Deutsche Bank's Rating Downgraded By Fitch, Outlook Stable
Zacks Investment Research | Oct 02, 2017 09:19PM ET
Deutsche Bank AG (DE:DBKGn)’s (NYSE:DB) long-term credit grade was cut one level by Fitch Ratings Inc. The rating agency stated that the lender will take longer to stimulate growth under a plan, which was unveiled in March. Also, Autonomous Research LLP referred to the bank as “beyond repair,” except there’s a sudden “miracle” jump in its bond trading business, which was once a booming unit.
Chief executive officer of the Frankfurt-based lender, John Cryan, had settled misconduct lawsuits and raised €8 billion in late 2016. However, his growth plans are now on rocky grounds as the second quarter saw the weakest revenue performance in the past three-and-a-half years.
Fitch analysts wrote in a statement, “We no longer expect revenue to demonstrate any clear signs of franchise recovery this year, and we expect necessary further restructuring costs to continue to erode net income." They also believe that the loss in market share experienced by the bank last year because the clients stopped doing business with the lender, as they were doubtful about the bank’s capital strength, will take more time to reverse. Low volatility and interest rates in Europe will continue to affect the bank’s revenues.
Though the rating for Deutsche Bank was reduced from A- to BBB+, the outlook was set to stable by Fitch. Moody’s Investor Services has rated the bank’s credit Baa2 since May 2016, whereas S&P Global Inc. raised their rating to A- from BBB+ this March, stating that a retroactive change in German Law will protect senior creditors.
Shares of Deutsche Bank have gained 31.7% in a year, outperforming the Original post
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