(The following statement was released by the rating agency)
Oct 10 - Fitch Ratings has affirmed Deutsche Bank AG's
Issuer Default Rating (IDR) at 'A+' with a Stable Outlook, Short-term IDR at'F1+' and Viability Rating (VR) at 'a'. At the same time, the agency affirmedthe Support Rating at '1' and Support Rating Floor (SRF) at 'A+'. The ratings ofDeutsche Bank's main subsidiaries have also been affirmed, as were the ratingsof all issues. A full list of rating actions is at the end of this rating actioncommentary.
The rating actions on Deutsche Bank have been taken in conjunction with Fitch'sGlobal Trading and Universal Bank (GTUB) periodic review. Fitch's outlook forthe industry is stable. Positive rating drivers include improved liquidity,funding, capitalisation and more streamlined businesses, all partly driven byregulation. Offsetting these positive drivers are substantial earnings pressure,regulatory uncertainty and heightened legal and operational risk.
RATING ACTION RATIONALEDeutsche Bank's IDR is at its SRF and therefore based on support from the Germanauthorities. The affirmation of the IDR, Support Rating and SRF reflect Fitch'sunchanged view that there is an extremely high probability that Deutsche Bankwould receive support from the authorities because of the bank's systemicimportance domestically and internationally. Deutsche Bank is Germany's largestbank.
The affirmation of the VR, which at 'a' is one notch below the bank's Long-termIDR, is based on Fitch's view that the bank is likely to strengthen capitalratios quickly to achieve its target 10% Basel III common equity tier 1 (CET1)ratio on a 'look-through' basis earlier than end-2015 to bring this more intoline with peers, while continuing to adequately control the risks in itsinvestment banking operations. Market risk exposure, as measured by severalmetrics, has declined over recent quarters, and the bank's strategy concentrateson reducing its risk exposure, while at the same time improving performance.
RATING DRIVERS AND SENSITIVITIES - IDRS, SUPPORT RATING, SRF AND SENIOR DEBTThe Stable Outlook on Deutsche Bank's Long-Term IDR reflects Fitch's view thatsovereign support for the bank will continue to be available in the medium term.
Deutsche Bank's IDRs, Support Rating, SRF and senior debt ratings are sensitiveto a change in Fitch's assumptions about the availability of sovereign supportfor the bank. In this context, Fitch is paying close attention to ongoing policydiscussions around bank support and 'bail in', especially in Europe. An upgradeof Deutsche Bank's IDRs is unlikely given Fitch's expectation of diminishingsovereign support for banks generally in Europe and globally.
Any downgrade of Deutsche Bank's SRF would lead to a downgrade of the bank'sIDRs. In line with Fitch's criteria, the bank's Long-term IDR is the higher ofthe VR and the SRF.
RATING DRIVERS AND SENSITIVITIES - VRDeutsche Bank's VR reflects the group's strong franchise in German commercialbanking, with excellent access to domestic large and mid-sized corporates. Inaddition, the acquisition of Deutsche Postbank (Postbank) has increased itsretail customer base, with good access to retail funding. The group is also oneof the largest global investment banks with strong franchises in key segments.The bank has an excellent franchise in foreign exchange and other fixed incomesegments, complemented by strong league table positions in equity products.
The VR is based on Fitch's expectation that Deutsche Bank's planned reduction ofrisk-weighted assets (RWA), primarily in the investment banking operations, willproceed. Together with the further reduction in legacy assets, this shouldreduce exposure to credit and market risk. However, the bank's corporate bankingand securities businesses will continue to be the main risk taker in the bank,which is reflected in its VR. Deutsche Bank's VR would come under pressure ifthe group does not achieve its planned RWA reduction, or if it increases itstrading risk exposure, which Fitch currently does not expect.
Deutsche Bank's capitalisation is weaker than most of its global peers' with a'look-through' Basel III CET1 ratio of below 7% at end-June 2012 and highadjusted leverage. The VR factors in Fitch's expectation that the bank willmaterially strengthen its capitalisation by end-March 2013 and after that willcontinue to report capital ratios in line with its peers.
The agency would downgrade the VR if capitalisation, as measured by the Fitchcore capital ratio, which at end-June 2012 stood at 9.2%, or by the'look-through' Basel III CET1 ratio did not improve to levels in line with peersand remain there over time. The bank targets a 'look-through' CET 1 ratio above8% by end-March 2013 and of above 10% by end-2015 and Fitch expects swiftmaterial progress in strengthening capitalisation between these two dates. TheVR would also come under pressure if adjusted leverage increased further fromits current high level.
Fitch considers Deutsche Bank's profitability targets to be ambitious. Its VR issensitive to core, sustainable earnings deteriorating below peers, but Fitchdoes not expect this to be the case once the upfront reorganisation costs aroundPostbank have been dealt with.
Deutsche Bank's VR also reflects the group's strong funding profile, whichbenefits from a good customer deposit base, and the bank has managed to accesswholesale funding and achieve good pricing throughout the financial crisis. Thegroup's liquidity is managed globally and a strong liquidity reserve ismaintained. At end-June 2012, the liquidity reserve amounted to EUR205bn, equalto over 170% of unsecured short-term wholesale funding.
SUBORDINATED DEBT AND OTHER HYBRID SECURITIESSubordinated debt and other hybrid capital issued by Deutsche Bank and itssubsidiaries are all notched down from Deutsche Bank's VR in accordance withFitch's assessment of each instrument's respective non-performance and relativeloss severity risk profiles. Their ratings are primarily sensitive to any changein Deutsche Bank's VR.
SUSBIDIARY AND AFFILIATED COMPANY RATING DRIVERS AND SENSITIVITIESPostbank's IDRs are equalised with those Deutsche Bank, which indirectly holds94.1% of Postbank's shares. Fitch views Postbank as core to Deutsche Bank'sambition of strengthening its domestic retail banking. Fitch views the controland profit and loss transfer agreement between DB Finanz-Holding GmbH (notrated, a wholly-owned subsidiary of DB) and Postbank, which was irrevocablyvalidated by a German court in September 2012 as a very strong indication ofsupport.
The IDRs of the other rated subsidiaries are also equalised with Deutsche Bank'sto reflect their core role within the bank's operations and their integration inthe parent bank.
As the IDRs of the subsidiaries are equalised with those of Deutsche Bank toreflect support from their ultimate parent, they are sensitive to changes in theparent's propensity to provide support, which Fitch currently does not expect,or from changes in Deutsche Bank's IDRs.
The rating actions are as follows:
Deutsche BankLong-term IDR: affirmed at 'A+'; Outlook StableShort-term IDR: affirmed at 'F1+'Viability Rating, affirmed at 'a'Support Rating: affirmed at '1'Support Rating Floor: affirmed at 'A+'Senior Debt, including programme ratings: Long-term: affirmed at 'A+';Short-term affirmed at 'F1+'Senior market-linked securities: affirmed at 'A+emr'Subordinated market-linked securities: affirmed at 'A-emr'Subordinated Lower Tier II Debt: affirmed at 'A-'
Long-term IDR: affirmed at 'A+'; Stable OutlookShort-term IDR: affirmed at 'F1+'Support Rating: affirmed at '1'Senior Debt, including programme ratings: affirmed at 'A+'/'F1+'Subordinated Lower Tier II Debt: affirmed at 'A-'Unsecured guaranteed bonds issued by former DSL Bank: affirmed at 'AA'/'AA emr'PB Finance (Delaware); Inc:Commercial paper: affirmed at 'F1+'
This rating action has no impact on the 'AAA' rating of the outstanding coveredbonds issued by Postbank.
Deutsche Bank SecuritiesLong-term IDR: affirmed at 'A+'; Outlook StableShort-term IDR: affirmed at 'F1+'Support Rating: affirmed at '1'Deutsche Bank Trust Company AmericasLong-term IDR: affirmed at 'A+'; Outlook StableShort-term IDR: affirmed at 'F1+'Support Rating: affirmed at '1'Senior debt, including programme ratings: Long-term affirmed at 'A+'; Short-termaffirmed at 'F1+'Subordinated Debt: affirmed at 'A-'Deutsche Bank Trust CorporationLong-term IDR: affirmed at 'A+'; Outlook StableShort-term IDR: affirmed at 'F1+'Support Rating: affirmed at '1'Senior debt, including programme ratings: Long-term affirmed at 'A+'; Short-termaffirmed at 'F1+'Subordinated Debt: affirmed at 'A-'Deutsche Bank Australia Ltd.Commercial Paper affirmed at 'F1+'Deutsche Bank Financial LLCShort-term IDR affirmed at 'F1+'Subordinated Debt: affirmed at 'A-'Commercial Paper: affirmed at 'F1+'
Deutsche Bank Capital Funding Trust I: affirmed at 'BBB-'Deutsche Bank Capital Funding Trust IV: affirmed at 'BBB-'Deutsche Bank Capital Funding Trust V: affirmed at 'BBB-'Deutsche Bank Capital Funding Trust VI: affirmed at 'BBB-'Deutsche Bank Capital Funding Trust VII: affirmed at 'BBB-'Deutsche Bank Capital Funding Trust VIII: affirmed at 'BBB-'Deutsche Bank Capital Funding Trust IX: affirmed at 'BBB-'Deutsche Bank Capital Funding Trust X: affirmed at 'BBB-'Deutsche Bank Capital Funding Trust XI: affirmed at 'BBB-'Deutsche Bank Contingent Capital Trust II: affirmed at 'BBB-'Deutsche Bank Contingent Capital Trust III: affirmed at 'BBB-'Deutsche Bank Contingent Capital Trust IV: affirmed at 'BBB-'Deutsche Bank Contingent Capital Trust V: affirmed at 'BBB-'Deutsche Postbank Funding Trust I (Germany): affirmed at 'BBB-'Deutsche Postbank Funding Trust II (Germany): affirmed at 'BBB-'Deutsche Postbank Funding Trust III (Germany): affirmed at 'BBB-'Deutsche Postbank Funding Trust IV (Germany): affirmed at 'BBB-'ProSecure Funding Limited Partnership (LP Jersey): affirmed at 'BBB-'
Additional information is available on
. The ratings abovewere solicited by, or on behalf of, the issuer, and therefore, Fitch has beencompensated for the provision of the ratings.
Applicable criteria, 'Global Financial Institutions Rating Criteria', dated 15August 2012, are available at
.Applicable Criteria and Related Research:Global Financial Institutions Rating Criteria(New York Ratings Team)