Actions follow downgrade of Deutsche Bank AG's ratings
New York, July 06, 2012 -- Moody's Investors Service has today downgraded the long-term
debt and deposit ratings of Deutsche Bank Trust Corporation and its subsidiaries,
including Deutsche Bank Trust Company Americas. All Prime-1
short-term ratings were confirmed.
LIST OF AFFECTED RATINGS
The affected subsidiaries are as follows:
- Deutsche Bank Trust Company Americas : long-term
bank deposit and issuer ratings downgraded to A2 from Aa3; short-term
bank deposit rating confirmed Prime-1; standalone bank financial
strength rating (BFSR)/baseline credit assessment (BCA) upgraded to C+/a2
from C/a3.
- Deutsche Bank National Trust Company ("DBNTC") :
long-term bank deposit and issuer ratings downgraded to A2 from
Aa3; short-term bank deposit rating confirmed Prime-1;
standalone bank financial strength rating (BFSR)/baseline credit assessment
(BCA) upgraded to C+/a2 from C/a3.
- Deutsche Bank Trust Company Delaware ("DBTCD") :
long-term bank deposit and issuer ratings downgraded to A2 from
Aa3; short-term bank deposit rating confirmed Prime-1;
standalone bank financial strength rating (BFSR)/baseline credit assessment
(BCA) upgraded to C+/a2 from C/a3.
-Deutsche Bank Trust Corporation: issuer rating downgraded
to Baa1 from A1; subordinated debt rating downgraded to Baa2 from
A3
Following the rating actions, the outlooks on all ratings are stable.
RATINGS RATIONALE
Deutsche Bank Trust Corporation (DBTC) is a U.S. bank holding
company wholly-owned by Deutsche Bank AG (debt and deposit ratings
at A2, standalone BFSR/BCA at C-/baa2, outlook on all
ratings stable). DBTC in turn owns Deutsche Bank Trust Company
Americas as well as two smaller trust companies, DBNTC and DBTCD.
The three trust companies are engaged in private wealth management,
corporate and personal trust, and securities services, which
Moody's considers to be closely integrated operationally.
The operating trust companies also engage in US-dollar clearing
and cash management services for institutional and corporate customers-
an important part of Deutsche Bank's global transaction business
(that represented roughly 20% of reported pre-tax earnings
for Deutsche Bank in 2011). DBTC's corporate trust and clearing
businesses have strong, albeit not leading, market positions
in the US.
The downgrades of the long-term debt and deposit ratings of Deutsche
Bank Trust Company Americas and the two other trust companies reflect
Moody's downgrade of the ratings of Deutsche Bank AG on 21 June
2012. The A2 deposit ratings of the operating trust companies are
now equal to their standalone credit assessments of C+/a2.
There is no longer any uplift in the US trust company ratings reflecting
potential support from Deutsche Bank AG, since the standalone credit
assessment of Deutsche Bank AG is now lower than that of its US trust
company subsidiaries.
Deutsche Bank Trust Company Americas (DBTCA) has reported very strong
capital ratios, with Tier One common ratios exceeding 30%
each year since 2009 and Moody's expects the ratios to continue
to be strong. DBTCA's transaction banking business also results
in a strong liquidity profile, with a loan to deposit ratio of 74%
at 3/31/2012. However, until March 2012 DBTC and DBTCA were
subsidiaries of Taunus Corporation, which at year-end 2011
reported a Tier One capital ratio of -6.37%.
In Moody's view, the very high leverage at Taunus Corporation
limited the financial flexibility of its bank subsidiaries. In
March 2012 Deutsche Bank restructured its US subsidiaries, resulting
in the spinoff of DBTC and its trust company subsidiaries out from under
Taunus Corporation. The upgrade of the standalone credit assessment
of DBTCA and its sister trust companies to C+/a2 from C/a3 reflects
the strong capital and liquidity profile of those entities as well as
their improved financial flexibility following the recent restructuring.
On balance Moody's considers the overall risk profile of DBTCA and
its sister trust companies to be lower than Deutsche Bank AG overall,
given its emphasis on clearing and wealth management as opposed to capital
markets activities. Moody's nonetheless believes DBTCA's
credit profile could be adversely affected by a deterioration in Deutsche
Bank's own credit profile given the likely confidence sensitivity
of the bank's customers, especially in the clearing business.
This risk is a key constraint on the ratings of DBTCA and its sister companies.
Deutsche Bank Trust Corporation's issuer rating was downgraded to
Baa1 from A1. The two notch rating differential from the operating
trust companies reflects structural subordination and high double leverage
at this entity.
RATIONALE FOR OUTLOOKS
Following today's actions, the outlooks on the ratings of
the DBTC and its subsidiaries are stable, consistent with their
intrinsic financial strength.
RATING METHODOLOGIES
The principal methodology used in this rating was Moody's Consolidated
Bank Rating Methodology published in June 2012. Please see the
Credit Policy page on www.moodys.com for a copy of these
methodologies.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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
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this announcement provides relevant regulatory disclosures in relation
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Peter E. Nerby
Senior Vice President
Financial Institutions Group
Moody's Investors Service, Inc.
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Moody's downgrades ratings of Deutsche Bank Trust Corporation and subsidiaries
