DBRS Morningstar Confirms AA Credit Ratings on Deutsche Bank A.G. Conditional Pass-Through Structured Covered Bonds (Structured - Mortgages) Guaranteed by SCB Alpspitze UG

DBRS Ratings GmbH (DBRS Morningstar) confirmed its AA credit ratings on the notes issued under the Deutsche Bank AG (DB AG or the Issuer) Conditional Pass-Through Structured Covered Bonds Programme (the programme) guaranteed by SCB Alpspitze UG. The credit rating actions follow DBRS Morningstar’s full review of the programme.

There are three series of covered bonds (CBs) outstanding under the programme, totalling a nominal amount of EUR 3.31 billion.

The credit ratings are based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of A (high), which is one notch below the Long Term Critical Obligations Rating (COR) of DB AG. DB AG is the Reference Entity (RE) for the programme. DBRS Morningstar assigned a CBAP that is one notch below the COR even if the programme can be seen as strategic to funding the RE’s primary activity, departing from the notching schedule guideline proposed in the “Rating and Monitoring Covered Bonds” global methodology. For more information, please refer to the rating report at www.dbrsmorningstar.com.
-- A Legal and Structuring Framework (LSF) Assessment of “Very Strong” associated with the programme.
-- A Cover Pool Credit Assessment (CPCA) of BBB (low), which is the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-L of AA (low).
-- A one-notch uplift for good recovery prospects.
-- The level of overcollateralisation (OC) of 32.6% to which DBRS Morningstar gives credit, which is the minimum level observed in the past 12 months adjusted by a scaling factor of 0.85.
-- The sovereign rating on the Federal Republic of Germany, rated AAA with a Stable trend by DBRS Morningstar, as of the date of this press release.

DBRS Morningstar analysed the transaction using its European Covered Bond Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets, and interest rate stresses.

Everything else being equal, a one-notch downgrade of the CBAP would lead to a one-notch downgrade of the LSF-L, resulting in a one-notch downgrade of the CB credit ratings. In addition, all else unchanged, the CB credit ratings would be downgraded if any of the following occurred: (1) the CPCA was downgraded below BBB (low); (2) the LSF Assessment associated with the programme was downgraded to “Adequate” or below; or (3) the quality of the cover pool (CP) and the level of OC were no longer sufficient to support a one-notch uplift for good recovery prospects.

As of 30 September 2023, the aggregated outstanding balance of the CP underlying the Issuer’s CB was EUR 4.6 billion. The total amount of liabilities outstanding is EUR 3.31 billion, yielding a current nominal OC ratio of 38.9%. The Issuer has publicly committed to maintain an OC level of 15.0%.

As at September 2023, the CP assets comprised 50,989 residential mortgage loans, with a weighted-average (WA) current unindexed loan-to-value ratio of 72%, a WA seasoning of 64 months, and a WA remaining time to maturity of 212 months. The CP is located mainly in the German regions of North Rhine-Westphalia (31% by outstanding balance), Baden-Wuerttemberg (10%), and Lower Saxony (8.5%). Almost all (roughly 99%) of the retail pool yields a fixed coupon and 87% is fully amortising.

The DBRS Morningstar-calculated WA life of the mortgage assets is roughly 10 years based on a 0% prepayment rate, which is longer than the 3.7 years of WA life on the CB, not accounting for any maturity extension. This risk is mitigated by the conditional pass-through nature of the CB.

All CP assets and CB are denominated in euros. As such, investors are not currently exposed to any foreign-exchange risk.

DBRS Morningstar assessed the LSF related to the programme as “Very Strong” according to its rating methodology. For more information, please refer to the DB AG structured CB rating report at www.dbrsmorningstar.com.

For further information on the programme, please refer to the rating report at www.dbrsmorningstar.com.

DBRS Morningstar’s credit ratings on the DB AG outstanding Structured Covered Bonds address the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the related interest payment amounts and the related principal amount.
DBRS Morningstar’s credit rating does not address non-payment risk associated with contractual payment obligations contemplated in the applicable transaction documents that are not financial obligations.
DBRS Morningstar’s long-term credit ratings provide opinions on risk of default. DBRS Morningstar considers risk of default to be the risk that an issuer will fail to satisfy the financial obligations in accordance with the terms under which a long-term obligation has been issued.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
Credit rating actions on Deutsche Bank AG are likely to have an impact on this credit rating. ESG factors that have a significant or relevant effect on the credit analysis of Deutsche Bank AG are discussed separately at https://www.dbrsmorningstar.com/issuers/6178.
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the “DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings” at https://www.dbrsmorningstar.com/research/416784/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the credit rating is: “Global Methodology for Rating and Monitoring Covered Bonds” (8 May 2023), https://www.dbrsmorningstar.com/research/413651/global-methodology-for-rating-and-monitoring-covered-bonds.

Other methodologies referenced in this transaction are listed at the end of this press release.

DBRS Morningstar has applied the principal methodology consistently and conducted a review of the transaction in accordance with the principal methodology.

A review of the transaction legal documents was not conducted as the legal documents have remained unchanged since the most recent credit rating action.

For a more detailed discussion of the sovereign risk impact on Structured Finance credit ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Morningstar Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrsmorningstar.com/research/421590.

The DBRS Morningstar Sovereign group releases baseline macroeconomic scenarios for rated sovereigns. DBRS Morningstar analysis considered impacts consistent with the baseline scenarios as set forth in the following report: https://www.dbrsmorningstar.com/research/384482.

The sources of data and information used for these credit ratings include investor reports and loan-by-loan data on the CP as at 30 September 2023, and dynamic delinquencies (90 days+) by vintage of origination, spanning from 2010 to H2 2022, provided by the Issuer.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial credit ratings, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the credit rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing these credit ratings to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the credit rating process.

The last credit rating action on this transaction took place on 16 May 2023, when DBRS Morningstar assigned a AA credit rating to Series 7.

Information regarding DBRS Morningstar credit ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: https://registers.esma.europa.eu/cerep-publication. For further information on DBRS Morningstar historical default rates published by the Financial Conduct Authority (FCA) in a central repository, see https://data.fca.org.uk/#/ceres/craStats.

These credit ratings are endorsed by DBRS Ratings Limited for use in the United Kingdom.

Lead Analyst: Tomás Rodríguez-Vigil, Vice President
Rating Committee Chair: Ketan Thaker, Managing Director
Initial Rating Date: 1 November 2019

DBRS Ratings GmbH, Sucursal en España
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Tel. +34 (91) 903 6500

DBRS Ratings GmbH
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60311 Frankfurt am Main Deutschland
Tel. +49 (69) 8088 3500
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

Global Methodology for Rating and Monitoring Covered Bonds (8 May 2023),
https://www.dbrsmorningstar.com/research/413651/global-methodology-for-rating-andmonitoring-covered-bonds.

Global Methodology for Rating and Monitoring Covered Bonds Addendum: Market Value Spreads (8 May 2023),
https://www.dbrsmorningstar.com/research/413652/global-methodology-for-ratingand-monitoring-covered-bondsaddendum-market-value-spreads.

Global Methodology for Rating Banks and Banking Organisations (22 June 2023),
https://www.dbrsmorningstar.com/research/415978/global-methodology-for-rating-banksand-banking-organisations.

Legal Criteria for European Structured Finance Transactions (30 June 2023),
https://www.dbrsmorningstar.com/research/416730/legal-criteria-for-european-structured-financetransactions.

Common RMBS Rating Methodology (8 February 2023),
https://www.dbrsmorningstar.com/research/409553/common-rmbs-rating-methodology.

Operational Risk Assessment for European Structured Finance Originators (15 September 2023),
https://www.dbrsmorningstar.com/research/420573/operational-risk-assessment-for-europeanstructured-financeoriginators.

Operational Risk Assessment for European Structured Finance Servicers (15 September 2023),
https://www.dbrsmorningstar.com/research/420572/operational-risk-assessment-for-europeanstructured-financeservicers.

Interest Rate Stresses for European Structured Finance Transactions (15 September 2023),
https://www.dbrsmorningstar.com/research/420602/interest-rate-stresses-for-european-structuredfinancetransactions.

Global Methodology for Rating Sovereign Governments (6 October 2023),
https://www.dbrsmorningstar.com/research/421590/global-methodology-for-rating-sovereigngovernments.

DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (4 July 2023), https://www.dbrsmorningstar.com/research/416784/dbrs-morningstarcriteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/278375.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].