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Rating Action:

Moody's downgrades Deutsche Bank's ratings (senior debt to Baa2, long term deposits to A3 and counterparty risk assessment to A3(cr)); outlook stable

Global Credit Research - 23 May 2016

New York, May 23, 2016 -- Moody's Investors Service has today downgraded the ratings of Deutsche Bank AG and affiliates, including the bank's long-term deposit rating, to A3 from A2, its senior unsecured debt rating to Baa2 from Baa1, its standalone baseline credit assessment (BCA) to ba1 from baa3, and its counterparty risk assessment to A3(cr) from A2(cr). Deutsche Bank's short-term ratings and short-term counterparty risk assessments were also downgraded to Prime-2 from Prime-1 and to Prime-2(cr) and Prime-1(cr), respectively. Today's rating action reflects the increased execution challenges Deutsche Bank faces in achieving its strategic plan.

Moody's also downgraded the ratings of US--based Deutsche Bank Trust Corporation and its trust company affiliates. These trust companies' long-term deposit ratings were downgraded to A2 from A1, their long-term issuer ratings were downgraded to Baa2 from Baa1, their standalone baseline credit assessment was downgraded to baa1 from a3; their long-term and short-term counterparty risk assessments were downgraded to A3(cr) from A2(cr) and to Prime-2(cr) and Prime-1(cr) respectively. The Prime-1 short-term deposit ratings of these trust companies were affirmed.

The outlook on the ratings is now stable, reflecting the potential long-term benefits to creditors of Deutsche Bank's five-year strategy plan through 2020 once achieved. It also reflects actions taken by the management team to preserve capital and liquidity during the restructuring process. This rating action concludes Moody's review for downgrade of Deutsche Bank and its subsidiaries which began on 21 March 2016.

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_190083 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and identifies each affected issuer.

RATINGS RATIONALE

RATIONALE FOR RATINGS DOWNGRADE

Deutsche Bank is engaged in a multi-year undertaking to simplify its businesses, fortify its controls, strengthen its balance sheet and stabilize its earnings. Once substantial progress has been made, Deutsche Bank will have a reduced risk profile, more balanced earnings and operate with more conservative levels of leverage. Accomplishing these objectives will be positive for Deutsche Bank's creditors, and the newly appointed management team is diligently attempting to execute this plan.

However, the rating downgrade reflects increased risks to Deutsche Bank's ability to successfully execute this ambitious, creditor-friendly plan. Deutsche Bank's performance over the last several quarters has been weak, and substantial operating headwinds, including continuing low interest rates and macroeconomic uncertainty, will challenge the firm. These forces will likely result in periods of subdued customer volumes and revenues within Deutsche Bank's retail, asset management and institutional franchises, in Moody's view. Moody's expects that such revenue weakness could hinder or delay Deutsche Bank's ability to make progress on its plan, as this would be contingent on the firm's ability to balance the impact of plan-related expenses on its internal capital generation against the firm's growing regulatory capital requirements.

"Deutsche Bank's new management team is executing in a disciplined way, but the headwinds have stiffened, reducing the firm's operating flexibility", said Peter Nerby, a Moody's Senior Vice President.

These challenges have been evident in revenue pressures facing Deutsche Bank over the past two quarters. Looking ahead, continuing headwinds could limit management's ability to address one of the bank's key credit challenges - to improve its structurally weak profitability and internal capital generation by 2018. Moody's estimates that the firm is unlikely to achieve its targeted profitability improvements unless there is a material and sustained improvement in the operating environment.

RATIONALE FOR STABLE OUTLOOK

At the same time, the outlooks on Deutsche Bank's ratings are stable, reflecting the potential long-term benefits to creditors of the five-year plan through 2020. Deutsche Bank maintains a sound liquidity position which is supportive of the bank's credit fundamentals while management is deploying many operating and financial tools to execute this multi-faceted re-engineering. Recent actions include the implementation of a more comprehensive account opening process, the decommissioning of many legacy systems and the closure of onshore operations in Russia.

The stable outlooks also reflect actions taken by the management team to preserve capital and liquidity during the restructuring process, such as suspending the dividend on its common stock and accelerating asset sales. These are important actions to maintain prudent cushions above regulatory minimums, if profit generation is limited in 2016 and 2017.

The downgrades to Deutsche Bank Trust Corporation and its trust company affiliates reflect the close linkages of the franchise value and client base of these operations to those of the parent Deutsche Bank. At the same time, the baa1 baseline credit assessments of the trust companies remain three notches above those of Deutsche Bank, reflecting strong regulatory ring-fencing, which preserves the capital and liquidity position of these entities as well as a lower risk profile focused on operational and wealth management services within these entities.

What Could Change the Rating -- Up?

Steady progress toward improving profitability and reducing tail risks in the form of outstanding litigation and the run-off of legacy positions as well as material progress in rebuilding the information technology environment of the bank, could lead to a rating upgrade.

What Could Change the Rating -- Down?

The current ratings incorporate the possibility for a modest loss and substantial litigation costs in 2016 and the potential for limited profitability in 2017. Further downward pressure could occur if capital ratios weaken substantially or if liquidity declines sharply.

The principal methodology used in these ratings was Banks published in January 2016. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

REGULATORY DISCLOSURES

Please click on this link http://www.moodys.com/viewresearchdoc.aspx?docid=PBC_190083 for the List of Affected Credit Ratings. This list is an integral part of this Press Release and provides, for each of the credit ratings covered, Moody's disclosures on the following items:

• Methodology, Publication Date

• Unsolicited Ratings

• Non Participating Issuers

• Person Approving the Credit Rating (PACR)

• Releasing Office

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 rating action on the support provider and in relation to each particular 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 rating action, and whose ratings may change as a result of this 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.

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: 212-553-0376
SUBSCRIBERS: 212-553-1653

Robert Young
MD - Financial Institutions
Financial Institutions Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades Deutsche Bank's ratings (senior debt to Baa2, long term deposits to A3 and counterparty risk assessment to A3(cr)); outlook stable
No Related Data.
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