Deutsche Bank Aktiengesellschaft (DBK) Earnings Call Transcript & Summary

[Audio Gap] session with Deutsche Bank. As with most of the other sessions in here, we've got some questions that I'll run through with James, and then we'll have plenty of time for questions from you guys towards later on in the session. So with that, welcome back, James. It's a pleasure to have you back with us again. Thank you.

Thank you, Rohith. Thank you for hosting us.

Always a pleasure.

I guess maybe if we could just start with a recap. So you've recently reiterated your 10% RoTE and EUR 8 billion in capital return commitment by 2025. So where are we so far in that journey? And what do you need to do to deliver both of those? And how are you managing the business to do that?

Yes. So thanks for the question, and happy to give sort of the overview. So the targets, I'll go through them one by one. So we said, this is in March of 2021 -- 2022, I'm sorry, we said a 3.5% to 4.5% growth -- compound annual growth rate target from '21, a 62.5% or better cost/income ratio target, producing an RoTE of better than 10%. And our distribution path was essentially 50% increase per year in dividends, also share repurchases that would cumulatively pay out EUR 8 billion in respect of the financial years to 2025, meaning including the dividend paid in '26 and the buyback. And we're absolutely on track or better on all of those things. I'll take them one by one. First of all, the compound annual growth rate in revenues so far since '21 to June of this year is 7.5%, so well ahead of what we thought. And of course, interest rates, relative to what we were looking at in March of 2022, has been a big driver of performance since that time. Interestingly, interest rates just keeps giving. Part of that, as you've heard, I think, from some of our competitors, has been beta assumptions in the model simply didn't capture how this cycle has progressed. And we're continuing to see more support from the interest environment than we expected at the time. And there's an interesting dynamic at this point as to how -- while we do expect betas to begin to converge in our deposit books still over the next, say, 9 months, 12 months, interestingly, we may be bridging a little bit better to the point where some of our long-term hedges come through. So interest rates has been a driver of that compound annual growth rate outperformance. What we're now waiting for and believe is going to happen is a resurgence of noninterest revenues. And we think at Deutsche Bank, we're well-positioned. Our business models are geared in the businesses to that. And I think the businesses are performing from what we can see extremely well against the client opportunity, the market opportunity that's out there. So we're feeling good on the revenue side. And as we started to say in the first quarter results, we're working on strategies to try to outperform, hopefully, considerably outperform that revenue path. On expenses, we've talked about initially as an expense takeout of about EUR 2 billion based on initiatives that were underway or planned if you take the clock back to March of 2022. And we've now made considerable progress on those initiatives. So we're -- and we've raised the target now to EUR 2.5 billion, recognizing that there's more investments that we see the opportunity for, but also that inflation has been more significant than we thought along with the interest rate environment back in March of '22. And so we need to work harder to stand still. And basically, the message back in March of '22 was we're going to be working hard to keep costs flat over that period of years, which produces the cost/income ratio and, ultimately, the return on tangible equity. So we feel good. We've now -- we talked about in the second quarter, we've now taken actions, apart from raising the target, we've now taken and completed actions that will deliver about EUR 1 billion of the EUR 2.5 billion, and there are a whole raft of initiatives underway that we're tracking very carefully. As you've seen, we've now sort of further expanded Rebecca Short's responsibilities, my colleague, to be just every day focused on executing on those initiatives, and we can go into what some of those were. So a lot of work to do on the expense side, but we're making really good progress on it. On the capital side, I have to say, I'm probably as comfortable about our capital trajectory as I've been since I've been in this role. Because as you know, when you follow this journey for us, whether it's significant restructuring and transformation charges or changes from models in TRIM or the most recent IMI or the [ ERMA ] works that we've been doing with the ECB and then Basel III, we've been sort of climbing this mountain of demands on our capital. And we now see the end of that process or at least clear predictability as to what the outcomes will be. And as often happens, we're now seeing the sort of the benefit of more ability to optimize better models, better data and working through how we ameliorate the capital position. We talked in Q1 about seeing now a path to taking EUR 15 billion to EUR 20 billion out of what we thought was there before in terms of inflation and impact of the various items. So as we now look to the future, I can tell you, I have more confidence than I've had for a very long time about the capital path that lies ahead, our ability to deliver on that target as well. So if I put all that together, Rohith, we're feeling good about our trajectory and all of the steps we've been taking to put ourselves on this trajectory.

And then if we think about the businesses that make up the group, how do you feel about the current capital allocation across the businesses? And do you expect all of them to make that 10% RoTE hurdle?

Yes. Well, look, first of all, one of the challenges that we know we faced and we had the feedback from investors, it was the business mix that the firm had. So first of all, it wasn't profitable enough, wasn't sustainably profitable and the business mix was viewed to be too heavy in its balance towards the Investment Bank. At this point, if you look at our revenues in the first half of this year, now we -- let me just preface by saying we want all of our businesses to thrive, but that business mix has changed. The Investment Bank at this point is just a bit over 1/3 of the revenues in the first half, which we know is seasonally the strongest for Investment Banking. Our Private Bank is just under 1/3 of revenues in the group. Our Corporate Bank is 25% and growing quickly, and then the Asset Management is the rest. So between the 2 of them, they make up the other 1/3. So a business mix that's quite different from several years ago. And within the Investment Bank, our view is the market doesn't fully understand how, and we need to do a better job explaining, how we make money in the Investment Bank and how it's quite different from 5 or 10 years ago. You asked though about capital allocation. We've been looking at it carefully. It was, of course, part of our -- the restructuring that we began in '19 was trying to take down the total capital allocation we had to the -- what I'll call those wholesale businesses, which through the CRU was actually significantly impacted. But essentially, we're working in a world where we want to limit new capital going into the Investment Bank, obviously continue to serve clients, optimize the capital we have. And of course, there's some absorption of reg inflation that happens. But in a sense, the Investment Bank works with constraints and seeks to optimize. And then in the Private and Corporate Banks, within the risk appetite that we set for those businesses, we want them to grow in line with the customer demand and the opportunities in the market. So the capital allocation direction is towards those 2 businesses. There's a little bit that the -- that our Asset Management business gets in seed capital and other things that it needs to support its businesses, but we're operating in that world. And absolutely, we want -- at the business segment level, we want all of the businesses to be exceeding the group's cost of capital and more. And what we've been spending a lot of time in the past couple of years is going through the individual sub-portfolio businesses and getting much more refined on the tools and the discipline that we're applying to those -- to the businesses at that level. You've seen us take some actions, announced actions to sort of address sub hurdle portfolios. So for example, pull back on mortgage lending, worked on our trade finance portfolios, that's another area where we have sort of operating sub hurdle. But across the bank, a much sort of sharper focus on ensuring that all of the businesses, certainly at the top level, are doing better than the cost of capital.

And then just to come back to the commentary around the rate environment and the interest income. So I guess you started to -- well, you mentioned the beta increase you're anticipating. Can you scale that for us and also the interaction with the hedging?

It's hard to do, to be honest, and the reason I say that is not to back away from providing the guidance, but we've been wrong. So had I given you the numbers we thought, whatever, December of last year or in March or in June, I would have been wrong and to the conservative side to scale it. There is a percentage of the run rate. So if you take the run rate of net interest income in the second quarter, which annualizes to about EUR 14.4 billion, call it EUR 14.5 billion, there is some amount of that, that I would see going away in the 3 quarters to the middle of next year. And that's particularly in the Corporate Bank, much less in the Private Bank. Private Bank, just the sensitivity, I think, to the betas, the fact that it's euro -- it's an overwhelmingly euro-denominated book and the point in time when those -- when the hedges start to flow through, we can potentially bridge it better. I think in the Corporate Bank, some amount of retracement. But interestingly, in the second half of next year, you already have the 2021 hedges rolling off. So a lot of that book is hedged over 3 years. So we get the -- begin to get the lift of the roll-off of hedges already in the second half of next year. Hard to scale, and the honest truth is because we've been wrong, and I'd like to think that we're still conservative on our views.

And that uncertainty or being wrong, do you think that's a -- is that a timing thing? Or is it a difference in the end point in terms of where the cumulative [ betas are ] when it gets to?

Well, if you talk to our businesses, they think it's a timing thing. And the reason -- the laws of competition haven't been suspended. I mean there is pressure from clients to -- naturally, the corporate treasurers seeking to maximize the return on their liquidity books. We think there may be a decision at some point to term out to a greater extent that has taken place so far. Again, you're working in an environment where you're going to have to respond to pricing actions that some of your competitors might take in that business. So hard really to judge what happens. But the fact that the rate environment has continued to move up at least this week in the euro may continue to do so in the dollar so that there's this sort of catch-up period. The fact that I think the industry has been disciplined in how it's managed pricing, the fact that we sort of, for the wrong reasons, built the very granular pricing capabilities with our clients when we were talking about passing on negative rates means that, that granularity of price -- of client pricing is working in a beneficial way in this cycle. All of those things are different to what the market -- what the models might have predicted and, hence, the greater retention. So those are the dynamics that we're seeing. But -- and remember also, and I suspect you've heard this from others, the convergence to models in dollars has been more fulsome. So there's also a very different dynamic in dollar versus euro that -- where we've seen more of that pressure.

And then moving on from net interest income, particularly thinking about the Corporate Bank and Private Bank. Near term, do you see much credit demand? And longer term, you mentioned, I guess, at the start about the range of growth drivers you have outside net interest income. Can you talk about those in the context of those 2 businesses?

Sure, I'm happy to. So -- and I'll start with the Corporate Bank again. About a year ago, we started to see that slowdown, and you could see in our published accounts, slowdown in loan growth from sort of a high point of -- in the middle of last year, we've come down in our total loan book by a little bit over EUR 10 billion. Of that, by the way, half is FX. So it's EUR 5 billion on a balance that now has gotten to around a little over EUR 120 billion. So there's been a decline. And that's been -- there had been a decline in demand, and we haven't yet seen an inflection point, but we expect that that's coming now. It may not be the next quarter, but we would hope to see some loan growth into the year-end. But what we're seeing is an increase that we expect in demand just as the investment decisions that corporates have made in the past few years are beginning now to roll through actual expenditure. And you see a lot of that. So we see a pipeline, in a sense, developing. You read the paper, some of these big investments, say, in chips going into Germany, the auto industry, supply chain changes, we're seeing that in our business. We're working with clients to prepare. And so we think starting in '24 and beyond, we'll see some lasting sort of upside from that. We've also been quite aggressive on positioning the portfolio ourselves. So I mentioned sub hurdle lending. You've seen that in both pricing and sort of selection in, for example, trade finance. And so some of it is actions that we've taken on our own and less demand. But related to your question, we do see an inflection point coming, we'd expect that to pick up, but the last year has been going in the wrong direction. On the fee income side, that's what we're also investing to produce. So take some of the fee income businesses, our sub-custody business is getting momentum, had been going in the wrong direction for some time, that's encouraging. We've really put ourselves in documentary custody, trust and agency services and what have you in a really good place, depositary receipts. These are sometimes considered boring businesses. But as the markets consolidated and, frankly, just as activity increases, it comes to us. And these are also capital-light businesses. So one piece of the strategy shift that we and others are making is to the capital-light side of the equation, we think we're well equipped, well positioned to benefit from that. So lots of good things happening in the Corporate Bank beyond interest rates that we think will show through in the coming years. In Private Bank, you may remember, I think I was sitting sort of on this stage a few years ago explaining quarter after quarter or year after year, there was good stuff going on underneath the surface in the Private Bank, but you couldn't see it because every year, we had the runoff of old hedges that we were fighting through sort of EUR 100 million, EUR 200 million of interest rate-related pressure, and that's now gone in the other direction. But we still have this underlying growth. You will have seen that we had inflows in total in the first half across Asset Management and the Private Bank of EUR 28 billion of AUM. So good growth there, frankly, not entirely in line with the market, sort of ahead of what we see as the market is doing in terms of assets flowing into those businesses. And we've also been working through some sort of, I call them, idiosyncratic headwinds in the first half of this year in the Private Bank, had to do with some changes in law about commissions and some other things, but there's momentum there as well. So that's why we think there's pivot to better growth in nonoperating -- noninterest income will benefit those 2 businesses, and we're trying to position them to really to leverage that. And just as an aside, we also think there's momentum of that nature in our Corporate Finance business, as we call Origination & Advisory. So underwriting, M&A, leverage lending, those are businesses that have gone through now a sort of a 6-quarter hiatus in terms of activity, and you're seeing, I think, quite clearly that activity coming back. So reasons for optimism, I think, in -- across several of the businesses in that and the growth drivers.

Which is my next question, actually. So you had flagged in Q2 that you felt that momentum was coming back. It sounds like your experience in September has been consistent with that. I guess what we've heard from some of the other banks recently is that may not translate into fees near term. It's more a longer-term thing or next -- a '24 thing rather than a '23 things. Is that -- would that be consistent with your...

'24 thing, yes, I think you'll probably start to see it in the fourth quarter because by the fourth -- fourth quarter of last year, we're already sort of in that period. But the third quarter, as you've seen, just in terms of deal volume or wallet, still significantly down. So let me start. Fabrizio, I think, said last year -- last week, our -- we think the revenues -- the consensus is about right in revenues for the Investment Bank for this quarter.

Q3, right.

Consensus -- and within that, what you do have is a normalization of the FIC businesses, Fixed Income & Currencies, relative to a really sort of strong performance last year with a variety of things going on. Within that normalization, actually, there's also a positive message that we have, which is this year has been characterized by just a healthy, solid flow environment even as volatility in some of the places like FX was lower than -- a lot lower than last year and less in the way of lumpy transactions, structured transactions this year than we saw last year. So to the extent that we've actually preserved a good level of activity in this normalization is one reason that we're encouraged about the picture there in the markets business. And I think as another thing to point out, just these businesses are very different from the past in terms of the risk profile and how it's managed and what have you in that markets business. The lending side, the financing side is strong in terms of the opportunity there. There is -- again, there's just a constraint that we put on a business selection from capital. In Origination & Advisory, one thing that's a little different to us than some of our peer disclosures is leveraged debt capital markets marks that we went through last year, particularly in the second and third quarters, we run through our debt capital markets line. So the non-repeat of that is helping us, and therefore, you'll see Origination & Advisory up in a down market like in Q2, somewhat driven by that non-repetition. Your question, though, sort of the green shoots debate, we absolutely see it. You're seeing it, and the equity market is always a good indicator of animal spirits. I think the banks are talking about the pipelines and M&A. So we think all of those things are coming back in a healthy way. And what I find especially sort of encouraging about it is this repricing that had to take place as the rate environment changes so dramatically, and that's a natural part of how the capital markets function. You'll have a period of time where everybody steps back, waits to see what's going to happen with rates, what's going to happen with absolute valuations. And when they sort of see more clearly what the future, they start to transact again and, in many cases, have to transact because there's just a refinancing pipeline and things that need to get done. So that's what we're seeing, and I would expect that to play out over the coming quarters.

And then -- so that's the short term. When we think a bit longer term, how do you feel about the revenue pool for investment banking globally?

Look, I think there are just underlying drivers that move it out. Were there periods of time where we had secular declines for one reason or another? Yes. And that was particularly true if you kind of wind the clock back to 2015, let's say, in the fixed income businesses, this idea that it was on a steady decline. We don't see that today. We -- the world is growing its indebtedness, the need to hedge risks, the need to finance activities, especially these days with big investment requirements that governments have and corporates have in transition to sustainability investments, in digitalization, supply chains, all the things that are happening require financing. And with that financing comes the investor activity, the hedging and all those things. So I think that in a secular sense, that is going up. The same is true, by the way, of corporate finance wallets. There's always a little bit of margin compression, by the way, in both of those 2 businesses. But in essence, corporate finance activities tends to follow, slightly outpace the economic growth. And I don't see a reason why that would necessarily change.

And when you think about your market share opportunities, is that particularly in Origination & Advisory where you've been certainly been hiring recently?

Yes. Look, I want to start by saying, we intend to be disciplined here and not retrace the strategies of the past. We think we've got a clear client proposition we refer to as the Global Hausbank and that we have a unique position in that world. I know unique is a horribly overused world -- word, but in the European Union, we're one of a small number of banks that has a set of capabilities that we think our governments, our corporations, our investors need. We're the only one of those that is really still a network bank globally, which, in particular, supports our Corporate Bank activities, which again puts us in a slightly unique position. And our Corporate Finance capabilities absolutely fit with that and support that. We do see and we saw an opportunity this year, in some respects, opportunistically to accelerate some of our investments there and reposition. But it is in the context of this Global Hausbank idea where we think we can be especially relevant to clients. But we were sort of under-penetrating, if you like, our client base in some of the products like M&A advice, equity underwriting, debt underwriting and what have you. And so we -- and made a [ treated ] market share for quite a period of time. Our market share today is around 2% of that wallet. And I mean I would argue that that's not necessarily a natural place to be. It's not that we have a birth right, but we can work, we can invest, we can engage with clients to, I think, do more with them within -- or mostly within our existing footprint and definitely within our risk appetite. So we feel very confident about that, but it's a disciplined strategy that's taking advantage of opportunities that are presenting themselves in the marketplace and an environment where we're investing, we think, in the down period of the market, which hopefully we'll be able to enjoy more of the benefits when the market comes back.

And then IB profitability, you've talked -- so you're flagging some revenue growth, but no additional capital to the IB. And then how you're managing the cost base within that?

Look, we think we've made, in the IB, real progress already in the cost base, which isn't to say there's more to do -- there's not more to do, in particular, I think slimming down processes, continuing investments in technology. And by the way, Fabrizio will often talk about front to back. And it's not just Fabrizio, all of us believe in this, but we still haven't really gained the efficiencies in my area and in the risk area of how we manage our data and our systems in a front-to-back way. So there's work that we can continue to do to optimize. But if we look, we've done a fair amount of work on benchmarking recently. We look at, if you like, the front-office costs in the Investment Bank. And we think we're pretty much in line with our peers, and we have sort of a revenue productivity in most areas that is also in line with our peers. It doesn't mean we're not going to keep working to optimize and build on that. And as I say, a lot of opportunities still on the cost side, but more in the middle to back, if you like, and that's something we'll continue to work on. And just one thing to make sure we're clear, capital allocations move around very slowly because they ultimately are the relative growth rates of the businesses and management steering, but they also include the relative impact of reg inflation. So we sort of treat reg inflation as something that it's hard to offset without damaging the business. So I don't want to leave that unsaid.

And so broadening out the cost discussion, you talked about the fact that you've increased the gross cost reduction targets given the higher inflationary environment. There are a number of other pressures on the cost base, so the control environment has been a sort of repeated issue, if you like. There's investment in the business to improve efficiency and improve growth. So could you expand a little bit on your earlier comments in terms of how you're managing the overall group's cost base to keep that relatively...

Sure. Well, look, first of all, we understand that it's one thing that the market is looking for us to really demonstrate. And so it's front and center in terms of the management agenda delivering on those promises. What gives us sort of confidence and comfort about the trajectory we're on, it's that the things we're doing are being done today. So we're not talking whiteboards and ideas to fill the promises and commitments we've made. We're talking about delivery of specific items that then go in the rearview mirror and produce the benefits that we're looking for. There is a bit of an inflection point that we've come to. And believe me, it's been a long time. But if you like, if I think of our investment portfolio, so where are we putting our efforts and our money, we're always trying to strike a balance between the control investments that we need to do, the technology investments, what I often would look at as deferred maintenance, if you like, or deferred investments, investments that can drive cost savings and then the business front outcome, what clients see and what drives growth, trying to find a balance with all of that. I do think we're moving from a world where so much of that investment profile was, in essence, mandatory to a world where much more of it becomes discretionary and sort of forward-looking. And particularly, as we get to a greater degree of maturity in our control environment, that should help, still work to do and we won't sort of disinvest, but there is the opportunity that you've seen with peers that are earlier in this cycle, you begin to, again, reduce new investment and gain efficiencies in how you -- or use the controls, how you do all that. So that is an opportunity. The other thing on the -- opportunity to be more discretionary about investments. The other opportunity is on technology where some of the things that we've been doing, in essence, build on each other on themselves. So you -- the analogy I use is sort of walking out of -- with the water in the beach. As you gain altitude, if you like, you can make more progress with less effort. And so we see that, for example, in our cloud environment. As we -- as our engineers are trained, as we've got the environment set up, the acceleration of moving apps into that environment is something that we can now capitalize on in a way that 2 years ago, we were sort of embarking on or just learning. So a lot of things, Rohith, that we're seeing tangibly in the day-to-day that help us. I think there's also -- we have to demonstrate internally the discipline to deliver on all these things. And so that's where there's a lot of management focus, I can assure you, on how we do that.

And then moving on to asset quality. In Q2, you flagged some softening in your mid-market client base, and there's obviously a lot of focus on commercial real estate. So how has that evolved over the last couple of months?

Yes. Look, in a word, I'd say stable. So we did flag -- there are 2 areas of the portfolio that we're looking at carefully: mid-market and CRE. We certainly haven't seen a deterioration in conditions in those 2 areas since the last time we talked to the market in July. Are there strains in that mid-market area around higher financing costs, again, all the things we've dealt with, energy, supply chains and so on, they're working through those things. We've actually had some good things happen on the recovery side of the ledger there. So clients go through sort of bankruptcy or bankruptcy-like processes, and then the outcomes come out better than we might have expected or provisioned for. But we were expecting continued strains on that part. It hasn't deteriorated, but I'd say it's been stable, maybe with a little bit of sort of good events, as I say, on the recovery side. On CRE, similarly, I know we're watching it closely, investors are watching it closely. We've provided some disclosure, and I'd say it's sort of in line with the expectations, again, that we set out in July. So are we taking provisions against the portfolio? Absolutely. So there are instances where sponsors are walking away from projects, banks have to get into a workout situation, that is happening at a level that we might have expected. So it's a worsening of the environment relative to a year or 2 years ago, but it's been pretty stable. And what's encouraging is the, what I'll call, the events that each of these projects has to go through, whether it's an extension event or refinancing and negotiation between banks and sponsors, those things are taking place in line with our expectations. And so we see sort of rational behavior. As you've seen in our disclosure, we benefit, I think, and we need to then prove this over time. But from a portfolio that's well underwritten, clients that are sort of high-quality sponsors, high-quality sort of positions in the market, that part of our portfolio, this office, U.S. office is high-grade good sponsors. So part of our confidence, such as it is, is a feeling that the portfolio we have is well underwritten. Obviously, we all need to work through this and carry it to the other side without incurring sort of what I'd see as a stress scenario in terms of losses.

I do have a few more questions, but perhaps we should take some from the room. Any questions? There's one. I think [ Ian ] is...

Two separate questions, please. First one is Postbank integration process has been picking up some fairly ugly press commentary.

Negative press.

Could you talk around that, please? Can you help me understand what's really happening and what you can do to fix it? And then the second one is you talked about the Global Hausbank strategy, which makes perfect sense following your corporate client base across the world. What I always wonder in my mind is as you build those costs across the various geographies, and I think some of those are new geographies where you had exited and now you've come back, how do you get the balance between putting the costs there and then avoiding the drift of gradually expanding the capability to maybe serve local companies, but where you don't have such good critical mass or corporate relationship as you do with following your core corporate client base?

Yes, it's a great question. So we -- by the way, I want to be careful about reentering geographies. I mean as I don't want to rule it out, but reentering geographies you left has a bunch of things with it. We've gone in back into Mexico as an example, but in a pretty sort of targeted franchise around Fixed Income & Currencies. But you're right, there's a cost to every node in the network, and you've got to be quite careful about making sure that each node is sort of paying for itself, is valuable to clients and that the business you're doing in that node is in line with your strategy. I have to say, as I wander around the world to some of the geographies that I've traveled to recently, I do see this alignment of the global franchise with what we're doing onshore, which is actually encouraging because there were times where some of our local franchises were sort of disconnected with really what the mother ship was doing or the whole group was doing. I think we've gotten to a much more kind of coherent platform there and, to your question, is it's simply management discipline to remain there and not go into things that you don't understand that well. On the Postbank situation, it's really frustrating to us and, obviously, clients. And so the outcomes for clients in -- especially in a couple of specific areas about route that are operationally intensive or obviously not acceptable, and you're seeing us sort of react as we should and need to, to it. And I think if we're -- we clearly reacted too late given what was happening sort of on the ground. But if I'm to give investors a clear sense of what happened here, the technology transfer was completed and successful. And so from my perspective, the point of risk on that part of what we were doing is behind us, and that's a really good thing because that's been 3 years of hard work and a lot of investment that's gone into that. What we underestimated was the operational sort of frictions that the clients were seeing. And as a consequence, there was sort of a cascade of operational backlogs, has sort of concentrated itself in some areas that are operationally very intense, garnishments and [ trust estates ] as 2 examples. And those are painful for clients, not acceptable to allow that to happen. So what we've done is surge resources into that to work down those backlogs, improve the times and get sort of back into what you'd expect in terms of service levels, and we're well on our way to achieving that. So the peaks of these backlogs was in early August. This doesn't make it sort of good that with the passage of time, customers are still suffering dislocations, but we're surging the operational resources to deal with it and get back into service level. And I think also, as you'd hope, lessons learned and figure out how we can sort of change that equation significantly in terms of the customer experience. So a lot of work we're doing to make sure that we fix that problem and get on top of it and hopefully also change that customer experience and to take it in the other direction.

Okay. I think we are going to have to wrap it up there. So thank you very much for your time this morning, James.

Rohith, thank you.