DBRS Places Deutsche Bank’s “A” Rating Under Review with Negative Implications

DBRS, Inc. (DBRS) has today placed the ratings of Deutsche Bank AG (Deutsche Bank, DB or the Bank) Under Review with Negative Implications, including its Senior Unsecured Debt & Deposits rating of “A” and its Long-Term Critical Obligations Ratings (COR) of AA (low). At the same time, DBRS has confirmed DB’s short-term ratings with Stable trends, including its Short-Term Debt & Deposits rating at R-1 (low) and Short-Term COR at R-1 (middle). As part of the review process, the Intrinsic Assessment (IA) of “A” will also be re-evaluated.

In placing these ratings Under Review with Negative Implications, DBRS considers the notable challenges Deutsche Bank faces in improving its internal capital generation ability at a time when the Bank’s regulatory capital levels have fallen to the lower end of the global peer range.

During the review period, DBRS will assess the Bank’s earnings and capital position. With a very elevated expense base, revenue generation is of critical importance. Signs of outsized revenue deterioration, combined with capital erosion, would likely result in a downgrade. Given the relative placement of Deutsche Bank’s long-term ratings, DBRS anticipates that any downward rating pressure resulting from this review should likely not exceed one notch. DBRS will also monitor investor or customer confidence during the review period, especially if losses are again to be outsized in 1Q16. Any notable pressure on the Bank’s funding and liquidity profile, evidenced by deposit outflows, a notable reduction in liquidity reserves or severely challenged funding markets, could therefore contribute to a downgrade.

DBRS will also assess the go-forward prospects for the Bank during the review period. DBRS will look at the execution risks associated with the implementation of the Bank’s ambitious Strategy 2020 plans, as well as assessing the risk of misconduct, litigation or weaknesses in operational controls causing damage to the core franchise.

Notes:
All figures are in EUR unless otherwise noted.

The principal applicable methodology is the Global Methodology for Rating Banks and Banking Organisations (December 2015). Other applicable methodologies include the DBRS Criteria – Support Assessments for Banks and Banking Organisations (March 2016), DBRS Criteria: Rating Bank Capital Securities – Subordinated, Hybrid, Preferred & Contingent Capital Securities (February 2016) and Critical Obligations Rating Criteria (February 2016). These can be found at: http://www.dbrs.com/about/methodologies.

The primary sources of information used for this rating include company documents and SNL Financial. DBRS considers the information available to it for the purposes of providing this rating was of satisfactory quality.

DBRS does not audit the information it receives in connection with the rating process, and it does not and cannot independently verify that information in every instance.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a twelve month period. DBRS’s outlooks and ratings are under regular surveillance.

These ratings are under review. Generally, the conditions that lead to the assignment of reviews are resolved within a 90 day period. DBRS reviews and ratings are under regular surveillance.

For further information on DBRS historic default rates published by the European Securities and Markets Administration (“ESMA”) in a central repository, see:
http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.

Lead Analyst: Lisa Kwasnowski
Rating Committee Chair: Alan G. Reid
Initial Rating Date: 27 February 2015
Most Recent Rating Update: 4 February 2016

Information regarding DBRS ratings, including definitions, policies and methodologies are available on www.dbrs.com.