Deutsche Bank Aktiengesellschaft Q2 2026 Earnings Call

Welcome to the Q2 2026 analyst conference call and live webcast. I am Matilda, the conference call operator. I would like to remind you that all participants will be in listen-only mode, and the conference is being recorded. The presentation will be followed by a Q&A session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Silke McCalla, Deputy Head of Investor Relations. Please go ahead. Thank you for joining us for our second quarter and first half year 2026 results call.

As usual, our Chief Executive Officer, Christian Sewing, will speak first, followed by our Chief Financial Officer, Raja Akram. The presentation, as always, is available to download in the investor relations section of our website at db.com. Before we get started, let me just remind you that the presentation contains forward-looking statements which may not develop as we currently expect. We therefore ask you to take notice of.

We are very pleased with the performance we delivered and the momentum we achieved in the first half of 2026. We continued to invest in our global house bank, which paves the way for further growth, efficiency gains, and value creation for shareholders. We grew revenues to EUR 17.2 billion, well on track to reach our full-year ambition of around EUR 33 billion. This momentum enabled us to deliver a post-tax profit of EUR 4.1 billion, our highest ever for a half year. We made further progress on our key ratios. Post-tax ROTE increased to 11.9%, while our cost-income ratio improved to 60.9%, despite the impact of SVA accreted strategic actions we took in the second quarter. Our CET1 capital ratio was 13.9%, in line with our operating range. Strong organic capital generation enabled us to support business growth and make distribution deductions in line with our 60% payout ratio.

Today, we are taking the next step. We are announcing a new EUR 500 million share buyback from 2026 net income. This is the first time we are executing a buyback from the current year's earnings, a clear sign of the earnings momentum and confidence we have built in the first half. This momentum positions us well to deliver our 2026 objectives and reinforces frame. We made tangible progress across all three levers of our strategy. We delivered revenue growth of 5% with strong contribution from the Investment Bank and focused growth areas. We maintained strict capital discipline. We announced the sale of the Private Bank's India franchise, which will be SVA positive upon closing next year, and we took a number of additional capital accretive measures across the franchise. Third, we progressed our scalable operating model.

We continue to simplify our operating model in the Private Bank and make targeted investments in technology and front-to-back capabilities across the group. For example, in the Corporate Bank, we continued investing in our cash management capabilities and strengthening our coverage and sales platforms with multinational companies. Our franchise performance indicators are all positive, with significant business volume growth across businesses. Assets under management grew by nearly EUR 270 billion or 16% year-on-year to EUR 1.92 trillion, supported by record inflows of EUR 56 billion across Private Bank and Asset Management in the first half year. Loans increased by 4% year-on-year, driven by momentum in the Corporate Bank and fixed financing. Deposits rose by 7% year-on-year, with strengths across the Corporate Bank and Private Bank. Furthermore, we delivered strong performance across all our divisions, as you can see on slide four.

All divisions delivered returns on tangible equity of 12% or higher. The Private Bank's transformation continues. We made progress on our target ratios, despite absorbing costs relating to continued investments and the exit of its India franchise, and grew client assets by more than EUR 55 billion in the first half year. The division has now completed the branch closures planned for 2026 and continued to strengthen wealth management coverage. Asset Management grew assets under management by EUR 97 billion in the second quarter alone, which included record net client flows of EUR 25 billion. The Corporate Bank continued to grow business volumes in both loans and deposits, reflecting the strength of our corporate clients franchise. The Investment Bank supported clients through heightened market volatility, reinforcing our position as a trusted partner and gateway for investing in Europe, while also growing EMEA market share in Investment Banking and Capital Markets.

Based on disclosures from peers so far, we are confident that with our record second quarter performance, we have also expanded our market share at the floor, dependent on the successful execution of our strategy. We also identified several trends that could provide further upside over time. Are taking shape. The government's 34-point plan should boost economic activity in the years ahead. Fiscal expansion is slowly but steadily gaining momentum. Investment spending in the infrastructure and defense sectors has started. Our Corporate Bank and Investment Bank are ideally placed to capture opportunities. We are seeing encouraging steps in private pension reforms. With Deutsche Bank's combination of 19 million Private Bank customers in Germany, wealth management expertise, and Germany's leading Asset Management franchise, we are well-placed to support existing and new clients with investment solutions and help them participate in opportunities as the market develops.

The second trend is AI, which is evolving even faster than we expected, and the potential benefits for us are becoming clearer. We are embedding AI across workflows to boost productivity and drive scalable growth. We also see scope to enhance client experience, deepen client coverage, and capture share of wallet through AI-driven intelligence. This gives us potential for both incremental operating efficiencies and revenue growth in the future. The third trend is Savings and Investment Union. Across Europe, momentum is building, especially as pension reforms are top of the agenda in Germany. Our asset gathering businesses, alongside the Investment Bank and Corporate Bank, are very well-placed to capture opportunities from more integrated markets, new frameworks, and growing investment flows as and when they arise, but also to provide clients with access to evolving capital markets and assist with financing needs.

The fourth trend we discussed in November is a more level regulatory playing field. We are encouraged to see an increasing policy focus on competitiveness, simplification, and growth in Europe. Over time, we expect this to be supported on several dimensions. The European Commission is taking a number of initiatives, including the recent proposal with a broader legislative package expected in early 2027. We believe that among European Bank regulators, there is both increasing flexibility and political will to address some of the unintended consequences of CRR3 while not compromising on resilience. This includes support for lending activities such as mortgage and financing for unrated corporates by addressing the transitional arrangements currently in place. Temporary relief on FRTB as soon as January 2027 and expected permanent relief via a legislative package later on would also maintain the competitiveness of European banks in trading and capital markets.

In addition, efforts to streamline the EU macroprudential framework could lead to fewer buffers and more simplified requirements across member states. In other words, across all four areas, the trends are positive. Of course, the speed and exact shape of change is hard to predict, but the overall direction is encouraging. What this means for us, first, our financial and strategic progress reinforces our confidence in delivering an ROT of greater than 30% in 2028, and the developments in these trends strengthen our view that there is considerable upside to our targets. Second, we are actively positioning the bank to capture these opportunities through targeted investments, focused capital deployment, and continued engagement with policymakers. With that, let me hand over to Raja.

Thank you, Christian, and good morning. We delivered another solid second quarter with net revenues of EUR 8.5 billion, a return on tangible equity of 11%, and a CET1 ratio of 13.9%. Profit before tax increased by 11% year-on-year, while the cost-income ratio improved to 63% despite the impact of SVA-related strategic actions in the quarter, including the exit of Private Bank's India franchise. Revenues were up 9% year-on-year, making these 20 consecutive quarters of revenue growth. All divisions contributed to this revenue growth, led by the performance of the Investment Bank and strong contributions from our focused growth areas. C&O also contributed positively to revenues this quarter, mainly due to valuation and timing differences, which we expect to revert over the remainder of the year, with our full-year C&O guidance remaining relatively unchanged.

We continue to see strong client activity across our asset gathering businesses, with record net flows in Asset Management and another quarter of robust inflows in Private Bank, supporting a 16% year-on-year increase in assets under management, which are now EUR 1.9 trillion. Continued Corporate Bank deposit growth reinforces the broader momentum behind our client-led growth strategy. Overall, despite a continued dynamic backdrop and specific strategic measures taken during the quarter, we delivered revenue growth ahead of cost growth year-on-year and maintained strong capital discipline fully in line with our 2028 objectives. Let me now turn to revenues in more detail, starting on slide eight. We saw strong growth in the Private Bank, underpinned by both wealth management and personal banking, while Asset Management also contributed positively. The Corporate Bank delivered sequential growth as promised.

We are encouraged by the continued underlying momentum of the franchise, supported by higher loans and deposit volumes and signs that activity in Germany is picking up. Investment Bank results were driven by a record second quarter by our leading FICC franchise, supported by clear improvement in investment banking and capital markets. Looking at revenue composition, Net Interest Income demonstrated a solid increase driven by volume growth and hedge rollover, with trading and other income broadly flat year-on-year. Net Commission and Fee Income performance showed continued strength, benefiting from growth in wealth management as well as seasonally stronger performance within Institutional Client Services in the Corporate Bank. Overall, our non-investment banking businesses continue to contribute more than 60% to our revenue mix. Let me now move to NII on slide nine.

NII was solid at EUR 3.6 billion across the key banking book segments and other funding, with both loan and deposit revenues contributing positively compared to the prior-year quarter. In the second quarter, deposit-related NII continued to benefit from underlying volume growth and the contribution from our hedge portfolio, where loan NII benefited from strong volume growth. Looking at the divisions, in the Private Bank, margins continued to progress steadily, particularly in deposits with volumes broadly steady in the quarter. The Corporate Bank, Net Interest Income also went up sequentially, with strong underlying NII growth across both deposits and loans, supported by increased client activity resulting in volume growth. In FICC financing, revenues remained strong, benefiting from loan growth.

For the full year, we expect NII across key banking book segments and other funding to slightly exceed our prior guidance of around EUR 14 billion, and benefits from recent rate decisions will become more pronounced in 2027 and 2028, reflecting our structural hedging approach. As always, you can find details on the benefit of the long-term hedge portfolio rollover on slide 25 of the appendix. Turning to slide 10. Non-Interest Expenses were up 8% year-on-year at around EUR 5.3 billion. The year-on-year cost increase reflects increase in fixed pay and performance-related compensation, the absence of prior-year litigation releases and one-off costs of close to EUR 100 million related to the recently announced exit of the Private Bank's India franchise. Excluding the aforementioned litigation releases in the prior-year quarter and the exit of the India franchise, the year-on-year cost increase would have been 4%.

As planned, incremental investments increased to around EUR 200 million, including severance costs of slightly less than EUR 500 million, mainly reflected by the Bank operating model optimization. The remaining investments are focused on technology and targeted hiring across wealth management, IBCM, as well as the expansion of Corporate Bank solutions to support our capital light growth agenda. Importantly, operating efficiencies of around EUR 200 million, mainly through workforce and target operating model measures, continue to largely offset these incremental investments. As I said in April, we have capital investment plans aligned with the external environment. As we continue to execute those plans and efficiency benefits accelerate, we expect positive jobs to become increasingly visible in the next two years. With that, let me turn to Provisions for Credit Losses on slide 11. Starting with asset quality, overall portfolio performance remains strong. Provision for Credit Losses was EUR 460 million.

As previously discussed and consistent with our disciplined approach to managing financial resources, we took further targeted action to de-risk our portfolio and improve our overall risk profile with a planned exit of certain non-performing CRE exposures. These actions had an impact of approximately 10 basis points in the quarter and will be overall capital accretive once executed. Excluding these portfolio actions, CRE provisions would have been lower quarter-on-quarter. Separately, we released a portion of the management overlays. Underlying portfolio performance remained in line with expectations, supporting a normalized average provision rate of roughly 30 basis points through 2028. Turning to capital on slide 12. Starting with the CET1 ratio, we ended the quarter at 13.9%, up 11 basis points compared to the first quarter, in line with our operating range.

Net income, net of deductions for AT1 coupons, accumulated 45 basis points, reflecting strong second quarter earnings, while deductions from distribution of 27 basis points represents the 60% payout ratio that we committed to starting with 2026 financials. The EUR 500 million share buyback announced today has no incremental impact on our CET1 ratio as it is fully covered by CET1 capital deductions. The other category increased by 11 basis points due to equity compensation and reduced capital reductions, mainly from lower deferred tax assets. Risk-weighted assets increased by EUR 5 billion, excluding FX effects of EUR 1 billion. The main driver of this increase was business growth, notably growth in loans and commitments alongside guaranteed funds and asset management. This was partially offset by increased RWA benefits from securitization and reduced CVA risk-weighted assets.

We plan to launch new SRT platforms in the second half of the year to create additional capital capacity. Lastly, the other category of risk-weighted assets includes effects on model calibrations. Let's now turn to divisional performance, starting with the Private Bank on slide 14. The Private Bank continues to deliver tangible progress supported by robust revenue momentum, sustained asset guiding, and disciplined execution of strategic priorities. Return on tangible equity was 11%, and the cost-income ratio stood at 70%, despite absorbing the upfront costs related to the divesture of the Private Bank's India franchise, as well as Segments costs. The transaction supports a sharper focus on scale and competitive strength. Excluding the impact of the divesture, return on tangible equity would have been approximately 13% and the cost-income ratio 66%, highlighting the strength of the underlying business performance.

Revenues increased by 80%, driven by 10% growth in net interest income and an 8% rise in net commission and fee income, with both personal banking and wealth management contributing. Personal lending revenues grew by 6%, mainly from higher revenues from deposits, while wealth management revenues increased by 11%, driven by investment products and deposits. Client activity continued to show solid momentum, with net AUM flows of EUR 9 billion, primarily into investment products, with client assets rising by 7% to almost EUR 850 billion in the first six months. Deposits increased 4% year-over-year, driven by underlying campaign inflows and wealth management growth. Loan development remained aligned with our strategy, driven by continued expansion in wealth management lending and offset by targeted reductions in non-SBA-accredited retail portfolios and the classification of India franchise as held for sale.

Excluding the aforementioned actions, Private Bank loans would have grown by 2% year-over-year. The Private Bank continues to rationalize its branch network, having completed all 100 planned branch closures for 2026 and has already onboarded 116 wealth management coverage hires, well on track towards a target of 250-plus coverage hires. Non-interest expense rose by 8% year-over-year, reflecting the impact of the aforementioned divestiture and continued incremental investments, including higher Segments costs of more than EUR 80 billion. We expect the cost of future growth, hiring, and other investment initiatives to increase in the second half of the year, but we remain flexible in the pacing. Credit quality remains resilient and Provision for Credit Losses has been in line with expectations. The year-over-year increase was materially driven by one-time releases in the prior year period.

Turning to slide 15, Asset Management delivered a solid quarter, benefiting from favorable market conditions, stronger passive flows, and improving trends across selected active asset classes. Quarterly revenues increased 4% year-on-year, primarily driven by higher management fees, up 13% year-on-year, supported by higher average assets under management and stronger long-term flows. Sequentially, performance fees were lower, considering the recognition of significant fees from an infrastructure fund in the first quarter. Non-interest expenses increased by 7% year-on-year, reflecting higher business activity, including volume-driven costs and share price related compensation effects. The increase is aligned with the growth initiatives and levers. Turning to flows, net flows hit a record EUR 25 billion in the quarter, including EUR 13 billion of cash inflows.

Long-term net flows amounted to EUR 12 billion, driven by continued strength in passive products, with Xtrackers remaining well-positioned to continue capturing strong net flows and supported by positive contributions from active asset classes. Within active, SQI maintained strong momentum, while active equity returned to positive net flows, benefiting from further improved investment performance and client demand across selected strategies. Total assets under management increased to almost EUR 1.2 trillion, up 18% year-over-year, reflecting favorable market effects, net flows, and FX movements, partly offset by infrastructure-related asset paydowns. For further details, please refer to DWS's disclosure on their investor relations website. Let us move to the Corporate Bank on slide 16 before closing with the Investment Bank. The Corporate Bank once again delivered a strong return on tangible equity of 16.4% and a cost-income ratio of 62%, sustaining its high level of profitability.

As guided previously, we now see interest rate and FX headwinds diminishing while positive business momentum has become more pronounced. Second quarter revenues were at EUR 1.9 billion, up 1% year-over-year, compared against a very strong prior year quarter. Corporate Treasury Services and Business Banking each grew by 30%, supported by higher business volumes, interest rate hedging, and growth in net commission and fee income with Corporate Treasury Services. The 6% decline in Institutional Client Services reflected the non-recurrence of prior year benefits and the remaining impact of FX headwinds. Sequentially, Corporate Bank revenues increased by 5%, driven by seasonally strong net commission and fee income in Institutional Client Services and higher business volumes in Corporate Treasury Services.

Business volumes were strong, with average deposits and loans both higher year-over-year and sequentially, primarily driven by higher segment deposits in Corporate Cash Management and higher loans in Trade Finance. Non-interest expenses were slightly higher as volume-related growth, franchise investments, and the non-recurrence of a prior year litigation provision release were partially cost managed. Provision for Credit Losses remain well contained, reflecting solid underlying portfolio quality. I'll now turn to the Investment Bank on slide 17. Revenues for the second quarter were 19% higher year-over-year, driven by a record second quarter performance in FICC and significantly higher revenues at IBCM. Significant year-on-year revenue growth in FICC markets was primarily driven by strength in rates and credit trading. Both businesses benefit from the non-repeat of the market volatility seen early in the second quarter last year.

In addition, rates saw heightened client activity and credit trades benefited from a strong environment for distressed product trading. FICC financing performance continued to be robust, with revenues essentially flat compared to a strong prior year. Moving to IBCM, the revenues increased 36% year-over-year and 17% sequentially, demonstrating clear improvement. The year-over-year increase reflected strong growth in both equity origination and advisory, in line with the strategic rebalancing of IBCM that we indicated at our Investor Day. IBCM pipeline visibility for the second half of 2026 points to further significant year-on-year revenue growth. Non-interest expenses were 6% higher year-over-year, materially driven by the targeted hiring combined with performance-related compensation. Loan growth year-over-year was primarily in FICC financing, driven by the financing and solutions business, including well-characterized asset-backed lending, while the CRI book remained broadly flat.

Provision for Credit Losses was EUR 174 million and included the impacts of aforementioned planned capital accretive exits. From a year-on-year perspective, these were more than offset by a partial release of management overlays and a non-recurring sub-model updates recorded the prior frame. With that, I'll turn to the outlook on slide 18. We are on track to meet our 2026 objectives. Our divisions are performing well, and strong first half revenues are putting us firmly on track to comfortably deliver on our revenue ambition of around EUR 33 million, with further growth in the key banking book NII and other funding, as well as continued growth in net commission and fee income. We continue to prudently pace our planned investments throughout the year, generating operating efficiencies and deliver on a full year expense guidance in line with our Investor Day commitments. As we said with the first quarter results, we are seeing increasing signs of potential incremental productivity benefits led by AI and organization simplification versus our earlier assumptions for 2028.

Asset quality remains strong, and portfolios are performing in line with expectations. We remain vigilant to potential geopolitical and other risks to the operating environment and expect our portfolios to remain resilient to those challenges. On an underlying basis, we continue to expect Provision for Credit Losses to reduce slightly year-on-year. We will continue to evaluate limited and targeted actions that are both capital accretive and further de-risk our portfolio. We remain committed to delivering attractive capital returns. That is why we continue to make CET1 capital reductions in line with a 60% PR ratio.

The $500 million share buyback in the 2026 net income announced today will commence on completion of the EUR 1 billion share buyback, which is currently underway. First half year profitability laid a solid foundation for strong operating performance in 2026, and you can see this in our businesses, particularly in the Private Bank, where disciplined execution is leading to higher profitability, and the Corporate Bank, where business momentum now clearly building. With that, we look forward to your questions. Thank you. Right. Thank you very much, Raja.

Operator, we are now ready to take your questions.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from a question queue, you may press star and two. Questioners on the phone are requested to disable the loudspeaker mode and eventually turn off the volume from a webcast while asking a question. Anyone who has a question may press star and one at this time. The first question comes from the line of Chris Hallam from Goldman Sachs International. Please go ahead. Yeah. Good morning, everybody.

You're on track for EUR 33 billion revenue ambition this year. You've highlighted further growth in NII, the improving IBCM pipeline, and stronger Corporate Bank momentum. I guess against that, C&O should normalize in the back half and investment spending looks like it may also rise in the second half. How should we think about the balance of those tailwinds and headwinds when we're trying to solve for H2 performance? What are the key trends you're expecting to see on a divisional level, in the second half of this year? It's the first question. Then secondly, what's your conviction level, I guess, mark to market, on achieving that greater than 13% return on tangible equity target for 2028? How do you see the medium-term picture improving more broadly?

If I look at slide five, you've mentioned in remarks considerable upsides to 2028 targets. If I look through those themes on slide five, many of them kick in next year. Is it still a case of both higher 2028 ambitions and maybe also a more front-loaded or less linear progress towards those ambitions? Thank you. Good morning, Chris.

Thank you for your question. Let me start, Raja can obviously add on. Let me start with your first question.

To say on this year's performance, 2026. Look, first of all, really pleased what we have seen over the last six months. It, I think, reinforces the strategy which we have stated at our investor day. What is actually satisfying me most is that we see this encouraging performance in all four businesses. It's not only driven by one business. It actually demonstrates the strength and the diversification of our franchise. Chris, to your question then, what does it mean for 2026 from a revenue point of view and from a performance and momentum point of view? We see this momentum continuing in all four businesses. Private Bank and Asset Management, to be honest, you have seen the assets under management flow. This is continuing. I will get later back to your page five question, with all that, what is also happening here in Germany, in particular the pension reform, you can see that actually the attention of the people to do something on their own pension and to go for investments is, to say, on a high, we are benefiting from this.

To be honest, we can also see that in July. Corporate Bank, I'm glad. Actually, we are doing better in the Corporate Bank in Q2 than we expected. We have seen this increase or this revenue improvement, which we forecasted for Q3 and Q4 already earlier, really led, both on the deposit and on the lending side, also on the fee side. We are moving into the right direction, in the Corporate Bank.

I would say that this is now a trend which you will continue to see. We forecast that Q3 and Q4 are sequentially showing better revenues, increasing revenues. I would say that we see this turnaround in the Corporate Bank. All the investments we have done, the focus also here on Germany, but on our Business Banking, mid-cap banking, multinational Corporate Banking, and Institutional Cash Management is paying off. That's good. Then, actually in the Investment Bank, I'm very happy. We, I think have taken or it looks like that we have taken market share across the board, in particular in the FICC business. It's actually fantastic to see what Ram has done again in Q2. With those markets, like we have seen it in Q1 and Q2, but also now the constructive start in July.

I do believe that given the market position we have, given the risk management needs of the clients, which we see in our day-to-day meetings, I see a very constructive development in FICC. You can see actually that in the IBCM business, it happened that what we expected, and that is a strong increase in Q2. I would say that looking at our pipelines, looking at Q3 and Q4, I actually feel that the second half in the IBCM business is even stronger than the first half. Overall, I would say across the business, of course, always taking into account that in the Markets business, the first quarter is the strongest one and we have some seasonality. Actually, I remain very confident on the revenue guidance and therefore full confidence in the EUR 33 billion. I want to be always disciplined when it comes to outlook.

We have a complex environment out in this world, I would not be surprised if we can even slightly exceed the EUR 33 billion for the full year. On the cost side, to be honest, we are not changing our guidance. We always guided for slightly above EUR 21 billion, and that is unchanged. We are continuing to invest into technology, Wealth Management, IBCM, exactly in line with the plan which we laid out in November. Obviously, in case we would see a weaker revenue development, it gives us obviously immediately the flexibility to do something, but we don't see that, and therefore we leave this guidance on the cost side unchanged. I'm actually very happy with the discipline, which is really across the bank on the cost management.

Then looking at the quality of the loan book and taking it all together, to be honest, I think we will see a strong operating 2026. I think it's too early to change, so to say, the guidance. Let's leave the guidance there where it is. I love to beat and race, as you know, and I think it's exactly the time to simply keep your head down, work every day, make sure that we keep the momentum, and then I'm actually very positive on 2026. Let me add to immediately and go to 2028, and again, Raja may want to add to that. Everything what I said for 2026, and when I look at the momentum of the businesses, also if I see the client reactions, I was just in Asia, I was before that in the U.S.

The scheme I told you before that actually the world wants to have, in particular in these times, an alternative in Europe, a strong European alternative when it comes to Global Banking, when it comes to Investment Banking, this is unbroken. Therefore, I would say that actually everything what we are seeing from an operating point of view, the focus also in our business on capital light business is actually filling me with confidence that we will see that momentum and the overall development of the bank from an operating point of view also in 2027 and 2028. No change to that. I even feel slightly better. You referenced page five and obviously page five gives us more confidence. I'm positive and optimistic on that what has been announced in Germany in particular over the last six to eight weeks.

You asked me rightfully in the first quarter, whether Germany is lagging progress, and we were all a bit disappointed with slow reforms in the first 12 months. I can see actually that competitiveness and growth has been put at the core of the agenda now. Both or three things, health reform, pension reform, and the 34 reform planned by the government is actually very positive. You have also seen actually the Ifo Institute coming out earlier this week with stronger numbers than we anticipated. Actually, the kind of tailwind which we see from a German reform point of view is positive and in my view will kick in in 2027, to a lesser extent in 2026. We said that already last time, but I would say that is an upside in 2027 and obviously then 2028.

In that pension reform, obviously for us as a bank, super positive and in this regard, I'm actually surprised by the depth of the pension reform, in particular in pillar 1 and pillar 3. Pillar 2, I would have loved to see even more, but let's see what the tariff partners are doing about the recommendations. Pillar 1 and pillar 3, very good incubator for our business, in particular in Asset Management and in the Private Bank. Then to be honest, I also see good progress and I'm optimistic when it comes to the latest reports from Brussels for the EU reforms and when it comes to bank competitiveness. I'm glad that items like a review of CRR3, capital buffers, trying to achieve more a level playing field, has been put into the agenda.

Therefore, looking at all of these, I would say, Raja talked about AI obviously before, I think these upside levers are playing out exactly like we hoped. That gives me obviously all the confidence that we can achieve the larger 30%. To be honest, if everything is decided like it is announced, and this is now obviously to be shown over the next couple of months in particular in Germany, I do believe that there is some meaningful upside above the larger 13%. Again, like I said for 2026, I don't like to change guidance after three or six months after an IDD. Let's beat and race, the overall environment, very constructive and most importantly, underlying business really doing well.

Okay. Super clear. Thank you, Christian.

The next question comes from the line of Anke Reingen from RBC. Please go ahead. Yeah, good morning, and thank you for taking my questions.

The first is on the loan losses and the comment about underlying reiterated. Can you clarify your comment about the additional loan losses to de-risk the portfolio? What sort of magnitude are we talking about? Could we be looking at a reported level 2026 could be above 2025? Is there a risk that any overshoot under EUR 33 billion revenues is basically offset by higher loan losses? Which specific areas are you thinking about? Secondly, on the costs, about the 2026 guidance slightly above EUR 21 billion or the 3%, how should we think about the sequential trends from the Q2 levels into the full year number? Thank you. Thank you, Anke, for your question.

Let me take the cost question first since Christian already spoke about it a little bit. That would be helpful for me to conclude. Look, as he talked about, we assume at this point that we will get close to our original target. That obviously assumes that we will spend the remaining investment EUR in the cadence that we have decided. Obviously investment spacing is not always precise, depending on technology and things like that. Don't forget that included in our estimate is also almost EUR 400 million of additional productivity that is also coming in the second half of the year. It's not just that the investments are going at an incremental pace for the second half of the year. We also have productivity offsetting those.

That's why we feel very comfortable about the number that we gave, and we think that, as I mentioned last time, I feel very comfortable that we're not going to overshoot that number. In fact, if the pacing comes out a little bit differently, that we may be slightly below. That's the way I would think about it, that if everything goes according to plan, we should be getting to our number on a pretty even basis. Obviously, we have a couple hundred million EUR of productivity falling out each quarter, and then offset by investment spend for the remaining two quarters. That's how we have planned it, and we'll see how the quarter evolves and how fast we can onboard the clients, how fast we can hire the people that we want to hire. That obviously dictates the amount of investment spend.

In terms of PCL, I think I would just like to reiterate that overall we are seeing better credit trends in 2025 In 2026 versus 2025, I think whether it's Private Bank, where we're seeing very low level of revisions, Corporate Bank performing according to plan, which was already better than expectations.

On the Investment Bank, as you noticed, we made a very specific decision and a very targeted decision for around EUR 100 million to de-risk our commercial real estate portfolio and also free up capital sooner than we ordinarily would have. At this point, our conviction remains that we should be doing better this year versus last year. That said, if we see another opportunity of around the same magnitude in the second half of the year to do something that is equally capital accretive and equally beneficial from us from a de-risking perspective, we'll consider it, but it depends on whether the market gives us that opportunity to exit certain positions that we think we would like to.

In terms of magnitude, I don't think that we should assume that it will be something that's dramatically more different than what we have already done. When I look at consensus, that may be actually the high end of where we may end up even with these actions. In the absence of any additional actions, we feel pretty good about our guidance in terms of being lower year-over-year. Really the key thing for us is does it de-risk our commercial real estate portfolio even further, and does it give us capital relief sooner than if we were to just wait on a normal exit?

Thank you. We now have a question from the line of Tarik El Mejjad from Bank of America. Please go ahead. Hi. Good morning, and thanks for taking my questions.

First, I'll start on capital. You had a capital bid this quarter, and you are above your guidance of being to mid-range in each quarter this year. This is despite the strong growth in the IB in the quarter. At this pace with the SRT, Raja, that you mentioned you'll do in second half, you should definitely be above the 14% target for the full year. I know you guide for surplus capital above 60% only from 2027, but what would refrain you from distributing more than the 60% from this year? Is there a scenario where in full year you assess your surplus above 14% and decide to adjust your payout higher? In terms of front loading, you've done a front loading of 26 during in Q4.

If you feel confident about how the second half evolves, would you be ready to announce another front loading in Q3 executed in Q4 calendar and Q1 calendar next year? That's one of my first question. Second one is on the revenues, and there is a big M&A ongoing in Germany. Could you actually highlight what could be the benefit you get from potential desynergies from the Commerzbank UniCredit merger in Germany, and how would you benefit from that and at what timeline? If I can squeeze a last one just to follow up on the SAA. Would you quantify what could be the uptick in ROTE from this measure? Some of the banks start to do that. We did some analysis. It'd be interesting to see if internally you start to work on that because it's not that far away.

Actually the securitization market, because it's down to that, what do you think the securitization market in Europe could be on the back of the discussions we have in tripartite post-summer? Thank you. Thank you for your questions.

Let me take the one on capital, and I'm going to pass it on to Christian to take the more difficult ones. Tarik, I think we have been pretty clear that for the rest of the year, we feel like we should be comfortably operating in the operating range of 13 and a half to 14%, given the timing and the pacing of some of the benefits that we're going to have, not only from securitizations, but some of the other actions. As I mentioned, we have taken a charge for the India sale, but the benefit will really come once the sale closes. Some of the exits for NPE, we have actually obviously taken the charge, but we are now in the process of executing those sales. A little bit depends on the pacing on when these offsetting actions happen.

That's why I'm a little bit more cautious about guiding to 14%. I think more importantly, the important part is that we were very clear in our investor day guidance that we have to be sustainably over 14% before we start executing on share buybacks. That's a judgment call on what sustainable means, whether it's one quarter or two quarters or three quarters, but I would think it's definitely more than one quarter. In addition, as you know, we are doing a pretty major change in our cadence already. We went from 50% to 60%. In addition, it's the first time that we did a share buyback based on six months' worth of earnings, which actually shows a lot of confidence by us, but also from our supervisors that they allow us to do a share buyback in a year.

I would assume, Tarik, that we will go through another couple of quarters, and when we have much better visibility, at least another quarter or two for the forward look, then we would think probably about another share buyback application. I would think that it's normal to assume for now where we are that a six-month cadence is a pretty good one. We have already, with this announcement, would have done EUR a billion and a half in the first half of the year versus EUR 1 billion that we did in all of 2025. We are accelerating quite substantially. If things go well, and we see no reason why the second half of the year should not be as strong, then obviously we'll consider something towards the latter half of the year again.

Once we are sustainably above 14%, it is really our intention to put share buybacks at the forefront, because we have enough capital to operate the business. Frankly speaking, we are freeing up capital to invest in the business through many other measures, whether it's sales of portfolios, whether it's SRTs or exiting NPEs. I think we are able to manage business growth by freeing up capital quite organically.

Thank you, Roger. Tarek, let me address the other two questions on Germany and then on the regulatory front. First of all, I think we also need to watch what is happening. Of course, we have done and we are doing our homework, let me put it this way. I think actually, everybody knows that we looked into a potential situation in 2019. We know exactly what is possible on revenue synergies and revenue dyssynergies. You have also seen over the last 12 months that also on senior positions, we have made targeted investments in Germany on the Corporate Bank side, on the wealth management side, on the Private Bank side, who honestly benefit from that. Of course, we will see that this is a revenue opportunity for us, and we are prepared for that.

Of course, it's also our duty and obligation to go for that. Actually, the timing of that depends on the business. On the Corporate Bank side, you see far more active discussions with clients already because they obviously plan out, they are trying to risk manage their own situation. Therefore, there are lots of discussions on the Corporate Bank side. On the Private Bank side, it depends between retail clients and wealth management clients. On the wealth management side, you also start to have discussions and active discussions. On the retail side, that happens usually once things really happen, if you mean what I'm saying.

I would say, given the magnitude of potential revenue dyssynergies we would have seen based on our analysis in 2019, that could mean a meaningful opportunity on the revenue side over the next three years, and we will absolutely go for it. Otherwise, we wouldn't have invested into our organization, in particular in Germany. Fabrizio, Claudio, and Stefan Hoops are obviously fully on it. It's a net positive. The SAA and regulatory changes, look, as I said in my first answer, I think it's too early now to talk about potential increases in terms of ROTE or target revisions. Clearly, in particular, if you look on all the announced intentions when it comes to CRR3, when it comes to FRTB, when it comes to buffers, when it comes to a review of software amortization, that can have a meaningful impact.

Tarek, we are talking about a political process. We are talking about now an announcement which needs to be executed, therefore we should not front-run this process. Everything what I said also to Chris' question on 2028, I'm far more confident, not only in exceeding the 13%, I was already confident in November 2025, but I have the highest confidence since then now based on our operating performance and the changes we see, for instance, on the regulatory side. It needs to be approved. It needs to go into the legislative package and process end of 2026, 2027. Then I do believe that we see actually a good tailwind in the latter year of 2027 and in particular in 2028 from a regulatory point of view.

Thank you very much. Next question comes from the line of Kian Abouhossein from JPMorgan.

Please go ahead. Yes. Hi, thanks for taking my question.

The first one is regarding the Private Bank, which is showing strong flows and cost income decline. I wanted to ask about the advisor hiring, where you indicated 116 hires already, and the target was 250 plus at the investor day. Clearly you're well ahead of expectation. I just wanted to see how we should think about advisor hires going forward, competition, and lastly, how we should think about net new money flows, considering you're hiring fast and maybe even more it might be. If you could clarify that. Secondly, on the Corporate Bank, I don't understand what is going on in the Corporate Bank because I see low growth, I see asset growth, leverage exposure is growing, margins are declining, and Risk-Weighted Assets are not growing if you adjust for operational Risk-Weighted Assets.

Now, if you're giving out loans which are cheap in order to get fee business, the fee business is not really growing significantly either. I'm just trying to understand what I'm missing on the P&L and your confidence in the second half and beyond, because you clearly have the CAGR of 8% over a certain time period which now has to be even higher, more like 10% to get there implied. Is it all hedges or how should we think about this? I don't see the delta that you're going to create on the revenue side.

Yeah. Hi, Kian, it's Christian. Thanks for your questions. Let me take the Private Bank one. Roger is going for the Corporate Bank. Look, my first answer to you on the Private Bank is actually a very nice story. If you would see me now, I'm smiling because this operating leverage in the Private Bank will continue. We really need to deep dive then into the Private Bank, because what we can see is a constant and continuous cost takeout, in particular in the retail business. Claudio, with his team, are following up on all the cost reduction program, whether it's the front to back processes. I think it was in our prepared remarks in that we finished already the branch closures, which we had planned for the entire year 2026. It's done at the end of June.

Obviously, we can see that costs are moving out. With the investments into the technology, into our digital assistance and digital assistant program, we actually are even improving at the same time the client experience. Therefore, you see in the retail bank also benefiting from all the attention Germany has now on pension and investment that we see rising revenues and, at the same time, costs coming down. You and I discussed it for years. It was badly needed that we get this operating leverage. We have seen it now quarter by quarter, and it will continue. Now on the wealth management side, it's actually a real growth strategy. You are right, we have hired approximately half of the people we targeted. As Roger was saying, we are targeting to do our full investment program for 2026.

That includes that we are targeting to get to the 250 people. Now, it always depends whether at the end of the day, we will get these people in, but I'm actually quite happy with the progress. You are also right that we can see that these, on the wealth management side, that actually they are quicker operational and getting assets under management in than we initially thought. That next to the general trend which we see in Germany, and again and again with our 19 or 18 million retail clients, that we grow the investment business. This is coming on top from the wealth management side, which is a pure growth business. I really do believe that we will see this nice operating leverage in the retail bank costs further down, given our flow business and, in particular, the focus on investment business.

Also in the retail business, increasing revenues and wealth management is a very nice growth story. Claudio has shown it now for years. Last but not least, it's also really nice to see that people simply want to join Deutsche Bank. That was different two or three years ago. We had difficulties at some point in time to get the right people. Now we don't have that anymore. They want to work for us. Therefore, it's actually a real enjoyable story. Over to you. Thanks, Christian.

Again, I think on Corporate Bank, I'm not going to re-repeat my last quarter's discussion about the FX and interest rate headwinds, because while they are still there, they are clearly diminishing now, which gives us great confidence that we actually can exit out of this year mid to high single digits, which may not be all the way up to 10, but that actually gives us confidence. Look, it's clear that we are growing fee and commission income in mid-single digits this quarter. Again, we did very well in trust and security services, as well as in structuring fees on Trade Finance and lending. The margins, for the most part, are pretty stable. Honestly, it's not that meaningful given how much of it comes from deposits.

Especially when you look at the hedging strategy that we have, especially in light of the higher interest rates environment versus what we had assumed, we have a much bigger upside and tailwind for 2027, 2028 versus what we had assumed. Corporate Bank is actually one of the bigger beneficiaries of that upside. Combine the fact that we are growing fees mid-single digits, a much better interest rate outlook, rationalization of our portfolio, which was low yielding, which we are continuing to do on the trade side. The fact that Christian talked about that this is on the back of Germany not even being full speed yet gives us a lot of confidence. I had promised you guys that we will show a positive year-over-year growth on the Corporate Bank in the second half of the year.

We managed to do that by a little bit in the second quarter, when I look at my forward outlook, I have zero pause on that we're going to exit this year out with a very healthy growth rate. The fact that the betas are also holding up, by the way, just so you know, on deposits. We have a slightly higher beta on EUR deposits despite the competition. We have much better betas on U.S. and other currencies. In addition, despite Germany not being full speed, we grew our German lending book by 3% this quarter. All the indicators for the Corporate Bank give me great confidence that we will show you all what we promised, which is good growth rate. As you know, the ROTE is still pretty solid for the Corporate Bank. It has not been impacted.

We think we have some ways to get it in there. All in all, the story for the Corporate Bank is playing out, I would say, exactly how we had crafted this plan, and I think the only way for us to prove that would be to go through one or two more quarters when you start seeing the 1% growth turn into 5% growth and 5% turn into 8%. I'm honestly super not fussed about what's happening with Corporate Bank because with the interest rate tailwinds, with the German fiscal, and the fact that we are actually seeing loan growth after a long time, and that too in Trade Finance, which is where all the good stuff happens, the fees come associated with that, the payments businesses come with that. I feel pretty good about it where we are.

May I just follow up, how much of the uplift in revenues is hedge related then? In the second half. We talk a lot about uplift, uplift and hedges, but we don't actually know how much it is.

As I said in my prepared remarks, the majority of the benefit comes into 2027 and 2028 because of the way our hedges are set up. We don't leave ourselves super exposed in the short end. We obviously are going to benefit, but the real improvement is actually coming from 5% to 6% fee and commission growth, and the increase in the deposit balances that you are seeing, and the fact that the betas are holding up pretty well. The growth of the Corporate Bank is not super dependent on this interest rates position, but is actually super helped by it. What's happening is that now we are able to reset these hedges, and the 2027 and 2028 impacts are going to be much more pronounced than the 2026 impact.

Thank you. We now have a question from the line of Giulia Aurora Miotto from Morgan Stanley.

Please go ahead. Good morning.

Thank you for taking my questions. I have two. I'll start on SRTs. Is it correct that you have currently released about 100 basis points of capital thanks to SRTs, and how much more can you do? What are your thoughts when you think about capital optimization via SRTs? Do you have any limitation in terms of RWA density, which is declining, or in terms of regulatory limits? Will this change your opinion once the securitization package, which we have all been discussing for more than a year, finally, hopefully, exits dialogue and gets approved? That's the first question on SRTs. The second question is instead on costs. Consensus for 2026 is at EUR 21.2 billion. Are you comfortable with the number? Can we assume that we don't get another perhaps bump higher guidance from you as we approach Q3? Thank you. Giulia, let me just take the second question first.

It's only my second quarter here, but I would like to reassure you that we feel very comfortable with our expense guidance. We have planned the year very meticulously. We communicated what we wanted to invest in quite upfront, so there will be never any surprises. Based on where we are at today, I see no reason, based on what management knows that why we would not hit close to where everybody has us. Obviously, it's a EUR 21 billion expense base. Could I be EUR 50 million one way or the other? Yes. For the most part, I am pretty comfortable that we will not exceed what we have guided because we have clear benefits from productivity showing up along with the pacing that we have. I would like to just reassure everyone on that one.

Look, on SRTs, I'll take you back to the Investor Day, and we had said what our ambitions were. That is just one tool in our belt related to capital optimization. We don't want to be over-reliant on any one thing, and in fact, we don't want to be over-reliant on any one product or platform in the SRTs. Therefore, we are building new platforms and diversifying against counterparties. In this particular quarter, we executed one of the programs. We have some lined up. At this point, unless we really see a need, we don't think we really have a dependency to massively scale the SRTs. We have much better ways to free up capital, taking portfolio actions where we don't give up economics. Things like we've done in India, exiting non-performing exposures which free up capital.

I think at this point, we are pretty comfortable with the goal that we had for using SRTs as we laid out at the Investor Day. At the moment, our ratio benefit is around 75 to 80 basis points. I think we think it's reasonable.

Thank you. Next question comes from the line of Tom Hallett from KBW.

Please go ahead. Hi. Thank you for taking my questions.

Firstly, the FICC performance was particularly strong relative to peers. I'm just wondering, do you think that relative outperformance is sustainable? It looks like there was quite a big gain there at the last few days of the quarter. I'm just curious how the third quarter has started off, please. Secondly, and sorry if I've missed it, but when do you plan to start and complete the $500 million buyback? I'm just curious in terms of timing for 2027, should we be looking at the second quarter as the time where you'll seek to distribute your first half profits again? Also look to kind of signal to the market there's excess upon approval that will do for the second half of the year.

I'm just trying to get a better understanding of the timing of future buybacks. Finally, just could you help size the revenue opportunity for the pension reforms? Thank you. Sure. Let me start.

Look, I think the share buyback, as I mentioned, we are in the brand new cadence where we are distributing the first half of profits with the second quarter results. I think it would be reasonable to assume that we will, assuming everything else goes according to plan, obviously we have all the regulatory approvals that we need, that we would aim to do that again in the second half of the year to distribute the first half profits. I think that's a fair assumption. In terms of FICC, I would say, in some ways it's very reassuring that we've kind of proven the naysayers a little bit wrong that said that it will be hard for a European bank or FICC franchise to compete with the U.S. banks given the relief that they're getting. The performance in FICC is very broad-based.

We did extremely well both on rates and on credit. On rates, I think it's clear the volatility with trend isn't good for markets, and it tends to be conducive to high level of activity, and we clearly were rightly placed there, especially our strength in euro rates, where we are super competitive was a differentiating factor for us. On credit, it was both the story of flows, where we had emerging market macro business that actually performed very strongly, as well as distressed products, where maybe there were a few more idiosyncratic events that played in our favor. All in all, I think the FICC business performed exceptionally well. I think, as Christian said, we believe based on this performance, we probably took share. We did not really massively deploy RWA for this performance. It was really market-based performance.

As far as the last day of the quarter, you will notice on the chart, it's always a little bit spiked. There's accounting adjustments, there's day one P&L, there's reserves. It's nothing unusual. It's not even one of the higher spikes. There's not much to read on the last day of the year. I'm sure I can ask for Christian, that it's hard to quantify anything at this point in terms of benefits for the future reforms or pension reforms. I think it's a little too premature to do that.

Yeah. I think Raja is right. Sorry. Putting a number to it is wrong. I would say, looking at the depth of the pension reform, how it has been announced, and again, subject to execution because it needs to go through parliament now, I would not be surprised if we see, so to say, an overshoot of our assets under management goals for the private bank and asset management compared to that what we have given to the market in November 2025. Because we can already see what happened in the first six months with that what was decided. I'm very optimistic that we can have a refinement of that number going forward. First, let's really have that approved in the German parliament what has been announced.

Thank you. We now have a question from the line of Nicolas Payen from Kepler Cheuvreux.

Please go ahead. Yes, Morning.

Thanks for taking my question. I have two, please. The first one, Christian, coming back on the slide five. Actually, if you had just one item, you could pick only one item out of the four trends that you listed on slide five, which one would it be? Coming back to the Investment Bank, the leverage allocation, also the RWA allocation actually of the IB compared to the group has actually increased quite significantly, especially on the average side. Was it just opportunity related or is it actually a structural trend and is there a cap or should we continue to see that proportion to grow? Thank you. Difficult question actually because I'm quite pleased with the progress on all four ones.

I always like to choose that what is in our hands because we can control it like we have controlled the last seven or eight years. To be honest, what I have seen in our own application of AI, the productivity gains also Raja was talking about, that gives me all the confidence that with the investments we are doing, we will achieve more in the next three years than we indicated. Again, it's in our management responsibility and in our day-to-day discipline of executing, and therefore, obviously, this is something which is, sort of say, closest to our own steering. I talked a lot about Germany and the reforms, to be honest, I'm actually really positively surprised about the competitiveness report by the European Union last week because it's pretty broad.

We are not only talking, one item, i.e., CRR3, we are also talking capital buffers. We are actually discussing other items we brought in like software amortization. Therefore, if this is now executed in the spirit of how it has been written, I really do believe that we get a better balance between the needed stability, but also to position banks into supporting the growth of the economy. Therefore, I'm really pleased with that, and I think it will in particular help a bank like Deutsche Bank a lot. Therefore, I would pick that one in particular.

Thanks. Let me take the question on Investment Bank. We did obviously see some opportunity to deploy leverage this quarter a little bit, and then you can see the results of that. The performance and the returns were fantastic. Going forward, look, the way I think about capital deployment for IB, and obviously we have not set any hard or fast ceilings for that one, but the way I think about it is that we need a world-class Investment Bank that's wrapped around with very stable fee capital-light businesses. If we are growing our fee and capital-light businesses disproportionately higher, obviously the proportion of capital that's allocated to Investment Bank may optically appear to be more, but that's by design.

While we don't have a cap, we do want to continue to shift the mix towards where majority of our revenue and our PBT continues to come from stable fee-based businesses. By the way, this is another quarter where 60% of the revenue comes from non-IB businesses. On the PBT side, it's a little bit less, but if you were to adjust for the sale of India and the investments in the Corporate and Private Bank, we actually also have made the pivot. Now where over 60% of the PBT could theoretically come from those businesses. I do think that we have the capital, but the question that I pose to the business is really, do we have the returns that go with that capital?

We are not in a situation where we have desperation to just deploy capital to get to where we need to get to. We have our other businesses growing in a pretty healthy way. At this point, if we can take market share and we can get the returns, sure, we'll deploy a little bit, but we have more than enough capital now. I said, in the medium term, I don't see a large amount of RWA growth for us to sustain what we want to do for the Investment Bank. I feel pretty good about the size, but what's more important for us is that the businesses around Investment Bank are now growing with the pace that we had envisioned at the IDD. Frankly speaking, as Christian said, on the asset flow side, we are hitting the ball out of the park.

If you were to look at the average growth rate we had assumed to hit our 1 trillion of client assets for PB, we are way in excess of that. Stefan will not like it when I give him his 27 number, but I think his 160 billion of AUM is beginning to look a little bit of a shy number.

Thank you. Next question comes from the line of Stefan Stalmann from Autonomous Research.

Please go ahead. Morning. Thank you very much for taking my questions.

I want to come back to the VaR chart and the trading profile. It looks like you're now getting these valuation effects not only at the quarter end, but also month end, at the end of each month. I was wondering if you could give us a little bit more of a steer about what kind of businesses are actually producing these kind of effects. Also, these businesses should be run on a fair value basis, I guess, that means every day. Why is there this lumpiness in regular intervals rather than a more continuous development? The second question, I was curious about whether you could give us a rough sense of what your exposure is to data center financing credit exposure that is.

If you have a number also, whether you could clarify whether that number overlaps with your private credit exposure or whether it's on top. Thank you. Thanks, Stefan. Stefan, I think it's not, as you noticed, that we have historically, if you compare to our historical VaR, I think we had shown a chart in the investor day.

The company is running a much tighter band. The volatility is actually much lower than what it used to be. As I mentioned in the previous question, it is not unusual for banks like us to actually have a final day of the month impact because we do assess reserves and day one P&L at the end of the month. In the big scheme of things, it's not game changing. There's no real reason for it to be off. I think it's just a matter of how we close the books and how everybody does it, frankly speaking.

I think our chart would not seem that much dissimilar from most banks who are in a trading kind of an environment. This quarter, it's a little bit more pronounced, but I went back in history, it's not even the highest one that we had. It's actually within the range of reasonableness. Look, the other thing is, I don't believe that we have gone out and given a full-on breakdown of our data center exposure, but it's high single digits and it's within our appetite. More importantly, our exposure is to large sponsors who have a diversified business model and a revenue stream. We don't generally tend to lend to small sponsors or companies whose only business is AI or only business is a certain type of technology. That makes us comfortable. There will be a small portion of that also within the private credit exposure.

Obviously, our private credit portfolio is extremely well diversified between mid-market companies, both in Europe and in the U.S. There's not a direct one-to-one overlap. Just to communicate both the data center exposures and the private credit exposures for the most part have remained pretty stable in size, and that's by design because we have risk tolerances for types of borrowers and types of industries. That's kind of the way we look at that. There's very little private. Thank you very much.

Sorry, there's very little data center in private credit.

Excellent. Thank you very much, Mazen.

We now have a question from the line of Matt Clark from Mediobanca. Please go ahead. Good morning.

A couple more balance sheet questions, please. Firstly, on the buyback, I think it's implicit that you've already got regulatory approval. If you could just confirm that. If that is the case, I'm curious about the kind of earlier calendar this year versus last year. I'm wondering whether you used the fast track approval process this time around. Second question following on from Stefan's is on the loan book. You've got 8%, I think, Investment Banking Division loan book year to date. You've just said that private credit was pretty stable. Could you share what has driven that Investment Banking loan growth if it wasn't private credit? Thank you. Sure. Let me answer the first question because it's a super easy one.

Of course, we do any announcements regarding capital return with full permission from our supervisors, and we have to get them comfortable with our status and our projections. Any future share buyback would be their acceptance. I will not comment on the process. I think that's something that should stay between us and our supervisor. As you know, we essentially are changing our process. We give share buyback this time around in the current year earnings. Certainly, we've been able to do it a little bit quicker this time around. Look, in the end of the day, loan book in IB is pretty broad-based. We had a little bit of asset-backed lending growth. Also obviously in our IBCM franchise, we are supporting clients in their transactions.

It's not necessarily any focus areas. On FICC financing, we clearly are seeing an ability to deploy some loans because the spreads have not come down as much as we thought they would when we made our initial plan. The returns are pretty attractive. The growth, I would say, is broad-based. It's hard for me to pinpoint any one thing other than it's not private credit.

Great. Thank you. I have a question from the line of Mate Nemes from UBS.

Please go ahead. Yes. Good morning, and thanks for taking my questions.

I have three of them. The first one would be a follow-up on FICC financing. Roger, you were just saying that spreads haven't tightened as much as you would have expected. Revenues are flat year-over-year and down 6% sequentially, while the loan book is clearly expanding at a high pace. Is it that just the spread compression is slightly less than you expected? In that process, should we expect somewhat more compression in the second half of the year, or we can just expect volumes to drive FICC financing revenues from here? This is the first one. The second question would be on the revenue guidance, the EUR 33 billion. You mentioned the banking book NII is now expected to be slightly better than EUR 14 billion, i.e., the original guidance.

I was just wondering, is there any offset to this growth, or should we expect the EUR 33 billion revenue guide also to increase by the incremental NII? The last question would be on the Corporate Bank. I was just wondering what the underlying loan growth was in the quarter after stripping out SVA management. I think you mentioned a 2% underlying growth for the Private Bank. I'm wondering what is the equivalent number for the Corporate Bank, or the headline growth is the underlying growth. Thank you. Yeah. Thank you for the question.

Let me answer the FICC financing question first. When we did our investor day back in November, we had made a certain assumption about how fast the spreads could potentially be coming down between 2025 and 2028. That was the basis of our plan. I would say we had a pretty conservative assumption in terms of spreads. What we have seen is the spreads have come down, but nearly not as much as what we had modeled. Therefore, it gives us an opportunity to deploy some capital and still make attractive returns. What has happened is that the refinancing rate is slightly higher, but the rollover of the current portfolio is now actually happening at higher spreads than what we had envisioned.

In some ways, we are benefiting from the deviation between what our original assumption was versus what is actually happening. That's what's given us the opportunity to potentially do more, a little bit more than what we had assumed at the previous spread level. That's kind of the reality over there. Obviously, the ability to deploy these loans across different businesses is also something that we like. As I mentioned, the real uplift of the NII is going to be in 2027 and 2028, given our hedge strategy. We do find a little bit of that improvement in 2026, which is why we're indicating that we believe that NII guidance for 2026 should be slightly higher, and that should fall to the bottom line. As Christian mentioned, all the other businesses are actually performing quite well as well.

The unknown is a little bit on the C&O. We have outperformed our C&O guidance in the first half of the year by a little bit. At this point, from a planning perspective, we assume that some of that will revert back or is beginning to revert back. Therefore, we are going towards our guidance for the second half of the year for C&O, kind of offsetting that upside. The reality is that where I sit today, I think if you were to look at the range of outcomes around 33, because 33, remember, is an approximate 33. If I was to look at the range of outcomes of above that 33, at the very minimum, we should be above the midpoint of that range and not at the low point of that range.

That's how I would think about the upside that we have with the performance of the first half, we are now comfortably up to 33, and depending on how C&O evolves, I think we could potentially be comfortably above the 33, and that's kind of where our guidance is at this point. On your last question on loan growth, I think we have approximately EUR 1 billion or so of SVA actions in our low sub-hurdle lending book in the Private Bank as well. We haven't really called it out because the loan growth, even despite that, is pretty healthy, but that trajectory we'll continue to see, reducing that book and replacing that with the Trade Finance book, which is much more SVA positive.

Thank you, Roger. Very helpful.

We now have a question from the line of Andrew Coombs from Citi. Please go ahead. Morning. Just a couple of small numbers ones.

Firstly, on the Private Bank assets under custody, 10% decline Q1 Q. Can you just draw out what's causing that and the average margin on the assets under custody versus the assets under management in that division? Secondly, the 11 basis points boost you've had on capital for X compensation DTAs. I think you said mainly on the DTA effect. Can you just explain that in more detail and also whether there's anything more to come there in the remainder of the year? Thank you. Yeah. Look, assets under custody is a little bit episodic.

In some cases when large transactions happen, whether it's IPOs or other strategic transactions, and in certain cases, the money comes in and stays, and as other cases, it flows out. Obviously, our goal is to build this business because it is actually directly in line with our strategy, which is to bring very low cost, high margin, even if low spread business, because it gives us visibility into the client's assets being held away from us in wealth management. It gives us an avenue to actually go to the client and talk to them about moving their assets that are under custody to assets under management. It's not a high basis point business, but it's extremely accretive given we have the platform to do that.

We have basically started working on that really in earnest post the Investor Day, the focus has been I think the average margin, the fees or margin is around mid-single digits, but it's very accretive mid-single digits. The reason we do that business is because it's a pipeline to assets under management from assets under custody. Sorry, you had one more question for me about DTA. Look, I think the DTA dynamic works on where our earnings are being generated and which jurisdiction the DTA is. Clearly it is our goal as we generate more and more revenues across the platform that we would like to see continued utilization of the DTA, but it really depends on the earning mix in the jurisdiction in that particular quarter and how much we can utilize.

At this point, we haven't really planned for massive DTA-related benefits, but clearly what we're seeing is because the earnings power of the company is increasing versus historical consumption of DTA, we're seeing more DTA utilization, hence more benefit.

As a reminder, if you wish to register for a question, please press star and one on your telephone. The next question comes from the line of Jeremy Sigee from BNP Paribas. Please go ahead. Morning. Thank you.

Just two quick ones. Firstly, any reflections on the business model in the Investment Bank with the strength that we're seeing in equities, both trading and also the IPO flow, does that change anything in your need to be involved in some of those business activities? Second unrelated question, Raja, you talked about scope for extra cost savings earlier in the year. It sounded like a bit of a personal project of yours. As a newcomer in the bank, you were seeing opportunities to save costs that hadn't really been tackled before. I just wonder if that's still the case, if that's something you could expand on. Thank you. Let me answer the second question first, because that will bring a smile to my boss's face as well.

It's absolutely something that we are very focused on. I think AI has given us a tremendous opportunity to look at our processes that are not even AI dependent, because what we're seeing is when you go in and you look at deploying AI in a particular process end-to-end, you find ways to simplify the process itself. That's something that we are actively looking at, and I think as my conviction level goes higher as time passes, and I think that's what gives us a lot of confidence that Christian is talking about. I think we will be doing much better in 2028, at least on that front because that is in our control, versus what we have.

Clearly there's opportunities that are not just AI driven, but opportunities for identifying simplification that are coming up because we are going in to deploy things in areas which have been BAU for a while.

Jeremy, on your first question on the business strategy in the IB, no, it does not really change. I think we have a clear strategy laid out in November 2025. We knew that we wanted to sort of say adjust a bit, in particular in IBCM, our strategy, and I'm very happy with the direction Alison and Fabrizio are going. You see the results in Q2, and I see this is only one reflection. We see that momentum continuing. Now, it's also really good for us, obviously, that we had the one or the other mandate in big IPOs, global IPOs, U.S. IPOs, because it gives us actually the attention also here in Europe. With all that what is now decided and has been announced in Germany, I do think that activity is also coming back here in Europe.

I can see actually that investors are still looking very interested at Europe. If I just see the investor response to the publication and announcement in Germany over the last four weeks, it was very positive. They would like to have a bank which they can use as a gateway to Europe and a bank with a global network, and this is exactly how we prepared for that. In this regard, it simply only supports my view on the IB business. We need to stay disciplined, but I think we can actually take a lot of benefits of these developments.

That's great. Thanks very much.

Ladies and gentlemen, there are no more questions at this time. I would now like to turn the conference back over to Silke Szypa for any closing remarks.

Thank you very much, and thank you for joining us today and for your questions. For any follow-ups, please come through to the investor relations team, and we look forward to speaking to you on our third quarter call. Bye-bye. Ladies and gentlemen, the conference is now over.

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