(AGENPARL) – gio 29 giugno 2023 PRESS RELEASE
JUNE 29, 2023
DBRS Morningstar Upgrades Deutsche Bank’s Long-Term Issuer
Rating to ‘A’, Stable trend
BANKING ORGANIZATIONS
DBRS Ratings GmbH (DBRS Morningstar) has upgraded the Long-Term Issuer Rating of Deutsche Bank AG (DB or the Bank) to ‘A’,
Stable trend. The Bank’s Short-Term Issuer Rating remain at R-1 (low), Stable trend. The Intrinsic Assessment (IA) for the Bank has
also been upgraded to A, while the Support Assessment remains SA3.
KEY RATING CONSIDERATIONS
The upgrade reflects the successful implementation of DB’s strategic transformation programme, which has helped stabilise, and
more recently grow the Bank’s franchise, and restored profitability. At the same time, the Bank has maintained a conservative risk
profile and solid capital ratios. While not entirely resolved, DBRS Morningstar also notes the progress made in addressing certain
corporate governance issues, notably the Bank’s Anti Money Laundering (AML) procedures.
DB’s ratings are supported by the Bank’s global franchise and strong position in Germany as well as its business diversification.
During the past three years, DB’s revenues have benefitted from above-average market volatility and the rapid rise in interest rates.
Given the business momentum, the ongoing repricing of its loan portfolio to higher rates and the cost controls implemented, DBRS
Morningstar expects the Bank to be able to maintain profitability levels in line with its rating also in a more steady market
environment. DB has a sound funding and liquidity profile, which benefits from a large and stable deposit base mostly in Germany,
supplemented by a diversified wholesale funding profile and significant liquidity cushions. While DB’s profitability is still somewhat
moderate when compared to global peers, the increased financial flexibility is helping the Bank to invest in growth opportunities as
they arise, to take on more risk and absorb potential losses. The ratings also reflect a combination of corporate governance failures
resulting in large fines and low profitability, that made DB vulnerable to a loss in market confidence in the past. As the Bank has
resolved major litigation cases, strengthened internal controls and improved earnings and capital ratios, this vulnerability has
declined significantly, but some issues still remain.
RATING DRIVERS
The ratings would be upgraded if the Bank demonstrates a sustainable and solid earnings profile and makes further progress on
internal controls, while maintaining solid asset quality and capital ratios.
The ratings would be downgraded in case of a sustained decline in profitability or any unexpected events that negatively impact the
Bank’s financial position or its reputation.
RATING RATIONALE
Franchise Combined Building Block (BB) Assessment: Very Strong/Strong
With total assets of EUR 1.3 trillion at end-Q1 2023, DB operates globally, but has a regional focus on Europe, and Germany in
particular. The Bank offers a wide range of products and services across Investment Banking, Private Banking (including Retail),
Corporate Banking and Asset Management. After the successful implementation of a strategic transformation programme, which has
helped stabilise the Bank and put it on a growth path, DB has established new profitability targets for 2025, including a return on
tangible equity of at least 10% and a cost/income ratio (CIR) below 62.5%. This is expected to be achieved mainly through revenue
growth as the Bank has regained financial flexibility to invest. We note that the positive business momentum could be adversely
affected by the current economic uncertainty, but expect the Bank to still benefit from higher interest rates over the medium term
and take advantage of its increased financial flexibility to further grow its franchise in a selective way.
Earnings Combined Building Block (BB) Assessment: Moderate
In DBRS Morningstar’s opinion DB’s earnings power has improved significantly over recent years driven by the restructuring
programme implemented since 2019. In addition, the Bank’s investment banking operation has benefitted from the increased
capital market volatility since the onset of the COVID-19 pandemic. Whereas the incremental benefit from these two factors is
subsiding, tailwinds from interest rate increases that started in mid-2022 should continue to support revenues going forward. In
2022, the Bank reported a pre-tax profit of EUR 5.6 billion up significantly from EUR 3.4 billion in 2021 and EUR 1.0 billion in 2020.
The return on average equity (ROAE) was 8.4% in 2022. Results were supported by higher rates, volatility in capital markets, lower
expenses as well as a valuation gain. The positive trend continued in Q1 2023 with a pre-tax profit of EUR 1.9 billion, up 12% Yearon-Year (YOY), driven by strong revenue performance at the Corporate Bank, and, to a lesser extent, at the Private Bank, partly offset
by weakness in Investment Banking and Asset Management. The ROAE was 7.4%, up from 7.2% in Q1 2022.
Risk Combined Building Block (BB) Assessment: Strong/Good
In DBRS Morningstar’s view, DB’s credit risk profile is sound, benefitting from a large exposure to its stable German home market,
and a diversified loan book in the rest of the world. The Bank has demonstrated good market risk management during periods of
significant market volatility in recent years. Operational risk has decreased in our view, as DB has made progress in improving its
anti-money laundering (AML) and other internal control procedures and has been resolving outstanding litigation cases. However,
this is an ongoing process and could still result in further fines, albeit to a lesser extent than in the past. Despite a number of
challenges such as the COVID-19 pandemic, the war in Ukraine, high inflation and rate hikes, asset quality metrics have remained
fairly stable In Q1 2023. The Bank’s Stage 3 loan ratio edged up somewhat to 2.7% from 2.5% at year-end 2022 and 2.6% at end
Q1-2022. The cost of risk (CoR) was 30 basis points (bps) in line with the 25-30 bps guidance for 2023. In our view, the downside
risk has increased, but should remain very manageable.
Funding and Liquidity Combined Building Block (BB) Assessment: Strong
In DBRS Morningstar’s view, DB has a strong and well-managed funding profile, underpinned by a large and diversified deposit
franchise and a diversified wholesale funding profile. The Bank has a comprehensive framework in place to manage its liquidity. DB’s
deposit franchise continues to support the overall funding profile with a loan-to-deposit ratio (based on DBRS Morningstar
calculations) of 89.8% as of end-2022. Despite the turmoil in the markets following the failure of Credit Suisse, the Bank’s liquidity
metrics have remained fairly stable. The Bank reported deposits of EUR 592 billion at end-Q1 2023, down from an elevated level of
EUR 621 billion at end-2022 and from a peak of EUR 631 billion at end-Q3 2022, however, YOY the decline was a moderate 2%.
The Liquidity Coverage Ratio (LCR) of 143% at end-Q1 2023 slightly increased from 142% at end-2022 due to active management.
The Net Stable Funding Ratio (NSFR) remained stable at 120%. We note that deposits are diversified and granular, and that 73% of
all deposits originate from the Bank’s German home market. 77% of German retail deposits and 41% of all customer deposits are
insured by the statutory guarantee scheme, with further protection provided by the voluntary guarantee scheme of German private
banks.
Capitalisation Combined Building Block (BB) Assessment: Good/Moderate
DB’s capitalisation is sound, supported by adequate cushions over minimum requirements, an improving internal capital generation
capacity and continued access to capital markets. The CET1 capital ratio at end-Q1 2023 was 13.6%, up 25 basis points since yearend supported by earnings retention, partly offset by higher RWA. The buffer over minimum requirements was 251 basis points
(bps), down 37 bps from end-2022 as capital requirements increased by 62 bps, due to a combination of the countercyclical and
systemic risk buffers as well as higher Pillar 2 requirements. We expect the Bank to maintain a CET1 ratio of at least 13% as long as
current capital requirements are in place. The leverage ratio was 4.6% at quarter-end, well above the 3.75% requirement applicable
since 1 January 2023.
Further details on the Scorecard Indicators and Building Block Assessments can be found at https://www.dbrsmorningstar.com/
research/416520
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental, or Social factors that had a significant or relevant effect on the credit analysis
Governance (G) Factors
At this point, the Governance factor does not affect the ratings or trend assigned to Deutsche Bank. However, as a result of
shortcomings in the Bank’s Anti-Money Laundering (AML) framework, the ‘Corporate / Transaction Governance’ subfactor is
considered as relevant. This has been reflected in the Bank’s risk building block grades.
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://
http://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-riskfactors-in-credit-ratings.
Notes:
All figures are in EUR unless otherwise noted.
The principal methodology is the Global Methodology for Rating Banks and Banking Organisations (22 June 2023) https://
http://www.dbrsmorningstar.com/research/415978/ In addition DBRS Morningstar uses the DBRS Morningstar Criteria: Approach to
Environmental, Social, and Governance Risk Factors in Credit Ratings, https://www.dbrsmorningstar.com/research/396929/dbrsmorningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (17 May 2022) in its
consideration of ESG factors.
The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/
methodologies
The sources of information used for this rating include Morningstar Inc. and Company Documents, Deutsche Bank Annual and
Quarterly Accounts (2015 – Q1 2023), Deutsche Bank Investor Presentations (2015 – Q1 2023), DBRS Morningstar considers the
information available to it for the purposes of providing this rating to be of satisfactory quality.
DBRS Morningstar 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.
The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS
Morningstar’s outlooks and ratings are under regular surveillance.
For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority
(ESMA) in a central repository, see: https://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml. 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.
The sensitivity analysis of the relevant key rating assumptions can be found at: https://www.dbrsmorningstar.com/research/416519
This rating is endorsed by DBRS Ratings Limited for use in the United Kingdom.
Lead Analyst: Sonja Förster, Vice President – Global FIG
Rating Committee Chair: Elisabeth Rudman, Managing Director – Global FIG
Initial Rating Date: 27 February 2015
Last Rating Date: 1 July 2022
DBRS Ratings GmbH
Neue Mainzer Straße 75
60311 Frankfurt am Main Deutschland
Geschäftsführer: Detlef Scholz
Amtsgericht Frankfurt am Main, HRB 110259
For more information on this credit or on this industry, visit http://www.dbrsmorningstar.com.
Ratings
Deutsche Bank AG
Date Issued
Debt Rated
Action
Rating
Trend
Attributes
29-Jun-23
Long-Term Issuer Rating
Trend
Change
A (low)
29-Jun-23
Short-Term Issuer Rating
Confirmed
R-1 (low)
29-Jun-23
Senior Non-Preferred Debt
Trend
Change
BBB (high)
29-Jun-23
Short-Term Debt
Confirmed
R-1 (low)
29-Jun-23
Short-Term Deposits
Confirmed
R-1 (low)
Date Issued
Debt Rated
Action
Rating
Trend
Attributes
29-Jun-23
Long Term Critical Obligations Rating
Trend
Change
A (high)
29-Jun-23
Short Term Critical Obligations Rating
Confirmed
(middle)
29-Jun-23
Long-Term Deposits
Trend
Change
A (low)
29-Jun-23
Long-Term Senior Debt
Trend
Change
A (low)
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Contacts
Sonja Förster
Vice President, Credit Ratings – European Financial Institutions
Elisabeth Rudman
Managing Director, Credit Ratings – Global Fundamental Ratings
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