The Non-Core Operations Unit (NCOU) is expected to further contribute to both the Group’s capital roadmap and deleverage program.
The strategy and mandate concentrate on accelerated de-risking and are aligned with the Bank’s overall objectives. The aim is to free up capital, reduce balance sheet size as measured under CRR/CRD 4 and protect shareholder value by reducing risks from remaining assets and business activities. This has translated into an emphasis on reducing capital demand to improve Deutsche Bank’s capital ratios without diluting shareholders.
Going forward, there will also be a strong focus on deleveraging the balance sheet as measured under CRR/CRD 4, thereby assisting the bank to meet its leverage ratio targets. Additional focus is on resolving high-profile contingent risks and non-bank assets as well as aligning the underlying cost base of the NCOU division with the de-risking progress.
Challenges remain for the successful execution of our de-risking strategy. The NCOU includes significant investments in individual companies and carries other assets that are not part of our core business. These investments and assets are exposed to the opportunities and risks arising from changes in the economic environment and market conditions. Such changes may make the associated timeline for de-risking activity less certain and may also impact future results.
The pace of de-risking is expected to slow over time as the portfolio reduces in size, while this will also lead to lower portfolio revenues. We will continually evaluate the rationale of exit versus hold, to take advantage of market conditions. Our de-risking strategy will always focus on a combination of impacts with capital, leverage, risk reduction and associated IBIT being the main considerations.
We reached a settlement agreement in 2013 with the Federal Housing Finance Agency (FHFA), to our single largest residential mortgage-related litigation case, nonetheless our expectation is that the litigation environment will continue to be challenging.