S&P Global Ratings on June 1 lowered the long-term issuer credit ratings of Deutsche Bank AG
The agency placed the German banking group's ratings on Credit Watch with negative implications in April, following the appointment of Christian Sewing as CEO of the lender.
The downgrade reflects the German lender's updated strategy, which S&P said "envisages a deeper restructuring of the [bank's] business model than expected, with associated non-negligible execution risks." While acknowledging that the bank's management is taking "tough, although likely inevitable" actions to restore profitability over the medium term, the agency said the lender "appears set for a period of sustained underperformance compared with peers, many of whom have now finished restructuring."
The stable outlook reflects the bank's ability to maintain its global capital markets franchise, according to the agency. The group's A-2 short-term issuer credit ratings and its trAAA/A-1 Turkish national scale ratings were affirmed.
The long-term issuer credit ratings of units Deutsche Bank Trust Corp., Deutsche Bank Trust Co. Delaware, Deutsche Bank Trust Co. Americas, Deutsche Bank National Trust Co., Deutsche Bank Luxembourg SA
S&P said it will look into Deutsche Bank's delivery against its 2019 objectives over the next 18 months, including its €22 billion cost target, as well as proof that the lender has maintained the solid support of its clients, which would help underpin the revenue base in its corporate investment banking division amid a period of downsizing.
Deutsche Bank on May 31 saw its shares crash to an all-time low following reports that the U.S. Federal Deposit Insurance Corp. added unit Deutsche Bank Trust Co. Americas to its list of "problem banks." The rating actions also came after the Australian Competition and Consumer Commission said it will charge Deutsche Bank in connection with a controversial 2015 share issuance by Australia & New Zealand Banking Group Ltd. The German lender served as an underwriter in the offering.
In a statement to staff following the downgrade, Sewing said Deutsche Bank's financial strength "is beyond doubt" and renewed his commitment to deliver change at the lender.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.
