for some time already. So -- and that's -- and it's not likely to change. Okay?

And the next question is from the line of Andrew Stimpson of Bank of America Merrill Lynch.

Can I just -- first, on pricing, I know, in the past, you've said you won't be pricing or allocating capital down to desk level according to leverage. Can I -- I just wanted to check whether that's still the case, and what your thoughts are then on LCR and SFR and TLAC on the same basis, and whether you think any of those will eventually get pushed down to desk level, do you think. And secondly, on the CtA remaining. Clearly, you've had -- the CtA has been running well below the amount you originally expected. And I just wanted to know whether that will be -- the remainder will be shunted into future periods, or whether that's just a permanent underspend. And then thirdly, apologies if this is a repeat in your question, but the decline in contingent liabilities was greater than the amount of provisions you made. Maybe I misunderstood the answer to Kinner's question, but maybe -- could you explain what the other moving part is in the calculation there?

On your last question, only to clarify that I had said in the text here that, while -- on contingent, from a systematic point of view, we go to the higher end of our estimates and provide a quite ample room on the contingent. You cannot look at the one-to-one trend numbers when it goes into reserve. With IFRS, we are required to stay in the middle of the range, and to make -- to get to a specific point. So in that sense, there will be never a one-to-one transfer, so that's not mathematically -- and again, I had also made you aware that any topic I have in reserve, I cannot have in contingent liabilities. And therefore, the topics are quite straightforward and clean. We think that on the -- overall, the question on leverage, on the longer-term basis, of course, leverage will become a binding constraint for the bank. And obviously, we will include it into the way we steer the bank, and it's certainly also part of our planning process that we do. So in that sense, obviously, that's something to look into the future. So we want to include -- I wanted to say it very clearly, we want to include the leverage. But we -- obviously, we all need to continue to focus on capital, so it's more -- please look at it as something that we add as a second level or as an additional level of allocation instead of replacing our capital allocation of level. So we expect, on the CtA -- by the way, we expect to spend the entire amount because these are projects that are ongoing. And currently, all the EUR 4 billion is planned, and some of the planned spend might be postponed into 2015. But we do expect, obviously, assets usually in the seasonality that we will have a higher spend in the fourth quarter as well. So there will be some catching up in the fourth quarter, and there will be some moved into 2015.

All right. And just on TLAC, do you think that would -- do you think eventually that would be the same as leverage, that just eventually it goes down to desk level?

Too early to -- this is really too early to tell, yes. Okay?

Okay.

[Operator Instructions] Excuse me; there are no further questions at this time. Please continue with any other points you wish to raise.

Operator, thank you, and thank you, everybody, for joining us here on the call today. Obviously, the Investor Relations team at Deutsche is available for any follow-up calls you have. Otherwise, we wish you a very good day.

Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.