Deutsche Bank Aktiengesellschaft (NYSE:DB) Q1 2023 Earnings Call Transcript

Deutsche Bank Aktiengesellschaft (NYSE:DB) Q1 2023 Earnings Call Transcript April 27, 2023

Operator: Ladies and gentlemen, thank you for standing by. I'm Natalie, your Chorus Call operator. Welcome, and thank you for joining the Deutsche Bank Q1 2023 Analyst Conference Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. . I would now like to turn the conference over to for closing -- sorry, Deputy Head of Investor Relations. Please go ahead.

Unidentified Company Representative: Thank you for joining us for our first quarter 2023 results call. As usual, our Chief Executive Officer, Christian Sewing, will speak first; followed by our Chief Financial Officer, James von Moltke. The presentation, as always, is available to download in the Investor Relations section of our website, db.com. Before we get started, let me just remind you that the presentation contains forward-looking statements, which may not develop as we currently expect. We, therefore, ask you to take notice of the precautionary warning at the end of our materials. With that, let me hand over to Christian.

Christian Sewing: Thank you, , and welcome from me, too. It's a pleasure to discuss our first quarter 2023 results with you today, and we are pleased with the progress we continue to make towards our 2025 goals. The first quarter was marked by turbulent conditions in the banking sector, particularly in March in addition to the macroeconomic challenges. However, our transformation has provided us with strong foundations, which enabled us to navigate these challenges successfully. We delivered on four critical --. First, profitability. Pretax profits increased by 12% to EUR 1.9 billion and post-tax profit by 8% to EUR 1.3 billion which on both counts, represents our strongest quarter since 2013. Our cost-to-income ratio was 71% this quarter, 2 percentage points better than the prior year, driven by positive operating leverage.

We also generated an 8.3% post-tax return on tangible equity in this period. As you know, annual bank levies are recognized in the first quarter. Spreading these bank levies equally across the four quarters of the year, our first quarter cost income ratio would be 67% with a post-tax return on tangible equity of 10%, putting us well on track to our 2025 targets. Second, we proved the strength of our franchise. Our business model is focused on four client-centric businesses, which complement each other and provide a well diversified earnings mix as this quarter shows. We delivered revenues of EUR 7.7 billion, up 5% over the prior year quarter. Third, we again proved our resilience. Our common equity Tier 1 ratio was 30.6%, up from 13.4% in the previous quarter and 12.8% in the first quarter of last year.

Our liquidity reserves were EUR 241 billion, and our liquidity coverage ratio rose to 143%. Finally, sustainability is an important part of our strategy. As you heard at our sustainability deep dive in March, we have updated our business strategies and policies, expanded on our commitments in several ways to fight climate change, namely our thermal coal policy and our ambition is to encourage our corporate clients to commit to net zero. This quarter, we made further progress towards our target of EUR 500 billion of sustainable financing and investments, excluding DWS by end 2025. Our cumulative volume since January 2020 has grown to EUR 238 billion. Let me now turn to Slide 2 to discuss the strong performance across our divisions this quarter.

We saw good momentum across all business and delivered on the strategic steps, which support our 2025 targets and strengthen our global house bank model. The Corporate Bank showed financial strength with record revenues and good client activity across our main businesses. I'm pleased that we are winning mandates with top clients to support working capital and their global value chain. In the Investment Bank, we added talent to support growth, and we are expanding our core franchise. We increased our global market share by more than 40 basis points compared to the previous quarters in Origination & Advisory and achieved year-on-year revenue growth in rates for the fifth consecutive quarter. This reflects our ongoing investments, especially in capital-light business areas.

The Private Bank produced its best ever operating revenues, grew assets under management and captured net inflows. We also successfully completed the next wave of the Postbank IT migration at the beginning of April, transferring over 6.5 million contracts from 5 million Postbank clients. This will unlock the EUR 300 million of cost efficiencies as we previously communicated. Asset Management saw inflows of EUR 6 billion and EUR 9 billion, excluding cash, despite turbulent markets. Stefan Hoops is progressing with the strategy by investing into transformation to create a stand-alone platform while expanding the product offering. launched the largest ETF of all time in the U.S. of approximately USD 2 billion. This is also the single largest climate investing ETF launch.

Turning now to the big provision profit on Slide 3. Preprovision profit for the group was EUR 2.2 billion in the first quarter, up 14% compared to the prior year period. We again achieved positive operating leverage as we grew our revenues and controlled expenses. This quarter underlines how complementary our businesses are and how our strategic transformation has helped us to rebalance our income strength. I'm particularly pleased with the performance at the Corporate Bank and Private Bank, which benefited from the normalized rate environment. The contribution from the Corporate Bank and the Private Bank to preprovision profit increased to almost 60% from 33% compared with last year. The Investment Bank also produced a solid underlying contribution against an exceptionally strong prior year quarter.

The rebalancing towards our stable revenue businesses is especially visible when looking at their contribution to the total group's preprovision profit on a last 12 months basis. The Corporate Bank and Private Bank alone have contributed 70% over this period. You will recall that our corporate and other results were negatively impacted by valuation timing in the prior year quarter. We anticipated that this would reverse over time, and we are benefiting from this effect this quarter. The momentum and balance we see across our four businesses gives us confidence we have the right business model and a strong platform to further improve returns. In addition to our growth focus, we maintained our discipline on cost as we continue to invest in technology and controls and face inflationary pressures.

In February, we said that we were working on additional efficiency measures, which we are now implementing and which are shown on Slide 4. The changes we announced to the Management Board yesterday should support this agenda. The creation of a group Chief Operating Officer will help us to deliver our strategic transformation agenda and drive inefficiencies out of the bank. We also focus on rightsizing our nonclient-facing functions. During the second quarter, we will begin to reduce our senior nonclient-facing workforce by 5% and we'll limit new hiring without compromising our controls. We continue to align our German Private Bank to the current trends and market environment, including actions to streamline our mortgage platform. In addition, we are working on a series of productivity measures including sophisticated capacity planning in several areas, including anti-financial crime.

 

Our target is to increase returns over time, and we continue to look for more opportunities to deliver on this. I will speak about this later. Let me now turn to our balance sheet strength and resilient funding profile on Slide 5. Once again, we benefited from disciplined risk management in our strong and stable balance sheet. Our loan book is well diversified across businesses and regions. Around 70% of the book is secured or hedged and almost 80% of our loan portfolio is in stable and mostly lower-risk businesses in the Private Bank and Corporate Bank. Nearly half of our book is based in Germany, and 40% is equally distributed across EMEA and North America with the remainder in APAC. Our deposit base funds about 60% of the net balance sheet and our loan-to-deposit ratio was 82% at quarter end.

Over 80% of our deposits are from most stable client segments such as retail, corporate small- and medium-sized enterprises or severance where we have long-standing and deep-rooted client relationships. 77% of our German retail deposits are insured by the statutory protection scheme. In the Corporate Bank, close to 3/4 of all deposits are sticky operational and term deposits supporting our clients' daily needs. James will say more on deposits later. Our CET1 ratio strengthened to 13.6%, 250 basis points above the MDA buffer and our highest level for 2 years. Our leverage ratio was 4.6%. As I said, our liquidity metrics remained sound. The LCR was 143%, above our target of around 130% with a buffer of EUR 63 billion above regulatory required levels.

The net stable funding ratio was 120% at the high end of the group's target range of 115% to 120% and EUR 100 billion above required levels. To summarize, we have solid foundations to navigate through the recent turbulent environment. And importantly, I view the European banking sector as stable, thanks in part to the regulatory efforts of recent years. Moving to Slide 6. The current environment underlines the importance of our global house bank model, which positions us well to serve clients in volatile markets. When we set out our strategy in March last year, we outlined the key themes which underpin these goals and ambitions. And these themes have become even more important in light of the geopolitical and macroeconomic upheavals since then.

Our first quarter results demonstrate the progress we are making on the path towards our 2025 goals, benefiting from a strategy and business model, which are well aligned to market trends. We will leverage the more favorable interest rate environment, deploy our risk management expertise to support clients and -- capital to high-return growth opportunities. With sustainability being so important, we will deepen our dialogue with and support for clients, expand our product range and broaden our agenda for our own operations. We will also continue to benefit from the investments we are making in technology together with our strategic partners. The investments should accelerate our transition to a digital bank and the benefits should be seen our efficiency and controls.

These technology investments are also designed to create value for our clients. We believe we have the right strategy and the right focus on clients, which allow us to accelerate execution of our strategy, enhance our franchise and drive returns. We see these opportunities on three dimensions, which we detail on Slide 7. We have committed to self-fund our investments and increase operating leverage through efficiencies and we now see additional scope to do that. We already indicated that we aim to deliver incremental operational efficiencies greater than the EUR 2 billion identified at the 2022 Investor Deep Dive. As discussed, we are in the process of identifying and executing on a further EUR 500 million of benefits, which we will work to extract.

The incremental benefits will come from a strategic review of our entire workforce, further optimizing the distribution networks in the Private Bank. We also expect to see benefits in operations and process automation, and we are excited about the opportunities that should emerge from artificial intelligence and machine learning. Second, we are focusing on capital efficiency. Deploying capital to increase shareholder value has always been our priority, and we see opportunities to reallocate capital. We aim to free up EUR 15 billion to EUR 20 billion of risk-weighted assets from reduction in certain sub hurdle lending and mortgage portfolios, greater utilization of securitization and hedging optimization. These actions are expected to have a minimal impact on revenues but will enable us to increase returns and reallocate resources to more capital-accretive businesses.

We believe that the combination of cost and capital efficiency, together with additional opportunities across markets should position us to outperform our existing growth objectives. To support this, we continue to invest into our platforms and to take opportunities created by current market conditions to attract talent to strengthen advisory capabilities in various business and regions including Asia. We expect these actions to accelerate the execution of our strategy and more importantly, increase returns to shareholders over time. Before I hand over to James, let me summarize our progress on Slide 8. Our performance in the first quarter demonstrates the strength of Deutsche Bank's franchise, earnings power and balance sheet. Our transformation has given us a strong platform for growth with a diverse business model, providing well-balanced earnings.

This provides a strong step-up to accelerate our global house bank ambition through additional actions on the three dimensions we just discussed. We remain fully committed to our capital distribution plan. With the successful first quarter behind us and strong capital, we have now initiated the dialogue with the supervisors about share buybacks, which are expected to take place in the second half of this year. This is in line with the promise we made last quarter that we initiate the step once we have greater clarity on a number of issues, including the macro environment. Everything we have seen this quarter supports our view that we are on the right path. The group is well positioned to capitalize on current trends to drive returns above the cost of equity.

With that, let me hand over to James.

James von Moltke: Thank you, Christian. Let me start with a few key performance indicators in the first quarter on Slide 10 and put them in the context of our 2025 targets. We have strong revenue momentum. A balanced business mix enables us to benefit from higher interest rates despite challenging financial markets, delivering revenue growth above our 2025 targeted compound annual growth rate on a last 12-month basis. Our post-tax return on tangible equity was 8.3% in the first quarter or 10% prorating bank levies through the year, already in line with our 2025 target. We've made steady progress on our cost income ratio, which was 71% in the quarter, a 4 percentage point improvement on full year 2022. If the bank levies were prorated across the year, the cost/income ratio would be 67%.

The first quarter performance shows clear progress toward our 2025 target of less than 62.5%. And we demonstrated the strength of our capital and balance sheet and the quality of our loan book in challenging conditions. Our capital ratio was 13.6% in the first quarter in line with our 2025 target of around 13%. With that, let me turn to the first quarter highlights on Slide 11. Group revenues were EUR 7.7 billion, up 5% on the first quarter of 2022 and with a better balance across our businesses. Noninterest expenses were EUR 5.5 billion and adjusted costs of EUR 5.4 billion were essentially flat year-on-year. We booked bank levies of EUR 473 million this quarter, down 35% year-on-year as a result of a reduction in the sector-wide single resolution fund assessment as well as our improved relative sector contribution and an increased use of the revocable commitments.

Our provision for credit losses was EUR 372 million or 30 basis points of average loans. Overall, credit losses remained well contained despite a small number of idiosyncratic events. We generated a profit before tax of EUR 1.9 billion, up 12% and net profit of EUR 1.3 billion, up 8% compared to the prior year quarter. Our cost-income ratio came in at 71%, down 2 percentage points versus the prior year period. Diluted earnings per share was EUR 0.61 in the first quarter with an effective tax rate of 29%. Tangible book value per share was EUR 27.28, up 2% on the fourth quarter of 2022 and up 8% year-on-year. Now let me turn to some of the drivers of these results, starting with our NIM development on Slide 12. We have continued to benefit from the interest rate environment in the first quarter, as demonstrated by the rise in net interest margin in the Corporate Bank and Private Bank.

Group NIM, however, declined due to the accounting treatment of some of our central hedges and balance sheet management activities. This quarter, the accounting effect resulted in a sequential impact on group NIM of around negative 20 basis points. This effect is held in C&O, where it is fully offset by an increase in noninterest revenue, and there is no economic loss to the firm or overall impact on group P&L. Realized deposit betas remained favorable when compared to our models, but we expect this to partially normalize in the coming quarters as the pace of interest rate rises slow. Average interest-earning assets declined modestly, driven mainly by our TLTRO payments. With that, let's turn to costs on Slide 13. Adjusted costs, excluding bank levies of EUR 4.9 billion were flat sequentially, but increased by 5% year-on-year or EUR 240 million.

This reflected cumulative investments over the past 12 months in technology, controls and people, together with higher business activity and inflationary pressures. The monthly average run rate of around EUR 1.63 billion is in line with our prior guidance, and we expect to operate at the run rate of between EUR 1.6 billion and EUR 1.65 billion per month for the rest of the year. Looking at the individual components. Compensation and benefits costs were essentially flat as increased fixed remuneration was offset by lower variable remuneration. Ongoing workforce optimization limited the impact of higher headcount. IT costs were up EUR 66 million or 8% year-on-year, reflecting continued investments in technology and innovation. Professional services increased by EUR 25 million, driven by business consulting and legal fees.

And the increase of around EUR 100 million in other costs mainly reflects increasing expenses for banking services and outsourced operations. We also saw a normalization of travel and marketing expenses. Let's now turn to provision for credit losses on Slide 14. Provision for credit losses for the first quarter was 30 basis points of average loans or EUR 372 million. Stage 3 provisions increased to EUR 397 million compared to EUR 114 million in the prior year quarter. The majority of this increase was driven by the Private Bank and included a small number of idiosyncratic events in the International Private Bank. This was partly offset by a release of EUR 26 million in Stages 1 and 2 provisions, partially driven by a slight improvement in the macroeconomic outlook since the fourth quarter of 2022 compared to a charge of EUR 178 million in the prior year quarter.

We did not see a wider deterioration in the portfolio outside of this small number of specific events, and overall credit quality remains high. For the full year 2023, we reaffirm our previous guidance range of 25 to 30 basis points of average loans. Let me also cover our commercial real estate portfolio on Slide 15. Our EUR 33 billion commercial real estate focused portfolio represents 7% of our loan book. And as you know, it consists of nonrecourse lending within the core CRE business units in the Investment Bank and the Corporate Bank. As a reminder, we have provided disclosure on this focused portfolio since the COVID crisis. The portfolio is well diversified across regions and property types. Despite the headwinds facing the sector, we are comfortable with our exposure for several reasons.

First, our loan originations are focused on larger institutional quality assets in more liquid primary markets and with strong institutional sponsorship. Second, the moderate weighted average LTVs, or loan-to-value, of 62% in the Investment Bank and 53% in the Corporate Bank provide material cushion against the expected decline of collateral values. Our sponsors typically have significant skin in the game in the form of cash equity invested in their properties and have invested more equity where needed to ensure the ongoing performance of their assets. However, we recognize the market is under pressure, especially in the U.S. where lending markets have tightened with further uncertainty caused by recent turmoil in the regional banking sector.

The U.S. office sector is also facing greater pressure as the office vacancy rate is approaching 20% compared to approximately 7% in Europe. Our exposure in the U.S. office sector is manageable at EUR 4.5 billion, less than 1% of our total book. Our office portfolio is high quality with around 80% in Class A properties and we have institutional sponsorship in major markets. The loans are primarily backed by multi-tenant properties in large urban markets and again, with high-quality sponsors. The portfolio has an average LTV of around 64% with a weighted average lease term of 6.7 years, which provides relative stability of cash flows. At the same time, only approximately EUR 600 million of exposure has final maturities over the course of the year, which limits the refinancing risk in a higher rate environment.

In the first quarter, provisions related to U.S. office were EUR 60 million or just 4% of the first quarter Stage 3 provisions, which shows the relative resiliency and quality of this book. Moving to funding and liquidity on Slide 16. We ended the quarter with a liquidity coverage ratio of 143% equivalent to an excess of EUR 63 billion above our regulatory requirements. Over time, as market conditions improve, we would look to prudently steer our LCR down towards our 130% target. As Christian outlined, we have a well-diversified deposit base across client segments and regions. Our deposit base of EUR 592 billion declined by 5% sequentially or 4% on an FX-adjusted basis, year-on-year. The decline in part reflected a normalization from the elevated levels seen in the second half of last year and was broadly in line with the market.

About 1/3 of the reduction in balances came at the end of the quarter as certain clients reposition parts of their exposures. This constitutes about 1% of our overall deposit portfolio and speaks to the underlying quality of our book. Deposits in the Corporate Bank declined by 7% sequentially or 6% if adjusted for FX, mostly due to normalizations from elevated levels in the last 2 quarters as well as increased pricing competition. Private Bank deposits declined by 2% in the quarter. Approximately 30% of flows migrated into higher-yielding investment products in the Private Bank, while the remainder reflected the ongoing inflationary pressures and increasing price competition. Before we move to performance in our businesses, let me turn to capital on Slide 17.

Our common equity Tier 1 ratio came in at 13.6%, up by 25 basis points compared to the previous quarter. Net capital build was 30 basis points reflecting our strong organic capital generation from net income, partially offset by higher equity compensation awards. Risk-weighted assets grew modestly, reducing the CET1 ratio by only 6 basis points. Credit risk-weighted assets increased primarily due to seasonal loan growth in the Investment Bank and Corporate Bank. Market risk RWA declined slightly following ECB approved reduction in our qualitative multiplier add-on. The leverage ratio was 4.6% at quarter end, up 6 basis points on the previous quarter, mainly due to higher retained earnings. And finally, we continue to operate with loss-absorbing capacity well above our requirements.

Our MREL surplus as our most binding constraint has increased by EUR 1 billion to EUR 19 billion over the quarter. Moving to the Corporate Bank on Slide 19. Corporate Bank revenues in the first quarter of EUR 2 billion were 35% higher year-on-year, driven by increased interest rates and continued pricing discipline. This was the highest quarterly revenue performance since the formation of the Corporate Bank, driven by revenue growth across all regions and business units. However, as we highlighted at our fourth quarter results, we expect a normalization of our interest revenues in the second half of the year. Our first quarter results were supported by still very benign pass-through rates, which we believe marks the peak revenue impact of this pricing dynamic.

Momentum was particularly strong in cash management with corporate, institutional and business banking clients as well as in Corporate Trust. Loan volume in the Corporate Bank was EUR 121 billion, down by EUR 4 billion compared to the prior year quarter and flat sequentially. Deposits were EUR 269 billion, essentially flat compared to the prior year quarter, but down 7% from elevated prior quarter levels, as I have just outlined. Credit loss provisions remained contained despite a more challenging macroeconomic environment and were primarily driven by one larger Stage 3 event, which was offset in revenues by insurance recoveries. Credit loss provisions remained well below the prior year quarter, which was impacted by the start of the war in Ukraine.

Noninterest expenses were EUR 1.1 billion, an increase of 2% year-on-year, driven by higher internal service cost allocations, partly offset by a lower bank levy contribution. Profit before tax was EUR 822 million in the quarter, more than triple the prior year quarter. The cost income ratio improved to 55% and post-tax return on tangible equity was 18.3% despite the recognition of bank levies. I'll now turn to the Investment Bank on Slide 20. Revenues for the first quarter were 19% lower year-on-year. Revenues in fixed sales and trading decreased by 17% in the first quarter compared to a prior year, which included approximately EUR 500 million of episodic items. Client flows were robust with institutional activity broadly flat year-on-year and underlying business performance strong despite the extreme market volatility in March.

Rates revenues were higher compared to a very strong prior year quarter, reflecting improvements across the platform and effective risk management. Credit trading, financing and emerging markets revenues were lower, principally reflecting the absence of episodic items in the prior year period, while underlying performance improved. Foreign exchange revenues were significantly lower compared to a strong prior year period, driven by the impact of extreme interest rate volatility and market dislocation during March. Moving to origination and advisory. Revenues were down 31% in a market which remained challenging. Our performance was in line with the industry fee pool and reflected a market share recovery and a shift in the underlying product mix compared to the fourth quarter of 2022.

Saving. Save, Piggy Bank, wealth

micheile-henderson-ZVprbBmT8QA-unsplash

Debt origination revenues were significantly lower. Volumes remain low in leveraged loans, although the market did start to see a partial recovery in high yield. Investment-grade debt revenues also declined as did the industry fee pool. Equity origination revenues were down in a challenging market with limited issuance. Revenues in advisory were significantly lower, though by less than the industry fee pool decline. Turning to costs. Both noninterest expenses and adjusted costs were essentially flat versus the prior year as reduced bank levies were largely offset by investments in technology and our control functions. Loan balances increased year-on-year, driven by higher originations primarily in the financing businesses. Quarter-on-quarter balances were essentially flat with lower origination reflecting our selective risk deployment.

Provision for credit losses was EUR 41 million, 16 basis points of average loans, a slight increase on the prior year. Profit before tax was EUR 861 million in the quarter. Turning to the Private Bank on Slide 21. Private Bank revenues were EUR 2.4 billion in the first quarter, up 10% year-on-year and marked the highest quarterly revenues since the beginning of our transformation of the Private Bank, excluding specific revenue items. Revenues in the Private Bank Germany increased by 14% to EUR 1.6 billion. Higher net interest income from deposits more than compensated for a decline in fee income, which reflected changes in contractual and regulatory conditions, market uncertainty and to a lesser extent, lower client activity. In the International Private Bank, revenues were up 3%.

Revenues in Wealth Management and bank for entrepreneurs were up 4% or 7% if adjusted for the impact of the sale of our Financial Advisors business in Italy. Revenues in premium banking declined by 1%. Noninterest expenses were up 10%, partly due to the nonrecurrence of releases of restructuring provisions, which benefited the prior year quarter. Adjusted costs increased by 5% year-on-year due to higher internal service cost allocations, higher investment spending, including costs related to the Postbank IT migration and inflation impacts, partly offset by lower bank levies and savings from transformation initiatives. Net inflows were EUR 6 billion in the quarter, driven by growth in investment products in both Germany and the International Private Bank.

Provision for credit losses was EUR 267 million, up from EUR 101 million in the prior year quarter. The increase was driven mainly by a small number of single name losses in the International Private Bank. Excluding these items, the development of the portfolio continued to reflect the high quality of the loan book and continued risk discipline. Profit before tax was EUR 280 million in the quarter, including the full year impact of bank levy charges. Cost-to-income ratio was 78% in the quarter with a post-tax return on tangible equity of 5%. Let me continue with Asset Management on Slide 22. My usual reminder, the Asset Management segment includes certain items that are not part of the DWS stand-alone financials. As you will have seen in their materials, DWS reported a decline in performance compared to the prior year, reflecting lower market levels.

Sequentially, assets under management increased to EUR 841 billion, reflecting EUR 19 billion of market appreciation and net inflows. Inflows excluding cash, were nearly EUR 9 billion primarily in passive and multi-asset. Flows in cash products were very volatile throughout the quarter, ending with net outflows of EUR 3 billion. Revenues declined by 14% versus the prior year quarter. This was predominantly driven by an 8% decline in management fees to EUR 571 million, which reflected financial market performance during 2022. Performance and transaction fees were also lower year-on-year from performance fee recognition and lower real estate transaction fees. Other revenues declined on lower gains from co-investments and a smaller benefit from fair value of guarantees.

Noninterest expenses and adjusted costs increased by 3% and 1%, respectively. Profit before tax of EUR 115 million in the quarter was down 44% compared to prior year. The cost income ratio for the quarter was 74%. And return on tangible equity was 14%. Moving to Corporate & Other on Slide 23. A reminder that Corporate & Other now includes the impact of our legacy portfolios previously reported as the Capital Release Unit. Corporate & Other reported a pretax loss of EUR 226 million this quarter, a significant improvement from the pretax loss of EUR 677 million in the first quarter of 2022. The year-on-year improvement was principally driven by valuation and timing differences, which were positive EUR 239 million in this quarter compared to negative EUR 184 million in the prior year quarter.

The pretax loss associated with our legacy portfolios was EUR 130 million, an improvement of EUR 166 million year-on-year, primarily driven by lower expenses. Excluding bank levies, adjusted costs associated with these portfolios approximately halved to EUR 66 million. Funding and liquidity impacts were negative EUR 106 million in the current quarter versus negative EUR 127 million in the prior year quarter. Expenses associated with shareholder activities not allocated to the business divisions as defined in the OECD transfer pricing guidelines were EUR 124 million in this quarter, essentially flat year-on-year. The reversal of noncontrolling interests in the operating businesses, primarily from DWS was positive EUR 37 million down from EUR 56 million in the prior year quarter.

Other impacts reported in the segment aggregated to negative EUR 142 billion. Risk-weighted assets stood at EUR 43 billion at the end of the first quarter, including EUR 19 billion of operational risk RWA, representing a EUR 3 billion reduction since the fourth quarter of 2022. Turning to the group outlook for 2023 on Slide 24. We remain focused on delivering positive operating leverage. We expect 2023 revenues around the midpoint of a range between EUR 28 billion and EUR 29 billion. We expect to keep our noninterest expenses broadly flat to 2022. As confirmed earlier, we expect the monthly run rate of adjusted costs, excluding bank levies to be about EUR 1.6 billion to EUR 1.65 billion for the rest of the year. To deliver on the cost reduction measures, which Christian outlined, we now expect to record restructuring and severance provisions of approximately EUR 500 million in 2023.

In line with our previous guidance, provision for credit losses is expected in the range of 25 to 30 basis points of average loans. Christian mentioned our commitment to capital distributions. Consistent with our path laid out at the Investor Deep Dive last year, we have proposed a cash dividend of EUR 0.30 per share for approval at the AGM in May, and the dialogue with supervisors about share buybacks in the second half of the year has been initiated. We are also committed to maintaining a strong capital position and a solid liquidity and funding base, all of which we demonstrated during turbulent conditions in the first quarter. With that, let me hand back to , and we look forward to your questions.

Unidentified Company Representative: Thank you. Operator, we would be ready to take the first question, please.

See also 20 Biggest Power Generation Companies in the World and 16 Largest Grocery Chains in the World.

To continue reading the Q&A session, please click here.