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7/8, 7:35 AM (Source: TeleTrader)
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Moody's: No direct upward pressure on Deutsche Bank

After Germany's ailing flagship lender unveiled the plan to shutter the equity sales and trading division and decided to aggressively pursue savings and form a so-called bad bank with €74 billion in assets, Moody's Investors Service said on Monday that it maintained the negative outlook on the A3 long-term deposit and senior unsecured debt ratings. Of note, Deutsche Bank AG's remaining investment banking activities will be more independent from the corporate banking, the strategic sector.

The rating agency estimated the overhaul as credit positive "if successfully executed" and pointed to sensitivity in revenue, cost cuts and the derisking expenses. It brushed off the impact of lowering the common equity tier 1 (CET1) target by 50 to 100 basis points to 12.5%.

"There is no imminent upward pressure on DB's ratings. In the medium term, substantial completion of DB's strategic plan that results in sustainable and improved earnings, such that the bank earns a net return on tangible equity of above 6%, coupled with a stable capitalization displaying a tangible common equity/risk-weighted asset ratio at or above 13% and a leverage ratio around 5% could result in upward rating pressure," the report adds and stresses the benefits of scaling back on capital markets funding.

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