Jul 28, 2021
Ioana Patriniche
Thank you for joining us for our second quarter 2021 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.
Christian Sewing
Thank you, Ioana. A warm welcome from me as well.
It's a pleasure to be discussing our second quarter 2021 results with you today. We are now over halfway through our transformation journey, and we have continued to deliver against our milestones.
For the second consecutive quarter this year, we have delivered a significant profit improvement driven by growing strength across our businesses. We generated €1.2 billion of pretax profit and €828 million of profit after tax.
And that's including a negative impact of around €230 million from the German Federal Court ruling or BGH ruling on consent for changes to consumer contracts, which we will discuss later in further detail. Despite a more normalized market environment in the quarter, revenues remained robust at €6.2 billion, down only 1% compared to the previous year.
This demonstrates regained franchise strength at Deutsche Bank. We also continue to make progress on costs.
We reduced our adjusted costs excluding transformation charges and reimbursement for Prime Finance from €4.8 billion to €4.5 billion year-on-year. And we continue to invest in the execution of our transformation agenda with more than 90% of our transformation projects now in the implementation phase.
They are key contributors to our cost reduction progress. Risks are well under control, and so we continue to make progress towards achieving sustainable profitability.
This quarter, we generated a 5.5% return on tangible equity. The headway we made across all business in the second quarter reinforces our confidence that we will be able to meet our profitability targets.
Finally, we delivered another quarter of progress towards the goals we outlined at our Sustainability Deep Dive in May. Now let me take you through the highlights of what we have achieved in the first half of this year on Slide 2.
Our performance over these past 6 months shows that our 2022 targets and ambitions are well within reach. Refocusing our business around core strength is paying off.
Revenues of €13.5 billion for the first half of 2021 fully support our trajectory to the 2022 revenue goal. We've reduced adjusted costs, excluding transformation charges, by roughly 4% year-on-year.
Coupled with provisions for credit losses down 89% on the year to €144 million or 7 basis points of average loans, we continue to see an improvement in our operating environment. We also reduced our cost/income ratio to 78% from 87% for the same period last year, which represents significant progress towards our 2022 target of 70%.
And in the Core Bank, the cost/income ratio is even lower at 73%.
James von Moltke
Thank you, Christian. Let me start with a summary of our financial performance for the quarter compared to the prior year on Slide 12.
We generated a profit before tax of €1.2 billion or €1.4 billion on an adjusted basis. Total revenues for the group were €6.2 billion, down 1% versus the second quarter of 2020.
Net interest income has declined by €143 million versus the prior quarter as the one-offs I flagged in April have normalized.
Ioana Patriniche
Thank you, James. Operator, we are now ready to take questions.
Operator
. First question is from Tom Hallett from KBW.
Tom Hallett
So firstly, could you just walk us through the building blocks for the incremental €600 million in revenues by division, please? And how the recent curve developments have been incorporated into your planning, if at all?
And then secondly, the 8% return target has remained flat. So when I factor in the bump in revenues and moderate provision somewhat, I would get to an increase in your RoTE target even after adjusting for the rising costs.
So is there some one-offs or something we should be considering? So any commentary around that would be great.
And I'm going to be a bit sneaky and ask a third question, but you're guiding towards a lower risk charge even for the next year now, but the majority of the better performance has been from the release of prior period reserve builds. It looks like you've now released a significant portion of those made last year, which strikes me as quite high versus your peers.
But you also see the supervisors are remaining pretty cautious on credit risk too. So what gives you the confidence on moving guidance already?
Christian Sewing
Well, thank you for your questions. Let me start to answer that and then James just chip in for additional comments.
To your revenue question, let me go through the building blocks as you're saying, and I'm doing it business by business. But overall, our confidence in higher revenues, Tom, really goes back to the positive development, which we have not only seen now for the last quarter or the first quarter, but actually for the last 4 quarters in all 4 core businesses.
And what we can do is that we can go back to our 4 business and compare our 2022 revenue targets, which we outlined at the IDD in December, and compare this now with our view after the first 6 months, but also after looking at the transformation over the last 12 to 18 months. So let me start with the Private Bank.
First of all, let me say that I'm really happy with what we see there. There is clear growth in Investment business and on the credit side.
Remember, the prepared remarks we sent, we almost -- or we actually reached our full year target in new investment business after 6 months' time. And obviously, that will spark the revenues also going forward.
Same on the credit side, really good momentum, in particular on the mortgage side with good margins. Don't forget that we are selectively repricing deposits in that business.
So actually, we see ourselves fully on track to achieve the €8.3 billion revenue number, which we gave to you on the IDD. I would even say there is upside because the business we see right now, I do believe that we are ending this year with an €8.2 billion number with the growth rates, which we see right now in the last 6 months, but also the momentum in the business, I think €8.3 billion is a conservative pick.
Same actually goes for Asset Management. You remember our plans for Asset Management in the IDD was at, I think, €2.3 billion for the year end 2022.
And given the development which we have seen so far, we will outperform this. Looking at Q1, Q2, the inflows, which we are seeing, and it's actually continuous inflows business momentum is very good.
It's actually excellent. The run rate we see now in this business points to almost 10% higher than the plan, which we have for the year 2022.
So clear outperformance on that side. On the Corporate Banking side, is the underlying business in this segment has grown steadily since 2019 and actually as a result of 4 measures, which we have implemented and which we are working on day by day.
It's, a, the core initiatives such as the business with platforms, fintechs and e-commerce providers, we see the growth rates there. Very successful.
Our growth in the Asia Pacific business, but also in the German business banking, you will remember that we launched a specific German business banking initiative last year in October, really goes well. We have further positive development on charging agreements, which we have in place now for, I think, €87 billion of deposits.
And I can tell you, we are not stopping here. Obviously, we won't see those kind of jumps anymore like we have seen over the last 15 months, but it will further increase.
But even these €87 billion of deposits will bring us on an annual basis, €300 million of revenues. And we put even more focus and that's what Fabrizio and Stefan Hoops are doing more focus on the lending business.
And finally, we can see and already see that in June, but also now in July that the lending business also in Germany in the Corporate Bank is gaining momentum, and we are putting more capacity and focus on that. Furthermore, James always said in the last quarters that the headwinds from interest rates is getting lesser in particular in the Corporate Bank.
So in this regard, with a jump off, which we estimate this year of 5.2, potentially even slightly better. And then the underlying growth we have and all the items we have told you, 5.5 is definitely achievable.
So we are confident about that. Let's talk about the IB as the fourth business, I think also here, we have shown now for the last 4 quarters that we can gain market share there where we want to play and where we think we are relevant.
And that even in a normalized market environment, I think Q2 is nothing else than the best evidence for that. And also, we are seeing that what we have told you, in particular, in the IDD and in the first quarter, that we see a very good degree of sustainable earnings from 3 or 4 items client reengagement, looking at our CDS price, looking at the overall momentum and also robustness of the bank.
Clients are reengaging, coming back to us and simply are doing more trades, and it's our really good financing franchise, which obviously also contributed a lot to Q2. So now looking at the number, which we have given you for 2022 of €8.5 billion of annual revenues as a target for 2022, and taking into perspective where we are right now, what we see, this €8.5 billion is clearly a conservative number.
We will be north of €9 billion for this year. We see the momentum.
We have the market share. And therefore, I think €8.5 billion is again conservative and the upside.
Next to all these items, i.e., the 4 businesses, which I tried to describe, and again, James can give you more details on this, we have further upside in some treasury positions, in particular, on the interest rate curve, but also in our funding costs. That again is the smaller 3-digit million amount, which you can add.
And therefore, at the end of the day, we are highly confident that we can outperform the number which we gave to you on the revenue side in December 2020. And I believe that we have an absolute credible path to go to €25 billion or actually to plus €25 billion.
On the CLP side, let me answer that, first of all, you can imagine, I'm very happy with the risk management, which we have shown now for years, but in particular also throughout the COVID crisis. And it's simply on both levels and outstanding risk management, i.e., on portfolio level but as well as an individual level, when you take into account some happenings in particular in Q1, which we avoided at Deutsche Bank.
So in the first 6 months, as James said, we had, on an annualized basis, 7 basis points. Of course, this number is too low.
But we should also remember what we said at the beginning of the year, Tom, and that was approximately above 30 basis points of loan loss provision expectations for 2021. We believe now with looking at the portfolio, looking at the economic development that we believe looking at the upgrade, downgrades in the portfolio, that 20 basis points is a conservative pick for 2021.
You know that for 2022, actually, we planned something between 25 and 30 basis points. Again, at a time in December 2020 when the economic outlook was more vague than it is right now.
Looking at the portfolio behavior, the robustness of our clients, I can see upside to that number, which we haven't yet even planned for. So clear upside on the revenue and on the CLP side.
Now to your last question, why they're not even higher than 8%. Look, at the end of the day, I firmly believe that coming to 8% is our target.
We want to achieve that. This management team is laser-focused on this one.
And therefore, let's only talk about the upside to that when we already achieved the 8% and there is a way to go for the next 18 months. But hopefully, with the comments on revenues, our clear discipline, which we have on costs and the risk discipline, I'm confident to get there.
James von Moltke
Tom, I have very little add to add to Christian's answer. I would just say on the curve, look, it's moving every day.
We obviously update and refresh our analysis constantly as well. As of the end of the second quarter, we would have had upside of as much as €150 million in revenues, constant balance sheet to our plan assumptions for the curve.
That's probably halved in the month of July so far, a little bit more than halved. And as Christian mentioned, we probably have about €100 million of benefit coming through on funding due to sort of balance sheet efficiency and also improved spreads in our unsecured funding.
So we have a bit of a tailwind there as well. On the CLP, again, very little to add.
We think the allowance is prudent. We think we've taken the right actions in terms of overlays.
We don't think there's a lot of overbuild to still release, which, as you know, is perhaps being characteristic of some of our peers where we've been very clear throughout the crisis that we've taken, we think, appropriate steps methodologically and otherwise to ensure we had a prudent and appropriate allowance at all times. I'd just focus you on Page 14 of the supplement where we have the asset quality details and carrying an allowance of almost €5.9 billion -- €4.9 billion, I apologize, in total is, I think, a very comfortable level for us.
Operator
Next question is from Anke Reingen from RBC.
Anke Reingen
The first is on costs. I just wondered if you can give us some comfort that you're not losing focus on costs.
I mean you're still running at a cost/income ratio, 80% group, 76% Core Bank, which is still some way off the 70% target. How do you feel comfortable about dropping the absolute cost target may be a bit premature?
And then just thinking about if your revenues come in at the €24.4 billion like the old target, would we then be back to the €16.7 billion cost target? Or is it basically moved to €17.1 billion?
And then lastly, sorry, just coming back to what you just mentioned on -- the positive comment on the Corporate Bank. The flat revenues, '21, '20 look a bit challenging based on the Q2 run rate.
Should we basically assume that Corporate Banking revenues have troughed under your assumptions in Q2?
Christian Sewing
Well, let me start, and then I hand over to James. So look, very fair question on the cost side.
But with everything I have, I can tell you, our focus on costs. And of course, in particular, on the controllable part of the cost is unchanged.
We will not change anything in terms of our attitude on costs. So therefore, you have the full commitment and passion of the management board and the leadership team to actually further reduce our costs.
You are completely right in order to get to 70% cost-to-income ratio, there is a way to go. And therefore, we are always working on the 3, 4 items, which we have said before.
Number one, it's obviously the normal cost reduction, which are in particular supported by our key deliverables which are overseen by the Chief Transformation Officer. There is a big part to come from all the initiatives, which we already obviously kicked off and which will pay and reduce our costs in '21 and '22.
Number two, you will see that we have other operating costs and lower restructuring and severance costs next year, which will also be part of the reduction in the cost/income ratio. And number three, James said it.
Of course, you have some with the all the positive momentum we see on the revenue side, you have some volume-related costs, where we now decided in the second quarter that we have further cost measures and kicked off further cost measures in order to actually compensate for that. And we have done it quite successfully in the second quarter.
Otherwise, we wouldn't have been able, despite the overall increase in revenues in Q1 and Q2, to actually reduce the cost to €4.5 billion in Q2. So therefore, there is nothing like loosening on the cost, not at all, the full focus.
And I do believe with that, i.e., the cost reduction in the normal operating basis, lower litigations, lower restructuring and severance, we will get to the 70% and everything, what is volume related, we try to offset, and we've been very successful in Q2 about it. With that, I would hand over to James?
James von Moltke
Sure. Thank you.
Anke, I can only underscore what Christian just said. Look, every measure that was part of the targeting to €16.7 billion is underway and on track as we sit here today.
So there's no sort of loss of focus on execution. And as Christian mentioned, we've initiated a set of additional cost measures in order to offset what we see as volume and control related costs.
So in a sense, we are redoubling on our efforts here. There's always uncertainty about a revenue environment, but I think our outlook is certainly skewed to the upside relative to the €24.4 billion that we shared with you in December, as Christian has gone through.
And we always have to be prepared for a downturn of course. And there, I think the volume-related costs that we've called out would certainly help.
But we think there's a fair amount of support, if you like, in the revenue outlook. We intend to invest against the revenue outlook that we provided.
On the Corporate Bank run rate, I would say we're on track with what we have planned to do. Of course, it's been heavy sledding for the Corporate Bank, facing the headwinds that it has on interest rates and what have you.
But as Christian outlined, they've been very successful under Stefan Hoops' leadership, just executing on the plans that we laid out for you in '19 and again in '20 to drive growth both, if you like, organically from the existing portfolio and based on new initiatives going forward. And we're making the right investments, we think, to underscore that.
So from our perspective, we do understand it's a higher growth rate than perhaps some of the other businesses have 2021 into '22. But we see the underlying momentum that supports that.
And as we've said for some time, as the interest rate headwind falls away, that underlying momentum should simply go through the top line.
Christian Sewing
And one last comment, supporting James. But to your specific question, yes, I do think we have seen the low revenue number in Q2.
So all we can see from the forecast is that Q3 and Q4 are turning around.
Operator
Next question is from the line of Stuart Graham from Autonomous Research LLP.
Stuart Graham
I had 2, please. They're quite geeky.
Can you say how much of Q1 and Q2 revenues in Investment Bank came from that in distress trade and whether there are further unrealized gains assumed to be booked in the second half? And then the second question is on the BGH ruling.
How many complaints or request will address have you received so far? And can you say what percentage of clients have signed up to your recent letter, inviting them to consent to paying higher fees?
James von Moltke
Sure. Stuart, I'll start and Christian may wish to add.
On Zim, obviously, we're happy with the developments around Zim Integrated Shipping. As you may be aware, a position that was built up over several years in the distressed debt trading business, that arose from making markets in the debt instruments of that company.
But over time, we built a zero basis position also in the equity of Zim. Together, the debt and equity revenues from Zim in the first half have represented 300 million of revenues, approximately 170 million of that in the second quarter.
So it's certainly been a help for the revenues, but it really doesn't change directionally the story around outperformance in both the first and second quarters in FIC, driven, of course, by very strong results in credit also outside that 1 position. Looking to the future, we continue to hold a significant equity stake.
We're subject to liquidity restrictions on that equity stake. We have a significant reserve to reflect the lack of marketability and don't necessarily expect that to change in the near term.
Over time, of course, we would seek an orderly exit and realization. Over time, that liquidity reserve would come down.
But it's too early to say when -- over what period that was likely to take place. Turning to the BGH item that you mentioned.
We're tracking, obviously, very carefully the customer responses. Let's start with the outreach, if you like, the repapering exercise, that commenced at the beginning of July.
We're working hard to bring as many of those customer agreements to complete during the third quarter. Obviously, it's in our interest to have the foregone revenue impact for a shorter time as possible on that -- on those current accounts.
So as isolated as possible to Q2 and Q3, there is a possibility a small amount may still dribble into Q4, but we do expect in and around the 1st of October to have closed off the lion's shares of the customer acceptance of revised fee schedules. On the question of the restitution cost, as you saw, we booked a slightly higher reserve in the quarter than we'd initially called for.
As it happens, we've also booked in that litigation, the cost of operationally executing on the restitution and the repapering. So there's a significant amount of that reserve that is restitution cost and then an additional amount that represents the operational cost.
We think that reserve is appropriate and perhaps even conservative against prior experience dealing with similar situations. And as of today, I won't give you the precise numbers, but the actual customer inquiry for restitution is running below the level that we would have expected supporting that reserve impact.
So hopefully, that's clarity for you on those questions.
Stuart Graham
That's great. Just on the Zim because I think your stake is worth $500 million, but you're saying you mark that to market, but you have a reserve against it.
So we shouldn't just be assuming that the $500 million gain to come in the second half. Is that right?
James von Moltke
That's right. I mean so it is partially -- the market value of the equity position is partially already recognized in revenues, but there is a significant reserve for liquidity that is held against its future revenues at the current stock price.
Of course, it will depend on both the stock price development and the reserve release, but that is now marked daily, including the reserve amount.
Operator
Next question is from the line of Kian Abouhossein from JPMorgan.
Kian Abouhossein
The first question is related to Slide 44, just more detailed question around how should we -- should think about loan growth, in particular, in the financing business as you highlight lending growth in the Investment Bank. And how do I square that with a U.S.
wholesale funding growth target? Should I take this together in that context, what kind of financing exposures are we or should we be thinking of in context of ongoing growth?
So if you can talk about ongoing growth, but also what your financing and if I'm putting one and one together correctly. Secondly, on IT expenses, you're running at around $4.4 billion.
And I'm just wondering how we should think about the future of IT expenses beyond '21 into the future. Is this a number that you think will be continuously creeping up as you are improving your ROEs?
Or do you think this as a level that you're happy in terms of investment levels going forward?
James von Moltke
Thanks, Kian. It's James.
I'll start, and Christian may want to add. I'm not sure exactly the connection that you're seeking to make about the loan volumes and what it sounded like dollar funding.
So you may need to repoint me. But overall, I think the comments we'd make on Page 44 is we were pleased with loan growth developments, as you can see in Private Bank and Investment Bank.
Corporate Bank, as you may have seen also from other peers, has been a little bit slower to develop than we would have expected. Although late in the quarter, and I think the trajectory, we're still confident about growth coming back into that market.
The investment banking loan balances are a mix of things, but as you say, a relatively significant amount of structured lending that is split between dollars and other currencies. All of the dollar piece of that is, of course, built into our overall dollar funding base, and so it doesn't present a significant burden, frankly.
It's been relatively speaking, steady as you go as in terms of dollar funding. On the IT expenses, it's an area we've been looking very, very carefully at.
As you've heard, I think, over the years, for one thing, there has been what I would call deferred investment that we've had to catch up on. We've been talking about that for a while.
We're making very good progress on a series of relatively large scale investments that we've been building. And over time, those investments should result in significant savings in terms of applications, data and generally our technology estate.
We'd obviously like to accelerate as much as we can, the realization of benefits in technology. So the answer to your question is we do believe that we will be able in time and it's part of our planning for '22 and beyond to reduce our technology expenses, all the while preserving an investment budget in technology that we think is appropriate for a company of our size, scope and scale.
And in fact, one of the benefits of the investments we've been making, whether that's in data or now in the transition to cloud and also elsewhere is that the efficiency of investments is accelerating. In terms of just more value of our investments per euro spent and impact, especially on the front end with clients.
And so that's been encouraging. Lots of work to do, as you know.
But I think the next 18 months are really critical -- are a really critical period for that execution and really then delivering the benefits that we've been working on now for several years.
Christian Sewing
Kian, one more word on the Corporate Bank lending. I think it, in particular, comes now from 2 directions.
Number one, you can see in particular in Europe that the uncertainty of our corporate clients with regard to the economic development is slightly reducing. So people start to invest again in particular, also to invest into making their business greener.
So the transformation part and the ESG part of financing us is getting more and more traction here. That's number one.
And number two, you can also see that during the crisis, a lot of the German corporate clients have actually used their own liquidity, their own capital to go through this crisis and did not really rely on the banking facilities. So that is changing a lot.
And therefore, we could already see in the last months of the second quarter that there is starting momentum on the corporate client side to increase lending. And hence, we are quite optimistic for Q3 and Q4 in this regard.
Kian Abouhossein
That's very good, very clear answers. Just in terms of the lending level in the Investment Bank, shall we think about similar growth rate that we saw in the second quarter?
And in terms of financing costs, there's a lot of the things like structured credit are dollar-related, is there any headwind coming from dollar-related financing considering you mentioned the funding improvement going forward?
James von Moltke
Yes. I guess let me take that.
One thing you need to understand is that the Investment Bank quarter-end loan balances can be quite volatile based on just which transactions have closed versus in the pipeline at a point in time. So the direction of travel Kian, we think is up.
We do see loan growth opportunities, opportunities to put the balance sheet to work. But the comparisons on any given quarter can move around given the episodic nature of some of this.
On the financing costs, I'll -- obviously, it's all blended in the sort of percentage of dollar versus euro in our funding cost is blended in. Interestingly, as we've called out before, the geography of a portion of that funding cost that is based on swaps is asymmetric as to whether it's in net interest income versus other income.
So it's a little bit harder just to pull out for you what the impact on funding would be of a rising dollar balance sheet. But as I said earlier, we don't see a mix shift as likely in that balance sheet growth as it comes.
It's likely to be steady from a mix perspective with where we've been in the past.
Operator
Next question is from Andrew Lim of Societe Generale.
Andrew Lim
I'd just like to circle back to revenues again. You've talked a lot about 2022 revenues.
But on '21 revenues, you're still guiding to group revenues being flat at €24 billion. And this is despite the fact that the first half is tracking nearly €1 billion higher on revenues versus the second -- versus the first half year.
So I'm just wondering how you're looking towards the second half. Is there something untoward that we should expect that should cause revenues to be €1 billion lower?
Or should the conclusion be that €24 billion is a low ball guidance there from yourself? And then my second question is on that prime brokerage business that gets transferred later on this year.
Could you remind us what the revenue and cost impacts would be once that transfer takes place?
James von Moltke
So look, the guidance is -- reflects really seasonality that is typical and also some conservatism about the outlook in terms of the growth that is still to be captured this year without taking anything away from the momentum that we've talked about. I wouldn't want to go into low ball or otherwise given that's obviously our disclosure and best view.
But we certainly see, as I say, a strong year this year, especially relative to the outlook we had at the beginning of the year and especially in light of some of the headwinds that we faced this year that were unexpected. On Prime Brokerage, as I mentioned, the balances are beginning to transition over to BNP Paribas.
We're obviously pleased about that, given it's a significant undertaking both on the technology and the client management side and people are also transitioning over to BNP Paribas. As I mentioned, the leverage exposure impact would be about €25 billion from where we are now.
The expenses -- that €100 million ballpark, it's a little less than €100 million that we pull out of our numbers, is the amount that would simply go away once the transition is complete. There's a little bit more that -- as you know, that is stranded that we're working on separately to take out around the Prime Brokerage business.
But one of the benefits of this transaction is it's given us obviously much more time to work on that on preparation of removing the stranded costs, and that's been built into our view of CRU into next year.
Andrew Lim
And are there any associated revenues on that PB business?
James von Moltke
Any -- I'm sorry, what kind of revenues, Andrew?
Andrew Lim
Any associated revenues that we should be aware of?
James von Moltke
The revenues are past to BNP Paribas as part of the transaction. What we do recognize is revenue -- is that expense recovery which exactly offset the, call it, €100 million, a little less than €100 million that we show you in our expense disclosures.
Operator
Next question is from Magdalena Stoklosa from Morgan Stanley.
Magdalena Stoklosa
Congratulations on the quarter. I've got 2 questions.
One on the Investment Bank and one on your Asset Gathering business. So really when we look forward in the IB, where would you like to see your wallet gains from here?
So you talked about Capital Markets and Advisory in Germany in your prepared comments. But where else would you expect your position to strengthen?
So that's question number one. And question number two, really, when is your kind of integrated model between DWS and the Wealth, where do you see the biggest opportunities from a group perspective?
And how do you think about the scale in this business? And also because, of course, as we've seen very strong kind of net new money momentum on both sides.
Christian Sewing
Magdalena, let me take the first question. Number one, I -- with the focus in the Investment Bank, which we have given ourselves 2 years ago, obviously, we want to grow in those parts where we are now playing.
So it's -- it would be the wrong attitude of Deutsche Bank if we now say and out of these segments where we are now playing in the Investment Bank, there is only 1 or 2 where we want to grow and take market share. And therefore, I think there is a clear focus, a, on the financing business, where we had a track record of having the right process from origination over credit to distribution.
Secondly, I do think we have focused in the O&A business regionally, but also per industries on those where we think we have a relevant market share. We are very happy with regaining certain positions, in particular, obviously, in our home market.
But obviously, we can also see in other industries globally that we play a meaningful role. And thirdly, it is next to the financing business, in the trading business in those disciplines where we have been for years, I think, leading, be it FX, be it Rates, Emerging Markets.
We are doing a lot of investment, that is actually where we invest into people, where we invest into technology. And this has started to pay off.
I well remember that I've told you since the third quarter of 2019 that I do believe that with that focus on those 3 or 4 businesses with making the right people choices and the right IT investments, we can grow. And this we have done now for 5 or 6 quarters in a row, and they are actually -- I don't see that this is coming to an end, but that actually we are a very competitive bank in that area.
And we obviously use our chances to further outperform. Again, other items like the overall robustness of the bank, CDS prices now playing to our favor that clients are reengaging.
And obviously, again, clients are looking for an alternative to the U.S. banks, in particular in Europe.
And that's what we are playing for in the IB. So I would say a clear mandate in all businesses of the IB and the focus which we have given ourselves helps tremendously.
James von Moltke
Just briefly one thing to add on that, Magdalena. If you look at the wallet in FIC and the development over time of that wallet, we think a reasonably conservative view of 2022 and the development of this normalization in the FIC wallet.
And relatively stable market share numbers for us would support the number in our model that supports the low end of the range that Christian talked about earlier, the €8.5 billion for IB, the FIC contribution within that. So we think we're still looking at reasonably reliable assumptions about the wallet and market share for our company next year.
On DWS and the Wealth business, it's a really interesting question. We think we are pursuing a very unique strategy around particularly Wealth in Europe, where we're able to serve entrepreneurs in a different way from many of our peers.
So in markets where we're present as a retail bank, as a corporate bank for small and medium-sized corporates and also with larger core capabilities, risk management, what have you, alongside Wealth Management, we're able to serve the wealthy entrepreneurial family in a very different way from peers. And we're able also to offer DWS products.
Obviously, that platform is open architecture, but we do sell DWS products. And DWS has a cross-sell also into that same client base and the corporate client base in capabilities like pension and money funds.
So to your question, we do see a strong sort of value in pursuing those strategies alongside one another, and we have been making investments in those businesses, including in particular in Wealth Management in Europe.
Magdalena Stoklosa
And James, would you kind of venture into kind of where would you like that business to be even on a combined level. So from a perspective of your as a group, asset gathering business, 2-, 3-year view?
James von Moltke
Bigger would be the 2 or 3 years. We are making investments and working hard on that.
And I think you'll see the results of that as we execute on the strategy. We're quite bullish on that strategy.
Magdalena Stoklosa
And -- seriously, and I assume kind of both organically and inorganically?
Christian Sewing
Well, we said Magdalena then, of course, organically, is that what we are focusing on day by day. But we have also said that in particular, in the Asset Management, if there is the right opportunity with the maturity Asoka and his team have achieved.
If there is the right target, where we maintain, obviously, the majority and consolidate it because Asset Management is a key business and will always be a core ingredient of Deutsche Bank, we would also look into those alternatives. But that must be carefully reviewed, but we are not shy of doing something.
Operator
Next question Andrew Coombs from Citi.
Andrew Coombs
A couple of follow-ups for me, please. One on costs and one on revenues.
Firstly, on the costs. I hear everything you're saying about nothing's changed on your plan on costs.
You're still laser-focused. Your controllable part of the costs and your view there is unchanged.
But I guess it leads me back to the question, why did you choose to remove the absolute cost target rather than just amend it from €16.7 billion to €17.1 billion. Is it a case that you wanted more flexibility revenue opportunities?
Do you see a risk of more external factors? Or am I simply just reading too much into it?
That would be my first question. The second one on revenues, Christian gave a great walk-through of all the core divisions into 2022.
I just wanted to pick up both CRU and the C&O division. In CRU, you talked about the prime expense reversal of €100 million.
Could you just clarify when you exactly expect that to drop out, which quarter you expect that to drop away? And likewise, the €250 million internal transfer fund pricing change that we at C&O.
Can you just give us a feel for how much of that's already fed through this year?
Christian Sewing
Andrew, and let me take your phrase now, but I'll explain it. Yes, you are reading too much into it.
So number one, the €400 million, I think, which you are quoting we already signaled that since December in the IDD to the market that these are external costs, not controllable for us. And by the way, we will not give up fighting this increased SRF.
But I think we also should be reasonable at this point in time, we think we have to pay more next year. That is now taking into account.
And we always signaled that for that amount, we will not constrain investments into our core businesses, which are actually at the end of the day, also supporting efficiency but also revenue growth. And in this regard, we -- obviously, with the revenues also increasing, as I said, there are certain volume expenses -- volume-linked expenses, which we need to take into account.
James and I have done everything and initiated everything to counterbalance that. And therefore, we are confident that we can compensate for this volume-linked expenses.
But I also do think after now being 3 years in the transformation, 2 years in the Project Cairo, we are now at a point where actually, more and more, we invest into sustainable profitability, and that turning point also means that there is obviously also in managing this bank to a certain margin. I think the cost/income ratio requires also that we are managing it from the KPIs towards the key 2 KPIs, which is 8% return on equity and 70% cost/income ratio, that's how we're doing it.
The inner attitude of this bank will not change. Controllable costs will be reduced as much as we said in the initial plan.
But I think we also need to recognize the overall progress we have done. And with these revenues going into the direction which we said we obviously need to also take that into account.
James von Moltke
And if I look further to 2022. Now obviously, we're turning into a Deep Dive '22 plan today, but the CRU revenues, we'd be working to keep as close to 0, frankly, as possible.
There are some positive revenues that the portfolio throws off and then there's funding cost, hedging costs that offset it. And the impact of that revenue recapture will fall away, which isn't to say we won't continue to derisk.
But as we talked about in December, it will be a rump that we would only opportunistically derisk or deleverage and otherwise allow it to run off. In the C&O area, there, it's the treasury impacts, as you say, obviously, hard to predict valuation and timing differences.
So we just assume that they are neutral, but there. We control them as much as we can within the hedging and hedge programs that we can, but there is some hedge ineffectiveness that can go either way.
As you mentioned, there is the held liquidity costs in the aftermath of the funds transfer pricing, that should be below the €250 million that we're expecting for this year. Sort of trending towards €200 million.
And over time, that sort of amortizes or bleeds away. I hope that helps, Andrew.
Operator
Next question is from Amit Goel from Barclays.
Amit Goel
So my first question is just, I guess, maybe more of a follow-up on the same theme on costs and revenues. So I just wanted to I guess be completely clear.
In terms of -- do you believe that you can generate more than €25 billion of revenues and have costs of €17.1 billion, which obviously would be better than the 70% cost/income ratio. Or if we were to pencil in €25 billion of revenues, should we anticipate costs closer to €17.5 billion?
So that's the first question. And the second question is just relating to the -- some more detail point on the Corporate Bank this quarter, it looked like the net interest income dropped, but there was more income was that just more of the technical effects relating to the swaps?
Or what exactly was driving that?
James von Moltke
Thank you, Amit. I'll take those questions.
Look, on the costs, you can take it -- the way to think about it is the following: At the 70% efficiency ratio and moving from the €16.7 billion to the €17.1 billion, adding in some nonoperational costs, we would have to achieve the €25 billion or a little bit less, €24.9 billion, to make that math work. And what you're hearing from us, it's early to be talking in detail about '22, but what you're hearing from us is a high degree of confidence that we're on track to achieve that.
If it were to be higher or significantly higher than that, it would probably carry some additional volume-related costs with it, and so could see us going above. But that's in the case where, again, mathematically, revenues have begun to exceed that €25 billion level.
So again, it's a mathematical exercise, but underneath that, I think you're hearing a strong view about the revenue trajectory that at least affords us the ability to offset these uncontrollable expenses in RoTE and cost/income ratio. And the rest we'll see as time goes on and we get into the more detailed planning in the back half of the year to bring home '22.
On the CB item, it's a detailed point, but a good spot. As we've, I think, mentioned before, there are CLO recoveries that are recognized in revenues.
So in a default situation where there's an insurance that we have bought credit insurance, we will recognize revenue for the compensation in revenues at a point in time. That happened last year.
But in one instance, this year, there was a recovery, and it was, therefore reversed. And so part of the movement you hear -- you see, and that's part of the €90 million we've called out as episodic is really a swing relative to last year that's taken place.
Operator
Next question is from Jernej Omahen from Goldman Sachs.
Jernej Omahen
I have a lot of questions, but I understand we're limited to 2. So I'll zoom in on the issue of this Zim gain.
Can I ask you first of all, how do you think about this gain in the context of your recurring business and recurring revenue. So I was just wondering what is the threshold to classify something as a one-off versus leaving it in the core revenue and PBT line.
I think that's question number one. And then question number two, you very kindly pointed out, James, what the contribution was in the revenue line.
Is it fair to say that those absolute numbers applied to the pretax line as well? I'm assuming there's not much cost associated with these positions because there, I think it makes a very, very significant impact.
And in that context, I just wanted to check with you on Page 21, you flagged in the first bullet of your presentation. You flagged in the first bullet that Deutsche had significantly higher credit revenues.
That is at odds with every single of your global competitors reporting so far this quarter. And I was wondering, does that statement still hold true if you adjust for the Zim contribution?
James von Moltke
Yes, Jernej, thanks for the questions. So I believe the answer to that is the last part of the question is, yes.
We had a tough quarter last year in credit, as I think you saw in Ram's presentation in December. So it was a difficult environment.
And by the way, some of that had to do with the success of the hedging in Q1. So you had a swing in Q1 to Q2 that was a burden on revenues last year in Q2.
Why -- what's the one-off versus recurring business? Look, we see this transaction as being part of the ordinary course business in distressed debt trading.
It's not at all unprecedented to accumulate an equity investment like this, under the circumstances, we do it, our peers do it. What is unusual, of course, is the size of it, which, of course, is why we're prepared to disclose the amount so that you're able to look at the business without that in it.
As we say, direction of travel is the same. Our FIC revenues would have been down 19% reported rather than the 11% that we showed, but still a significant outperformance relative to peers.
And on your pretax profit, yes, I mean for the largest part, other than operational costs and compensation, the revenues will have fallen to pretax. Again, it's part of a larger business.
It's the business -- it's not a -- it's an unusually sized benefit but it is part of the ordinary course of the business to engage in transactions like this, much as, again, our peers do regularly.
Jernej Omahen
Sure. James, a very short follow-up.
So when we think about the path from here to the 8% return on tangible target next year, I guess that we should be stripping out this contribution, i.e. that this is a non-repeat for 2022.
James von Moltke
Well, that's the thing that's hard to say, Jernej, because as I say, the -- we do have a significant reserve, and it's not clear at this point, the time over which that reserve would be released and then we ultimately exit from the position. As I mentioned earlier, we aim to do it over time in a way that is responsible, given the size of the stake.
And the timing of that is at this point uncertain.
Christian Sewing
Jernej, just don't forget what James just said. I mean it's a wanted business, and I'm not saying more in GCT, which we have done for years where Zim is, so to say, not the only position we have.
And we have done that for years, and therefore, always take this into account when you think about our future revenue profile.
James von Moltke
And as a distinction -- Jernej, maybe a distinction to draw that might be held is Tradeweb, we have called out as a specific item consistently since we first started recognizing gains on it. Precisely because we don't see that as part of the operating performance of the business.
So perhaps that contrast will help you see the accounting distinction we make.
Jernej Omahen
But is it fair to say that there are no other similarly sized positions in that portfolio as it stands though?
James von Moltke
No, no. That wouldn't be fair.
Similarly sized to the balance sheet size of that today, it's a large position. But again, it's not out of the ordinary that we would have gains to recognize from time to time in that distressed business.
Again, it's part of the business.
Operator
Next question is from Nicolas Payen from Kepler Cheuvreux.
Nicolas Payen
I have 2. The first one would be on Wealth Management because you just mentioned your European wealth management strategy, and I wanted to know how do you see your current setup in Europe?
And how do you see it in Italy in particular? Do you think you have the size there to compete?
And also in comparison to Asia because you mentioned a lot of your European operation, but are you ready also to invest there in Asia? The second question will be on the risk-weighted assets, Investment Banking.
Just wanted to know what are the components of the inflation of RWA there. Is it a big stream of lending growth?
Or is there anything else there?
Christian Sewing
Okay, let me take the first question on Wealth Management. There is a clear difference between, a, our Wealth Management in Europe and, in particular, in Italy or Spain to Asia.
In Asia, it is more capital markets oriented, very successful growing. But in Europe, it goes to the point which James made in his previous response, that we are actually very well placed in particular in those countries where we have Corporate Banking activities, Wealth Management and Private Banking activities that we are seen as the bank for entrepreneurs.
And hence, we see a very nice line of growth in Italy, in Spain, also in Germany, where we can play this card, that we have the corporate banking exposure. But at the same time, we are banking the entrepren€or the owner of the company.
And in this regard, we have made also from a coverage point of view, tailored investment into Italy, but also into Spain to increase our coverage, our relationship management base in order to secure more market share, and we have seen the growth also in the second quarter, which I'm very happy with in the Wealth Management in Europe.
James von Moltke
And the brief answer on the question of RWA and IB is it was really all TRIM or almost all TRIM. Sort of portfolio movements were relatively neutral.
A total of €10 billion was added in the Investment Bank, both from TRIM and the CRR2 implementation at the end of June.
Operator
Next question is from Daniele Brupbacher from UBS.
Daniele Brupbacher
Just for me, a clarification, please, on the cost front. I mean we talked a lot about €16.7 billion to €17.1 billion.
I probably missed it, but have you made any statement regarding the €18.5 billion target for this year? Whether we should lift it up by €400 million as well?
And then in this context, can you tell us in which divisions we will see those €400 million showing up?
James von Moltke
Daniele, so we talked about a little bit in April. I think you can do similar math to what we were talking about earlier.
So €18.5 billion is to €18.9 billion as €17.1 billion as to -- €16.7 billion is to €17.1 billion. That's certainly what we are working towards and what we should be measured against.
In terms of the second part of your question, I'm sorry, remind me, Daniele, by division, it's probably too early to say. There's a lot in it, but the -- we can come back to you on that question.
Obviously, SRF is an allocation that we would know for the businesses. At this point, the step off would be last year's end balance sheet.
There, by the way, you'll see a fair amount of the benefit in CRU because that deleveraging will then be reflected in its allocation of the SRF. So less of a benefit in the core businesses than you would see in the CRU.
On the deposit insurance, it's mostly in Private Bank.
Operator
In the interest of time, we have to stop the Q&A session, and I would like to hand back to Ioana Patriniche. Please go ahead.
Ioana Patriniche
Thank you for joining us for our second quarter call and for your questions. Please don't hesitate to reach out to the Investor Relations team with any follow-up questions, particularly for those who have not -- we've not been able to get to due to time.
And with that, we look forward to speaking to you at our third quarter call. Thank you.