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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, thank you for standing by. I'm [ Franzi ], your Chorus Call operator. Welcome, and thank you for joining the Deutsche Bank's Q1 2022 Analyst Call. [Operator Instructions] I would now like to turn the conference over to Ioana Patriniche, Head of Investor Relations. Please go ahead.
Thank you for joining us for our first quarter 2022 results call. As usual, our Chief Executive Officer, Christian Sewing, will speak first. followed by our Chief Financial Officer, James von Moltke. The presentation, as always, is available to download in the Investor Relations section of our website, db.com.
Before we get started, let me just remind you that the presentation contains forward-looking statements, which may not develop as we currently expect. We therefore ask you to take notice of the precautionary warning at the end of our materials. With that, let me hand over to Christian.
Thank you, Ioana. A warm welcome from me as well. It's a pleasure to be discussing our first quarter 2022 results with you today. Before we go through this, we are mindful that the war in Ukraine has been devastating for millions of people and continues to bring a high degree of uncertainty to the world economy, to the market environment and to our clients.
We have made our position clear. We condemn the Russian invasion of Ukraine in the strongest possible terms, and we support the German government and its allies in defending democracy and freedom. We are not taking on any new business in Russia, nor with entities incorporate in Russia. We have been clear that we are in the process of winding down our operations in line with our legal and regulatory obligations and are accompanying our clients in doing the same.
We are committed to helping our clients navigate this period of upheaval and we are supporting our people in Ukraine and their families. However, this, of course, has the potential to impact our full year results in our important measurement year. Nonetheless, we delivered the highest quarter of net profit since 2013, and we believe this puts us on a good trajectory to reach our 2022 goals.
That shows through in our performance. We delivered group revenues of EUR 7.3 billion, an increase of 1% year-on-year even compared with a strong quarter in the prior year. We saw revenue growth across all 4 core businesses, driven by business momentum, market share gains and investments that will support sustainable growth in 2022 and beyond.
This quarter, we generated a reported 8.1% return on tangible equity, up on the first quarter of last year despite a 28% increase in annual bank levies, which are recognized in the first quarter. If bank levies were apportioned evenly across the 4 quarters of the year, with 1/4 of the annual charge booked in the first quarter, post-tax return on tangible equity would have been 11.2%.
We also improved our efficiency. Post-tax profit was up 18% over a successful prior year quarter, driven by positive operating leverage. This brings our cost/income ratio down to 73%, 4 percentage points lower compared to the prior year, or 66% if bank levies were apportioned evenly across all 4 quarters. We are mindful that the current operating environment presents many challenges, including on the cost front, and we will continue to focus on cost discipline.
Finally, looking at our balance sheet, we are well equipped to navigate the current environment, thanks to our high-quality loan book and tight risk management. Our capital position remains strong despite the impacts of the war in Ukraine and business growth. And this enabled us to continue our progress towards our goals for capital distribution to shareholders.
Last week, we completed the execution of our share repurchase program of EUR 300 million, and we have proposed a dividend of around EUR 400 million at the upcoming AGM, delivering on our commitment to distribute EUR 700 million in 2022.
Now let me take you through the progress on strategic priorities in our core businesses on Slide 2. In the Corporate Bank, business growth continued despite the more challenging market as we diligently executed on our strategy. We saw this reflected in loan growth, which, alongside interest rate tailwinds, contributed to an increase in net interest income.
This coupled with cost discipline helped us deliver operating leverage of 18% this quarter. In the Investment Bank, strong client activity in FIC supported revenues with year-on-year growth across institutional and corporate clients. Advisory revenues were more than 80% higher year-on-year, partly offsetting lower revenues in equity and debt origination.
The Private Bank delivered its best quarter since we launched the transformation with pretax profit up by more than half year-on-year to EUR 419 million. It also captured net new business of EUR 13 billion across inflows into assets under management and loans. In addition, the Private Bank made significant progress on the German IT platform consolidation.
Over the Easter weekend, we completed a successful migration of around 4 million Postbank saving clients and contracts onto the DB platform. Asset Management delivered revenue growth of 7% year-on-year, driven by higher management fees despite the volatile market environment. At the same time, the business continued to invest in growth initiatives and platform transformation. The dynamics in all 4 core businesses provided a strong step-up point to deliver on our 2022 targets.
Next, let me give you an update on Russia on Slide 3. We believe the investments we made in future proving our business meant we were well prepared as we entered this period of uncertainty. This means we were ready to deal with not only the direct impacts of the war in Ukraine, where we reduced our net loan exposure to Russia to below EUR 500 million by the end of this quarter, but also the second order ones and our investments in controls are a testament to this.
As a result, we executed diligently on sanctions implementation without any major issues and managed the financial aspects of these sanctions. As it stands, we operate under a hastened alert status, and we are continuously adapting our controls to the evolving threat landscape.
Despite the uncertainties of the current situation, we have not seen any major disruptions to our businesses, even with all the added safeguards we have put in place. While it is too early to quantify the potential long-term impact of the war, we believe our conservative balance sheet and transform business model will help us face the challenges ahead.
Of course, we continue to be mindful of the broader environment and uncertainties that go well beyond the war, such as the supply chain issues that could further impact future economic growth. Turning now to our progress on sustainability on Slide 4. We continue to make rapid progress in our sustainability activities.
After finishing 2021 with cumulative ESG financing and investment volumes of EUR 157 billion, excluding DWS, we are now at EUR 177 billion and on track to achieve our EUR 200 billion target by this year-end. We saw good volume growth across all categories. Issuance volumes were at EUR 71 billion in the first quarter, an increase of 13% compared to the fourth quarter.
Financing volumes increased to EUR 64 billion, up 12% sequentially, and assets under management increased to EUR 41 billion, also up 12%. We're also pleased with the growth rates in all businesses, as you can see on the slide. As we announced in our Investor Deep Dive, we plan to generate EUR 500 billion cumulatively by the end of 2025.
This implies an average rate of at least EUR 100 billion in ESG financing and investments per year from 2023 to 2025. According to our models, this will translate into revenues of at least EUR 1.5 billion in 2025, representing a compound annual growth rate of more than 20%. We also took an important step on our pathway to net-zero by disclosing the carbon footprint of our corporate loan portfolio at the beginning of March. And we are on track to publish 2050 net-zero targets for key carbon-intensive portfolios, together with intermediate targets for 2030 at our second sustainability deep dive in October.
We will also share further details on our Net-Zero strategy at this event and how we partner with our clients in their decarbonization efforts. A key driver of higher profitability is our delivery of positive operating leverage, which I will now cover on Slide 5. We delivered positive operating leverage at group level this quarter.
Starting with revenues. Group revenues increased by 1% year-on-year and the core bank contributed by generating revenues of EUR 7.3 billion, up 3% year-on-year. Excluding revenues in Corporate and Other and the Capital Release Unit, the average annual increase of revenues in the 4 operating divisions was 7%. Revenues in the Corporate Bank were up 11% year-on-year, a second consecutive quarter of double-digit growth, driven by continued deposit repricing and business growth.
Investment Bank revenues grew 7% year-on-year over a strong first quarter in 2021, a 15% increase in FIC revenues more than offset a 28% decline in Origination & Advisory. At the Private Bank, continued strong business growth more than offset interest rate headwinds. And as a result, revenues were up 2% year-on-year. Across all these businesses, we delivered strong growth in client lending. Our total loan book is currently at EUR 481 billion, up 9% year-on-year.
Asset Management revenues rose 7% year-on-year, driven by a 13% rise in management fees, which reflects consecutive quarters of inflows and assets under management growth during last year. Assets under management increased by EUR 82 billion year-on-year to EUR 902 billion.
Moving now to costs. Noninterest expenses were down 4% year-on-year despite an increase in bank levies of 28% or more than EUR 150 million, which was offset by lower transformation charges and the cessation of Prime Finance costs. Adjusted costs, excluding bank levies, transformation charges and Prime Finance, were also down 1% year-on-year, reflecting lower investment spending needs after the completion of some IT projects and delivery of efficiency gains in line with plan.
Beyond these cost items, we faced higher-than-expected expenses, mainly in compensation costs, which James will detail later. Before I hand over to James, let me summarize the first quarter and outlook on Slide 6. The first quarter presented a challenging environment. We supported clients and responded to their needs to help them navigate through difficult times, and we will continue to do so.
Our priority is to advance with our strategic plans and to further improve our profitability and efficiency while benefiting from strong risk management. Revenues in our stable businesses support this and demonstrate that we are on a clear path to meet our 2022 revenue guidance. And as always, we are absolutely focused on cost measures, and we are executing on our plans.
That said, we recognize that the path ahead of us is getting harder, especially with inflationary pressures we see in the current environment. But we remain committed to delivering positive operating leverage and tackling cost challenges while also capturing revenue opportunities as we did in the first quarter.
We are committed to our plan to return capital to shareholders, having already completed the 2022 share buyback program of EUR 300 million. In short, in this quarter, we have delivered a strong step-up point towards our target in this pivotal year, in particular, the 8% return on tangible equity target for 2022. With that, let me now hand over to James.
Thank you, Christian. Let me start with a summary of our financial performance for the quarter on Slide 7. Total revenues for the group were EUR 7.3 billion, up 1% versus the first quarter of 2021 despite the revenue decline of around EUR 370 million in CNO and CRU. Noninterest expenses of EUR 5.4 billion were down 4% year-on-year. This captures 3 main cost components. Firstly, bank levies came in at EUR 730 million, up 28% year-on-year and about EUR 150 million higher than we originally expected due to a higher assessment [of] basis applied by the SRB and the unchanged conservative determination with regard to the use of irrevocable payment commitments.
Secondly, we booked transformation charges of EUR 38 million this quarter, less than 1/3 of the level in the prior year quarter, and we have now recognized 98% of the total transformation-related effects anticipated through the end of 2022. This leaves adjusted costs, excluding bank levies and transformation charges, which were down 3% year-on-year despite certain volume-related increases, or 5% excluding FX effects. I will detail these shortly.
Our provision for credit losses was EUR 292 million or 24 basis points of average loans for the quarter. We generated a profit before tax of EUR 1.7 billion, and a net profit of EUR 1.2 billion, an increase of 18% year-on-year. Tangible book value per share was EUR 25.15, up EUR 0.42 on the quarter and 5% year-on-year. As Christian mentioned before, the return on tangible equity for the group was 8.1% for the quarter.
The effective tax rate for the first quarter was 26%, which is broadly in line with the effective tax rate we now expect throughout 2022. We also anticipate that, with continued profitability, particularly in the U.S., we may see additional positive deferred tax asset valuation adjustments in the fourth quarter that would reduce our effective tax rate in 2022.
Of course, the adjustments and the respective sizing of these remain uncertain and are dependent on a number of different factors throughout the year.
Let's now turn to the Core Bank's performance on Slide 8. Core Bank revenues were EUR 7.3 billion for the quarter, up 3% on the prior year quarter. Noninterest expenses were down 1% for the quarter and adjusted costs increased 1% year-on-year. We reported a profit before tax of EUR 2 billion, flat on the prior year as provision for credit losses normalized compared to the prior year quarter, where we saw releases across all stages. Our Core Bank post-tax return on tangible equity for the quarter was 10.7%, above the full year target. And our cost/income ratio came in at 69%.
Let me provide some detail on the evolution of our net interest margin on Slide 9. Looking back, the decline of net interest margin in the first half of 2020 was driven by the cut in U.S. rates. The margin has been broadly stable since then, above the level we initially anticipated, driven by increased balance sheet efficiency, deposit repricing and TLTRO income that helped offset ongoing deposit margin pressure.
Adjusting for TLTRO timing effects, NIM in the first quarter would have been at the prior year level. From here, we expect NIM to rise due to tailwinds from the rising interest rate environment. Let's now turn to costs on Slide 10. First, let's have a look at cost developments since the fourth quarter.
Adjusted costs, excluding transformation charges and bank levies, decreased by EUR 332 million, 7% sequentially or about EUR 360 million, excluding FX effects. Compared with the guidance we provided at the fourth quarter results, we are in line with or even ahead of our expectations with respect to the non-compensation categories, excluding FX. IT costs were EUR 168 million lower and EUR 212 million of savings came from the remaining costs, both reflecting completion of projects and further efficiency saves.
However, compensation and benefit costs were broadly flat against the elevated levels in the fourth quarter and higher compared to our previous guidance of expected savings of around EUR 150 million. This is mainly due to 3 components. Firstly, we expensed EUR 80 million more as a result of good business performance. An extra EUR 50 million related to the variable compensation for performance in the first quarter, and a EUR 30 million one-off impact for carried interest related to future performance fees and asset management alternative funds was also recorded.
Secondly, we had unplanned benefit costs to the tune of EUR 40 million, which we do not expect to repeat in the rest of the year. And finally, structural cost reduction efforts, largely in our private bank, were offset by costs from investments in strategic hires and control functions, of which EUR 20 million were one-off hiring costs. We continue to execute on efficiency measures aimed at reducing compensation costs, however, we are seeing increasing pressures as we compete to retain and attract talent.
If we look at the year-on-year cost developments on Slide 11, adjusted costs decreased by EUR 135 million or 3%. Excluding FX effects, costs were down 5% or EUR 237 million. IT costs declined by EUR 110 million, driven by completion of certain projects and capturing the expected delivery of efficiencies. Then professional services and other non-compensation costs came down by EUR 136 million due to the completion of IT, control and remediation projects.
Compensation expenses increased by EUR 9 million compared to the prior year. Effects from the workforce reduction were offset by payroll inflation and by the impacts from variable compensation and selected strategic investments. Let's now turn to provision for credit losses on Slide 12. Provision for credit losses for the first quarter was 24 basis points of average loans on an annualized basis or EUR 292 million, in line with guidance.
A moderate sequential increase was entirely driven by the war in Ukraine. Elevated Stage 1 and 2 provision of EUR 178 million compared to net releases of EUR 95 million in the prior year quarter, relating to downgrades of all Russian exposures and additional overlays to reflect macroeconomic uncertainties.
Stage 3 provision of EUR 114 million includes a few impairment events predominantly on Russian names in the corporate bank. This was offset by a small number of larger releases in the investment bank, while the private bank provision benefited from a model recalibration.
Let me now update you on our direct exposure to the Russian Federation at the end of the first quarter compared to our previously disclosed exposures at the year-end on Slide 13. Gross loan exposure was cut by 5% to EUR 1.3 billion and 21% to EUR 468 million on a net basis. The reduction reflects active exposure management and repayments. Our contingent liabilities were cut by 35% to EUR 1 billion, and exposures are largely mitigated by export credit agency coverage and contractual drawdown protection.
Overall, we have low levels of direct market risk exposure to Russia after all major derivative counterparty positions were unwound. Let me now turn to capital on Slide 14. Our Common Equity Tier 1 capital ratio decreased from 13.2% to 12.8% over the quarter or 41 basis points. This reflects a decline of around 8 basis points from higher RWA, driven by Core Bank business growth, partially offset by lower operational risk-weighted assets.
ECB mandated model adjustments related to small- to medium-sized enterprise lending led to a decrease of 20 basis points. Strong organic capital generation during the quarter was offset by share repurchases, deductions for dividends, AT1 coupon payments and equity compensation, adding 4 basis points net. We estimate the impact of the war in Ukraine on our CET1 ratio as 17 basis points due to higher risk weights on our Russia related exposures and higher prudent valuation reserves due to the increased dispersion of market prices.
CET1 capital now includes a capital deduction for common share dividends of EUR 354 million for 2022 in addition to the roughly EUR 400 million, which were already put aside last year to pay the proposed 2021 dividend of EUR 0.20 per share post the AGM this May.
We remain committed to support business growth through continued earnings retention and to finish the year with a CET1 ratio of 13% or higher. However, what remains hard to predict at this point is the potential for further regulatory-driven RWA inflation in the remainder of the year. Our fully loaded leverage ratio was 4.6%, a decrease of 30 basis points over the quarter.
Of the 30 basis points decrease, 16 basis points were driven by Tier 1 capital, which reduced as a result of the call in January of our [ EUR 1.75 billion ] new style AT1. Our successful EUR 750 million AT1 issuance, which settled in early April, adds a further 6 basis points to our leverage ratio on a pro forma basis.
Leverage exposure, excluding FX effects, increased by EUR 28 billion quarter-on-quarter following continued growth in our core bank, including loan growth. Our pro forma fully loaded leverage ratio, including certain ECB cash balances, was 4.3%. With our reported leverage ratio of 4.6% at the end of the quarter, we have a buffer of 134 basis points over our leverage ratio requirement of 3.23%.
With that, let's now turn to performance in our businesses, starting with the Corporate Bank on Slide 16. Corporate Bank revenues in the first quarter were EUR 1.5 billion, 11% higher year-on-year. Revenue growth was driven by the continued impact of our deposit repricing actions and business growth, particularly in Corporate Treasury Services. Interest rates turned into tailwinds in the U.S. non-euro EMEA and Asia, more than offsetting remaining euro headwinds.
Corporate Bank grew loans to EUR 125 billion, up by EUR 3 billion compared to year-end 2021 and by EUR 8 billion compared to the prior year quarter, mainly in corporate treasury services. Provision for credit losses increased year-on-year across all stages, primarily driven by impacts of the war in Ukraine. Noninterest expenses of EUR 1 billion declined by 7% year-on-year due to non-compensation initiatives and lower nonoperating costs. The resulting return on tangible equity stood at 7.2%. Adjusted for the pro rata bank levies, the return on tangible equity in the first quarter would be 9.2%.
Corporate Bank profit before tax was EUR 291 million in the quarter, up 25% year-on-year despite higher credit loss provisions, evidencing improvements in our profitability and efficiency. I will now turn to revenues by business segment in the first quarter on Slide 17. Corporate Treasury services revenues of EUR 917 million grew by 14% year-on-year, driven by strong business momentum, in particularly, in corporate cash management, higher loan volumes, deposit repricing and the improving interest rate environment.
Institutional Client Services revenues of EUR 350 million rose by 11%, benefiting from episodic items and currency translation effects while the underlying business remained stable. Business banking revenues of EUR 194 million were up 1% year-on-year as solid underlying business growth and benefits of deposit repricing were mostly offset by remaining interest rate headwinds.
I'll now turn to the Investment Bank on Slide 18. Revenues for the first quarter of 2022 were slightly higher year-on-year, both on a reported basis and excluding specific items. Strong performance in financing and macro trading businesses was partially offset by lower revenues in Origination & Advisory and credit trading. Noninterest expenses were higher, primarily due to increased bank levies and compensation expenses.
Our loan balances increased year-on-year, primarily driven by higher loan originations across the financing businesses. We continue to maintain a well-diversified portfolio across regions and industries. Leverage exposure was higher, reflecting increased lending commitments and trading activities to support client flows. The year-on-year increase in risk-weighted assets predominantly reflects the impact of regulatory inflation in addition to loan growth within the financing businesses.
Provision for credit losses of EUR 36 million or 15 basis points of average loans remained low. The year-on-year increase was driven by Stage 1 and 2 provisions versus releases in the prior year quarter.
Turning to revenues by segment on Slide 19. Revenues in Fixed Sales & Trading increased by 15% in the first quarter when compared with the prior year. Strong performance within financing and across macro trading businesses was partially offset by lower revenues in credit trading. Financing revenues were significantly higher driven by increased net interest income and higher capital markets activity with solid performance across all businesses.
Revenues across rates, foreign exchange and emerging markets were significantly higher driven by market activity and client flows benefiting from effective and disciplined risk management. Credit trading revenues were significantly lower, with the business impacted by a challenging market environment.
Revenues in Origination & Advisory were also significantly lower versus the prior year, driven by an industry fee pool reduction of approximately 30%. Debt origination revenues were lower due to materially reduced leveraged debt capital markets revenues. Investment-grade performance remained robust with revenues slightly higher year-over-year.
Equity Origination revenues were significantly lower driven by a material decline in the industry fee pool and reduced SPAC activity versus the prior year. Revenues in Advisory were significantly higher, reflecting a high level of completed transactions against a solid pipeline.
Turning to the Private Bank on Slide 20. Revenues were EUR 2.2 billion, up 2% year-on-year or 3% if adjusted for specific items. Continued revenue growth despite the uncertain environment towards the end of the quarter, more than offset headwinds from still low interest rates, although these headwinds have abated somewhat relative to the previous year.
The decline of 6% in noninterest expenses year-on-year was in part attributable to releases of restructuring provisions of EUR 44 million. Adjusted costs were down 3% year-on-year despite higher bank levies, reflecting incremental savings from transformation initiatives, including workforce reductions as well as continued strict cost discipline.
The Private Bank reported a strong pretax profit of EUR 419 million in the quarter, up 54% year-on-year, reflecting both continued cost savings and revenue growth. The cost/income ratio improved to 77% compared to 83% in the first quarter of 2021. Post-tax return on tangible equity rose to 9%. Considering bank levies on a pro rata basis, pro forma post-tax return on equity would have been 11% with a corresponding cost-to-income ratio of 73%.
Assets under management declined by EUR 6 billion to EUR 547 billion in the quarter, a negative impact of EUR 18 billion from market movements was largely offset by net inflows into assets under management of EUR 10 billion and by exchange rate differences. Risk-weighted assets increased by 13%, predominantly due to regulatory changes in the prior year and a growing loan book.
Provision for credit losses was EUR 101 million or 16 basis points of average loans, in line with the prior year, reflecting tight risk discipline and a high-quality loan book. Stage 3 provision also benefited from a model recalibration, as I mentioned earlier.
Turning to revenues by segment on Slide 21. Revenues in the Private Bank Germany were up 1%. Higher fee income from investment and insurance products compensated still negative impacts from deposit margin compression, lower benefits from the TLTRO-3 program as well as residual impacts from the BGH ruling. The Private Bank Germany attracted net inflows of EUR 3 billion in investment products and net new client loans of EUR 2 billion.
In the International Private Bank, revenues, excluding specific items, increased by 6%. Private Banking and Wealth Management revenues increased by 5% or 8% if adjusted for Sal. Oppenheim workout activities. The growth was attributable to both investment products and loans and was supported by relationship manager hiring in prior periods. Revenues also benefited from FX impacts. Personal Banking revenues were stable, supported by growth in loans, partially offset by deposit margin compression.
The International Private Bank attracted strong net inflows in assets under management of EUR 6 billion in the quarter, driven by investment products across all regions. Net new client loans were EUR 2 billion, mainly in Americas and EMEA, in part offset by deleveraging activities by clients in APAC. As you will have seen in their results, DWS delivered a strong quarterly performance compared to the prior year period despite the recent market turbulence.
To remind you, the Asset Management segment on Slide 22 includes certain items that are not part of the DWS stand-alone financials. Revenues grew by 7% versus the prior year, primarily due to an increase in management fees of EUR 74 million, mainly from higher average assets under management, which more than offset lower performance fees recognized in the quarter.
Noninterest expenses increased by EUR [16] million or 4% with adjusted costs up 5%. This reflects higher compensation costs, principally the variable compensation impact of carried interest related to future infrastructure performance fees, and higher asset servicing costs due to the increase in assets under management. Compared to the prior year, the divisional cost/income ratio improved further to 62%.
Profit before tax of EUR 206 million in the quarter increased by 12% over the same period last year, reflecting a stable margin and a strong increase in revenues. Assets under management of $902 billion have increased by EUR 82 billion since the same quarter last year, which is mainly attributable to successive quarters of net inflows in 2021 as well as positive FX translation effects as well as market performance as we show on Slide 44 in the appendix.
Looking at the sequential performance. Assets under management have declined by EUR 25 billion in the quarter, reflecting the negative impact from market performance, partly mitigated by FX translation effects. Net outflows of EUR 1 billion in the quarter were primarily due to outflows in low-margin cash and fixed income products in a challenging market environment. Excluding cash, net inflows were EUR 6 billion in higher margin strategies. The business also attracted EUR 1.1 billion of net inflows into ESG products during the quarter.
Turning to Corporate & Other on Slide 23. Corporate & Other reported a pretax loss of EUR 428 million in the first quarter of 2022 compared with a pretax loss of EUR 178 million in the prior year quarter. This was principally driven by a negative contribution of EUR 183 million from valuation and timing differences compared to a negative contribution of EUR 4 million in the prior year quarter.
The result for the quarter was principally from adverse movements in interest rate and credit spread curves, partially offset by the effects of funding basis and broader rate movements in light of the volatile market environment. As previously communicated, valuation and timing differences arise on positions that are economically hedged, but do not meet the accounting requirements for hedge accounting.
Funding and liquidity impacts were negative EUR 127 million versus negative EUR 36 million in the prior year quarter, and they include certain transitional costs relating to the bank's internal funds transfer pricing framework as well as costs linked to legacy activities relating to the merger of DB Privat- Und Firmenkundenbank AG into Deutsche Bank AG, as we have previously disclosed.
Expenses associated with shareholder activities as defined in the OECD transfer pricing guidelines, not allocated to business divisions, were EUR 120 million, a small increase to the EUR 112 million in the prior year period.
We can now turn to the Capital Release Unit on Slide 24. For the first quarter of 2022, the Capital Release Unit recorded a loss before tax of EUR 339 million, narrowing the loss from the prior year by EUR 70 million. Revenues for the quarter were negative EUR 5 million, as funding and risk management costs were partly offset by income from our loan portfolio and net derisking gains. This compares to the positive EUR 81 million in revenues we reported in the prior year quarter, with the reduction primarily from the conclusion of the Prime Finance cost recovery.
Noninterest expenses declined by 32%, primarily driven by a 27% reduction in adjusted costs, reflecting lower internal service charges, lower bank levy allocations and lower compensation costs. This quarter also marks a step down in costs following the conclusion of the Prime Finance transfer.
As a result, the division reduced its loss before tax to EUR 339 million, down by 17% from the prior year quarter. Year-on-year, CRU reduced leverage exposure by EUR 46 billion and risk-weighted assets by EUR 8 billion.
Since the fourth quarter of 2021, the division has reduced leverage exposure by EUR 4 billion through deleveraging and natural roll-offs and reduced risk-weighted assets by EUR 3 billion, including a EUR 1 billion reduction in operational risk RWA. Looking through to the remainder of 2022, we are confident of achieving the target for adjusted costs of EUR 800 million that we set out at the Investor Deep Dive.
We will also aim to drive risk-weighted assets and leverage down further and expect to record a negative revenue number for the year. Turning, finally, to the group outlook for 2022 on Slide 25. The current geopolitical outlook and macroeconomic environment bring a great deal of uncertainty to the financial markets and to our clients. However, strong revenue momentum in our core businesses continues to support our revenue guidance of EUR 26 billion to EUR 27 billion for 2022.
And in our view, our first quarter results built a strong foundation to achieve this. As Christian highlighted, we remain highly focused on cost discipline and continue to work towards our targets, but the current environment remains challenging and the visible cost pressures have intensified. We remain disciplined in managing our risks and we believe that near-term risk is contained.
Our capital remains resilient, and our organic capital generation was offset by distributions while at the same time, we absorbed business growth, regulatory changes, and the impact of the war. We remain confident in our year-end guidance of around 13%, consistent with our target of greater than 12.5% for our CET1 ratio. As Christian mentioned, we finished our share buyback program and the expected payment of dividends immediately after the approval at the AGM, will complete the shareholder distributions of EUR 700 million in 2022. We continue to work to our 2022 targets. With that, let me hand back to Ioana, and I look forward to your questions.
Thank you, James. Operator, we are now ready to take your questions.
[Operator Instructions] The first question is from Chris Hallam from Goldman Sachs.
2 questions from me. So FIC has obviously been strong in the first quarter, and it looks like you're still taking share there, and you slightly tweaked the IB revenue guide for the year, but the Corporate Bank and the Private Bank were also strong. So I wanted to hear how you're thinking about revenue trends beyond 2022 and whether what you've seen so far this year changes anything at the divisional level.
And then second, on capital, which was slightly lighter than expected, could you lay out how you see capital ratios evolving through the rest of 2022? And speak to whether anything is changing to a degree, which might make you rethink either the phasing or the absolute level of the EUR 5 billion capital return commitment embedded in that 13% core Tier 1 target for 2025.
Thanks, Chris. I appreciate the question. Look, you're right, FIC was strong in Q1, and it's reflecting some of the trends we've been talking about for a while around client engagement, the benefits of investments we've been making in people and technology, the impact of the rating upgrades and therefore, people opening business with us and lines and that's all flowing through.
And we think leads to a sustainably improved view, obviously, at some point -- some degree dependent on the market wallet. CB and PB, as you say, are showing the type of growth that we've been calling for, for a while as interest rates and those headwinds start to abate. We've talked for a while about underlying growth. And as you can see in CB year-on-year at 11% up, you're seeing the combination of underlying growth plus help from interest rates in CB.
And similarly, PB, although more affected still by headwinds in the euro deposit base, you're now seeing growth come through, particularly, for example, IPB up 4% year-over-year. And so we're seeing strength in the business, and it feeds our commentary back at the IDD about momentum driving the types of compound growth rates that we've called for in the period from '22 to '25. We think the first quarter performance is clearly validating around that momentum and the direction of travel there. Looking at '22, again, the first quarter, no question is helpful in building towards the guidance that we provided. I'll remind you of Christian's comments on the last quarterly earnings call, where he went through business by business what we were expecting this year. And I think as we sit here today, all of the businesses are at least in line with that guidance. And in some cases, as you point out, the IB, for example, above that guidance. And actually, as you say, we're seeing strength in CB as well that could lead to some outperformance there.
And hence, as we think about the EUR 26 billion to EUR 27 billion guidance that we've provided for revenues this year, we actually think we're biased to the high end of that based on what we see right now. In terms of capital distributions, we talked about the ratio target for the end of the year or objective in our prepared remarks.
So we -- there's no change based on the Q1 performance to our guidance for the full year. And to your point, there's no change in our view on the capital trajectory or the resulting distribution path that we intend. Look, we had a 40 basis point drawdown through the quarter. And as mentioned, really, the drivers were the model impact and the effects of the war in Ukraine.
In that latter case, much as you saw in COVID, we'd expect a lot of that 17 basis points to come back. And really, most of the model change was already built into our capital planning. So as a result, no significant impact on our views for the full year, the guidance we provided and consequently, no impact at all on our distribution plans.
The next question is from Kian Abouhossein, JPMorgan.
Two questions on costs. I think that’s a key issue today impacting your share price. And I think there's some confusion. And maybe, James, you can explain a little bit how we should read the comments. On the one hand, you have a cost/income target of 70% stated, which implies on your revenue guidance, EUR 18.2 billion to EUR 18.9 billion on a stated basis. And I assume there are EUR 200 million of restructuring charges in there.
And on the other hand, there's also guidance of flat cost between '22 and '21, which is around EUR 19.6 billion clean. And I'm just wondering, first of all, if you could explain that, what should we be focusing on in terms of cost guidance going forward? And then the second question is, again, related to cost. If I compare your Investor Day, where you talked about EUR 3 billion of cost plus resolution fund, and that was for January, February, the EUR 3 billion.
One could have argued the cost should be closer to EUR 5 billion, maybe EUR 5.1 billion, but we ended up significantly higher. And you clearly explained that to some extent in your remarks. However, there seems to be a concern that there's a bit of slippage in cost discipline.
And if you can elaborate on that, how, over 1 month -- less than a month, there has been so much concern around cost, which -- or there has been a material increase in cost, which was not anticipated, so to say, at the Investor Day. So can you talk about the process and confidence around cost discipline. So those 2 questions.
No, thanks for the question. I appreciate it. I'm happy to clarify if there's any confusion. So listen, the guidance that we provided is unchanged from the annual report outlook. And as we think about costs for the full year, the essentially flat language is a range. It's a range about -- around 0. And compared to last year, where we look at adjusted costs, excluding transformation charges and the Prime Finance expenses, so your starting point in that is sort of 19.3%. There's a range, of course.
And that's consistent with the earlier guidance that we provided, which was sort of low to high 18s and remains consistent. So that's what we've been working to and aligns, as you say, with the revenue guidance we've provided and the fact that we're working to a 70% cost/income ratio target. So that's the guidance we're providing and what we're working towards.
If I think about where we were back at the beginning of March, we had 2 months of expenses where the run rate combined was really at about EUR 1.5 billion taking January and February together, which was clearly encouraging to us. That excludes the single resolution fund costs as we were -- I think we were clear in thinking about that as the, call it, the operating expenses, excluding Single Resolution Fund.
And as you can see, March came in higher than that run rate, call it EUR 1.6 billion, principally reflecting the compensation items that I mentioned in the prepared remarks. Now those compensation items essentially materialized in March. We make variable compensation determinations at that time based on revenues and profitability for the quarter as we see it.
The carry costs that we incurred in DWS only became visible to us as the valuations, frankly, came in of those -- of the underlying investments. So clearly -- and actually, some of the hiring costs also materialized in March. So much of that cost accession was, in fact, March and not entirely visible to us when we spoke with you.
I will say what's encouraging is that the non-compensation guidance, so when we tie back to the EUR 450 million sequential decline that we talked about in January, we're looking at non-comp costs that, in fact, were better than that original guidance. And the miss relative to the [ EUR 450 million ] of about [ EUR 90 million ], really all explained by these variable compensation items by and large, costs that we consider positive in as much as they reflect current or future revenues.
So lots of work underneath the hood there, but we're working towards the 70%. And notwithstanding some of these higher expenses in the quarter, some of which, as you know, are out of our control, the SRF. We don't get that invoice until April every year, some of which was late in the quarter, reflecting performance and new information. The fact that we were able to offset it in the quarter on a cost/income ratio basis, given the strong revenues, I actually think is an encouraging sign and it continues to put us on track for the cost/income ratio that we're -- as we continually say, we've been working towards. Hope that help clarify a little bit, Kian.
Yes. That's very helpful. If I can just follow-up, just one more time on the absolute cost number, should I think more around the cost/income as a main binding constrain of 70% for this year? Or more around the level of costs in line with last half?
Well, of course, we give guidance. What we are -- management's objective is to work to that 70% target we've set.
And that's achievable with your EUR 26 billion to EUR 27 billion revenue?
Exactly. And so we translate that into guidance consistent with what's required in our outlook statements, which compares to the prior year. And again, we've been consistent on that. In terms of what management is focused on, we're focused on managing our run rate costs sort of month by month, quarter by quarter. We've, obviously, acknowledged that there are some headwinds, some of which appeared already in Q1, some of which -- and that are not repeating in general, and that we're working hard to offset those headwinds. Again, hopefully, that gives you a sense of really where management's focus is.
Next question is from Nicolas Payen from Kepler Cheuvreux.
I have 2 please. The first one would be on NII. And I wanted to see if you could give us maybe an update on the outlook that you gave us last quarter and if there has been any changes versus last quarter? The second question would be rather with regard to your discussion with German corporates and what kind of level of activity they're expecting for the rest of the year? And beyond this, if there were any concern regarding growth slowing down, potential recession next year in Germany? And any general concern that you are discussing with them?
Thank you, Nicolas. Look, NII is really one of the reasons -- the areas where we -- that supports our confidence in the guidance that we've provided. And we wanted to give you a little bit more color on that on Slide 9 in the deck, some new disclosure that we have, really underscoring our view that we've kind of reached the turning point in NII and net interest margin.
And that's driven, of course, by both growth in the loan book as well as the efficiencies in the balance sheet and now increasingly from interest rates. So that gives us, I think, real confidence about the forward on interest income. If I speak to the -- your question about German corporates, look, we're all going through sort of an unprecedented crisis and resulting from these awful events that we're seeing in Ukraine, but the knock on macroeconomic consequences of all of that.
German corporates, of course, are reacting. They're acutely aware of some of the changes in supply chains, obviously, energy pricing, the sufficiency of energy supply, and so we're working hard to adjust to that new environment. I think in general, you see a relatively high degree of adaptability in the German economy and that's something that we're working with clients on, including how do you adapt your supply chains.
And we think, in general, it will probably mean that there's more support in lending needed for the German economy. And clearly, that's our role. We stand ready to support the economy to support our clients as they gear up to respond here. We think it's generally supportive of driver growth in the corporate bank, both the supply chain, the additional lending, what is happening in the payment space.
And so are generally encouraged by the trends we see today, obviously, with an awareness that the disruptions in higher rate environment may lead to a recession further down the road, and we all need to be mindful and appropriately cautious about the outlook on that basis.
The next question is from Stuart Graham from Autonomous.
I had 2. It follows on from those last comments, James. I mean, the Bundesbank put a study out saying if the gas stops there’s a deep recession in Germany. I'm sure you've done a stress test on what that means for your loan book. Can you give us a feel for what that impact would be in terms of your ECL, please? That's the first question. . And then the second question is also following on the rate sensitivity. You gave that slide at the IDD saying that the forward curve as it stood, I think, was EUR 400 million of benefit for 2022 and EUR 1.5 billion for 2025. Obviously, the curve has steepened further since then. So can you give us an update on those 2 numbers, the EUR 400 million and the EUR 1.5 billion, please?
Sure. Happy to, Stuart, and thanks for the questions. Look, I'll take them in reverse order. The answer is the curve has improved the revenue outlook relative to that curve that we showed or the impact that we showed. And so if we're looking at recent curves, it would impact interest rates or interest income this year by over EUR 100 million and the 2025 cumulative impact by around EUR 500 million.
So we'd be closer at the end of that period, we showed EUR 2 billion than EUR 1.5 billion. So continued support from interest rates even relative to the guidance that we showed. And it, again, supports the feel -- the strong feeling we have about the guidance for this year's revenues, again, coming in that [ EUR 26 billion, EUR 27 billion ] range. And as I say, biased to the high end as things stand.
One thing, Stuart, I gather, you'd asked why we didn't repeat that slide in the disclosure. The reason is it was a December 31 sort of step off number. And as time goes by, it essentially becomes old. And so we didn't want to sort of repeat essentially stale numbers, but absolutely a fair question about that sensitivity, and it's one of the reasons we are beginning to provide this interest-earning assets and net interest margin disclosure.
On your question about the downside scenario around an interruption of energy supply to the German economy, I've been talking with our economists naturally, we do our work looking at these scenarios, we would come out with similar numbers, frankly, to the Bundesbank study. And so it is a relatively significant impact on the economy in that, sort, of stressed case and potentially a lasting one because you can't refactor the economy and source supplies all that quickly.
So it potentially would be an effect that goes beyond sort of 1 year. I can't provide you with the ECL impact that would be a lot of sort of stress testing disclosure. But what I can say is it's not too different from other scenarios that we look at and frankly, prepare for, which I think is the important takeaway.
We'd -- the stress scenarios that we look at in our credit book, even in severe scenarios are manageable for us. And I think the other thing that's very important as you think about that scenario is that Germany has shown itself to have the fiscal space and the political will to support the economy, to support households and corporates in managing through some of these policy driven shocks that have taken place.
So those ECL impacts that you're asking about, of course, would be mitigated by whatever action the government were to take either directly or through the development bank. So it's really very hard to speculate and I wouldn't give you much value, frankly, given how subjective it is and the uncertainty about the mitigants.
But it's something, as you know, because we're so focused on risk management on the concentrations in our books, we hedge, as you know, a significant amount of the credit risk on our books through various mechanisms. These are the types of adverse scenarios. Frankly, we're preparing for all the time.
That's fair. So the 5 basis points of extra provisions this year, you referenced, that's just the direct Russia. There's nothing for supply chain bottlenecks, any possible indirect impacts. Is that right?
Yes, that's right. So we're sort of looking at a base case today. We're not building provisions for that. What we still think is unlikely downside case. But again, frankly, on a net basis, with some assumptions about the severity of the crisis and the degree of fiscal support, the increment may not be that much more than, frankly, we've shown already. Again, it's very, very path dependent.
The next question is from Daniele Brupbacher from UBS.
Can I briefly come back to the capital return question. And you made some remarks already, but I was just wondering what would currently prevent you from doing further buybacks this year? Or what -- just to put it the other way around, what would make you start another program already this year? Is it a [ 12.8 ] CET1 ratio that it has to be above 13?
Or what is really preventing you from doing another one? Because currently, dividends and buybacks, the EUR 8 billion in total are a bit back-end skewed, back end loaded, and I would prefer to have a bit more already decent next year. And then secondly, more a technical question. You mentioned, again, the DTA benefits potentially. Can you give us a range of where that could land in terms of positive impact? Because obviously, it could be quite important in the context of the 8% RoTE target.
Look, in this environment, a war going on, all of the uncertainties that we just discussed with Stuart, I think by itself, that would temper any management team's perspective about accelerating or growing capital returns. So it's something that we would -- we'd look at in light of the environment we're in and the uncertainties we have.
Clearly, right now, the focus for us is delivering on that guidance we've given for year-end. That means that we need to build a little bit of capital on a net basis through the year. We think most of that will come in the second half based on sort of organic earnings growth or capital generation through earnings, while supporting the balance sheet growth that was in our planning.
And as you know from our discussions after the IDD, we've given ourselves some room in our capital planning, some flexibility, particularly in '23 and '24, and hence, we just don't see -- we don't see any impact of today's ratio or outlook on our plans -- distribution plans. But equally, given the uncertainties, we wouldn't be sort of in a rush to accelerate at this point.
On the DTA, it's hard to say. It's going to depend on the analysis that we do every year of U.S. profitability, both in year and on a projected basis. But I mean, to give you a rough range, it could be in similar levels to what we saw in the fourth quarter of last year, so call it around EUR 300 million on -- in the tax line.
The next question is from Magdalena Stoklosa from Morgan Stanley.
I've got 2 questions, James, one, unfortunately, still on costs and another one on the corporate lending and pipelines there as well. So on costs, how should we scale the kind of the sources of inflation, right? Because you've got 2 things. You've got the payroll, and you've got your variable comp. So on a variable comp, I'm with you, it kind of comes with a revenue offset.
But how should we kind of scale your kind of payroll inflation because, of course, that we all kind of take on the chin. And I assume that's particularly acute in Germany and IB. So any color there would be very useful. And second, I mean your lending growth in the corporate bank kind of continues to be strong.
And I just kind of wonder how do your pipelines look like kind of there? And where has the demand actually and what were the drivers of the current demand? What are you seeing there?
Thanks, Magdalena, for the questions. So look, it is payrolls that we're looking at most carefully. You've seen on non-comp, we've been very, very focused. And I think over several years now. And while you do see sort of vendors attempting to put through price increases, it's something in part, we're protected from contractually. And in part, we manage through sort of competitive bidding and demand management internally.
So we're very focused on the non-comp lines. And as you say, variable compensation in a sense, is a good thing when it increases. On the payroll, one thing I'll tell you, the recent agreements that we reached in Germany are in line with our planning. So while there's, of course, pressure all around the world, at least that item has been now finalized without presenting pressure to the planning or is in line with the planning.
I think where we see pressures, and I think some of our peers have also talked about this is just retention and recruiting, which reflect the inflation that is out there in the marketplace in compensation costs. And that's something we've got to work hard to manage.
We want to be competitive. We clearly need to execute on our plans, including incidentally our control investments, but our work that is cut out for us to do that within our budgets, and that is where we see some inflation that needs real focus to address.
In terms of the corporate bank lending pipeline, we're very pleased, I have to say, with the steady loan growth we've seen across both Corporate Bank and Private Bank, by the way. So EUR 2 billion to EUR 3 billion per quarter of loan growth is a good level for us. We'd like to see sustained, and it remains to the question about risks earlier within our risk appetite and quality origination and also the client perimeter, we sort of target.
What's driving the CB is really trade finance and efforts that we've made over time to invigorate the lending side of our client discussions for a long, long time, the corporate banking sales force was really a liability sales force, and it takes quite a long time to sort of retune it to be both sides of the balance sheet and also to line them up in a way that's sympathetic to how we manage liquidity and essentially the funding cost.
So we're very pleased about seeing now a sustainable, hopefully, long-term sustainable impact on loan growth. And as I mentioned earlier, to Nicolas' question, we think that this environment, far from being a detriment somehow to this is an environment where we're that much more needed and relevant for our clients, including with our balance sheet.
The next question is from Anke Reingen from RBC.
Just 2 follow-ups. First is on the NII. I guess it's just a question you wanted to avoid. But the NII in Q1 across PB and Corporate Banking has already relatively strong or bounces up quite a bit versus Q4. So should we think that part of the EUR 400 million you previously -- are now higher for 20 -- the EUR 500 million you said for 2022 is already reflected in Q1?
Or is it largely coming in later in the year? And then on the RWA inflation. I mean, normally, you're quite specific on what we should expect in the rest of the year and this time, you're a bit more vague. Is that because you have something in mind and you can't call it by it? Or is it just generally cautions.
Thank you for the question, Anke. So on the first one, we see accelerating as the year goes by. So a relatively modest amount of that EUR 500 million is in the Q1 numbers. And it's only in the CB non-euro piece. And as you can imagine, especially with rate sensitivity to the short end in dollars and dollar-related currencies in CB, that's only just started and may move quite quickly.
In the euro books and of course, PB is overwhelmingly euro, whatever the ECB actions are in both in magnitude and timing would impact the rest of the year, potentially north of the EUR 500 million because it isn't clear to us that everything that the ECB will do ultimately is already priced in.
You need to remember that there'll be a lot of moving parts when the depot rate moves. There's reversing deposit charging. There's reversing the tiering, but then there's benefits from zero floor deposits and benefits from the asset side that come through. So there's a lot of moving parts. But the basic trajectory is significantly positive and accelerating through the year based on what we're seeing so far.
Right now, we would assume that the ECB has moved in its depot rate to up by, say, 75 basis points and the Fed by 235 basis points. So as you -- and that largely hasn't happened yet. So you can see the front-end impact is still lies ahead. On the RWA inflation, yes, there is some uncertainty. We talk about these examinations that take place. We had the same sort of experience through TRIM, where you go through examinations. There's feedback and discussion and then a number in terms of model adjustments or overlays is something you incorporate into your RWA. There's some discussions underway, and we just don't know the outcomes at this point. So I don't know really what to build in at this point.
Next question is from Jeremy Sigee, BNP.
2 questions, slightly linked. First one in particular is linked to some of the earlier discussion about provisioning. It's been notable that some of your U.S. peers and also one of your German peers is taking and the U.S. banks as well are taking precautionary provisions to cover the range of economic scenarios that could be ahead of us.
You don't seem to have done so much of that, and I just wonder what your thoughts are on whether there's merit in booking some of those precautionary provisions given the range of uncertainties, but the potential impacts that could be coming? And then my second question is a rather more nitty-gritty question.
Just on the corporate center, which was a heavier drag than normal and then the sort of run rate guidance and you've given us the various components of that. And I just wondered, do we expect all of those to normalize quite rapidly in the remainder of the year?
Thanks, Jeremy. I appreciate the questions. So look, we think we have done so in terms of precautionary provisions. And I'd point you to the disclosure on Pages 31 and following on our IFRS 9 determinations and the overlays that we put in. As I said to Stuart, it doesn't reflect a severe downturn sort of scenario at this point. We do build essentially sort of variations into our model. So we use a central scenario, macroeconomic variables in the sort of ranging of scenarios around that is essentially implicit in the models. So it's reflected in the IFRS 9 model driven. It's then reflected in the FLI, the forward-looking indicators. In other words, changes in those variables on a forward-looking basis, and then we've applied some additional overlays.
You may see those overlays as relatively modest compared to peers. But as we said, in the experience going through 2020 and the COVID impact, our view is that simply reflects the relatively low-risk loan book that we run and sensitivity, but it's highly collateralized.
It's often hedged in terms of the credit risk, and hence, our provisions, our precautionary provisions, sometimes seem less than others, but I'd invite you to look at the disclosure in terms of how it's predicated. The corporate and other numbers, as you call out, were a drag on the performance this quarter.
So we had considerable headwind from valuation timing differences in rounding EUR 200 million there and a higher than normal, what I'll call, treasury residual I would not expect those to repeat in anything like that magnitude in the quarters to come.
Valuation and timing is inherently sort of a function of the markets and we saw a huge amount of volatility in the quarter. So overall, we were reasonably pleased with the outcome there, given all the twists and turns that took place. And remember, essentially that VNTA, it can reverse sort of any given day based on the changes in curves and relationships; and b, ultimately, those losses will pull to par over time given that they're hedging sort of accrual positions.
And on the treasury residuals, again, we've given guidance of sort of EUR 300-ish million there. So the first quarter was unusually heavy and we'd expect that to moderate as well over the year. But net-net, C&O was a drag on the core bank performance and the group.
Next question is from Andrew Lim from Societe Generale.
The first one is on your NII guidance. If I understand correctly, this doesn't include the TRO runoff. So if we did assume that this program is runoff, to what extent would it bring down your NII guidance? And then secondly, just through visiting the cost trajectory again.
How committed are you still to deserve EUR 450 million sequential reduction in costs going forward? And what will be the starting point looking at 2Q onwards, do we take that [ EUR 4,616 million ] on Slide 10? Or do we also take off the higher regain comp one-offs that you indicated?
So Andrew, thank you for the questions. Look, as you -- on slide -- I refer you to Slide 9, where we show the net interest margin impact of the TLTRO kicker. And as that comes out, that's about 100 basis points of the margin. We're running right now at 112 and change per quarter of TLTRO and that steps down, call it, by half in the second half of the year. So that's built into our forward look.
But as I mentioned in answer to Anke's question, I think it was we have significant acceleration underneath that, that we would expect from the rate environment as both long and short-term rates come through. And then your question on the [ EUR 4.6 billion ], it's exactly where we were going in the discussion with Kian.
Our focus is on bringing down the run rates -- we were happy with where we were in January and February and less so in March, although, again, the reason for the March sort of bump was, by and large, positive around revenues both in quarter and in the future. But yes, that's the number against which to measure us.
And if you look at what it takes to deliver the year in line with our targets, there's a path that's in line with the guidance and the run rates that we've provided. And obviously, if other things go against us, whether it's inflation or uncontrollable items like SRF was in the past quarter, we need to find ways to offset that. And that's the work that management focuses on, I can tell you sort of day in, day out, week in, wake out.
Great. And just as a follow-on. The deposit beta experience that you're having thus far, is that closer towards 0% or 100%? What have you seen so far?
Yes. And it hasn't really started because it's really a short-term rate-driven item. And frankly, in say, in the dollar area, when you're coming off a zero floor, you're going to be pretty close to 100 to 0. So 100% kept. I will say some of our deposit base in dollars is what I'd call professional money.
So that will tend to be sort of 100% beta business, some of it. Some of it is actually 0 because of the terms of, for example, trust structure. So it's a bit of a mix and too early to really give you guidance as to the performance against our modeled result. As I've said on some earlier calls, my instinct at this point is that we should outperform our models as this starts off, but we haven't really got a time series yet to back test against.
The next question is from Andrew Coombs from Citi.
Yes, staying on the same theme, I'm afraid. If go back to your 2 answers to Kian's question. You, obviously, have provided January and February figures with the Deep Dive. And then subsequently today, you've talked about the run rate being 1.5 January and February, ticking up to 1.6 in March. I guess the question for me is we know your cost-to-income ratio was 73.6% over the first 2 months of the year because you helpfully provided that figure and that includes the levy.
We know that in March, therefore, it must have been around 73% as well given what you've reported for the Q1 and that's without any levy contribution in March. I appreciate your comments on higher variable comp in March. But I guess the question is, what gives you the confidence to go from 73% down to 70% or even below in the remainder of the year, when March is actually usually quite a strong month. And I imagine the volatility post-Russia, Ukraine, that you've been very supportive of some of your fixed income revenues. So why the confidence?
Yes. So Andrew, the -- what you just went through is one of the reasons we sort of labor through the SRF in the first quarter because it's so distortive in terms of looking through what the run rates are. But absolutely, we -- you can quite easily do the math off of run rates. If you just do a sensitivity analysis, [ 1.5, 1.55, 1.6 ], say what the revenues need to be on a monthly basis and cumulatively over a quarter to hit the targets.
Clearly, we need to manage this down from the first quarter, but acknowledging that a significant impact in that 73.4% for the first quarter was SRF driven, and that doesn't repeat. But it's the math of a cost/income ratio that, at a run rate, we need to make sure that the revenue support the expenses or if not, that we're taking the appropriate actions to manage the expenses down.
The next question is from Adam Terelak from Mediobanca.
I want to come back to NII again. I know you've given us the kind of circa EUR 2 billion by 2025. I took the full year or the CMD number and mark-to-market for what you said for kind of 25 basis point hikes. The euro curves moved 75, 80 basis points, which, for, me was much more than EUR 0.5 billion upgrade you've given us today. So can you just talk through what I might be missing why the upgrades aren't any bigger?
And then thinking about how to put this through our models over the coming quarters. It sounds like in the corporate bank, the replication models and the hikes coming through could mean Q-on-Q NII upgrades through the CB through this year. Could you speak to what that would look like for the Private Bank? I know you're saying headwinds are still there, but how we should think about that developing through the year and seeing that EUR 500 million coming through in terms of U.S. dollar hikes, but also replication and long end moves that we've already seen?
And so Adam, the -- I would refer you back to the first quarter NII disclosure that we built on in the IDD and that gave you a sense of the sensitivity to short versus long-term rates. And just in the kind of year 1 analysis, it is short-term rates that can drive an impact. And of course, they haven't moved, they haven't moved by a meaningful amount, clearly, the depot rate. There's also some of the sensitivity because of our hedging, doesn't show up, even in short-term rates, doesn't show up right away. So hence, not much impact in Q1, but an accelerating impact going forward. To your point about Corporate Bank, yes, we would see an accelerating impact there, given that it is a higher sensitivity to both short-term rates and to non-euro rates than the private bank.
And the private bank takes some time. There's an odd negative sensitivity in the short term for the private bank. It just takes longer to feed through given that it is -- it's a longer duration deposit book that we're hedging there, and it just takes longer for long-term rates to roll through and benefit that book.
Okay. Anything went missing on the 2025 guide? You said [ EUR 2 million, EUR 3 million or EUR 5 million ] for year 4 in the slides, and I think the euro curves moved more than 75 basis points.
Yes. We're -- so we're calling for the, as I say, the EUR 500 million increase in the fourth year in 2025. So right now, our models would suggest EUR 2 billion out that far. As we mentioned, I think at the IDD, some of the upside sensitivity is nonlinear to the downside, if you like. And so there are probably some quirks in how the detailed modeling we do internally behaves versus perhaps some outside in modeling. So that is probably the answer to your question is the quirks of how the portfolio is working in our hedging strategies.
The last question is from Amit Goel from Barclays.
So some follow-ups. Firstly, just on the capital return. I just wanted to double check whether there was any kind of also regulatory restriction or conversation, limiting your ability to do further buybacks at this stage. I was just kind of curious given that you were so fast in doing the first half buyback. And within that also, just wondering if the group were trending below the 13%. Obviously, there's a bit of variability in RWA that you flagged during the remainder of this year, how you would look to address that? And then my second question, also just again relates back to the cost point. I just wanted to check, again, this is more of a detailed point and maybe I can follow up with the Investor Relations team, but you gave a very detailed guidance on the February year-to-date P&L. When I look at that guidance, the EUR 4.9 billion of revs, the 73.5% cost/income ratio, it's still -- it does imply a slightly higher kind of monthly cost trend in the [ 1.5 ] in Jan-Feb. So I just wanted to check whether some of that cost had also kind of shifted to March?
Yes. I think I'm trying to follow your math and I guess, Andrew's math or earlier. And again, I think the distortion, maybe the single resolution fund on the cost. But starting with the capital returns. No, I mean, as I indicated to Daniele, in this environment, we wouldn't go and ask the question and hence, no discussion, no constraints.
But as you know, our capital planning is something that we're highly iterative with our regulators about, and they have a high degree of visibility. So it would be a fluid dialogue, but no sort of restrictions that have been placed on us. In terms of RWA variability, there's always a large number of moving parts in the RWA planning and the capital planning that we do.
And so it's a very detailed and frankly, dynamic process. Where we see accessions arising for any number of reasons, market risk RWA, regulatory changes, growth that exceeds our expectations or other things, we take offsetting actions, and it's part of our day-to-day management of RWA as we do all of the other resources tightly within the firm.
And then your -- again, your cost/income ratio, you have to kind of look at the run rate ex that EUR 730 million given how distortive it is. And hence, us guiding you to the 66% that we had at the group level if you exclude the EUR 730 million. So the monthly run rate was running below 70% ex the SRF every month of the first quarter.
And of course, there's some seasonality in the first quarter. So there's the question of will you sustain that same level of revenues? And there's the work that lies ahead, given the averaging effect of having a third quarter at 73%, including the SRF, it means we need to run -- to continue to run below 70 on a monthly basis from here. And that has management's laser focus.
There are no further questions. I will hand back to Ioana Patriniche.
Thank you for joining us for our first quarter 2022 results call and for all your questions. Please don't hesitate to reach out to the Investor Relations team with any follow-up items. And with that, we look forward to speaking to you at our second quarter call. Thank you.
Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for joining, and have a good day. Goodbye.