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

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

Thank you, James, and welcome from me. I will discuss the progress we have made in 2018, as well as our priorities and targets for 2019 and beyond. Starting on Slide 2. I'm pleased that in 2018, we have delivered on our promises. We generated our first full year net profit since 2014, and we grew our reported pretax earnings. Due to our disciplined execution, we delivered on our cost and headcount reduction targets, and we generated positive operating leverage in 2018. We view all these achievements as the first steps in our return to more sustainable profitability. We also made good progress on our strategic objectives while we further invested in strengthening our controls and processes. That said, the headline revenue performance was below our and your expectations in the fourth quarter. This was driven by the challenging industry conditions and the specific news which impacted us directly. But with costs and our balance sheet firmly under control, we now move to control growth. We are convinced that in 2018, we have laid the foundations for our growth agenda. We are making sustained investments in our core businesses and are showing improvements in key revenue drivers such as the substantial growth in loans. We expect these impacts to show up in our revenue performance in 2019. Let me address all of these points in turn, starting with our return to profitability on Slide 3. Our goal is to materially improve returns to our shareholders over time while maintaining a strong capital ratio. In 2018, we grew our profit before taxes by 8% to €1.3 billion, and we earned a net profit for the first time since 2014. This was achieved despite a high tax rate of about 75%, which was due to specific tax items. Without these items, our…

Thank you, Christian. Turning to a summary of our fourth quarter and full year results on Slide 12. In the fourth quarter, in difficult conditions for the industry, we generated positive operating leverage. Revenues of €5.6 billion declined by 2% year-on-year on a reported basis or 5% excluding the specific items detailed on Slide 29 of the presentation. Non-interest expenses of €5.6 billion declined by 19% and included the restructuring and severance of €181 million and litigation of €39 million. Adjusted costs declined by 15% to €5.4 billion. Provisions for credit losses were €252 million. As a result, we generated a loss before tax of €319 million. Our effective tax rate remained elevated, reflecting the impact of non-deductible expenses and certain deferred tax adjustments, which drove a net loss of €425 million. Tangible book value per share of €25.71 is broadly stable compared to the prior quarter and over the year. For the full year 2018, net income was €267 million, with profit before tax of €1.3 billion. Our full year tax rate was impacted by around €400 million of onetime items related to deferred tax assets and share-based payments that we would not expect to repeat this year. Reported revenues of €25.3 billion declined by 4%, while we reduced non-interest expenses by 5%. Slide 13 shows our adjusted costs excluding the impact of FX translation. FX translation provided a modest headwind in the fourth quarter but a benefit on a full year basis. For the full year, adjusted costs of €22.8 billion were €200 million below our target. We reduced adjusted costs by 3% or €800 million despite absorbing higher bank levies, increased amortization, Brexit costs and the investments Christian has outlined. The reduction was driven by efforts across the bank, including the effects from headcount reductions in compensation…

Thank you, James. Mia, let's now open the lines for questions.

Thank you, sir. [Operator Instructions] And the first question is from the line of Daniele Brupbacher with UBS.

Good morning and thank you. On Slide 8, you already talked about market risk RWA in Q1 and some of the other headwinds. Can you just give us an overall outlook for H1 with regards to CET1 capital ratio, and more specifically, how do you expect risk-weighted assets to develop? And then secondly, I'm not sure you are able to comment on this, but obviously, there were some - quite a few press articles regarding potential M&A and capital measures, are you ready and able to comment on these stories? And then lastly, revenues obviously down 23%, probably a bit worse than expected. Can you just give us a bit of a broader update on what you've seen year-to-date and what your outlook is for this year or the first half that would be useful? Thank you.

Sure, Daniele. It's James. I'll start with your question on the capital guidance and where we stand there. So if I just quickly review the guidance we've provided in my prepared remarks, we start of all, think that the starting point is a strong ratio and absolute tenor terms and on a peer comparison. On the guidance, the net of it was that we'd expected a decline of about 25 basis points in the first half of the year. Incorporating IFRS 16, the regulatory items that we mentioned and that we've been engaging with the ECB on, and the normalization of market risk RWA, that should get you to a ballpark of about 13.3%. And within these items, as I noted, it reflects our expectation that regulatory items come in at the low end of the range I provided in October. We think this ratio is strong, but we're obviously focused on managing what is in our control, such as capital demand, and anticipating as much as we can conservatively those things that are outside of our control. Capital deployment is within our control, to your question. For practical purposes, we're managing to an RWA cap somewhere in the range of €355 billion, at the high end, with the increment to the year-end level really reflecting the €4.5 billion that came on from IFRS 16. There are things outside of our controls, and those have principally been regulatory and accounting changes. But I think as you've seen, we've been able to anticipate and offset those items over time. So we feel very confident on our capital level, that the capital level is more than sufficient to support our current plan, and that, of course, affects everything we think about in terms of forward guidance.

Okay. Thank you.

And Daniele, to your second question on all the rumors, we have our plan, and we are working very, very hard on realizing this plan, and a lot of comfort we take from 2018. We set our targets, and we achieved each and every of our target in 2018. And that gives us a lot of confidence that we can work and that we will execute on our plan in 2019. That is our plan. We believe in this. And on everything else, we do not speculate, and we do not comment.

Okay. Thank you.

Next question is from the line of Jon Peace with Credit Suisse.

Thank you. So my first question is on Slide 10, your outlook for RoTE, you put the market share recovery into market, event sensitive rather than more controllable. But are there things that you're doing specifically to try to recover some of the market share in Fixed Income in particular? And is it different to what you've been doing before in terms of potential for success? And then just thinking about the RoTE development, the 4% target, can we just clarify that's a stated number, but it includes - or rather, it excludes the AT1 costs? And as you look beyond 2019, how quick do you see the potential for further improvements? Thank you.

I'll take the first question with regard to your question on the market share recovery. I think we always have to put this into relation to the 2018 year. We had a very deep restructuring in our Corporate & Investment Bank. We did all this in the second and in the third quarter, as James said, very swiftly and to the point. In the fourth quarter, obviously, we had difficult market conditions, and we also had specific issues around Deutsche Bank given the rate which we had seen in November. But our fundamental market position which we have in particular in the Fixed Income business is very, very strong. We remain among the top 4 banks globally, and we are here the strongest EU bank. And we know that we have the expertise, and we also know that we have the access to our clients, the franchise, and we can see that in our daily flows. So if you just think about what kind of headwinds we particularly had in 2018 but with the foundations being right, with the capital in place so that we can also do investments, and each and every incremental investment goes first into the Transaction Bank and into our Fixed Income business, we certainly believe also in improved markets versus the quarter four in 2018 that we can recover here.

And just briefly, Jon, on the AT1 dividend, that's correct. We - the RoTE and the net income we use for that purposes before is actually AT1 coupon.

Thank you. And in terms of the sort of longer-term developments of RoTE, where do you see it beyond 2019?

Sure. Well, we - look, we provided some color on that and, if you like, the frame of our forward planning in our June presentation. And so we would think of it as steady steps from here to our 10% aspirations. We've talked about that being dependent on market factors and other things rather like we've described for 2019. But that remains our planning and our core belief, and we're confident about that forward path.

Thank you.

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

Thank you for taking my question. I had two. My first question is you seem very focused on loan growth as a way to grow revenues. I wonder if you could comment on the kind of ROEs you're seeing on those new loans, please. And then the second question is on the Q1 base effect. If I recall, the profit warmed on Q1 CIB revenues last year. But from memory, I think January started very strong, and then the quarter tailed off. I think that's right. Maybe if I'm wrong, you can correct me. So as you think about the revenue growth you need to achieve the 4% return on tangible target and what you've seen in January so far, how do you feel today about showing year-on-year revenue growth in CIB for Q1? Thank you.

Sure, Stuart. I'll give you a couple of pieces of the puzzle to your first question. We do see loan growth and deposit growth which existed in PCB as drivers of future revenue growth naturally in a banking business, and so we're encouraged by that momentum that we saw in '18 and carrying into '19. If we think about what we think the margins look like, for example, in certain of our domestic and international consumer businesses, we're looking at sort of a 100 to 120 on mortgages, depending on whether that we're writing them in Germany, and then much higher-yielding consumer finance loans. That was obviously a range based on credit quality, but that goes up to 600 basis points and so a significant improvement on mortgages and, hence, our commentary about growing consumer finance. And in the commercial markets, those tend to be in a sort of a low 200s kind of margin world. The RWA content of our loan book, as we grow it, is on a risk-weighted basis in and around sort of 25%. That gives you a sense before costs what the economics of that loan growth look like to us. Again, we think that's an important indicator of both the health of the franchise and drivers of future growth.

Stuart, and to your question on the performance, consistent with our recent practice which we have now done for the last three quarters, we won't specifically speak to our business performance that early in the quarter. I would say, though, that we have been working to put the, I would say, more idiosyncratic issues that arose around our name in Q4 behind us as quick as possible, and that will certainly then help. And we have seen signs of improvement, as you can, for instance, see at our CDS spreads. Now overall, it also depends how the overall economy is doing. And there, my commentary would be relatively similar to what you've heard from our peers over the recent weeks. And that is, in my view, a generally more constructive tone in the capital markets versus Q4. And while there has been some deceleration of economic growth globally and also and especially in Europe, we do not see the conditions for a likelihood of a recession. That is also the clear tone I get from our corporate clients around the world. When I just summarized all my meetings I had last week in Davos, to be very honest, the people are still seeing growth, the fundamentals are satisfactory, and that will also help our long-term growth in the business.

Maybe if I could just follow on, I mean, James said that Debt Origination has started well. But if I look at Dealogic, I mean, you're down 20% year-on-year in DCM,, and you're down 60% year-on-year in loan underwriting. So I'm guessing that well is versus Q4, so you're talking Q-on-Q. Or again, going back to my earlier question, I recall January was very strong for you last year. So is it just you're facing a strong base effect looking backwards, not talking about this January but just looking back at last January?

We're commenting not to - on a comparison basis, Stuart. We're commenting on the pipeline events that we've already seen in the quarter-to-date. We've been involved in a number of marquee transactions in high-grade debt capital markets. So that was really the background to our comment.

Thank you for taking my questions.

Next question is from the line of Andy Stimpson with Bank of America Merrill Lynch.

Morning, everyone. Thank you for taking my questions as well. One on FIC revenues and one on loan losses, please. So firstly, on FIC revenues, clearly, down a bit more than what we were all expecting. You've seen a leverage exposure come down significantly in the quarter. I just wanted to know how much of that decline was seasonal and how much of that is permanent as a result of the perimeter changes that you've made. And I guess that I'm just trying to gauge how much balance sheet you've really got freed up, ready to redeploy, or if seasonality in 1Q means there's not much room to grow it on. I guess on the same flavor, with the risk-weighted asset headwinds you mentioned for 1H, it seems there's not much room for risk-weighted growth, so I guess the growth redeployment has to come from the leverage side. On the second question, on loan losses, I appreciate the quality of the book is generally very good, and you're very happy with all of that. But what kind of GDP downgrades would we need to see for loan losses to start increasing more meaningfully? Is it a downgrade to 1% GDP growth, or do we have to get 0 or negative for that to really make a difference? I guess things aren't really that bad yet in the fourth quarter, but you already highlight IFRS 9 as front loading some of those loan losses already in the fourth quarter. So just trying to get an idea of how that evolves, please. Thank you.

So there was a lot in there, Andy. I'll try to tackle - James here. So yes, the leverage ratio reflected a decline, but it was seasonal, in pending settlements. So you'll see that increase slightly into the first quarter. We don't think that's a material sort of burden on our ability to continue to support and grow client business inside our leverage ratio targets. So we feel comfortable about our ability to redeploy the leverage exposure savings that we created in 2018. Your point on the credit environment, what we're seeing in terms of rating migration at the moment is actually more of a deceleration of upgrades than an acceleration of downgrades. So while that's obviously something that we are - that we watch carefully, at this point, there's nothing in our - either our portfolios or what we're seeing in our obligors to suggest a deterioration in the environment. You're correct that there are sensitivities clearly now that IFRS 9 incorporates forward-looking indicators. And as we described, that was a major portion of the increase in our Stage 1 and 2 provisions. There is sensitivity to the economy built into those models. It's not just economic growth incidentally; it's unemployment. So interestingly, as we see, I think, still relatively strong employment conditions, we may see sort of some nuances in how that develops going forward. But just to reiterate, no real change in the quality of our portfolio or what we're seeing in terms of the obligors.

Okay. Thank you.

I think I missed one of your questions, Andy. I apologize.

No, no, no, I think you covered the two. They're just very long questions. I like to have a big market share on the call. And just to come back on the leverage exposure, so the - I guess 4.1% leverage exposure, if we see the seasonal rebound, I guess if we're seeing a 4%, it just doesn't seem that there's that much to redeploy. How much do you think you've got to redeploy into 2019?

I'm sorry, it's - I was not speaking into a live mic, I apologize. Andy, it's - part of it is just driving efficiency in the use of the leverage exposure, which, as you see, we did some of last year. The pending settlement difference in the December 31 numbers was €22 billion, so you'd expect to see a little bit of that come back. But that tends to be relatively small single-digit basis points. In terms of how we think about the room available to us, I'd point out that our - as we've managed the balance sheet this year, our phase-in ratio, the one against which we measure our medium term target, climbed to 4.3%, so a significant improvement over the course of the year, closer to our 4.5% target. The other thing I'd point out is we spent some time going through the balance sheet in some detail and how we see the composition, the riskiness, the credit quality, the liquidity aspects of that balance sheet, which is why you hear us often not focusing as much as I think some analysts focus on the leverage ratio. Because in the leverage ratio, of course, you're capitalizing 26% of your balance sheet which is cash and high-quality liquid assets. And so as a measure and a relative measure, it sometimes, I think, needs to be understood as it is, which is a leverage and ratio with differences between different balance sheets across the industry but the risk-weighted measures are better at capturing.

Sure. Thank you very much.

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

Yes, hi. My first question is on the ROE guidance, 4% plus. If I just do the simple math of your costs and at least the provisions unchanged, it gives the tax rate, I need around 4.5% growth in revenues adjusted for the €300 million, assuming that definitely comes through, so underlying growth has to be something like 4.5% in 2019 to '18. And why are you comfortable with that number considering market environment? And should that not be the case, do we have other measures, and can you discuss the other measures that you could take in order to get to that 4%-plus ROE guidance? The second question is related to your liquidity. You mentioned that you have plenty of liquidity as a percentage of balance sheet, and I wonder why is that the case. Is this a regulatory requirement? And if so, what would be the trigger for you to be allowed or yourself to make the decision to more aggressively not just reinvest that liquidity but actually reduce it. And then the last question I have is on Postbank, if I may. You mentioned the legal entities concluded. But can you give us a quick update where we are on staff reduction and branch reduction just so we know we can track roughly where you are at this point? Thank you.

So a lot of questions, Kian. Well, I'll try to tackle some. I think Christian will also add to them. Look, we feel good about, as we said, the momentum in the businesses that underlie the RoTE walk. So a significant amount of that uplift comes from the, call it, stable banking businesses, where, as we've described, we see momentum, and that should contribute, I'd say, conservatively 1% to the - to that growth. The tax rate, as we've talked about, a further 1% and expenses and liquidity deployment makes up the balance. So we feel comfortable that those things are both visible to us and in our control. As Christian outlined, when we think about the more market-sensitive businesses, we think we have strong franchises well positioned in the market environment that we're in to perform and frankly, recover some of the lost market share in 2018. And as we put the restructuring behind us, the stability and our ability to execute, we think, gives us the confidence in driving those performance in the market-sensitive businesses. We recognize that the step-off in the fourth quarter makes the growth rates look higher, and you gave us a firm-wide growth rate number. But again, by being market sensitive, they can also recover quickly. And we think we've made the right investments, have the right market positions in the core areas that we've defined to execute on that.

Kian, let me comment a bit on the integration of Postbank and Deutsche Bank in Germany. Let me first say that we are fully on track against our plans, which we articulated both to the market and to our regulators. And I really would like to reemphasize this has been a really large and complex undertaking over the past 18 months, and there is far more than simple reduction in branches and people because I think, in itself, the legal entity merger completed. We announced the combined management teams. We have - and you know that is in Germany a necessity. We have established a framework agreement around all job reductions for the coming years. And we also leveraged now the liquidity overhang on the back of the waiver which we got last year. So all in all, completely on track with the synergy commitments of €900 million by 2022, and we are doing everything also to accelerate those. As an example, I would cite the merger and the subsequent integration of the Deutsche Bank and Postbank mortgage companies which we even brought forward. With regard to branch closures, we said always that in 2018, we will finalize the individual programs on the Postbank side and on the Deutsche Bank side: that was, on the one hand, the management agenda in Postbank; and that was Horizon program in the Deutsche Bank. We completed that, and on top of that, we even closed already 240 branches on top of these programs. We also reduced year-over-year 5% in terms of FTE but far more to come now with the integration after we announced the management teams now coming into operations in 2019 and the following years. So in this regard, we are well under way. We have already optimized our sales structure and organizations. We completed the head office restructuring, and now we are moving on to planning the implementation for both the IT and operations integration. So a lot of work has been done, and as James said, we are starting to see the real synergies from the integration from 2019 on. But you - I think you also understand that in 2018, we already did a lot in order to reduce the costs there.

And Kian, it's James again. Your third question was about liquidity and our confidence in being able to deploy the liquidity. I'd break it into very...

Sorry to interrupt, it's not deploying the liquidity, why you need that much liquidity in the first place.

Yes. Well, it's - so it's - it gets to the answer I wanted to provide, Kian. We've carried buffers for conservatism that we now feel more confident about being able to take down. So that exists within our liquidity and the ratios that we report. There is also in our legal entity structure areas where there is trapped liquidity, and part of the program here is to put that trapped liquidity to work, use it more efficiently. There is a third element that goes to models and data enhancement, which, frankly, is a net flow of improvements, some which make our models more conservative, some less conservative; but net-net, it improves, if you like, our model or our stressed liquidity view. But overarching all of that is just a much greater confidence in our management reporting abilities to be able to reduce the buffers that we've carried and put them to work, essentially reduce the drag that this has created.

Is there a regulatory requirement to have this level of liquidity or is this purely your own choice?

It's not a regulatory requirement. The regulations speak to LCR and other things and also ask that every company have their own measures of stressed liquidity management. They naturally look at that, but the decisions on buffers that we hold is our decisions. The regulators engage with us on all aspects of this, whether it's the model enhancements and our capabilities. So they are certainly involved in the discussion, but the decisions are ours, and we feel confident in our ability to execute them.

Thank you.

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

Good morning. Thank you. A couple of questions on the leverage ratio. And actually, I was a bit surprised by your comment when you said that some analysts focus on the leverage ratio. My feeling was very much that you've been encouraging us to focus on that metric as the binding constraint and the key medium-term target, so I was a little surprised that you seem to be downplaying that. I mean, if you do want us to focus on the risk-weighted ratio, I think you need to talk quite a bit more about FRTB impacts, Basel IV impacts, what your go-to ratio will be with those impacts in a way that I don't really feel that you have. So I wondered if you could comment on that shift in emphasis and, at some point, open up about those regulatory impacts. And second question, linked to that really, is the 4.5% medium-term target for leverage ratio still a sort of hard requirement? Or are you viewing that more as a kind of aspirational soft sort of goal with a bit of management buffer in, and it doesn't matter whether or not you make it? And then the third question on the same subject is whether there is goal for you to move towards that ratio with more reduction in leverage exposure as you have here because it sounds - not from your comments, it sound very much like you're talking about seasonality having helped you but reversing slightly. And you're talking about redeploying leverage ratio, reinvesting it rather than making net reductions in leverage exposure, so it doesn't sound like that's going to help you hit the ratios. So three questions on leverage, please.

So Jeremy, let me clarify a little bit because we don't see it as a shift. I think we've spoken reasonably consistently about being, if you like, more focused on the CET1 target of 13%. The reason we talked about leverage in the middle of the year was more about this reallocation of resources and trying to focus our resources. And they were both balance sheet resources and human resources, talent, if you like, and focusing our client footprint, of which leverage exposure was one reflection. Broadly speaking, banks today we have to manage to a wide range of metrics, so it's multiple constraints. But I want to be clear that our thinking has pretty consistently been that the risk-weighted ratios have been the more - if you like, the ones we - that better reflect how we manage our business and think about our balance sheet extension than leverage ratio, although leverage ratio, of course, is a regulatory requirement, which requires that you be conscious of it and manage it. So hopefully, that clarifies a little bit why - how we think about it.

So just on that - sorry.

Can I just - yes, just let me answer the questions here. With regard to FRTB, as you mentioned, it's sort of an interesting case of why it is that we've not wanted to talk about inflation and RWA coming from changed regulations. The path of FRTB is actually a good example of how when you have first versions of rules, second versions of rules, revised rules and then a clear view on implementation, the world looks very different when it comes to implementation ultimately. We see the more recent refinements to FRTB, frankly, as being much closer to our expectations, an improvement again of aligning the regulatory standard with how we sort of observe and manage risk. So I think that's, again, an important example of how we look at the world. And then to the glide path on the target, I think we've been consistent in saying that the 4.5% is a medium-term target that we build to over time. And that over time is several years, I'd say the early '20s, acknowledging that there are a number of drivers of that. There's the common equity and also other equity components in the numerator and then a - the denominator items that we talk about.

Could you quantify the FRTB impact then now that we do know the rules? Because I think it's - I seem to recall you last qualified Basel IV in 2015, I think, and I think it's been a while since you've given us guidance on it?

I think that I will wait on that. The recent refinements are relatively recent, but they're in line with, frankly, below the earlier planning that we had built into our forward look on the CET1 ratio. Remember that it's introduced in 2023, so it's an effective rule with a pretty long transition time, hence, again, the fact that we're not quite as forward-looking as - perhaps you'd like us to be in how we give guidance on these things.

Okay. I mean my observation is some other banks are quantifying it, and they're building it into their sort of 3-year plan. They're trying to get to the right place for that by sort of the end of '21 kind of time frame, but maybe it's s topic for another day.

And the next question is from the line of Magdalena Stoklosa with Morgan Stanley.

Thank you very much. Good morning. My questions really are on costs and, once again, on capital deployment. Now on costs, when we look at the Slide 11, I was hoping for more granularity on the kind of cost savings plan. And my first kind of question would be on the personnel cuts. Which business function - which businesses or which functions are likely to be affected by the cuts from here? Is that kind of that implied 3,000 employees, and also, is there geographical differences that you are seeing within that kind of personnel cost cuts? And also, on the kind of non-people side, you've mentioned the vendors, the real estate optimization. But are there any kind of larger projects that in your cost cutting portfolio that you would want to kind of call and tell us about? So that's one. And really kind of within the - because we've concentrated on the savings, but where are your underlying investments going within the next 12, 18 months would be very interesting, too. And then on the capital deployment, I mean, we've talked about a couple of things where do you see your capital use. We've talked about loans. But within CIB in particular, which kind of business areas do you find attractive here particularly when you think about the margins you can earn? Thank you.

Sure. Thanks, Magdalena. A few comments on - just on costs. As Christian noted in his prepared remarks, the emphasis in 2019 will be on PCB and, in particular, driving towards the synergies that we've outlined related to the Postbank integration. But also further efficiencies in the - broadly define the infrastructure that supports the businesses. So that's really where we go to. And we are very conscious now of providing stability in the front office, if you like, the client-facing businesses after the restructurings that we went through in 2018. \ We do have also significant room, we think, on non-compensation expenses. In '18, it sort of probably fell, 40-60, if you like, comp versus non-comp. But that doesn't mean we'll stop on non-comp either. We've highlighted vendor-related spend and also professional services areas. We intend to keep working on that. We intend to keep pursuing the internalization of externally - currently externally sourced activities. So as a parenthetical, I'll say that the headcount targets that we published are sort of net of some reasonably significant amount of internalization that we have done and will continue to do. We took down, as we measured, the external workforce by about 40% last year. And lastly, I'd highlight continued improvements in our real estate portfolio, whereas we have shrunk as a company, we are able then to drive some benefits from also shrinking real estate footprint. As we said, though, we are also working to drive efficiencies out of the IT investment. And so I think in that tech spend, we're sort of at a pivot point, there's still a significant amount of spend going into controls or regulatory remediation programs, but we are seeing the shift more into both business-oriented improvements, digital investments. We've been - we have some, I think, superb digital properties, like the Autobahn platform, that we're continuing to invest in. So we are seeing a shift, as we go into '19 and beyond, of that investment into not just regulatory and also not just efficiency-oriented investments but also business-oriented investments that we think will deliver benefits over the years.

Can I just follow up on one thing, because, of course, when we think about the PCB-Postbank merger, we have the €900 million of net cost saves in mind kind of that you think in the past, look to 2021, '22 to deliver. Did I kind of understand correctly that some of that can potentially be coming earlier when you kind of called to that merger as a kind of key to the cost saves in a much shorter period of time?

So first of all, we confirm the €900 million, and wherever we can, obviously, we accelerate. But for the time being, we left the plan as it is, with the €900 million also allocated to the outer years. But I know that Frank Strauss is working on various issues to accelerate the one or the other, and therefore, I gave the example that, for instance, the merger of the two Bauspar or mortgage companies has been accelerated actually. And while this has been done, you will also see that, actually, the one or the other synergy from that is coming in earlier. The 240 branch closures which we have seen in 2018, that is actually kind of an over-delivery versus that what we planned, and there you can see that speed is put on each and every part of that integration.

Thank you.

And the next question is from Al Alevizakos with HSBC.

Hi, good morning. Thank you for taking my questions. I got two question. The first one is on leveraged finance. I was surprised to see that your leveraged finance overall exposure has been only €4 billion, like 1% of your loan, because one of your competitors last week kind of - which I assumed that it was smaller suggested that they got doubled these exposures. So I'm just trying to wonder what you define as leveraged finance. Maybe there is a different definition in you compared to the market. And also, I would like to know a bit more about also the trading inventory that you've got in this business. That's question number one. And then question number two, about the leverage ratio target. I've asked that question last quarter, but now you've got a better view of your potential G-SIFI given that you know now the 2018 full year balance sheet. Do you believe that, potentially, you could move down from 2% to 1.5% for this year's G-SIFI list? Thank you very much.

Sure. It's James. On leveraged lending, I don't know if you are looking at a difference between drawn exposure, so when will you fund the loan versus commitments. Obviously, we track both. And as we've disclosed, the - both the funded and the commitment pipeline or things that we track very carefully but represent relatively low proportions of our overall loan book, ultimately, the business is a - an originate and distribute business. And so for us, we focus, obviously, on the underwriting quality of the origination in the business but then significantly on how it's risk managed in terms of managing de-risking trajectories, which we've done, frankly, very well on, on managing concentrations, managing hedging. So it's an overall relatively low exposure and one that we manage very, very carefully. Again, I'm not sure exactly what the comparison you are drawing, but it may be in a difference between funded and unfunded. On the SIFI surcharge, it's obviously something that we measure and manage to. We've been historically sort of at the low end of the 2% bucket. We have, I think, been managing our balance sheet more and more tightly. Whether we are in a position to slip down a bucket is always hard to tell because it's a relative ratio, so it sort of depends on how much your numbers have moved compared to the industry. I will say, though, that as we look at all of the aspects of, again, managing a balance sheet, which, to Jeremy's earlier question, has multiple constraints on it, the consideration to the G-SIFI measures is one of those things. You'll see that we significantly brought down, for example, notional exposures in the derivative book last year, which is one aspect of the G-SIFI charge. So we can't tell at this point whether we will drop a bucket, but it's not a definitive goal of ours. Our goal is to manage the business and drive returns and profitability.

Thank you.

In the interest of time, we have to stop the Q&A session, and I hand back to James Rivett.

Thank you very much. And we'll see a lot of you in the next few days.