Deutsche Bank’s ratings reflect Scope’s view that the group’s business model and financial recalibration remain less than reassuring, which could affect a return to healthier profitability and more sustainable growth in business volumes.

The current dynamics of the global wholesale and investment banking markets are likely to hamper Deutsche Bank’s arduous path towards the adjustment of its business model and restoration of healthier profitability metrics, more in line with those of global peers. Deutsche Bank’s Strategy 2020 agenda should gradually address many of the intrinsic weaknesses in Deutsche Bank’s business model and fundamentals; however, material execution risks remain and the end game is far from clear.

Scope believes that the bank’s improved capital position, due to the recent capital increase, and strong liquidity should provide some temporary stability, allowing the necessary restructuring activities to be performed. However, weak profitability over past quarters suggests a reduced ability to pursue organic capital formation for the time being. The time needed for the restructuring process will prove a challenge with regard to investors, counterparties and bank employees; pressure on the management to deliver results could impair the bank’s governance.

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