Deutsche Bank Aktiengesellschaft (DBK) Earnings Call Transcript & Summary

Good morning, and welcome to our third and final day of our 25th Annual European Financials Conference. We're looking forward to the sessions of today. There are certainly going to be a tilt towards capital markets' exposed institutions. We're going to start with James von Moltke, the CFO of Deutsche Bank. Afterwards, we're going to hear from the CEO of UBS; as well as our own Richard Gnodde, the CEO of Goldman Sachs Europe. And the day will complete with Minister [ Donohoe ], who is also the President of the Eurogroup. But I'm delighted that the opening session of this day, the final day of our conference, begins with James Von Moltke, the CFO of Deutsche Bank. James joined Deutsche Bank in his capacity in a very, very different time for Deutsche Bank. Certainly, the opportunity set and the structure of the group has changed a lot, James, since you joined.

So I want to ask you kind of the first question. You are 2 years into executing your new strategy, if you could help us take stock is the way you think Deutsche Bank is. And before you start answering, let me just say, thank you for taking the time this morning. You're always welcome at our conference, and I'm looking forward to today's session.

Thank you, Jernej. I appreciate it, and good morning to everyone. I'm delighted to be with you. Well, it's interesting. I have some nostalgia for this conference, because if I think to June of '18, that was when I made a presentation, you may remember, where we talked about the goal of unlocking the vicious circle that we had been in and turning it into a virtuous circle. And there were a number of elements that I laid out at that time that I thought were important to achieving that. But I also laid out the upside that I thought Deutsche Bank had if we were successful in achieving it. And I do think we've gotten to that point where the momentum is in our favor, some of which is being driven by the outside environment, if you like, and we can talk more about that. But a lot has been driven about the decisions that we've made, the execution on our strategies and really working hard to unlock some of the value in the company. So it's been -- that was 3 years ago now. And as you pointed out, 2 years ago, we announced what -- the restructuring, which included exiting secondary equities but really focusing on the core businesses that we identified at that time. And as we sit here today, it's been successful. And I think we're still in the relatively early stages of unlocking some of the potential that came with reversing the virtuous and opening up -- reversing the vicious and opening up a virtuous circle.

I remember that session well. It was in Paris, and I think 2 days after that session, there was a downgrade of a credit rating outlook. So how things..

It was -- actually, no. You're a year off. It was in Frankfurt. But you're right, the S&P action happened not long at around the same -- the S&P action happened in '18, and the conference is in '18. In '19, Paris was quite a different environment and was just before we announced the restructuring, and so the market was waiting to see what we were going to do. And again, I think if you look back on that history, the distance traveled is something that we're quite proud of in terms of what we've achieved but also humble about because we recognize that there's a lot of work still to do to achieve our targets, to unlock the potential of the company. But we think it is -- again, much of it's in our control. It's about continuing the execution discipline that really, I think, we began around that time of June '18 when we were together, and continuing with that execution discipline to focus on achieving financial targets, achieving nonfinancial that is transformation milestones, and at the same time, ensuring that we continue the investments that we'd be making in the control environment and regulatory remediation. And as we deliver all 3 of those things, I think by the end of next year, you'll see a very much transformed institution from where we were 3 years ago in that June of '18 conference.

Right. So part of that transformation or perhaps the consequence of that transformation [indiscernible] the reengagement. And I think it was pleasing to see, particularly in the first quarter that multiple quarters of market share loss seem to have reversed. Now it was an exceptionally strong quarter, but still -- but can I ask you also on the client reengagement front, is that something that was an event, i.e., at some point, clients realized you are exiting certain businesses but are fully committed to the rest? Or is that a process that continues?

I would say it's a process. It's very much a process. I actually think it began as early as the late third, early fourth quarter of 2019. So after we made the announcements and begun to execute on the new strategy and clients began to believe that we were really committed to the businesses that we've now reduced our perimeter to and that we could be consistent in serving them and supporting them in those businesses, you began to see a change in the tide. Since that time, it's been a steady increase of what we call reengagement over time. But it is -- but it's a constant flow. Literally, every few days, we'll get an e-mail about a client turning us on or a CSA that is amended to extend terms or RFP wins in our Corporate Bank. And so we've just seen a very steady movement of clients expressing confidence in the platform, the franchise, and appreciating the services that we offer, the way we do it, the people that serve them. And that's very gratifying. Again, on this virtuous circle argument, part of that is driven by things like our credit improvement. So the perception of the company around an improvement credit position obviously helps the FIC franchise. And that's very tangible in terms of, again, the trading terms that clients are comfortable working with us on. And that's an everyday occurrence that we see improvements there. And one of the things that I'm optimistic there about is, in many cases, we actually perform below our broker votes with clients. So we -- it's an existing client relationship. But as that confidence returns and our rating improves, we have [indiscernible] our broker vote and our actual revenue performance. But we also see that in the other businesses. In Origination & Advisory, market share gains really -- and especially in our product strengths. We see it in the Corporate Bank, winning and sometimes rewinning or winning back mandates that had gone away from us in prior years. And in the Private Bank, just steady growth in terms of loan originations and also investment products. And in the investment product, one of the, again, interesting and gratifying pieces of that is it's deposit conversion into investment products, and it's an area we think we're differentiated in, especially in our home market.

Great. James, one of the reasons why many investors -- well, not -- I wouldn't say a reason. So I think that the assessment of Deutsche Bank's home market, the attractiveness of the home market, is probably quite downbeat. I think Germany is generally perceived as being -- as having a market structure which just makes it very, very difficult for banks to make reasonable returns. But you've talked a lot about the changes in the environment and the changes in the pricing structure of some of the domestic products. Can I ask you, to what extent are you optimistic that this continues and Germany actually becomes a reasonable market from a profitability perspective?

Yes, yes. Well, it's an interesting question. Look, last year, let me just go back to 2020. It was one of the few years in which you could really see the virtues, not to overuse the word, of the German market. So one of the benefits of being so heavily weighted towards Germany, including, for example, in our loan portfolio, is that it's a very stable market from a credit perspective, very strong sovereign and what have you. So you did see that relative strength for us last year. As you say though, the market is very competitive. Spreads tend to be narrow, and there's a surplus of deposits looking to be put to work. And that deposit surplus is especially painful in the negative rate environment. So -- and structurally, as you know, it's an over-banked market for a variety of reasons. So there are those -- there are certainly those negatives. Do I see some positives in the outlook? Yes, I do. I think, first of all, interestingly, the spreads have held up in, for example, the mortgage product and unsecured credit -- unsecured consumer credit. So we've been watching that carefully to see whether the competition for assets would really flow through into further diminished asset pricing, and we haven't seen that so far. So I think that's encouraging. I think the second thing that is more of a secular thing is, with the negative deposit rates, you're absolutely seeing, if you like, a capitulation in the market on the part of savers finally to move out of deposit products into investment products. And as I said earlier, we think we're differentiated in the ability to serve that market demand and shift our deposit base into investment products and also win new clients. But secondly, in the competitive environment, obviously, that's affecting all of the other banks, including the savings and cooperative banks. So I think from a pricing perspective and especially a liability pricing perspective, and by the way, that's both on the consumer and personal banking world and on the small and commercial banking world, you're seeing more, I think, positive developments on -- in that area. And we'll see how the market evolves from here. So there are some strengths. And the pressures are still there, but I do see that those pressures may result in a more rational market over time. One thing I did want to mention, Jernej, is the recent court ruling. which I think investors have been interested in learning about. So there was a high court ruling in Germany around what is -- the acronym is AGB in German, but it stands for the general terms and conditions through which the banks engage with their clients. And at the end of the April, there was a surprising high court ruling essentially disallowing negative consent in those consumer contracts. That was a surprise to us and surprise to the industry because it overturned 2 lower court rulings that have been in our favor, and this was a Postbank case. And it overturned about 45 years of accepted practice or convention in the market. So it is a surprise to us. I wanted to mention what we currently see is the impact of that ruling. It's still, I have to say, early days. So we've been going through the work to assess the ruling, how to implement it and what the impacts are. We think there would be a modest look-back impact, which we are currently estimating we would take this quarter, that is Q2, of about EUR 100 million in provisions, if you like. That is highly subject to assumptions. But we think based on our historic experience, that is a reasonable place to start from. And then we would see what is a temporary revenue impact because essentially, for a period of time, we would have to suspend the fees we've been charging on these current account products until we can reinstate them based on, if you like, valid legal agreements. That will be, we think, a Q2 and a Q3 impact on revenues in each case of about, again, EUR 100 million. But we expect that by Q4, we will have reestablished those fee agreements and have restored, if you like, that lost revenue. So we see the lost revenue as temporary. As we said in the first quarter earnings call, we actually do see a silver lining to this event. While the event, we think, we would still sort of, as I say, express our surprise that we overturned a convention, not just in the banking industry, but more broadly. To your point about the structure of the German banking market, we think there's an opportunity here, frankly, to accelerate pricing change in the German banking market because it's a moment at which competitively, all of the banks are going to be needing to respond and readjust their pricing structures as a consequence of this decision. Very often, as you know, consumer protection actions tend to have sort of an odd effect of needing to formalize these relationships and ultimately accelerating pricing changes that were planned over time anyway.

James, so the EUR 100 million, this is the reversal of negative rates charged to date on these accounts?

So, right, it's account fees. So it's historical account fees over a look-back period based on customer claims.

Right. Okay. So if we take the -- so the second and the third question that we've covered so far, the second question was clients are reengaging on the capital market side of the bank. Market shares were going up. This was coupled with a very supportive revenue environment. On the German side or domestic side of the business, you outlined what you think is a positive structural shift. But then if we look perhaps a bit closer, so just the performance in the second quarter, I mean, yes, Q1 was great, EUR 3 billion of revenue. But yet, it felt that this was somewhat of a record quarter, with all the right tailwinds materializing at the right period of time. If you look at the performance of revenue in Q2, what are you able to tell us?

So look, you're right, the Q1, I think, was an outstanding quarter, I think, for us and for the industry with a lot of things working. We think that, again, the momentum, the trends that we've outlined remain in place, as we said, client reengagement focus on our core capabilities, products and what have you. And we think that what will emerge from that is more consistent performance and market share gains both in our FIC and Origination & Advisory business. As we've said, and I think a number of our peers have said, we would -- we did and we do expect markets to normalize this year in 2021 relative to the, let's say, the last 5 quarters, which have been extraordinarily favorable for the financial markets and, of course, issuance and trading activity. And we do see that taking place. So I would expect to see, relatively speaking, a normalized quarter in terms of the market's performance in this quarter. You can see that in some externally visible metrics like volatility and volumes that are out there. But we do think, as I say, this underlying trend we've had of an improving franchise is still present, and the confidence that we expressed back in April about that strategic direction and the performance that we were seeing and expected in the Investment Bank, that persists. So the outlook that we updated in April for the full year revenues in our Investment Bank was to be flat in '21 relative to 2020, which I think goes well beyond expectations late last year and into this year. That's based on an outstanding first quarter, as we mentioned, but then I think good but normalized performance in the second through fourth quarters. Ultimately, we're calling for -- as you'll recall in our December Investor Day, we talked about revenues, sustainable revenues in the Investment Bank of about EUR 8.5 billion, which was what we were looking for to support our financial targets and model for next year. And we do see that level of performance in our business and being sustainable. It requires that we earn something between EUR 2 billion and EUR 2.5 billion in revenues per quarter in the Investment Bank, and we think that's entirely achievable in normalized markets, bearing in mind, of course, normal seasonality. We see, I think, still ongoing good performance in the other 3 core businesses. Asset Management continues to perform. Financial markets, as you know, are still at elevated levels. And the underlying trends that we've been talking about for a while in the Corporate Bank and the Private Bank around just, if you like, volume drivers, new loan originations, transaction volumes, investment products, they've tended to continue as well into the second quarter.

So I just -- I want to go back actually to the previous -- to some extent, to the previous discussion that we have on this offsetting or the ability to offset interest rate headwinds and the revenue focus that you have. So you pointed out the development with the German courts and your response. But in general, are you still -- is Deutsche still able to adapt to change the structure or pricing structure of your liabilities and, in a sense, revenue targets for the Private Bank and the Corporate Bank of 2022? To what extent has this repricing made you more -- or the extent of repricing made you more or less comfortable in the ability of Deutsche Bank to hit our targets on those 2?

I'd say overwhelmingly more comfortable in our ability to put through pricing increases. As you've seen in our disclosures, we've now repriced balances representing about EUR 83 billion. So if you like, client accounts representing balances of EUR 83 billion of the total, there is still a lot more to do. I would say of that EUR 83 billion, as you've seen, it's been overwhelmingly in the Corporate Bank, but the experience in the Corporate Bank of putting through price changes has been to have less client attrition, more client acceptance of those changes as clients, frankly, just recognize that the environment that we're in negative rates, we simply cannot continue providing a direct subsidy to clients. We have, I think, a further distance and a greater opportunity then remaining in the Private Bank. And that goes back to the points I made earlier about the competitive environment. I think that -- I mean, we see more scope to be more aggressive, more quickly in pricing changes in our private banking franchise. And we believe the market will absorb that, in part given the competitive environment and in part given our experience so far in terms of client conversions. You've seen banks, like ourselves, gradually reduce the levels of, if you like, the thresholds or tiering if you -- at which clients get relief on negative rates. And the reaction has been, I think, consistently one of acceptance and very little sort of client reaction in terms of movement. And in fairness, banks have to be prepared to lose some clients in order to rationally price the use of the balance sheet, frankly, on both sides. But here, we're talking about the liability side.

Yes. James, so just a detour slightly or a follow-up, if you want. So I understand the -- on the retail banking side, you were talking about the German banks, your domestic competitors changing their approach to allowing for the market pricing to move favorably in your direction, if you want. On the corporate side of the equation, you said that you have to accept certain client loss if it materializes. Who is your -- who is Deutsche Bank's main competitor in corporate banking in Germany today? Are those German institutions or larger European institutions?

A mix of both. There are absolutely foreign banks participating in the German commercial market, the small- and medium-sized enterprise market, and there are a number of domestic competitors. So I think of it as a competitive market, but one in which we're very well placed. Stefan Hoops and his team have been -- now that it's an independent unit, if you like, has its own identity, its own strategy, business plan, technology budget. They are much more nimble, if you like, in going to market, articulating strategies and executing on them. And I think there's tremendous opportunity for us in that space in our home market. As you know, we had, I think, strategically somewhat neglected the SME market in Germany 20 years ago. And that's something we're still sort of rebuilding from. But it means that there's untapped opportunity. And remember, to your point, the product set that we offer among German banks is now nearly unique. And clearly, our capabilities, the more we're able to bring them together, in particular, deliver to clients over electronic platforms, I think we're very well positioned to capture share and growth opportunities in that market.

Okay. So now I'd like to touch on 2 topics, which are regulatory/supervisory-related. The first one relates to the various levies that the European banks have to pay up, Deutsche Bank being no exception; and the second one is on the EBA test. So the first one on the levy. So we hosted the Chairman of SRB yesterday. And I would like to contextualize this question by contrasting the comments from the SRB with the comments from the industry, right? So the industry obviously thinks that the SRB bucket is probably full that, that capital is not used productively. I think that Deutsche Bank has been vocal on that issue, both as an institution and through the association of your banks. What is the outlook here? I mean, are you hopeful that the SRB or the contribution to the SRF tails off in the near future? Could that be a substantial impact on your P&L, on your bottom line?

Look, to begin with, the program is -- by its terms, should end in 2024. I don't mean end, but the creation of the bucket, and it should step back significantly from '24. So we do see it as a transitory cost, and that partially explains why we think that there's -- as we said in Q1, where we have accessions in the SRF contribution relative to our expectations, it doesn't make sense to offset them with other expense savings because it's a transitory cost, and we might be making poor, long-term decisions for a short-term cost. Am I optimistic that there'll be a change next year? I'd say, decreasingly optimistic. The feedback we've had so far is the official sector in various sort of places understands the intellectual arguments that we have made around, as an industry, around this levy. But I don't think there's a political consensus around making a change to that levy. For a variety of reasons, it's just very hard to unlock. As you know, the industry's arguments, I think, are good that the levy is skewed, both geographically and from a business model perspective. And the challenge is that it's really a solvency. A resolution backstop is a solvency-driven, not a liquidity-driven sort of mechanism, and hence, we have argued against the increase in the target level. So as I sit here today, I'm less and less optimistic that there'll be a change in the near term, but that doesn't stop us from continuing to make our arguments.

Do you think the industry has a chance of being successful in shortening that time line?

Again, less and less optimistic, but we'll keep trying. We think it's a considerable burden. And in our case, we are among the more vocal because it represents an outsized component of, if you like, our return and earnings picture. Relative to the size of the bank, we've been shrinking the bank now for several years, but the SRF has been flat and potentially increasing. And that's an odd circumstance to be in.

Yes. Okay. And now I want to shift to the European Banking Authority stress test and perhaps link it into Deutsche Bank's own expectations about loan loss provision evolution over the course of this year and in the future or perhaps contrast it, rather. So we've just gone through the worst economic shock that any of us probably can remember. Yes, the bounce back has been dynamic, and it continues, and that's good, but 2020 was a year of record GDP decline. Now here we are, and European banks are being stress tested, Deutsche Bank being no exception for various scenarios by the EBA. One of them assumes a continuation of shrinkage. So we are stress testing or we're stressing what was a period of extreme stress already. What is your expectation for the EBA test? Number one. Number two, how would you interpret the results? What do they mean to you? I mean, we understand they're not binding. They don't feed in -- directly into the SSM assessment process, and yet they inform it qualitatively, if nothing less. And in general, what is your view of the setup of this test? What is your view on how and if it should change in the future?

Sure. Lots to talk about there. Well, let's start with the scenario. So briefly, we think that the baseline scenario is pretty much in line with consensus, so no real surprise on the baseline scenario. But the severe -- so the scenario is extremely severe. I mean, if I look at the -- as you say, it steps off from a historic contraction and then continues for 3 years. It's a -- in terms of the, if you like, the confidence interval, we think it's at the very far end of likely events. And therefore, you would expect the outcomes to be severe. Also, interest rates in this scenario, unlike previous years, stay low, and that, of course, is a burden on the bank's PPNR. So I would expect the outcomes of this test to be relatively severe on the industry broadly. Obviously, I don't want to speak to our own results. I think one has to remember, going to methodology, that it is an idiosyncratic test and process in terms of step-off points, some of the methodology decisions or approaches that are taken and what have you. So while I think it's obviously a useful exercise for the industry to do, when we learn every year, I think it's a good engagement with our supervisors and regulators. It will always be somewhat in contrast to a real-world stress. As we saw incidentally last year, the -- I remember last year, analysts and investors were wanting to compare, use the stress test from '18 to try to draw some conclusions about the 2020 stress. And of course, it was impossible to do because every stress is going to be somewhat idiosyncratic. So I think one needs to be careful in assessing those results, how to interpret them, whether on a methodology or a scenario level. To your point about qualitative, that's an area where we've made real investments to try to make sure that our qualitative capabilities are leading practice. And so we're continuing that process and investing. Finally, to the question of how it will inform the ultimate SREP assessment, I'd say it's very hard to tell. I think there are a lot of moving parts this year in terms of the SREP outcomes, one of which is the horizontal view of what comes out of the stress test. But then everything else that goes into the supervisor's evaluations in SREP. So we're working hard on a wide range of the -- of our improvements in the bank that we hope will be accounted for as well or taken into account in this SREP outcome alongside the stress test results.

When you look at the result of the test, what is -- what has more information value for you? The actual post-stress capital ratio, the relative rank of Deutsche Bank versus other institutions? What will you look?

What's valuable to us is observing the drawdown, what drives the capitalization and what we learned from that in a scenario. And so actually, there's a real dichotomy, Jernej, it's a great question, dichotomy between what the bank learns and the dialogue with supervisor, whereas the outside world tends to get only a relatively sort of crude ranking of outcomes. And so that divergence can be quite significant.

Yes. So now I want to -- I mean, I'd like to move on and contrast what is a theoretical exercise of applying stress and then what is your prediction of the most realistic P&L charge for credit losses over the course of this year. And here, I'd like to go back to last year. I recall very clearly the 2 of us having this discussion exactly 12 months ago, I thought that you were wildly optimistic when you made the predictions on the credit loss charges for 2020 at a point in time. I think Deutsche Bank was pretty much alone in suggesting that the second half credit charges might be lower than what you did in the first half of the year. And I just want to acknowledge that. Now the guidance for this year, I believe, is 20 -- 25 bps. What is the credit evolution at this point? We get it. The economy is better than we thought, hence, credit losses are better than we thought. The policy response has done its job. Are you concerned that there is a risk of a cliff edge if policy support is withdrawn?

We're watching it carefully. Look, we're very -- we're very mindful that there are downside risks in the economy and the financial markets, as much as we don't see that today, either in our credit portfolio or in the financial markets. Frankly, Jernej, to your point, the outlook [ has ] improved since we last gave guidance on credit loss provisions. You saw that the Q1 for us came in very low. It was low, I think, across the industry, including releases from Stages 1 and 2. At this point, we continue to see quite strong credit. And so it's probably continuing to evolve better than our expectations that we had coming into the year and better even that we had in April after Q1. At this point for Q2, we probably expect the Stage 3 events or impairment items to be more or less in line, probably slightly lower than Q1. So relatively modest and stable Stage 3 events. And it's too early to say what the Stages 1 and 2 will be. You're kind, very gracious on your comments, where we do intend to continue to be prudent in our provisioning to make sure that we are -- we're adequately provisioned. We see the downside risks. As we've talked about, there are portfolios that we're looking very carefully at consumer portfolios that still benefit from extraordinary support in moratoria, commercial real estate, for us, in particular, as an exposure, aviation. But as we see it today, the development in those portfolios remains better than our expectations.

James, help us just conceptually contextualize this. So the worst economic shock, as we all remember in 2020, economy shut down for months on end. Yes, policy response, we understand that. But can this be [ tricky ]? I mean, do you ever -- is there a probability that this is too good to be true? And the strength of European bank's balance sheets in general and Deutsche Bank's as well turns out to be -- the assessment of the strength of those balance sheets today turns out to be more too optimistic? I mean, how certain are you that this continues? You were right in your predictions, but you have to acknowledge that at the time and even today, those predictions remain -- were and will remain counterintuitive, right?

Yes. But it's what we see in our portfolio. So we're obviously pleased that our prediction turned out to be true at 41 basis points. It was basically in the middle of the range we gave last year. This year, we've given a range of 25 basis points. And at this point, we'd be -- the balance of probabilities as we sit here today is that we will outperform, i.e., improve on that 25 basis point. Mindful as we are of the downside risks, I don't think it is too good to be true, Jernej.

Good for everybody, not just for the Deutsche Bank. Okay. So I think we have 7 minutes left in this conversation. There's one topic I would like to cover. It relates to capital, point #1, and then within that to potential for capital return to shareholders. So I think you've said -- Deutsche Bank has said that you do expect some regulatory inflation on RWAs to impact your core Tier 1 ratio in Q2. So I'd like you to remind us what you think that, that impact will be and how you see the evolution of core Tier 1 beyond that. And then within that, I mean, Deutsche Bank is not known for being a dividend-paying stock, or at least hasn't been for a multiyear period of time. And yet you raised the prospect of not just dividends for which you've accrued in Q1, but also the prospect of share repurchases at some further point out in the future. And then -- so after we cover the core Tier 1 levels, if you could comment on that as well.

Sure. So you're absolutely right. So core Tier 1 was 13.7% at the end of the last quarter. We called for about 80 basis points of regulatory inflation. We still see that coming. There may be a little bit of slippage into Q3 of certain of the letters and implementation of these changes driven by, again, the supervisory side. But I don't think that changes the direction of travel, which is from the 13.7%, 13.8% range down to about 13% in the CET1 level. That is, in a sense, an encouraging development because from my perspective, it moves the biggest slug of the remaining reg inflation until '24 and then '28 to put it behind us, and we're in a more, if you like, stable capital management world. And then our hope is to continue in our -- and what we're working towards is to continue to manage capital in the high 12s, low 13s going forward, allowing for some balance sheet growth and client -- investor distributions on the basis of internal capital generation. To your question about dividends and repurchases, absolutely, we've said in July '19, and I think the market somewhat discounted this part of our strategy commitments, that we intended to return EUR 5 billion of capital to investors starting next year. So after a 2-year capital dividend hiatus that we will return to distributions in '22. It's absolutely our intention. As you say, Q1, we put aside, on a technical basis, EUR 300 million that's outside of our capital ratios for distributions next year. Our hope is that we'll continue to accrue based on earnings in the remaining 3 quarters of this year. That will put us in a good position to resume distributions. Too early to say what the level or the mix of distributions will be, but we intend to begin in earnest on that EUR 5 billion return in '22.

Okay. Which then brings us to a last topic. It's now -- by now, it's almost a tradition, I think. So we had the letter to shareholders released recently of Deutsche Bank, and it makes an explicit reference to the inevitability of consolidation in European banking and how Deutsche Bank would like to participate in that. Now I'd like to make 2 points. One, you have approached now a couple of years ago one of your domestic competitors to explore a potential combination. I recall very clearly at the time, when the talks broke off, that the narrative was, it's not that we don't see a strategic rationale here, but we just don't see the financial rationale. Since then, share prices have moved substantially in opposite direction. So that financial rationale, I think, is better. So I don't want to ask you a specific question, but I'd like to ask you a general question. Deutsche Bank now has a market cap. It has a market cap that allows you to be flexible on M&A, both domestically and cross-border. Is that a realistic option for Deutsche? So when you say you want to participate in European consolidation, what time line do you have in mind? And conceptually, what kind of transactions do you have in mind?

Look, it's really impossible to talk about time lines because there are so many sort of uncertainties attached to timing. But I think as Christian said very clearly at the AGM, it's something that we see in the future, as part of our future. And part of, I think, the benefit of what we've been working on now for several years, as you point out, not just the stock price, but the firm's preparedness to enter into strategic transactions that are beneficial both to our overall franchise, to our ability to serve clients and importantly, to shareholders and the stock price. I think that's improving over time. We've said also consistently over the years, our focus has been on doing our homework to prepare the company and put us in a better footing. And that homework is a lot of things. It's obviously meeting the financial targets. With the financial targets should come an improved currency and market capitalization. But as we do all of that, we are extremely mindful of the work that still lies ahead. I talked about the transformation work that still lies ahead. We're humble about that work effort over the next, call it, 4 to 6 quarters. But we also talk about the control remediation efforts that we have underway, in particular, in anti-financial crime. We know we've still got work to do there. And we're going to ensure that we deliver on our commitments. We will not sacrifice the control investments for financial targets, but we will do everything in management's power to be able to balance the need to deliver returns for investments with those control investments and requirements. But I think all of those things, more broadly as well, the technology platforms we're building, risk and finance capabilities, frontline product capabilities, executing on strategies, these are all things that make one -- that enable one ultimately to enter into strategic combinations. To your question about the nature of those combinations, very hard to assess. Again, as much as time lines are hard to speculate on, the right combination, the right strategic path for us is equally hard. I think we're -- we have built 4, I think, very competitive business lines. In our essence, the restructuring we announced in 2019. And I think in each of those 4 areas, we have opportunities to enhance our platform and our capabilities. And so we will assess the opportunities as they come.

Excellent. James, we've come to the end of our session. I'd like to thank you again for taking the time to be here with us today, for agreeing to open our third day of our conference. I certainly hope to see you next year, but I also hope to see you in person soon, so we can do away with this virtual events. But James, thank you very much, and thanks for joining us.

Thank you, Jernej. Great to see you. Thank you for having me.

Speak to you soon.