NOTE: On August 23, 2018, the press release was corrected as follows: The following was added as the sixth paragraph of the Regulatory Disclosures section: “The person who approved Deutsche Bank AG, Deutsche Bank AG, London Branch, Deutsche Bank AG, New York Branch, Deutsche Bank AG, Paris Branch, Deutsche Bank AG, Singapore Branch, Deutsche Bank AG, Sydney Branch, Deutsche Bank Capital Finance Trust I, Deutsche Bank Contingent Capital Trust II, Deutsche Bank Contingent Capital Trust V, Deutsche Bank Financial LLC, and Deutsche Finance (Netherlands) B.V. credit ratings is Ana Arsov, MD - Financial Institutions, Financial Institutions Group, JOURNALISTS: 1 212 553 0376, Client Service: 1 212 553 1653. The person who approved Deutsche Siedlungs- und Landesrentenbank credit ratings is Carola Schuler, MD – Banking, Financial Institutions Group, JOURNALISTS: 1 212 553 0376, Client Service: 1 212 553 1653.” Revised release follows.
New York, August 03, 2018 -- Moody's Investors Service ("Moody's") downgraded Deutsche Bank AG's
(DB) senior debt to Baa3 from Baa2 and reclassified the bonds as junior
senior debt which do not carry outlooks. Moody's also affirmed
DB's A3 deposit and A3 counterparty risk ratings with a negative
outlook. These actions on DB and related actions detailed below,
follows the introduction of a new senior unsecured debt class in Germany
that ranks above outstanding (statutorily subordinated) senior unsecured
debt instruments, which took effect on 21 July 2018.
The legal changes re-introduced an option for German banks to issue
preferred senior unsecured liabilities, as well as to issue new
contractually non-preferred, or junior senior, debt,
which will rank alongside outstanding legacy plain vanilla senior unsecured
debt. At the same time, Moody's believes that following
the legal change, the likelihood of government support being available
for most outstanding senior unsecured bank bonds has declined, as
under the revised legislation those bonds issued prior to 21 July 2018
remain subordinated to future preferred senior unsecured bank debt.
Following the change in law, the legal hierarchy of bank claims
in Germany is now consistent with most other European Union (EU) countries,
where statutes do not provide full preference to deposits over senior
unsecured debt. Consequently, the application of Moody's
Advanced Loss Given Failure (LGF) analysis reflects the revised hierarchy
of claims. Further detail on the decline in government support
and the revision of the rating agency's LGF approach and resulting
actions on other German banks' can be found at https://www.moodys.com/research/--PR_386808.
With respect to Deutsche Bank, the following additional rating actions
were taken after the change in German law.
Affirmation of DB's standalone baseline credit assessment at ba1.
- Affirmation of the A3 ratings on DB's long-term
senior unsecured debt instruments with structural features. At
the same time, Moody's reclassified these rated instruments
as senior unsecured debt from senior senior unsecured debt previously.
These instruments remain on negative outlook.
- Upgrade of DB's long-term issuer ratings to A3 from
Baa2 reflecting that Moody's assigns issuer ratings at the level
of the most senior unsecured debt class available in any jurisdiction.
These ratings remain on negative outlook.
- Affirmation of DB's A3 long-term deposit and counterparty
risk ratings, reflecting unchanged outcomes and rating uplift under
Moody's Advanced LGF analysis, as well as unchanged government
support assumptions. These deposits remain on negative outlook.
- Affirmation of DB's Prime-2 short-term debt
and deposit ratings.
- Withdrawal of DB's (P)A3 senior senior unsecured program
ratings and assignment of (P)Baa3 junior senior programme rating to DB's
operative shelves, which contain the option to issue junior senior
debt.
Furthermore, Moody's reclassified senior bonds issued by Deutsche
Siedlungs- und Landesrentenbank (DSL) as backed junior senior unsecured
debt and affirmed their ratings at Aaa with no outlook.
For a list of all affected ratings, please refer to the end of this
press release.
RATINGS RATIONALE
The downgrade of Deutsche Bank's existing senior debt to Baa3 and
its reclassification as new junior senior instruments reflects the legal
change explicitly designating these bonds as loss-absorbing in
case a bank needs to be recapitalised. Legally, the new non-preferred
instruments will rank pari passu with the majority of outstanding senior
bonds issued up until 20 July 2018, to the extent the latter instruments
were subject to Germany's statutory subordination under the previous
insolvency ranking. This pari passu ranking makes it less likely
that German authorities would selectively support statutorily subordinated
senior unsecured bonds (today reclassified into junior senior),
following clarification that the German authorities expect these liabilities
to bear losses in a resolution. Furthermore, any selective
support could give rise to claims by adversely selected creditors that
the No Creditor Worse Off principle established in the BRRD had been breached.
In affirming DB's ba1 BCA, Moody's noted that DB's
management has lowered DB's asset risk and strengthened its capitalization.
Management has disposed of many non-core assets, settled
litigations, scaled back DB's geographic perimeter and built
up liquidity. Management also enhanced the bank's financial
flexibility by raising €8 billion in common equity in 2017.
The negative outlook on Deutsche Bank's A3 debt and deposit ratings
reflects the rising and extended execution challenges still facing Deutsche
Bank, highlighted by recent management changes and strategic shifts.
There are still structural impediments blocking a quick path to restored
profitability for DB in its German commercial banking activities,
as well as potential revenue weakness associated with rationalizing the
bank's capital markets activities. Furthermore, it
is unclear how management will create an investment bank more focused
on European clients that can compete effectively against more diversified
peers with stronger US presences, while also earning acceptable
returns over the cycle. The plan requires management to refocus
DB's franchise, improve its profitability and strengthen its
operating platform over the next two to three years -- particularly
the plan to modernize the technology of the bank to generate efficiencies
and enhance controls.
What could change the ratings up?
The negative outlook indicates there is no imminent upward pressure on
DB ratings. In the longer term, substantial progress on DB's
strategic transformation plan resulting in a more balanced and stable
business mix and improved profitability could result in upward rating
pressure.
What could change the ratings down?
A sharp decline in capitalization or liquidity or a material risk management
failure could lead to a downgrade. Furthermore, Moody's expects
DB to be modestly profitable (including restructuring costs) in a €26
billion revenue environment in 2018 and 2019. Persistent failure
to achieve profitability during this period may lead to downward rating
pressure.
RECLASSIFICATION AND AFFIRMATION OF LEGACY SENIOR DSL BONDS
In addition to the above rating actions on DB, Moody's reclassified
plain vanilla senior bonds that were issued by DSL in the 1990s and which
benefit from a guarantee by the Government of Germany (Aaa stable).
Following the change in German law, these instruments now fall into
the backed junior senior unsecured debt class, while previously
they were considered backed senior unsecured debt. The instrument
ratings were affirmed at Aaa and no longer carry outlooks, in line with Moody's general practice of not assigning outlooks to the junior
senior debt class.
DSL is a subsidiary of DB Privat- und Firmenkundenbank AG,
which in turn is wholly owned by DB. The legacy senior DSL bonds
are subject to bail-in and are treated pari passu with all other
junior senior unsecured debt contained within the DB resolution perimeter.
However, the guarantee status ensures unchanged recourse in resolution
to the Government of Germany, which determines the bonds'
Aaa rating level.
The principal methodology used in these ratings was Banks published in
August 2018. Please see the Rating Methodologies page on www.moodys.com
for a copy of this methodology.
Ratings Action:
..Issuer: Deutsche Bank AG
Assignments:
....Junior Senior Unsecured Medium-Term
Note Program, Assigned (P)Baa3
Downgrades and reclassification:
....Senior Unsecured Regular Bond/Debentures,
Downgraded to Baa3 from Baa2, reclassified to Junior Senior Unsecured
Regular Bond/Debentures with no outlook
Upgrades:
.... Issuer Rating, Upgraded to A3 from
Baa2, Negative Outlook
....Senior Unsecured Shelf, Upgraded
to (P)A3 from (P)Baa2
....Senior Unsecured Medium-Term Note
Program, Upgraded to (P)A3 from (P)Baa2
Affirmations:
.... Adjusted Baseline Credit Assessment,
Affirmed ba1
.... Baseline Credit Assessment, Affirmed
ba1
.... LT Counterparty Risk Assessment,
Affirmed A3(cr)
.... ST Counterparty Risk Assessment,
Affirmed P-2(cr)
.... LT Counterparty Risk Rating, Affirmed
A3
.... ST Counterparty Risk Rating, Affirmed
P-2
....Commercial Paper, Affirmed P-2
....Subordinate Medium-Term Note Program,
Affirmed (P)Ba2
....Other Short Term Medium-Term Note
Program, Affirmed (P)P-2
....Pref. Stock Non-cumulative
Preferred Stock, Affirmed B1 (hyb)
....Subordinate Regular Bond/Debentures,
Affirmed Ba2
....Subordinate Shelf, Affirmed (P)Ba2
.... LT Deposit Rating, Affirmed A3,
Negative outlook
.... ST Deposit Rating, Affirmed P-2
Affirmations and reclassification:
....Senior Senior Unsecured Regular Bond/Debentures,
Affirmed A3, Negative outlook, reclassified to Senior Unsecured
Regular Bond/Debentures
Withdrawals:
....Senior Senior Medium-Term Note
Program, Withdrawn, previously rated (P)A3
Outlook Actions:
....Outlook, Remains Negative
..Issuer: Deutsche Bank AG, London Branch
Assignments:
....Junior Senior Unsecured Medium-Term
Note Program, Assigned (P)Baa3
....Backed Junior Senior Unsecured Medium-Term
Note Program, Assigned (P)Baa3
Downgrades and reclassification:
....Senior Unsecured Regular Bond/Debentures,
Downgraded to Baa3 from Baa2, reclassified to Junior Senior Unsecured
Regular Bond/Debentures with no outlook
Upgrades:
....Senior Unsecured Medium-Term Note
Program, Upgraded to (P)A3 from (P)Baa2
....Backed Senior Unsecured Medium-Term
Note Program, Upgraded to (P)A3 from (P)Baa2
Affirmations:
.... LT Counterparty Risk Assessment,
Affirmed A3(cr)
.... ST Counterparty Risk Assessment,
Affirmed P-2(cr)
.... LT Counterparty Risk Rating, Affirmed
A3
.... ST Counterparty Risk Rating, Affirmed
P-2
....Subordinate Medium-Term Note Program,
Affirmed (P)Ba2
....Subordinate Regular Bond/Debenture,
Affirmed Ba2
....Other Short Term Medium-Term Note
Program, Affirmed (P)P-2
Affirmations and reclassification:
....Senior Senior Unsecured Regular Bond/Debentures,
Affirmed A3, Negative outlook, reclassified to Senior Unsecured
Regular Bond/Debentures
Withdrawals:
....Senior Senior Medium-Term Note
Program, Withdrawn, previously rated (P)A3
Outlook Actions:
....Outlook, Remains Negative
..Issuer: Deutsche Bank AG, New York Branch
Assignments:
....Junior Senior Unsecured Medium-Term
Note Program, Assigned (P)Baa3
Downgrades and reclassification:
....Senior Unsecured Regular Bond/Debentures,
Downgraded to Baa3 from Baa2, reclassified to Junior Senior Unsecured
Regular Bond/Debentures with no outlook
Upgrades:
....Senior Unsecured Shelf, Upgraded
to (P)A3 from (P)Baa2
....Senior Unsecured Medium-Term Note
Program, Upgraded to (P)A3 from (P)Baa2
Affirmations:
.... LT Counterparty Risk Assessment,
Affirmed A3(cr)
.... ST Counterparty Risk Assessment,
Affirmed P-2(cr)
.... LT Counterparty Risk Rating, Affirmed
A3
.... ST Counterparty Risk Rating, Affirmed
P-2
....Subordinate Shelf, Affirmed (P)Ba2
....Subordinate Regular Bond/Debenture,
Affirmed Ba2
....Deposit Note/Takedown, Affirmed
A3, Negative outlook
.... LT Deposit Rating, Affirmed A3,
Negative outlook
.... ST Deposit Rating, Affirmed P-2
Withdrawals:
....Senior Senior Medium-Term Note
Program, Withdrawn, previously rated (P)A3
Outlook Actions:
....Outlook, Remains Negative
..Issuer: Deutsche Bank AG, Paris Branch
Affirmations:
.... LT Counterparty Risk Assessment,
Affirmed A3(cr)
.... ST Counterparty Risk Assessment,
Affirmed P-2(cr)
.... LT Counterparty Risk Rating, Affirmed
A3
.... ST Counterparty Risk Rating, Affirmed
P-2
.... LT Deposit Rating, Affirmed A3,
Negative outlook
.... ST Deposit Rating, Affirmed P-2
Outlook Actions:
....Outlook, Remains Negative
..Issuer: Deutsche Bank AG, Singapore Branch
Assignments:
....Junior Senior Unsecured Medium-Term
Note Program, Assigned (P)Baa3
Downgrades and reclassification:
....Senior Unsecured Regular Bond/Debentures,
Downgraded to Baa3 from Baa2, reclassified to Junior Senior Unsecured
Regular Bond/Debentures with no outlook
Upgrades:
....Senior Unsecured Medium-Term Note
Program, Upgraded to (P)A3 from (P)Baa2
Affirmations:
.... LT Counterparty Risk Assessment,
Affirmed A3(cr)
.... ST Counterparty Risk Assessment,
Affirmed P-2(cr)
.... LT Counterparty Risk Rating, Affirmed
A3
.... ST Counterparty Risk Rating, Affirmed
P-2
....Other Short Term Medium-Term Note
Program, Affirmed (P)P-2
Outlook Actions:
....Outlook, Remains Negative
..Issuer: Deutsche Bank AG, Sydney Branch
Assignments:
....Junior Senior Unsecured Medium-Term
Note Program, Assigned (P)Baa3
Downgrades and reclassification:
....Senior Unsecured Regular Bond/Debentures,
Downgraded to Baa3 from Baa2, reclassified to Junior Senior Unsecured
Regular Bond/Debentures with no outlook
Upgrades:
....Senior Unsecured Medium-Term Note
Program, Upgraded to (P)A3 from (P)Baa2
Affirmations:
.... LT Counterparty Risk Assessment,
Affirmed A3(cr)
.... ST Counterparty Risk Assessment,
Affirmed P-2(cr)
.... LT Counterparty Risk Rating, Affirmed
A3
.... ST Counterparty Risk Rating, Affirmed
P-2
....Subordinate Medium-Term Note Program,
Affirmed (P)Ba2
....Other Short Term Medium-Term Note
Program, Affirmed (P)P-2
Outlook Actions:
....Outlook, Remains Negative
..Issuer: Deutsche Bank Capital Finance Trust I
Affirmations:
....Junior Subordinated Regular Bond/Debenture,
Affirmed Ba3 (hyb)
..Issuer: Deutsche Bank Contingent Capital Trust II
Affirmations:
....Pref. Stock Preferred Stock,
Affirmed B1 (hyb)
..Issuer: Deutsche Bank Contingent Capital Trust V
Affirmations:
....Pref. Stock Preferred Stock,
Affirmed B1 (hyb)
..Issuer: Deutsche Bank Financial LLC
Upgrades:
....Senior Unsecured Medium-Term Note
Program, Upgraded to (P)A3 from (P)Baa2
Affirmations:
....Backed Subordinate Medium-Term
Note Program, Affirmed (P)Ba2
....Backed Commercial Paper, Affirmed
P-2
..Issuer: Deutsche Finance (Netherlands) B.V.
Downgrades and reclassification:
....Backed Senior Unsecured Regular Bond/Debentures,
Downgraded to Baa3 from Baa2, reclassified to Backed Junior Senior
Unsecured Regular Bond/Debentures with no outlook
Affirmations and reclassification:
....Senior Senior Unsecured Regular Bond/Debentures,
Affirmed A3, Negative Outlook, reclassified to Backed Senior
Unsecured Regular Bond/Debentures
..Issuer: Deutsche Siedlungs- und Landesrentenbank
Affirmations and reclassification:
....Backed Senior Unsecured Regular Bond/Debentures,
Affirmed Aaa, reclassified to Backed Junior Senior Unsecured Regular
Bond/Debentures with no outlook
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Items color coded in purple in this Press Release relate to unsolicited
ratings for a rated entity which is non-participating.
The below contact information is provided for information purposes only.
Please see the ratings tab of the issuer page at www.moodys.com,
for each of the ratings covered, Moody's disclosures on the
lead rating analyst and the Moody's legal entity that has issued
the ratings.
The person who approved Deutsche Bank AG, Deutsche Bank AG, London Branch, Deutsche Bank AG, New York Branch, Deutsche Bank AG, Paris Branch, Deutsche Bank AG, Singapore Branch, Deutsche Bank AG, Sydney Branch, Deutsche Bank Capital Finance Trust I, Deutsche Bank Contingent Capital Trust II, Deutsche Bank Contingent Capital Trust V, Deutsche Bank Financial LLC, and Deutsche Finance (Netherlands) B.V. credit ratings is Ana Arsov, MD - Financial Institutions, Financial Institutions Group, JOURNALISTS: 1 212 553 0376, Client Service: 1 212 553 1653. The person who approved Deutsche Siedlungs- und Landesrentenbank credit ratings is Carola Schuler, MD – Banking, Financial Institutions Group, JOURNALISTS: 1 212 553 0376, Client Service: 1 212 553 1653.
The relevant office for each credit rating is identified in "Debt/deal
box" on the Ratings tab in the Debt/Deal List section of each issuer/entity
page of the website.
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.
Peter E. Nerby
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Ana Arsov
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
