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Fitch upgraded Deutsche Bank to BBB+ from BBB with a positive outlook reflecting “good progress and increasingly manageable challenges arising from the restructuring initiated in 2019”. They see higher chances of a successful execution of the last phase of the bank’s restructuring in 2022. The positive outlook was on the back of potential to further consolidate its market share in the investment banking and improve the existing weak cost/income ratio of Deutsche’s domestic operations. However, Fitch noted that Deutsche’s domestic Commercial and Private Banking operations continue to suffer from weaker pricing power than its US and EU peers. The bank’s management and strategic stability over the past two years enhances the progress in executing the restructuring. The rating agency added that while Deutsche lags peers in non-financial risk controls, it has a good record of credit risk management despite large trading operations. Also, litigation costs are decreasing, and the bank faces fewer demands from regulators for remediation. Its profitability has also been increasing they said.

About 70% of the cost reduction targeted by its restructuring plan by end-2022 is likely to be executed by year end, with only modest residual restructuring charges to be booked next year. The wind-down of the capital release unit (CRU), whose annual costs halved to €1.7bn in 2020 from 2018, remains a key contributor to cost reductions. Its strengthening loan quality, manageable exposure to vulnerable sectors, capitalization and CET1 at 13.2% end 1H2021 are positives.

Deutsche Bank’s dollar bonds were flat – its 6% Perp is at 106.2, yielding 4.3%.

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