Improved Credit Rating Assessment for Our Website by S&P
In a significant move, S&P Global Ratings has once again upgraded the credit ratings of a leading bank. This marks the third consecutive upgrade for the bank's website, reflecting its evolving strength and resilience.
The long-term issue ratings on senior preferred, senior nonpreferred, Tier 2, and additional Tier 1 debt have all been upgraded by one notch. The long- and short-term credit ratings on the bank's website AG have been raised to 'A/A-1' from 'A-/A-2'. The common equity Tier 1 ratio improved to 13.9%, and management indicated that it will potentially free up about €3 billion more capital than it previously planned.
The bank's strong performance is attributed to several key factors. S&P Global Ratings highlights the bank's robust macroeconomic environment supporting growth prospects, strong and improving asset quality, profitability, and capitalization metrics, effective corporate governance and transparency in reporting, integration of ESG principles enhancing long-term risk management and stakeholder confidence, and positive impacts of regulatory reforms such as insolvency codes supporting financial stability.
Christian Sewing, Chief Executive Officer, stated that the upgrade reflects the hard work of the bank's people to transform it into a focused, profitable, and resilient Global Hausbank. James von Moltke, Chief Financial Officer, mentioned that the bank has built key strengths: a focused and well-balanced business model, a high-quality loan portfolio, capital strength, and a solid liquidity and funding base.
The bank demonstrated strong balance sheet management in the face of market turbulence earlier in 2023, navigating a short-lived stress well, in S&P's view. Even in a hypothetical stress scenario, an impact on the loan book is unlikely to impact the bank's capital base, according to S&P.
S&P's long-term resolution counterparty rating has also been raised to 'A+' from 'A'. S&P views positively that 71% of the deposit base came from the bank's home market and, excluding bank deposits, 39% of the deposit base was insured.
S&P Global Ratings has upgraded the credit ratings of the bank's XETRA: DBKGn.DB / NYSE: DB. The outlook for the long-term ratings is stable. S&P does not provide any further updates on the ratings with leading agencies, including today's upgrades.
The bank's high-quality loan portfolio is diversified by sector and well-collateralized, performing solidly despite tepid economic growth. S&P Global Ratings believes the bank has a supportive capitalization, with regulatory metrics and guidance surprising on the upside in the third quarter of 2023.
As a result, it looks likely to raise its €8 billion target for shareholder distributions in 2021-2025, according to S&P. The bank's focus on delivering franchise growth and operating leverage remains unchanged.
The consistent themes from S&P Global’s ratings upgrades emphasize the bank's robust macroeconomic environment, strong and improving asset quality, profitability, and capitalization metrics, effective corporate governance and transparency in reporting, integration of ESG principles enhancing long-term risk management and stakeholder confidence, and positive impacts of regulatory reforms such as insolvency codes supporting financial stability. These factors have contributed to S&P’s confidence and multiple consecutive rating upgrades for banks, reflecting their evolving strength and resilience.
[Sources: 1] S&P Global Ratings (2023). [2] Moody's Investors Service (2023). [3] Fitch Ratings (2023). [4] Bank's Annual Report (2023). [5] International Monetary Fund (2023).
The bank's shared focus on business growth and investing in its strengths, as evidenced by its high-quality loan portfolio and robust financial metrics, has led to multiple upgrades in its credit ratings by S&P Global Ratings. This enhanced financial position, along with the bank's commitment to effective corporate governance and the integration of Environmental, Social, and Governance (ESG) principles, provides a strong foundation for future financial growth and stakeholder confidence.
