Deutsche Bank credit rating cut

By Aaron Kirchfeld  |   2008-8-2  |     NEWSPAPER EDITION

DEUTSCHE Bank AG, Germany's largest bank, had its long-term credit rating lowered by Standard & Poor's yesterday after the company announced higher-than-estimated second-quarter writedowns of 2.3 billion euros (US$3.6 billion).

S&P cut the long-term counter-party credit rating one step to AA- from AA, and affirmed the bank's A-1+ short-term rating, according to Bloomberg News. The outlook on all the ratings is negative, S&P said, adding that the investment banking industry is still under "heavy pressure."

"The downgrade reflects that we no longer consider Deutsche Bank's performance to be materially stronger than that of the leading peers in the currently difficult environment," S&P analysts led by Bernd Ackermann in Frankfurt said yesterday.

Deutsche Bank reported that second-quarter profit declined 64 percent after markdowns on mortgage securities, loans and debt backed by bond insurers led to a loss at the securities unit. Chief Executive Officer Josef Ackermann said he "remains cautious" on the rest of the year.

Deutsche Bank rose 0.4 percent to 59.85 euros by 2:49pm yesterday in Frankfurt trading. The stock has declined 33 percent this year, valuing the company at 31.8 billion euros.

The bank, which generates the majority of its earnings from its securities unit, is unlikely to achieve the full-year pretax profit of 4 billion euros that S&P had factored into its ratings, S&P said.