Moody’s Downgrades Deutsche Bank’s Debt Two Notches Above Junk
By Tyler Durden
While not quite on the level of last week’s Berenberg downgrade (to Sell) which warned that DB’s problems are now “insurmountable“, shortly after the close Moody’s surprised the market with a downgrade that may have substantial repercussions on the funding costs (and perhaps viability) of the largest German, and European, lender.
Shortly after the market close, the rating agency decided to pile some more pain on the misery that has befallen Germany’s largest lender (who just today admitted it had rigged stocks in addition to seeing yet another MBS probe unveiled against it), when it downgraded the bank’s credit ratings across the board as follows: Senior debt to Baa2, or just two notches above junk, Long term deposits to A3 and counterparty risk assessment to A3.
Moody’s also downgraded 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).
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
The full release:
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.
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 …read more
Source: Moody’s Downgrades Deutsche Bank’s Debt Two Notches Above Junk
