Baseline Credit Assessment (BCA) affirmed at ba1
NOTE: On November 04, 2020, the press release was corrected as follows: In the LIST OF AFFECTED RATINGS, under Affirmations for Deutsche Bank AG, the outlook action for the “Long-term Bank Deposits, affirmed A3” and the “Senior Unsecured Regular Bond/Debenture, affirmed A3” was changed to “Stable from Negative.” Revised release follows.
Frankfurt am Main, November 03, 2020 -- Moody's Investors Service ("Moody's") has today affirmed the ratings and
rating assessments of Deutsche Bank AG (DB) and changed the outlook to
stable from negative on the bank's A3 long-term deposit and senior
unsecured debt ratings. The bank's Baa3 junior senior unsecured
debt ratings have also been affirmed.
For a list of all affected ratings, please refer to the end of this
press release.
RATINGS RATIONALE
--RATIONALE FOR THE STABLE OUTLOOK
Last summer, Deutsche Bank AG announced a deep overhaul of its capital
markets operations and business model. More than twelve months
into the transformation, Moody's believes that the more fundamental
reassessment of DB's capital markets aspirations has helped it move quickly
towards achieving a more balanced and sustainable business model,
that -- coupled with the bank's sustained solid capital and
liquidity buffers -- no longer warrants a negative outlook at its
current rating level.
The outlook change to stable from negative for DB's long-term deposit
and senior unsecured debt ratings is also reflective of Moody's evaluation
that the shortfalls in corporate governance and in executing on earlier
restructuring plans as well as overcoming structural and cultural issues
have receded since new management took over in 2018. This has led
to the removal of one full notch of negative 'Corporate behavior'
adjustment to DB's ratings.
--RATIONALE FOR AFFIRMATION OF THE BCA AND LONG-TERM
RATINGS
Effective execution and steady underlying progress towards its medium-term
targets have helped DB improve earnings stability; reduce capital
and leverage exposure consumption as well as its reliance on wholesale
funding; and free up capital for reinvestment and self-financing
of its strategic overhaul. DB further booked €6.4 billion
of restructuring and transformation charges since it initiated its restructuring
program last summer - as well as put aside €1.5 billion
of additional loan loss provisions during the first nine months of 2020
- while keeping its capitalization metrics stable.
During execution to date, senior management and staff have laid
the foundation for a sustainable turnaround of the underlying, recalibrated
business segments residing in its 'Core Bank'. DB also
succeeded in running off major parts of the non-core assets identified
last year and visibly reconfigured its more volatile investment banking
and capital markets franchise. This supported a significant and
sustainable reduction of the bank's operating cost base, putting
DB on firmer ground in the current highly uncertain macroeconomic environment
caused by the coronavirus pandemic. As a result of the aforementioned
factors, Moody's believes that DB is solidly on track to achieving
full execution of its proposed plans, in particular with regard
to sustaining its revenue base in its fixed income-related businesses;
reducing the drag of the newly formed non-core asset unit (CRU);
as well as sustaining its corporate banking franchise against stark competition.
However, continued and relentless execution will remain paramount
in achieving the medium-term strategic milestones. The coronavirus
pandemic presents additional challenges in executing on DB's plans,
adding to the earnings strain from the persistently ultra-low interest
rates on its German banking franchise as well as its asset and wealth
management operations. However, and provided current macroeconomic
conditions do not deteriorate meaningfully from here, Moody's believes
DB bondholders will remain protected by maintenance of the bank's current
capitalization; its granular and highly collateralized loan book
that will help contain asset quality deterioration; and DB's
solid liquidity metrics. Each of these factors underpinned today's
affirmation of the ratings.
The affirmation further takes account of Moody's unchanged Loss
Given Failure (LGF) analysis in assessing the bank's existing bail-in-able
debt cushion and resulting loss severity for its different debt classes.
For deposits and senior unsecured debt, this continues to lead to
three notches of rating uplift from the bank's ba1 Adjusted BCA.
For junior senior unsecured debt, Moody's LGF analysis continues
to lead to one notch of rating uplift from the bank's ba1 Adjusted BCA.
Moody's also maintained its assumption of a moderate probability of government
support for junior depositors and senior unsecured creditors to be forthcoming
to DB, in case of need. This assumption continues to lead
to one notch of additional rating uplift for the bank's and its subsidiaries'
as well as branches' deposit and senior unsecured debt ratings.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
Upward rating pressure will develop if the bank effectively executes on
and makes further steady progress towards its medium-term targets,
in particular earning sustainably improved returns post downsizing,
while continuing to invest to strengthen its technology platform and control
infrastructure as well as maintaining a prudent and well controlled risk
appetite. Further, improving its leverage ratio and maintaining
solid capital and liquidity metrics around current levels, as well
as continued sound asset quality, could result in upward rating
pressure. The ratings could further be supported by a lower dependence
on more costly and confidence-sensitive capital markets funding
as expressed through Moody's market funding ratio.
Downward rating pressure would develop if DB failed to show tangible progress
to achieve its new strategic milestones particularly with respect to revenue
attrition, realized cost saves and CRU-related de-risking
costs. The ratings could also be downgraded if DB faced additional
market headwinds or additional litigation costs meaningfully beyond those
covered by existing reserves. In addition, the ratings could
be negatively affected if the bank experienced a material risk management
failure or material deterioration in the group's asset quality,
liquidity or capital positions.
LIST OF AFFECTED RATINGS
Issuer: Deutsche Bank AG
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A3
....Short-term Counterparty Risk Ratings,
affirmed P-2
....Long-term Bank Deposits,
affirmed A3, outlook changed to Stable from Negative
....Short-term Bank Deposits,
affirmed P-2
....Long-term Counterparty Risk Assessment,
affirmed A3(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Long-term Issuer Rating,
affirmed A3, outlook changed to Stable from Negative
....Baseline Credit Assessment, affirmed
ba1
....Adjusted Baseline Credit Assessment,
affirmed ba1
....Senior Unsecured Regular Bond/Debenture,
affirmed A3, outlook changed to Stable from Negative
....Senior Unsecured Shelf, affirmed
(P)A3
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A3
....Junior Senior Unsecured Regular Bond/Debenture,
affirmed Baa3
....Junior Senior Unsecured Shelf, affirmed
(P)Baa3
....Junior Senior Unsecured Medium-Term
Note Program, affirmed (P)Baa3
....Subordinate Regular Bond/Debenture,
affirmed Ba2
....Subordinate Shelf, affirmed (P)Ba2
....Subordinate Medium-Term Note Program,
affirmed (P)Ba2
....Preferred Stock Non-cumulative
Preferred Stock, affirmed B1(hyb)
....Commercial Paper, affirmed P-2
....Other Short Term, affirmed (P)P-2
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: Deutsche Bank AG, London Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A3
....Short-term Counterparty Risk Ratings,
affirmed P-2
....Long-term Counterparty Risk Assessment,
affirmed A3(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A3, outlook changed to Stable from Negative
....Senior Unsecured Shelf, affirmed
(P)A3
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A3
....Backed Senior Unsecured Medium-Term
Note Program, affirmed (P)A3
....Junior Senior Unsecured Regular Bond/Debenture,
affirmed Baa3
....Junior Senior Unsecured Shelf, affirmed
(P)Baa3
....Junior Senior Unsecured Medium-Term
Note Program, affirmed (P)Baa3
....Backed Junior Senior Unsecured Medium-Term
Note Program, affirmed (P)Baa3
....Subordinate Regular Bond/Debenture,
affirmed Ba2
....Subordinate Shelf, affirmed (P)Ba2
....Subordinate Medium-Term Note Program,
affirmed (P)Ba2
....Other Short Term, affirmed (P)P-2
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: Deutsche Bank AG, New York Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A3
....Short-term Counterparty Risk Ratings,
affirmed P-2
....Long-term Bank Deposits,
affirmed A3, outlook changed to Stable from Negative
....Short-term Bank Deposits,
affirmed P-2
....Long-term Deposit Note/CD Program
Takedown, affirmed A3, outlook changed to Stable from Negative
....Long-term Counterparty Risk Assessment,
affirmed A3(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Senior Unsecured Regular Bond/Debenture,
affirmed A3, outlook changed to Stable from Negative
....Senior Unsecured Shelf, affirmed
(P)A3
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A3
....Junior Senior Unsecured Regular Bond/Debenture,
affirmed Baa3
....Junior Senior Unsecured Shelf, affirmed
(P)Baa3
....Junior Senior Unsecured Medium-Term
Note Program, affirmed (P)Baa3
....Subordinate Regular Bond/Debenture,
affirmed Ba2
....Subordinate Shelf, affirmed (P)Ba2
....Subordinate Medium-Term Note Program,
affirmed (P)Ba2
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: Deutsche Bank AG, Paris Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A3
....Short-term Counterparty Risk Ratings,
affirmed P-2
....Long-term Bank Deposits,
affirmed A3, outlook changed to Stable from Negative
....Short-term Bank Deposits,
affirmed P-2
....Long-term Counterparty Risk Assessment,
affirmed A3(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: Deutsche Bank AG, Singapore Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A3
....Short-term Counterparty Risk Ratings,
affirmed P-2
....Long-term Counterparty Risk Assessment,
affirmed A3(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A3
....Junior Senior Unsecured Regular Bond/Debenture,
affirmed Baa3
....Junior Senior Unsecured Medium-Term
Note Program, affirmed (P)Baa3
....Other Short Term, affirmed (P)P-2
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: Deutsche Bank AG, Sydney Branch
..Affirmations:
....Long-term Counterparty Risk Ratings,
affirmed A3
....Short-term Counterparty Risk Ratings,
affirmed P-2
....Long-term Counterparty Risk Assessment,
affirmed A3(cr)
....Short-term Counterparty Risk Assessment,
affirmed P-2(cr)
....Senior Unsecured Medium-Term Note
Program, affirmed (P)A3
....Junior Senior Unsecured Regular Bond/Debenture,
affirmed Baa3
....Junior Senior Unsecured Medium-Term
Note Program, affirmed (P)Baa3
....Subordinate Medium-Term Note Program,
affirmed (P)Ba2
....Other Short Term, affirmed (P)P-2
..Outlook Action:
....Outlook changed to Stable from Negative
Issuer: Deutsche Bank Capital Finance Trust I
..Affirmation:
....Junior Subordinated Regular Bond/Debenture,
affirmed Ba3(hyb)
..No Outlook assigned
Issuer: Deutsche Bank Financial LLC
..Affirmations:
....Backed Senior Unsecured Medium-Term
Note Program, affirmed (P)A3
....Backed Subordinate Medium-Term
Note Program, affirmed (P)Ba2
....Backed Commercial Paper, affirmed
P-2
..No Outlook assigned
Issuer: Deutsche Finance (Netherlands) B.V.
..Affirmations:
....Backed Senior Unsecured Regular Bond/Debenture,
affirmed A3, outlook changed to Stable from Negative (assumed by
Deutsche Bank AG)
....Backed Junior Senior Unsecured Regular
Bond/Debenture, affirmed Baa3 (assumed by Deutsche Bank AG)
..No Outlook assigned
Issuer: Deutsche Postbank Funding Trust I
..Affirmation:
....Preferred Stock Non-cumulative,
affirmed B1(hyb)
..No Outlook assigned
Issuer: Deutsche Postbank Funding Trust II
..Affirmation:
....Preferred Stock Non-cumulative,
affirmed B1(hyb)
..No Outlook assigned
Issuer: Deutsche Postbank Funding Trust III
..Affirmation:
....Preferred Stock Non-cumulative,
affirmed B1(hyb)
..No Outlook assigned
PRINCIPAL METHODOLOGY
The principal methodology used in these ratings was Banks Methodology
published in November 2019 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1147865.
Alternatively, please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and
sensitivity analysis, see the sections Methodology Assumptions and
Sensitivity to Assumptions in the disclosure form. Moody's
Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For ratings issued on a program, series, category/class of
debt or security this announcement provides certain regulatory disclosures
in relation to each rating of a subsequently issued bond or note of the
same series, category/class of debt, security or pursuant
to a program for which the ratings are derived exclusively from existing
ratings in accordance with Moody's rating practices. For ratings
issued on a support provider, this announcement provides certain
regulatory disclosures in relation to the credit rating action on the
support provider and in relation to each particular credit rating action
for securities that derive their credit ratings from the support provider's
credit rating. For provisional ratings, this announcement
provides certain regulatory disclosures in relation to the provisional
rating assigned, and in relation to a definitive rating that may
be assigned subsequent to the final issuance of the debt, in each
case where the transaction structure and terms have not changed prior
to the assignment of the definitive rating in a manner that would have
affected the rating. For further information please see the ratings
tab on the issuer/entity page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this credit rating action,
and whose ratings may change as a result of this credit rating action,
the associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The ratings have been disclosed to the rated entity or its designated
agent(s) and issued with no amendment resulting from that disclosure.
These ratings are solicited. Please refer to Moody's Policy
for Designating and Assigning Unsolicited Credit Ratings available on
its website www.moodys.com.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Moody's general principles for assessing environmental, social
and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.
At least one ESG consideration was material to the credit rating action(s)
announced and described above.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Michael Rohr
Senior Vice President
Financial Institutions Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
