Ladies and gentlemen, welcome to the Q3 2024 Analyst Conference Call and live webcast. I am Moritz, the Chorus call operator. I would like to remind you that all participants will be in a listen only mode and the conference is being recorded. The presentation will be followed by a question-and-answer session. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it’s my pleasure to hand over to Ioana Patriniche, Head of Investor Relations. Please go ahead.

Thank you for joining us for our third quarter 2024 results call. As usual, our Chief Executive Officer, Christian Sewing will speak first, followed by our Chief Financial Officer, James von Moltke. The presentation, as always, is available to download on the Investor relations section of our website at db.com Before we get started, let me just remind you that the presentation contains forward-looking statements which may not develop as we currently expect. We therefore ask you to take notice of the precautionary warning at the end of our materials. With that, let me hand over to Christian.

Thank you Ioana, and a warm welcome from me. I'm delighted to be discussing our third quarter and nine month results with you today. These show our ongoing strong operating performance, further reinforcing our confidence in our 2024 ambitions and 2025 financial targets. I'm particularly pleased that our continued intense client engagement has supported momentum in all businesses. This enabled us to generate revenues of €22.9 billion in the first nine months, putting us well on track towards our goal of €30 billion for the year. We recorded the third successive quarter of adjusted costs at €5 billion, inline with our 2024 guidance underpinning our forward trajectory. We are pleased with the settlements we achieved in August and September in the Postbank takeover litigation matter, equivalent to around 60% of the total claims by value. This resulted in a litigation release that supported our reported pretax profit of €2.3 billion, up over €500 million year-on-year, and our reported post tax return on tangible equity of 10.2% in the third quarter. For the first nine months, our reported RoTE stood at 6%, excluding the Postbank takeover litigation related impact, RoTE was 7.8%, up from 7% in the prior year period. Asset quality remains stable despite the sequential increase in our provision for credit losses, which James will go through in more detail. Importantly, we expect provisions to reduce towards more normalized levels going forward, particular in expectation of improvements in commercial real estate over the next quarters. Our CET1 ratio of 13.8% reflects our strong organic capital generation. This puts us on a clear path to distribute capital to our shareholders as planned and we have now sought authorization from the ECB for our next share buyback. Let me now discuss in more detail some of the drivers of our nine…

Thank you Christian, and good morning. As usual, let me start with a few key performance indicators on slide eight and place them in the context of our 2025 targets. As Christian mentioned before, we are on track towards our objectives and we expect further improvements over the coming quarters. Our liquidity metrics also remain strong. Liquidity coverage ratio was 135% above our target of around 130% and the net stable funding ratio was 122%. In short, our performance in the period reaffirms our franchise strength and our confidence in reaching the 2025 targets. With that, let me turn to the third quarter highlights on slide nine. Group revenues were €7.5 billion, up 5% on the prior year quarter. Non-interest expenses were €4.7 billion, down 8%, benefitting from a partial release of the Postbank takeover litigation provision following the settlements in the third quarter. A provision of €547 million remains in place for the outstanding plaintiff claims. The settlements achieved in August and September enabled us to release around €440 million of Postbank-related provisions in the quarter which were partially offset by charges of around €90 million related to other legacy litigation items. Non-operating costs were positive €302 million in the quarter, including a net litigation release of €344 million and restructuring and severance charges of €42 million. We generated a profit before tax of €2.3 billion, up 31%, and a net profit of €1.7 billion, up 39% to the prior year quarter. Our tax rate in the quarter of 26% was impacted by the aforementioned litigation effects. In the third quarter, diluted earnings per share was €0.81 and tangible book value per share was €29.34, up 6% year-on-year. Let me now turn to some of the drivers of these results. We remain well positioned to continue delivering strong net…

Thank you James. Operator, we are now ready to take your questions.

Thank you. [Operator Instructions] One moment for the first question please. And the first question comes from Anke Reingen from RBC. Please go ahead.

Yes, thank you very much for taking my questions. The first is on loan losses. When we talk about 2025 and towards more normalized level, is that closer to 30 basis points? And then what should give us the confidence that the loan losses can come down in Q4 and 2025? I mean you show us slide 13 should the Postbank integration and the large corporate events almost drop out or drop out in 2025? And when you gave us 24 guidance and we've been looking, sorry to say, about two quarters of upward revision. So what did you underestimate when you previously guided for 2024. And then second on the buybacks. Yes, great to hear you applied for approval. But can you be more specific on the amount should we use the slide 24 where you talk about the 50% increase year-over-year as a potential indicator of your request at this time? And what does it mean for potential additional buybacks in calendar year 2025? When do you think you can make a decision and is that a function of the loan loss charge guidance as well? And maybe that’s an opportunity to say something about the still outstanding settlements post the Postbank ruling today. Thank you very much.

Thank you. Anke, it's Christian. Let me start. And as usual, James will add obviously to all your questions. Let me start with the share buybacks because that also goes into the direction of, so to say, the most recent ruling of the Cologne court. First of all with the share buyback. As we always said after the full provisioning of the Postbank litigation case in April, we always said, we want to show to you two clean quarters, Q2, Q3 which we did. And even without the release which we recorded in the third quarter for Postbank, we have shown a record quarter for Deutsche bank in the third quarter. And that gave us then obviously the conviction and the clear path now to apply for a share buyback. By the way, I think with the 13.8 core tier one, this is also a nice step which gives us the confidence for the application. With regard to amounts and timing, we always do it like in the past. We obviously keep that discussion with our regulator. But I can tell you that there is full confidence with James and myself and the management team that based on the step off of 30.8%, based on the trajectory of our operating results, we are convinced of our distribution of above 8 billion for the time zone between 21 and 25. So nothing changed. Also, what I would like to emphasize is actually that today's ruling you have just seen that is not actually affecting our share buyback because we provisioned that amount in full and also in our capital plan going forward we did actually not assume further releases in our capital plan. So in this regard of course we don't like the ruling and now we have to analyze it…

Thank you. Can you come back on the capital, on the buyback? So should we look at the 50% increase, and is the plan still to potentially top up in the course of 2025? Thank you.

So, Anke, you referred to page 24 in the appendix, and yes, that lays out the path that we broadly wish to follow to deliver on the promises we've made. As I said, the 8 billion to us is a number that we think we're confident will exceed. We're not going to go into precise euro numbers at this point, but I think 24 lays out a good path. As it relates to incremental buybacks next year it's very early to make that determination. As we've talked about, there are lots of moving parts in a capital plan. Under the best of circumstances, next year we'll have CRR3 coming due in two phases, changes in the environment, potential upside in areas like, for example, the sectoral buffer that's been applied in Germany to mortgages. So lots of moving parts that at this point, one doesn't want to get ahead of. So we'll make that decision much later in 25 than today's application.

Okay, thank you very much. Thank you.

And the next question comes from Flora Bocahut from Barclays. Please go ahead.

Yes, thank you. Good morning. Thank you for taking my questions. I have one on NII and one on cost, please. So on the NII, could we come back, please, to the drop? We saw this quarter in the corporate bank. It's led the banking book and AI to be just 3.2 billion this quarter. And I think the full year guidance you have implies it would be, again, about that level in Q4. I mean, when I look at the slide, 32 and it's useful. Thank you very much for putting in that slide. I see you blocked a significant part of the hedge income already for the next two years, so that's very reassuring. I also see that you've used a ten year swap that would be 2.3 to 2.5%. That makes sense based on today's curve. But, the risk here is rather to the downside. So the question here is also, the light blue column, the contribution from the rollover of the hedges. If, you know, the ten year swap would go towards, say, 2% or 2.2%, would we still see, the rollover, contribute positively in the next two years, despite, on top of what you've locked already? So that's for NII. And then the second question is on cost. I think you were saying before, James, that to make your guidance for 2025 cost, you would need to get adjusted cost quarterly run rate down towards €4.9 billion. Obviously, you just had three quarters in a row where you've met the guidance for this year at €5.0 billion. So maybe could you talk a little bit into the capacity for you to get there already in Q4? And what gives you the confidence that you can get to €4.9 billion quarterly run rate for adjusted cost next year? Thank you.

Thank you, Flora. Happy to answer those questions. So, on the NII disclosure that we provide, you're right, there's, of course, some risk on the rollover of the hedges. We like that. We've locked in 90% for next year. And, yes, we use the implied forward curve to look at what the future might be. The dark blue is as I say what's locked in for the next several years. Remember, of course, that the gap is against hedges that are rolling off, that were essentially at zero or very, very low. So the idea that there may be a little bit of downside in the light blue bars, that's true. But the quantum is against very low hedges put in many years ago, as much as ten years ago in that rollover. And that actually goes to the first part of your question, which is the corporate bank. Yes, we had in the series sort of a low point in the corporate bank, but actually there are some hedges that now roll off in the fourth quarter into chunks, and that gives us some good visibility into the trajectory for the corporate bank. If I think about the two businesses separately, we are -- we think we may have passed the low point in the trajectory for private bank already now in Q3, and we'll be passing that low point in Q4 for the corporate bank. It's obviously early to make that judgment and we'll see how everything plays out, including the balance sheet growth, deposit growth betas and what have you. But we think we're on a path now to be rising in 2025, not just because of the benefit of the long-term hedges. So it's overall quite encouraging pictures as we see it. Going to costs. Yes,…

Yes, that's very clear. Thank you very much.

And the next question comes from Kian Abouhossein from JPMorgan. Please go ahead.

I got two questions. One is relating more specifically a question on the Article 468, the CRR3. Using these transitional rules, I'm just trying to understand the dynamic on the OCI. It's about 20 basis points on your capital and why are you using it? Because it is transitional, so at one point, you will have to take the impact. So just to understand, first of all, the dynamic, but also your decision process or why you've taken the benefit. And then second question is related to your 2025 revenues, you need to grow revenues just under 7% from €30 billion to €32 billion, even if you adjust for the €300 million delta on your hedges, clearly it's quite an upward sloping curve in terms of revenue growth in a more difficult German environment. And maybe you could just outline a bit how we should think about your assumptions in a more difficult German environment, and I'm not sure what your German environment outlook is in 2025 in terms of reaching that €32 billion, especially, again, Corporate Bank 2025 and then Private Bank in 2025.

Thank you, Kian. Let me start with the revenues and James is then going to your capital question. Look, first of all, before we talk about 2025 and fully understood your question, I think it's very encouraging that we have full sight on the €30 billion for 2024. And again, I think we have established a track record in achieving our revenue guidance for the last years. And if I look actually where we stand at the end of the third quarter, how actually October started in particular on the trading side. You just heard James talking about sort of say, a potential low point in the NII in the Private Bank, then also where equity indices are and what that potentially means for performance fees and asset management, we are super confident that we can achieve the €30 billion, which is obviously the right jump-off your question regarding the €32 billion. Now when we come to the €32 billion, look, the first item is, again, a continuation of that for James outlined on the NII side because everything what we can see from our forecast, given our hedging profile, but also, in particular, looking at our deposit growth, which we see in the Corporate Bank, but also in the Private Bank, we do feel that actually, just from an NII across the bank and in particular, carried by the Corporate Bank and by the Private Bank, we do see an upside of approximately €300 million to €400 million on the NII side. By the way, Kian, that does not include the expected growth on the financing volume, in particular also in [Indiscernible] business in the Investment Bank. So that when I look at the forecast, just from the financing part in that area and the NII part, obviously, my…

And Kian, just to touch your OCI filter, the CRR3 rule that we're taking advantage of. I think the short answer is, because it's there. The time value of capital in our ratio, especially as we're often measured against a distance to MDA appears, to us to be valuable and hence, the decision to take advantage of that transitional arrangement. Remember that the 22 basis points could be a lower number when the time comes that the transition benefit is over. So the passage of time and the book of securities that are generating those unrealized losses, we'll see some attrition and then the interest environmental change. So it's a number that may be considerably lower than 20 basis points when that transition period ends. And therefore, we think it's valuable for our shareholders to be able to redeploy that capital during that 18-month period.

Very clear. Thank you.

And the next question comes from Chris Hallam from Goldman Sachs. Please go ahead.

Yes, morning everybody. Just two for me. So first, on M&A. Does the current M&A situation in Germany impact at all how you think about your banking strategy in the home market, the competitive landscape in Germany or how you would prioritize organic versus inorganic growth? And then the second in O&A, it looks like you lost some share in the quarter. Your share was trending up 70 basis points in the first half, and now I think you're calling it up 50 bps versus 2023. So just what are the moving parts there, is that just mix? And does that change at all how you think about the composition of O&A revenues into next year, obviously, notwithstanding the answer you just gave to Kian?

Thank you Chris. Let me take the first one and James just taking the second one. Look, on the M&A side and on the specific potential situation you're referring to in Germany, that doesn't change our strategy at all. I think we have a very solid and a very good footprint in Germany, both in the Private Bank as well as in the Corporate Bank. We have worked on, obviously, on two sites in Germany to make that even more attractive. A, you see all the work just done by Claudio, in particular, in the Retail Bank to make this business more efficient. We know that there is work to be done, but I can see how Claudio you is actually focusing on that to have an efficient platform to offer digitalized products to our retail clients. And honestly, quarter-by-quarter, also with the feedback we get from the clients, we see clear improvement. On the Corporate Side, I think, again, what I said before, it was the right decision to establish ourselves with an own Corporate Bank and to make sure that we are, sort of say, the bank for German Mittelstand family-owned clients and obviously the large clients to support them domestically, but in particular, when they go abroad. And in this regard, we feel that we are rightly positioned. And with all the efficiency programs, we can actually see that the profitability in the German business on both sides is further increasing and will further increase. Now whenever it comes to these kind of potential items, to be honest, Chris, we shouldn't underestimate the opportunities for us. Because at the end of the day, it creates uncertainty, it creates uncertainty, so to say, with the other institutions, but in particular also with the clients. And we are ready to act. And this is what we established over the last three years to four years, both in the Corporate Bank and in the Private Bank. And in this regard, we have a clear strategy that is delivery of 20%, 25%, 10% and in this regard, whenever there is an opportunity to gain market share domestically, we will do this.

And Chris, your question about O&A market share, you're correct that Q3 was a little lower than the year-to-date. And that was mostly mix, particularly the leveraged debt capital markets was a smaller part of the wallet in Q3. We're actually encouraged by continued sort of year-on-year improvement in our M&A market share, where some of the investments are beginning to bear fruit. And that's particularly on an announced basis rather than a booked basis. If I look to the -- what we would estimate the market share to be in the fourth quarter based on the forward look of our pipeline and estimates of next quarter, we think we'll be back in the kind of 2.5, 2.6 range where we've been this year, and that's an encouraging step-up into next year.

Okay, thank you. Very helpful.

And the next question comes from Giulia Aurora Miotto from Morgan Stanley. Please go ahead.

Yes hi good morning. Thank you for taking my questions. I have two both very longer dated. So the first one is on the Postbank integration. If we take a step back, why is this still a topic? I mean by now, I would have expected the bank to be fully integrated, the IT to be merged. So when can we essentially stop talking about this and really see a step change in the cost on the Private Bank? And then my second question is on Private Credit, and this is becoming incrementally a topic. U.S. investment banks were talking a lot about this in Q3 results. And how do you approach Private Credit? Do you see it as a potential disruptor to some of your lending business? Do you see it as an opportunity to grow fee businesses by partnering? Yes, any comments on the Private Credit side? Thank you.

Sure, Giulia, it's James. I'll take the both, and Christian, I want to add on the private credit side. Look, Postbank, the recovery from the operational disruptions that took place in last year's third quarter has taken us longer than we expected. Among other things, we were extremely focused on ensuring that we close out the backlogs of processes that were adversely affecting our clients. That was our focus. It was also the BaFin focus as they looked at the problem set. Hence, collections was an area that we waited longer to focus on improving. We've now made those investments, and we've hired the people, we've trained the people and that collections process is getting closer to normal. That took us longer than we expected this year, no question, which is why it's had the impact on the CLP guidance that it did. But given where we are right now and being up and running on that process, I think we feel much more comfortable that we're at the end rather than that there's still risk. The other thing is a little bit in the details, but the last model conversion of a portfolio from Postbank onto the DB systems and models on the risk side, that took place in the third quarter, that also influenced that number of €40 million. So why is it a topic? The sort of longer-term impact of the operational disruptions that is coming to an end as well as the models. On Private Credit, we see it more as an opportunity than as a threat. Obviously, there's a degree to which the banks face the risk of disintermediation. But I think that is -- that downside is more than offset by the upside of, frankly, a growing market, a growing ability to place risk in the marketplace and thereby increase our origination sort of business model, fees on origination and expand loan origination beyond what the capital on our balance sheet supports by itself. We also see opportunities sort of in collaboration with private credit firms to do more, collaboration with our own asset manager, DWS, to do more as DWS builds its strategies in Private Credit. So we aim to be here a participant not just as an originator, but also as a partner and a participant in managing private credit. So it is a change in the market. It is a disruption to some extent, but one that we're strategically we, at Deutsche Bank, feel we're actually well positioned on a relative basis globally and particularly in Europe, to be a beneficiary.

Thank you. Can I just check on Postbank. So now the IT system is fully integrated, you have just one? Or are you still running more than one?

No, at this point, everything has moved over, and the remaining work is really archiving and what have you, one system. Interestingly, there's some future opportunities. There's actually one of the cost benefits that we see and revenue benefits going forward, Postbank has actually jumped out ahead of Deutsche Bank in some of its digital properties. And the investments we're making this year going into next year would actually help us catch up and accelerate further the Deutsche Bank side of that equation. So in a sense, there is more opportunity to be serving customers in a leading way competitively in this marketplace in both brands now that we have the hard work behind us. And by the way, most of the synergy value captured a little bit more still to come in Q4 and Q1.

Thank you.

And the next question comes from Stefan Stalmann from Autonomous. Please go ahead.

Hi, good morning. Gentlemen, thank you very much for taking my questions. I wanted to ask, please, you're mentioning that you're clearing the path for 2025 targets, acting decisively to address legacy items. Does it hint at any elevated one-offs potentially coming in the fourth quarter, let's say, on restructuring expenses? The second question I wanted to ask is on this upcoming portfolio sale in U.S. commercial real estate. Can you give us a rough sense of what the notion of that portfolio is in how Stage 3 loans, please? And if I may, just a quick third question. You mentioned these credit concentration hedges and the benefits from them. Could you let us know in which P&L items, which revenue items and which divisions we would find these hedge benefits, please, and how large they are? Thank you.

Stefan, thanks for the questions. I'll take all three. Again, Christian, you may want to add. I'd say it's too early to tell on your question of is there anything sort of extraordinary that we may book in Q4. And the reason for that is in -- when I think about litigation, for example, what's in our control and not either analytically or in actual settlement activity is always hard to tell. But certainly, and I think we've been consistent in messaging on this, we want to put ourselves in a place where we no longer have surprises like the Postbank takeover litigation item for shareholders. Equally, we're in the planning process, restructuring and severance, we're still working towards our €400 million budget for the year, you'll see -- you've seen that Q4 -- actually, we did less than we expected in Q3, I'm sorry. And so there may be a bit of a catch-up in Q4. If there are additional tactical measures that we identify, we may go a little bit further there. Another area I might point out is real estate, we're always looking at our real estate portfolio and to see where we can optimize further. In all of those areas, too early to say what actions we could find to take place. But I think it's a signal of a company always looking for ways to optimize, improve our run rates and then deliver on promises -- in a sustainable way, by the way, deliver our promises for next year. On the CRE portfolio, it was approaching but not quite €1 billion that we put in the market. Of that, a little bit is sort of approaching 40% with Stage 3, and then the rest, a mix of performing in Stage 2. We were encouraged, frankly,…

Very helpful. Thank you very much.

The next question comes from M. Clark from Mediobanca. Please go ahead.

Hi, actually, it's a similar question on the hedges. So there's a commentary of group mutual hedge in Private Banking revenues as a drag this quarter. So I'm just wondering where within the group is the offsetting benefit there. Thank you. Both in terms of division.

Thank you. It's in treasury was where -- or Corporate & Other, where the offset last year was. So what we did was there was some what I think of as hedging of the convexity of the mortgage portfolio, which we historically had kept in treasury. This year, the decision was to push that out to the business where we think it appropriately belongs. And where -- by the way, one of the reasons to do that was the hedge programs that we're able to implement have improved. So that was the trigger for the change. And so that's meant that Private Bank on the surface has had a year-on-year comparison that's worse, both on revenues, by the way, and on costs than the -- I'll use the word, underlying performance would show. So it's been a noisy quarter for PB, but in areas that at least two of which are group neutral, either on the cost side with other segments or, in this case, on the revenue side with Corporate & Other.

Thank you.

The next question comes from Jeremy Sigee from BNP Paribas Exane. Please go ahead.

Hi, there, thank you. A couple of follow-ups. A lot has also been talked about. Firstly, on the U.S. CRE. I just wanted to check something that I think you implied, but your -- on Slide 37, you've shown the quarterly CLPs have now stepped back down to sort of €68 million. I think you're implying that that's the new run rate. We stay around that level going forward. I just wanted to make sure that I'm sort of understanding that right. And I guess it's a positive really that your modified loans are now €13 billion out of the €15 billion. So it sort of implies you work your way through the -- pretty much the whole portfolio, and I guess that supports that outlook. So first question is really just are we now expecting to go forward at that 68-ish run rate? And then the second question, I just wanted to press you a bit more on the M&A topic. You were commenting this morning on the Newswire, James, about Deutsche Bank positioned to play a leading role in European consolidation. The industrial logic makes sense, but you're just not ready right now. And I just wondered sort of how you view the scenario of someone like Commerzbank tying up with a different bank and effectively becoming unavailable, what remaining optionality would you have? Where else would you see opportunities for consolidation and for Deutsche Bank to play a leading role?

So Jeremy, thanks for the questions. So more or less the answer is yes. We -- if we had printed in Q2 what we did in Q3, I think we would have been congratulated for the foresight. But we are absolutely seeing a trend here, and it's based on the items that we've talked about for a while. So relative stability in valuations, which you see in the loan to value. The interest rate environment. Obviously, the external indices that you've seen. And now having tested the market with the loan sale, also the results of that market check. As you also alluded to, inside the €68 million is €23 million that is -- and you could also think of it as bringing forward. And so the underlying run rate was even better. Look, I don't want to promise a number, I think having leaned out a little bit far in Q1 about Q2. But the direction of travel is there and all of the drivers that I referred to are there and visible. And as it relates to the modifications, you're correct. I mean, look, some of this portfolio will have been modified and then have its new maturity and come up for an extension a second time. So it's not impossible that it grows beyond the 15%, but it is -- just as a metric. But it is the case that we've been through the lion's share of the maturity profile and potential for modification. As we said last quarter, the list of projects where we see kind of scope for new defaults is obviously declining. So the number of loans where we see a risk in -- that there are modifications or default for the next 12 months, declining significantly. So all of those things to us…

Thank you.

And the next question comes from Tom Hallett from KBW. Please go ahead.

Hi, thanks for taking my questions. Firstly, when I look to fourth quarter guidance of the core businesses, I still seem to be coming out short relative to your €30 billion guidance, unless trading revenue is coming well over double digits and the same for O&A. So it feels like you expect the Corporate Center to continue to positively surprise, is that a fair assessment? And into next year, how does that -- how does the €500 million valuation timing differences, which we've seen year-to-date, feed into the revenue guidance for next year? And then secondly, it's been a whole [ph] based question, but does the general consensus that as long as rates stay between 2% to 3%, everything is fine. But if rates fall below 2%, it's a different story. So how would you see your interest rate sensitivity changing the further below 2% as we go? Thank you.

Thanks, Tom. In Q4, I'd say, well, one thing that is not built into the guidance that we referred to is potential performance fees on the asset management side, which they are -- the way they are accounted for, they're not certain until the year is done and final. We do see, as you say, sequential growth in O&A, that's encouraging and that would help against the 7.1 that we're looking at for Q4. And if I just kind of walk forward the momentum we've had so far in FIC markets this year that should also produce, I think, a very solid quarter and contributed to the run rate. So we're encouraged there. Look, the corporate and other lines are hard to predict just by the nature. Valuation and timing, the nice thing this year really in the third quarter, remember, in the first quarter, we had some losses and valuation timing that were -- because of their short nature, actually, the pull to par happen very quickly. There is some longer-dated pull to par that we can already see going forward. It's not a big part of what we're planning for 2025. And overall, I'd say 2025 would probably be a reversal to some degree, from 2024. But it's always hard to predict what goes in those lines. They're very market dependent. I hope that helps kind of square the math.

Yes. Thank you. And then on the right, the 2% to 3% [Indiscernible].

Yes. Look, it's always hard to predict. But as I've said to the question earlier, obviously, it would be -- we would like for our -- these roles to hedge -- to roll at 2% or more. To be fair, that's what the market expects in terms of a terminal rate in euros. Remember, though, that this is long-term rates. And so the scenarios of a steepening curve especially as you see less liquidity in the market, maybe higher fiscal deficits and other things, you could actually, in the long end, even in scenarios where the short goes down further see higher long-end rates. So it's not just the level, but also the shape of the curve. And what we look at this hard in treasury in our ALCO and ALM processes, how do we lock in as much of the future not just simply by rolling ten years, which is a big part of it for sure, but also by thinking about sort of option structures and other things that can protect specific sort of curve shapes over time. So I don't think it is -- don't think of it as totally linear in terms of our exposure to that environment.

And Tom, just one addition to that. I mean I also think about outside the rate sensitivity. Actually, what kind of investments which we have done over the last 18 months actually in the non-NII business. And exactly for that reason, in order to be really diversified from the revenue streams, that was the reason why we invested into Wealth Management, the fee business part of Corporate Bank and obviously, in the O&A business. So I do believe that even if this would come, that, A, I refer to James' comments, but also the strength of the bank in the non-NII business, which is clearly significantly improving.

Okay, thank you.

And the next question comes from Piers Brown from HSBC. Please go ahead.

Yes, good morning. I've just got one final one is just a modeling question in terms of the -- some of the moving parts on capital into next year items that we discussed last quarter. But if you could just tell us whether there's any update to the Basel IV guidance. I think I had about €7.5 billion versus January 2025, and then another similar amount with FRTB at the beginning of 2026. And then if there's anything to update on the leverage finance reviews on the AVA technical draft, I think those are two other potential moving parts for next year that would be helpful. Thank you.

Thanks, Piers. No, not much in the way of new news. It's still our estimate €15 billion in total split basically 50-50 is still about right. So next, the Q1 impact is operational risk related. Q1 2026 would be FRTB related. The OCI filter item that I talked about with Kian would also be a feature then whatever that number is in 2026. So those are the build items that are still left ahead of us. I think, as I say, there are also the possibility of things taking place that give benefits against that future. I mentioned the sectoral buffer against mortgages in Germany, considerably a delay in FRTB. So is the nature of the beast here is that it's a bit of a moving target. But with all of the things that we can see right now, we feel very comfortable in our path. On the leverage, well, the AVA item, which I take to be the question, so the EBA Q&A on additional valuation adjustments, I'm not aware of any real -- any sort of movement there. I know there was an exposure sort of draft, as I might call it, a lot of feedback for the industry, but there hasn't been a reissuance of that. We do, obviously, have very strong views about the ideas that were laid out in the EBA draft. That would be a headwind to our current expectations in capital plan, but we also think that those ideas were excessively conservative and would argue strongly around that. Was your question though, also more broadly about the leverage lending review with the ECB, there wasn't much really to update there either, I have to say.

But we should only say that we are still waiting actually for the final report. I think given all the discussions over the summer, we can only tell you that the number came substantially down. And to be honest, we feel very comfortable with the exposures we have. And now we have to wait for the further debate with ECB.

That's fine. Yes, I was actually referring to -- I think we've mentioned in the past is a 15 basis point add-on to your CET1. And I think the way [indiscernible] I'd just assume that or in the form of higher RWA or some form of capital reduction, but [indiscernible].

No change today to that. As you know, we were given 5 basis points back a year ago, which we took to be a good sign in terms of where we were on a relative basis, but no change to that.

Okay, that’s great. Thank you very much.

Thank you Piers.

[Operator Instructions] And the next question comes from Andrew Coombs from Citi. Please go ahead.

Good afternoon. Firstly, just a quick clarification. I think in the revenue walk from €30billion to €32 billion, you talked about €300 million to €400 million incremental NII in PB and CB from deposit growth. Can I just confirm that that's the case and that the €300 million from the structural hedge tailwind is then on top of that?

So Andrew, no. Just to be clear, we would expect, ballpark, €200 million in each of the larger deposit businesses next year and that ties to the disclosure around the hedges. That number is before any benefits of growth in the balance sheet, whether loans or deposits or spreads on either of those two things. So that's why, I think, in Christian's comments, we see upside in NII not just from the rollover, and let's say that's €300 million to €400 million depends a little bit still on the interest rate environment, but an incremental NII benefit next year from all those other factors. So I hope that clarifies.

Okay. And then as a follow-up to that, I always thought the hedge wasn't allocated evenly between PB and CB. So interested in anything you can say on the hedge allocation. And then more broadly, just the deposit margin trends that you're seeing both currently but what you're also assuming going into next year as well? Thank you.

Yes. So you're right that typically, the longer-term hedges, especially the euro hedge book, is more in the Private Bank and the Corporate Bank. As it happens in this year-on-year comparison, the Corporate Bank had a larger dollar hedge on, which is the same hedge I referred to earlier that's rolling off in Q4. So there's an unusual uplift from a 3-year dollar hedge -- U.S. dollar hedge that the Corporate Bank is benefiting from, that evens out the mix next year. On the -- sorry, what was the second question, just blanking for a second, Andrew.

It was just on the deposit margins, yes. Can you hear me?

Deposit margins, yes. Thank you. Yes, sorry for the blank. We still plan arguably with conservative views on deposit margins and beta behavior. Now the scope for upside from conservative assumptions there naturally has diminished because we've sort of gone through the upswing and now the beginning of the downswing of the cycle. We're not seeing anything in terms of behavior today that would suggest more pressure on the banks in terms of pricing. And so that's encouraging. But as I say, the scope for over-earning at this point in the cycle is obviously less. I'm going to say in beta terms, single-digit percentages rather than double-digit percentages that we once had.

Ladies and gentlemen, this was the last question. I would now like to turn the conference back over to Ioana Patriniche for any closing remarks.

Thank you for joining us, and thank you for your questions. For any follow-up, please come through to the Investor Relations team, and we look forward to speaking to you on our fourth quarter call.

Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.