Bangkok--Dec 13--Fitch Ratings
Fitch Ratings (Thailand) Limited today affirmed the National rating on the THB200 million six-month Constant Maturity Treasury Linked Notes and THB171m two-year SET 50 Linked Promissory Notes to be issued by Deutsche Bank AG’s (“DB”), Bangkok Branch, at Long-term ‘AAA(tha)’ with a Stable Outlook. The notes constitute the second and third tranches of DB’s THB25 billion Structured Medium Term Note (“MTN”) programme to be issued in Thailand. The latter may include currency-linked, equity-linked and index-linked notes.
Investors should note that the rating addresses only the credit risk of the notes and does not address any market risks or potential returns, which could be zero. The rating of the notes is based on DB’s credit as it is obliged to repay 100% of the principal on the notes.
The rating reflects DB’s strong international ratings of ‘AA-’ (AA minus)/‘F1+’ with a Stable Outlook, which are currently three rating levels above Thailand’s sovereign international local currency rating of ‘A-’ (A minus) Positive Outlook. Consequently, the National rating of ‘AAA(tha)’ for the notes is the same as the Thai sovereign.
DB’s international ratings are based on its strong global franchise, diversified revenue structure and good capitalisation. Consistently good earnings from fixed income and asset management have kept the bank’s Long-term rating in the ‘AA’ range despite dents to operating profit from restructuring, loan loss provisions and write-downs of the equities portfolio and weak earnings from domestic branch banking within the international context. Although the latter is improving, it contributed only 16% of 1Q04 pre-tax profit and still suffers owing to a weak German domestic economy.
Corporate and investment banking is the key driver of group profit. The group benefits from a strong global position, making it more resilient to market volatility than other investment banking operations. Meanwhile, profit generation from private clients and asset management business has been improving gradually, following the restructuring of asset management, private and retail banking.
DB’s domestic and international corporate banking operations were hit by the high corporate failure rate and some portfolio concentration in 2002. Loan loss provisions came down but remained at a relatively high level in 2003, and are likely to fall further in 2004. The bank has been active in managing down non-performing loans, now c.4% of gross loans, and in reducing the volume of some of its larger exposures. Sophisticated credit risk systems help to ensure that problem loans are adequately reserved. Market risk is well-controlled, with emphasis on customer-driven transactions rather than proprietary trading. DB’s capitalisation remains strong. Fitch expects the Tier 1 ratio to remain towards the top end of management’s targeted 8%-9% range until sustainable strong underlying profitability can be demonstrated. A full report on Deutsche Bank AG is available to subscribers at www.fitchresearch.com.
Contact: Chaiyapat Paitoon, Vincent Milton, Bangkok +662 655 4762/4759; David Marshall, Hong Kong +852 2263 9963.
Note to Editors: Fitch’s National ratings provide a relative measure of creditworthiness for rated entities in countries with relatively low international sovereign ratings and where there is demand for such ratings. The best risk within a country is rated ‘AAA’ and other credits are rated only relative to this risk. National ratings are designed for use mainly by local investors in local markets and are signified by the addition of an identifier for the country concerned, such as ‘AAA(tha)’ for National ratings in Thailand. Specific letter grades are not therefore internationally comparable. End.