Deutsche Bank Aktiengesellschaft (DBK) Earnings Call Transcript & Summary

Okay. So first of all, good morning from my side, and welcome back to our European Financials Conference. But obviously, most importantly, welcome to our next session, which is a session on Deutsche Bank. We're delighted to be joined by both James von Moltke, who is the Chief Financial Officer of the group; and Stuart Lewis, who is the Chief Risk Officer of the group. As you can imagine, the composition of this panel suggests that we're going to focus on the issue, which is front and center of investors' minds, not just for Deutsche Bank, but for European banks in general and I think global banks as well, and that's the issue of the extent, the scope, the magnitude of credit quality deterioration as a result of the operating environment that we are currently facing. We're obviously going to cover a much broader array of issues, but that will be the center of this discussion. Before I go into Q&A, let me pause here and let me first thank both James and Stuart for taking the time to join us here today. We certainly appreciate it. I think this is going to be a very interesting session, and I personally certainly hope that we make you feel welcome. So welcome both.

Thank you, Jernej. Thank you for the opportunity.

Thanks very much. So let's kick it off. An awkward thing happened in the first quarter, results of European banks. So we had a loan loss provisioning range, which went from 9 basis points at one end of the extreme to 269 basis points at the other. Deutsche Bank, with around 40 bps, was towards the lower end of this range, broadly 1/2 of that of BNP, which we would consider to be a close peer of Deutsche Bank. So I wanted to kick it off by asking what are the top-down macro assumptions that underpin your loan loss provisioning, what type of recovery you're assuming? What happens if that recovery doesn't materialize?

Yes, let me take that, and thank you again for the invite. I don't think our model is any different from many of our peers'. We tend to look at a variety of inputs into that model, which center around GDP expectations, both on a global level and on a national level, and particularly where the -- where we have large loan assets -- in countries that have large loan assets. And then we also look at unemployment data as well, and that is particularly, again, driven by our large retail presence in Germany. So German unemployment, I think, has had quite a big predominant impact on our micro -- macro forecasting. I beg your pardon. And in terms of what we've done to date on trying to figure out what the impact on loan losses might be across that portfolio, we've run 3 distinct scenarios and tried to therefore ascertain what the impact would be on core Tier 1 and also what impact there would be on credit loss provisions. And scenario 1 was run quite early on in this whole crisis with an expectation that there will be maybe not so deeper, a V-shaped and a quicker recovery. I think we can all assume that, that no longer holds true. Scenario 2, which is a central assumption, is one where we would see the peak pandemic in Q2, with some economic recovery starting to be visible at the end of Q2 and that would continue to increase -- to improve further through Q3 and into Q4. And then there's clear downside scenario that we'd run, where we'd see a far more gradual recovery really taking us to the end of 2021. So those are the kind of scenarios that we run. The -- your observation on some of our European competitors, and those competitors being higher provisioned in Q1, we tend not to think so much about the level of quarterly CLP. We tend to look at the total reserves, so the total loan allowances that we have as a bank across our organization. And we're about 95% total loan loss allowances -- sorry, 95 basis points, I beg your pardon, on total loss allowances as a percentage of our portfolio. We have, compared to most of our European peers and certainly our U.S. competitors, a far lower percentage of our loan book in consumer-related financing, whether that's consumer finance or credit cards. BNP have probably about 11% or 12% of their loan book in consumer-type exposure. We have around 5%. And actually, we've done some comparative analysis where if you strip out the consumer loans and credit card lending and then look at what I've described more as wholesale provisioning, then I don't think that we are too much of market compared to many of our peers. And that's before you start to then think about the nature of our loan book and the underlying quality of our loan book.

Stuart, just staying on the topic of the composition of the book and the risk propensity within that book, so you've already highlighted that you think unsecured consumer is obviously an area of exposure where you expect disproportionate losses. But -- so within the context of Deutsche, what are the portions of the loan book -- or the credit portfolio, rather, that you're watching most closely? And what is the scope of those exposures?

So on the retail side, yes, consumer finance, I would just kind of mention that, we're looking at that closely. We're clearly looking at that closely also in Italy on the retail side. As you know, we've got a fairly large presence in Italy, both in the mortgage book and the consumer finance books. On the wholesale side, within Investment Bank and the Corporate Bank, there are a variety of sectors, which I think, again, would surprise you that we are watching pretty closely. We have a large CRE portfolio that is well diversified. The exposures are generally in what we describe as gateway cities. The average loan to value in that portfolio is about 60%. So -- and first-lien's at 60%. So generally, I think that's pretty robust. The average size of the whole portfolio is around EUR 50 million per asset, so it's a pretty well diversified book across the U.S. and across Europe. Other areas of loan book that we focus on, we've had -- we have exposure in the oil and gas sector. And our oil and gas exposure tends to be to the major oil international companies, MNC companies and also the national oil companies, so some of the emerging market, large oil companies. We have very limited exposure in the non-investment grade as structured lending portfolio, so the weaker kind of oil and gas shale producers or other offshore developers. We also have exposure to the aviation sector. That's about EUR 4 billion of airline, aircraft financing. That financing tends to be all to modern fleets. And again, we think that having stress tested underlying residual values versus the loans and the loan to value of the loans that our portfolio feels recently resilient to downside. Other areas of exposure that we're focused on, the retail sector. On the retail sector, we've got about EUR 5 billion of exposure. Very little of that is to the consumer good-type sector. Most of that tends to be into the kind of grocery-type sector, perishable good-type sector. So that's kind of areas that we're focused on. We have done sort of a bottom-up look across all those high- and medium-risk sectors. We've identified the single assets that need, say, more attention. Clearly, some have moved to work out, and Amenysis will be helping our clients as well as we can through their cash flow difficulties.

Okay. So if we go back to a question that I think we discussed already at the time of your last quarterly report, James. So when somebody looks at the loan loss provisioning guidance and the peak of around 45 basis points and then tries to compare that with -- what the European Bank Authority thought was going to be the provisioning peak for European banks, for Deutsche Bank, they calculated around 82 basis points and the economic scenario underlying that calculation from where we stand today seems to have -- seems to be substantially more benign, right? So in your mind, when you look at that figure, 82 basis point EBA peak versus 45 basis points, your estimate of how severe this will get, what is the key difference between the 2?

So I'll let Stuart speak to the comparison with the EBA stress test. But just one thing to correct what you said. The -- we said the -- the range that we provided in terms of guidance for -- was for the full year of 2020 of 35 to 45 basis points, rather than the 45 basis would be the peak. We would expect that this quarter, the second quarter, will be the peak of the loan loss provisioning for this year. We think it'd be higher than the average for the year. Our expectation, broadly speaking, would be that credit loss provisions be in a range around EUR 800 million for this quarter, barring any sort of unforeseen sort of circumstances, and then that it would normalize in the second half of this year, again, reflecting the central case that Stuart just described earlier. So that's sort of where we're coming out. And if you like, affirming our view, a little over a month ago when we reported on Q1, there's nothing that we've seen since that time that would change our outlook for the full year. With that, I'll hand it over to Stuart to talk about EBA.

And look, the EBA stress test really had, I would say, a different profile from what we're currently seeing. So it was over a 3-year period of really continuous deteriorating growth. And I don't think necessarily that we're going to see that. I think I would also indicate that the EBA, by its nature, also tends to throw in some additional add-ons and implement some floors, which actually kind of exacerbate the downside scenario. They also don't consider that there's any proactive portfolio management, but consider roll-offs. It's a very kind of static look at the balance sheet, and it takes the 2018 balance sheet and assumes it's going to be that profile for the next 3 years. There's a variety of mechanisms the ECB use, which I think exacerbates the outcome of their analysis.

So in your view, the EBA analysis and the results we have for the sector overall, not necessarily for your institution, hold very little information value when we try and make conclusions about the current situation.

Look, I think all stress tests, external and internal stress tests help inform somehow. I think the reality is that as an institution, we run stress tests every month to try and figure out what type of scenarios might impact our balance sheet and our CLPs more than others. And this one is, frankly, a scenario which, given its shock, shock, shock, as I would describe it, it's very different from other stress tests that have been run externally or internally before.

Fine. So one thing is incurring losses. Then a different thing is having the ability to absorb those losses, I guess. So we had the first quarter of 2020. I think most investors would argue it's the start of the credit cycle. And this was a quarter with strong revenues as well. Despite that, the #1 and the #2 banks in Germany reported a marginal loss for the first quarter. So in a scenario where revenues were not particularly strong, but reflected the average, let's say, of the previous year, this marginal loss would be a more meaningful loss. So I was just wondering, so I take all of your points on the comparative strength of your -- of Deutsche Bank's credit exposures. But if you're wrong, and if the operating environment deteriorates from here by more than Deutsche Bank currently anticipates, James, what is the ability of Deutsche Bank to absorb those losses? And perhaps, what are the other mitigants outside of purely operating performance that are available to you?

Sure. Let me start with Q1 and just say, so we had a pretax profit of around EUR 200 million in Q1. And if you take out the SRF contribution that is recognized in the first quarter, that would be about EUR 700 million of pretax profit. In some ways, it's probably more instructive to look at post-crisis PPNR, or pre-provision net revenue, became a sort of a metric that people looked at to understand loss absorption capacity from ongoing earnings, in other words, before you got into capital. And what was, I think, gratifying is in the first quarter, that number for the core bank that we report was about EUR 1.8 billion. So to my mind, the starting point is that level of profitability, EUR 1.8 billion before the SRF and also before the CRU wind down. Now in our case, what's a little unusual is we are going through this restructuring, and so there's a burden on our profitability that comes from the capital release unit. And so as you point out, the profitability of the group as a whole is -- doesn't have quite the same loss absorption capacity that, were it not to be the case that we were running the CRU, wind down. And frankly, I think the CRU wind down, though, is helpful as you go forward, both in derisking the company and then freeing up additional capital as we move forward. So it puts us in line to be much more sustainably profitable, much more resilient over time. I think the other thing that's important to note is that as we've gotten to the first quarter of 2020 and now into the second quarter of 2020, we're actually 3, 3.5 quarters through this restructuring. And so if you like the period of greatest risk, the period of greatest burden coming from the CRU and from the restructuring, we're rapidly putting it behind us. Now as you point out, we're dealing not just with that restructuring, but also with the COVID environment, but I think managing through pretty well. We're obviously looking at all levers that we can pull to ensure that our financial performance, our capital isn't unduly burdened by the COVID stress, so seeing where we can offset the impact, for example, on provisioning from the COVID environment and whether that's expenses or other elements of our performance. So we think a combination of completing the restructuring, relatively robust level of PPNR in the core bank, the improvements in sustainable profitability going forward and, as you pointed out at the outset, a conservative loan book, a conservative risk appetite put us in a good position to navigate through this environment.

So coming back just to one of the sub points of the previous question. If the operating environment deteriorates from here by more than Deutsche expects, what are the mitigants available to you? So I get -- I take the point that restructuring charges are going to roll off and the drag from the restructuring unit is going to be lower. But if there was an incremental shock, so to speak, what are your options?

Well, I mean, you start with the revenue performance that we have, in fact, had rather than the sort of a downside scenario. And you've seen, I think, a pretty robust performance in the banking industry, not just in Q1, but into Q2. As parts of the business, and not only the investment bank, but also other parts of the business have recovered and sustained levels of revenue that are better than one might have feared as we were in March. I think secondly, as we are doing, we look at every element that we can on the expense side to offset some of the profitability pressure that comes from higher provisioning than we initially expected. We are looking, as Stuart outlined, at ranges of provisioning outcomes. But at least hitherto, we don't see a downside scenario developing on that front either. There's a world in which we could potentially slow down the restructuring, again, to preserve profitability and capital, but that's not the world we're in. We -- as we've said at the end of the first quarter, we're continuing to work on the restructuring to progress the many measures that we've put in place, but that is conceivably also a lever that we have to manage through, perhaps, a deeper crisis than we currently anticipate.

And, James, you touched on the fact that Deutsche Bank is undergoing a period of deep restructuring. How has the ability to execute on your restructuring plans changed? Or how has it altered given the public health crisis that we're going through?

Yes, I would say -- I know that, that was a concern that investors had kind of in Q1 around the results time. I'd say, first of all, we did announce a moratorium on new sort of communications of involuntary terminations. We thought that was the right decision at the time, but it was a temporary measure about 6 weeks, and we recently announced that we're resuming that. But in some ways, the sort of -- that hiatus is a small subset of all the things we're doing to restructure the company. I guess one way to think about it is Fabrizio Campelli, who was appointed late last year as our Chief Transformation Officer, he's now tracking 70 sort of individual initiatives that we are executing on against milestones, delivery plans and what have you. And as we look at that portfolio, if you like, only around 25% of them we think of as being in some way impacted by the constraints that are put on us from the COVID situation, the health crisis that we're in. So to give you examples, as you've heard us say, we did complete the merger of our sort of retail legal entity into the DBAG parent a couple of weeks ago. We have -- also did the core banking conversion in Italy, which has been a significant technology investment over the past couple of years, we completed also in late May. I think evidence of our ability to keep initiatives on track, despite those constraints. So if I put all that together, we're comfortable that we're continuing without any significant sort of interruptions or diversions, if you like, from the restructuring path that we've been on. And the management team remains very determined to complete this execution.

And when you think about -- so investors are concerned that the government wants to have a say or -- on a number of issues relating to the way banks run themselves. Capital obviously is one. Distribution of capital to shareholders is another. What makes you confident that, in what is very likely to be a spike in unemployment, that you will not have political interference in continuing with what is a significant reduction of Deutsche Bank's workforce?

We've had no indication at all that, that's a view the political institutions are taking. I think there's a recognition that banks, broadly defined, not just Deutsche Bank, need to take action to redefine their business models. In fact, if you listen to some of the commentary from -- within the German sort of regulatory and political environment, there's a recognition that the banks need to reshape their business model, and that's an effort that we're clearly undertaking. We naturally need to work on each sort of restructuring measure with our workers council representatives. They're all sort of -- it's a series of negotiations, but we continue to progress those discussions and negotiations. And we are executing today on measures that were defined, negotiated, agreed sort of last year. And we're currently negotiating and agreeing the measures that we'll execute late this year and into 2021. So it's an ongoing process, and we don't see really a change in the environment there. It's -- there is a recognition that we need to continue moving forward in this restructuring. We're obviously doing it within the social environment that exists in Germany and also globally for our businesses, with the appropriate care and attention to the interests of those separating employees because we well understand the impact on families of our decisions, but also on the obligation of the management team to execute on our commitments, to hit our milestones on this restructuring and to achieve what we laid out last July, which is putting the company on a path to sustainable profitability.

And in your mind, the support of all of your stakeholders, including, obviously, those represented by the workers council remains in place, despite a worsening macro picture.

Yes, in the context of every negotiation of this type, which, naturally, the interests come to the table and seek to find a mutual acceptable conclusion.

Okay. So let's shift to a more positive topic. So Deutsche Bank has spoken a lot about client reengagement. Since the initial announcement of the restructuring plan last year, I think we saw more evidence of that than certainly we expected in the first quarter of the year. And I was just wondering whether you see that continuing what you attribute it or what you ascribe it to, what you attribute it to and what we should expect from this client reengagement front in the future over the course of this year.

So yes is the answer -- the short answer. I can confirm that, that client engagement and the metrics that we're looking at around that have remained strong. And in many ways, as we talked about it a little bit a few weeks ago, the crisis has represented an opportunity for us, but also for banks to -- as an industry, to engage, in some cases, reengage with clients. So if I go through the businesses quickly, the Corporate Bank, I think, has done an outstanding job supporting our corporate clients and the treasurers through the crisis and now into the post-immediate crisis period, whether that's on near-term financing requirement, whether it's on risk and risk hedging. Importantly, also in Germany, the access to the government-sponsored lending programs has been a way in which we've clearly supported and engaged our clients. Even in Trade Finance, by the way, we've seen an increase in our revenues from Trade Finance and the ability to work with clients to find structured solutions to their needs. If I move to the Investment Bank, as I mentioned earlier, we've seen a good engagement. We, at least, held market share in areas like FX and emerging markets, including, because of this good partnership between the Investment Bank and the Corporate Bank and the coverage model we have today. And we gain share in rates, and that was a development we started to see in the sort of late third and fourth quarter last year. That's continued then into 2020. And we've seen a really strong performance in our Corporate Finance business. We've -- origination advisory where we have regained our position as the leading Corporate Finance house in Germany, as a leading European and German debt house and, again, a high degree of interaction engagement with our clients as they manage their companies through this crisis environment, particularly on the financing side where we have performed very strongly. Then briefly, both DWS and our Private Bank have been there to support clients also in this time in the Private Bank by keeping a greater proportion of our distribution, of our branch network open in Germany, a higher degree of engagement on digital channels. And with DWS, whether that's being able to support liquidity requirements or investment opportunities in a crisis environment, I think, across all of those metrics, very gratifying levels of client engagement, which, of course, translates into revenues, both in Q1 and beyond.

So I recall that the conversation we had this time around last year, it was at our conference in Paris, so I mean, at that point in time, it all focused around the level of Deutsche Bank CDS, the funding costs, the restricted ability to engage with clients because the funding cost was so high. So I just want you to give -- I want to give you an opportunity to comment on this from 2 perspectives. So number one, how important is the fact that funding costs have normalized, if you want, or reduced substantially in your efforts to reengage with your clients? And then secondly, how should we think about funding cost evolution from here? It used to be the case that Deutsche Bank had the lowest funding cost of any major global bank, let alone any bank in Europe. I think, for a brief period of time, Deutsche Bank CDS dipped below those of the U.S. peers back in March, which was an interesting development. So how do you see that? How important is the lower funding cost for generating new business? Where does it go from here? When is your next credit rating review? And what are you expecting from that?

So look, I remember the conference well, and I think the distance traveled since -- in the past year has been remarkable, not to give oneself the scorecard, but I think we've come a long way. I'd say today that the CDS is no longer a barrier to us doing business in the markets part of our company, and that's a pleasing development, obviously. We've come much closer to peers over the past 12 months. But frankly, there's still some distance to go. But I would say it's no longer, if you like, a friction to doing business as it might have been in the second quarter of last year. Now I don't think we've yet gotten to the point where the ongoing improvement in our credit profile has provided the tailwind that we would hope to get over time. So I do think there's opportunity in terms of how clients engage with us, whether cleared or uncleared, the tenor and what have you. So I do see some additional opportunity, but it ceased to be a friction. I think that on the rating front, we obviously are unhappy with our ratings at BBB-, Baa3 in the nonpreferred category. It is just really not a place that a global bank should be. And so one of our sort of key objectives over the next several years has been to improve that rating and come more in line with peers. Frankly, I think we've demonstrated over time, and also in this crisis to date, that the balance sheet strength would support a rating higher than our current rating. And the problem that we're working to overcome is the one you addressed earlier, which is sustainable profitability, the pre-provision net revenue to absorb to be -- to provide more resilience, more loss absorption and we think we're on the right path to achieve that, and so put that more decisively behind us. In some ways, building on what Stuart talked about earlier, the crisis, although unwanted for all of us in a way, is an opportunity to prove that resilience earlier than any of us might have wanted. But we do feel that we're very much on the right path to that improvement. But it always takes time with ratings. Lastly, the funding cost, we have achieved some good funding cost improvements over the past 2 or 3 years. Our spreads, as you point out, have come in a little bit, begun to converge with our peers'. But also you've heard us talk about more efficiency in the balance sheet. So we've been able to bring down, overall, the unsecured debt stack and done a number of things around balance sheet usage that has been led by Dixit, but also in close partnership with the risk organization in our businesses. So you have seen a decline in our funding costs, and we'd expect to see more opportunity. But of course, some of the low-hanging fruit has now been picked.

But certainly, no negative surprises as far as you're concerned on the credit review side of things.

Well, look, it's always an evolving dialogue. I mean we've -- at the rating agencies, as a group, now reacted to the crisis environment and come out with their actions and outlook. But they're, in some ways, all waiting, as we all are, to see how deep and prolonged this crisis is and whether it sort of diverts banks like us from our strategic path. I think once we get through the crisis, once we demonstrate that we won't be diverted from the strategic path, I think we would go back to the path that we hoped we were on and expected to be on of steady improvement in ratings and funding costs over time.

Let's talk about capital now. So we covered credit and liquidity, but now solvency. So we had European supervisors, in line with what was taking place globally, lower the hurdles for capital, for all European banks, Deutsche Bank being no exception. I just want to ask you 2 questions. Number one, why is it not the right thing to do to lower the capital target that you as a management team are pursuing? So that would be question number one. And question number two, once we get through this crisis, do you expect the changes to capital hurdles to remain? Do you expect the supervisors to tighten the screws again and essentially demand that banks accumulate capital to back to where it was before the crisis?

So I think we may take that together a little bit. Let me start with the -- just building on my answer to the question about ratings, it's an important reason why we're not going to change our capital target of operating ideally at or above 12.5% because I think, while we're going through this restructuring, it remains the appropriate and prudent thing to do, to stay at that level and have an idiosyncratically strong balance sheet position. And so that's been a decision that we made, and Stuart and I've worked closely on. We did announce in late April that relative to our earlier targets of at least 12.5%, the current environment might drive us temporarily and modestly below that 12.5% level. But that hasn't changed our sort of medium-term targeting. We thought it was the right decision, but also the right to give ourselves a little bit more flexibility, but also the right decision to preserve our ratio target. If I go, then, to the greater leeway that's being offered to the banks, I'd say a couple of things. One is I think the ability to use buffers is obviously useful. But as I say, our ratings and the market confidence is critical for us. And so we are neither inclined to use that nor, frankly, based on what we see in our capital planning, is that necessary. As we pointed out, we think a fair amount of the COVID-related impacts on capital will be temporary, whether that's related to drawdowns on liquidity facilities, PruVal increases, market risk RWA increases as examples, over time, those things should wash back out of our capital calculation and that capital will be restored. We told the market that, that was about 40 basis points in Q1. We expect to see maybe 20 to 30 basis points additionally in Q2, and then that amount of capital probably come back into our ratio over time. Much as -- by the way, Q2 is the peak of our provisioning expectations. We'd also expect it to be the trough, if you like, of our capital. Going to the broader question about the regulatory actions, we see most of those actions, frankly, as being changes in timing, so I think useful to give the industry more breathing room, whether that's on capital impacts that we expected that had been built into our previous capital planning. TRIM is a good example of that. The delay in Basel III final framework implementation is another good example, potentially bringing forward the treatment of software intangibles. All of those things are good things in terms of breathing room, but we see them more to be changing the timing of the path that we have been on, rather than a substantive change in the level or, as we said, our targeting.

Yes, completely. Yes.

Fair enough. Okay. Let's change, tech, for the one last time. So at the time of the Deutsche Bank's AGM, Christian made a statement, which was very interesting, but obviously what jumped out is his expectation. I think you referred to it as an inevitability of an M&A wave in European banking. Can you add some color to that statement? I mean, did he mean Germany? Did he mean cross-border? How imminent is it? And most notably, why is it inevitable?

Well, look, I think we've been pretty consistent in our feelings and communication on this for a while, including, incidentally, that we felt we had, we referred to it as our homework to do. There's been a lot of work that we've needed to do in putting Deutsche Bank on the right -- in the right place and on the right path, whether it's sustainable profitability, as we talked about, whether it's the control investments, the regulatory remediation, the technology investments that we've been making. But all of those things, I think, have been improving our position, both in absolute and also relative terms. So there's homework to do, and we are hard at work doing that. But equally, I think the overall dynamic in the world around, for example, scale in banking, the need to spread investments over a large business, frankly, the relatively fragmented nature of European banking across the region and, certainly, even looking at the EU 27 going forward, it's a fragmented, on a relative basis, banking sector that'll have a hard time getting the economies of scale and on the same level as has been achieved in the U.S., absent some consolidations. Always hard to predict, so I don't want to over-step in terms of our expectation. It's always hard to predict when that will happen and what form, whether it'll be domestic, principally, or cross-border, principally. But the -- if you like, industrial rationale is there. And at some point, I think we'll go there. For now, we're very focused on completing that homework and putting ourselves in the strongest possible position to participate in that when the time comes.

I guess the reason why investors struggled a little bit with this -- with labeling the consolidation as inevitable is because, I mean, for a lack of better example, Deutsche Bank examined the scope to merge with one of your large competitors, domestically, last year. You've come to the conclusion at that point that it didn't make sense. And when investors think about M&A banking and they say, "Well, if the #1 and 2 bank in a large country can't find sufficient synergies to make the financials work, what kind of M&A would make sense?" So I guess that would be my question number one. What gives you the confidence that those synergies can be found and can justify transactions? And then secondly, I don't think Deutsche's the only bank that attempted an abundant -- or considered, rather, an abundant M&A scenario, domestically. There's some other examples as well. Do you think that those domestic mergers could be revisited in the current environment?

Look, I don't want to go into too much detail on this, but we did do the work last year to examine a domestic merger and decided that a combination of execution risks, execution costs, synergy potential and some of the strategic implications of focusing on one thing rather than the restructuring plan that we ultimately announced were the wrong decision for the company. And I think the passage of time and the execution over the past 3 or 4 quarters has demonstrated that those decisions were the right decisions. I don't think it necessarily pertains to any combination or every individual domestic market around Europe. But I also think -- and again, this crisis has been interesting in demonstrating -- I think, the banking business, as we all know, is going through a significant evolution, whether that's the use of technology, what it means to have distribution in one market versus over a broader geography, how you think about brands, how you think about the investment in risk capabilities. All of those things are in some degree of flux. I do think there's a significant amount of synergy potential that comes from removing duplicative infrastructure around a lot of those "what you think of as" the corporate infrastructure, rather than looking only at the branch base or the distribution side of the equation. And -- but everything is going to evolve and be, I think, quite idiosyncratic to individual combinations over time. Again, without wanting to emphasize too much, either the timing or the nature of it, but to give you a little bit of color of how, at least, I think about domestic versus cross-border and why there may be significant synergy potential on cross-border as well.

Okay. I think -- so James, we've done 45-odd minutes, but let's just try and squeeze in a few questions on the German domestic market because I know that you have a view there that you've talked about for a long time. So let me ask the question this way. James, so finally, on German banking, I think that the profitability profile of German banking remains the lowest amongst the large European banking markets. You've long been of a view, even before this public health crisis, that, that's changing that you've seen altered behavior by your domestic competitors, to some extent, falls through by the negative interest rate policy of the ECB, which is impacting these institutions particularly hard. You can have market share concentration through M&A. You can have market share concentration simply by outcompeting your domestic peers when you originate new business. And I wanted to ask you, is this front book market share concentration, in your mind, is it still happening? What is the shape of your domestic competitors? And after hearing the German banking is just on the cusp of changing for so many years, is this time really different in your view?

Yes, and I want to be tempered in my response to that very last question, but let me start with the scale we have in the domestic market. So with 19 million retail customers, we're the largest sort of single bank in the domestic market. DWS is the leading retail asset manager in Germany. Our Corporate Bank is extremely strong on the ground, serving not just large corporates, but also middle market and small corporations. So we think we're at a point where we do have scale in Germany, but there's a lot of work to do to enhance the profitability of that German franchise and, in particular, in retail. You'll recall that in the Investor Day -- Investor Meeting we had in December, the lion's share of the improvement in profitability in the Private Bank in Germany was an expense play. So we're not banking on significant growth in the franchise or an increase -- an improvement in the lending spreads, but feel like, again, going to this homework idea, we can do a lot to improve the profitability of our domestic retail franchise off our own bat. Does the crisis represent an opportunity competitively? I think, perhaps. I'd say it's early days to really make a judgment of that, but I think a combination of the crisis, of changes in regulation and the now very long, low or negative interest rate environment will obviously force change in the sector. I wouldn't want to get out ahead of how soon and how quickly that'll have an impact. Again, I think we've got to focus on maximizing our opportunity set. And if there is a change in the competitive landscape, that would be upside to our sort of base case planning.

Okay. James and Stuart, I think we've come to the end of this conversation. I certainly enjoyed it. I think that our investors will find it interesting as well. I would like to thank both of you again for joining us, for making the time. And I'm certainly looking forward to speaking to both of you soon. Thanks very much.