Bangkok--Dec 21--Fitch Ratings
Fitch Ratings (Thailand) Limited has today assigned a National Short-term ‘F1+(tha)’ rating to the upcoming THB1 billion issue of two-month notes and THB1bn issue of three-month notes, both linked to CMT (Constant Maturity Treasury), to be issued by Deutsche Bank AG’s (“DB”), Bangkok Branch. The notes constitute the fifth and the sixth tranches of DB’s THB25bn structured medium term note (“MTN”) programme being 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. The fifth tranche is in the form of two-month notes with interest payments of 6.5% minus CMT3M with a floor of 3.85% and the sixth tranche is in the form of three-month notes with interest payments of 6.75% minus CMT3M with a floor of 4%. 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)’/Stable/‘F1+’, which are two notches above Thailand’s sovereign international local currency rating of ‘A’ with a Stable Outlook. Consequently, the National Short-term rating of ‘F1+(tha)’ for the notes is the same as the Thai sovereign.
DB has undergone a substantial transformation in recent years, both in business profile and culture. It is a leading global investment bank and one of Europe's largest commercial banks. Its profitability has been supported by good revenue levels in its investment banking operations, overall tight cost control and improved profit generation from its retail banking operations. DB’s retail banking side is benefiting from a more efficient branch network and a stronger focus on more value-added products such as consumer financing.
In its capital market-driven businesses, DB benefits from a strong global position, both in terms of geography and product, making it more resilient to market volatility than many other investment banking operations. Revenues remain dominated by its consistently strong earnings from fixed income and foreign exchange, and benefit from the expansion of its equity-linked and credit derivatives businesses. In the first half of 2005, the bank's operating profit was boosted by very strong revenues from its sales and trading operations in the first quarter of 2005. Its retail banking operations are profitable, despite a relatively low demand in Germany due to the still sluggish economy. The picture at its asset management operations is somewhat mixed.
DB’s ratings are underpinned by its sophisticated credit risk management and good capitalisation. The bank has reduced non-performing loans to less than 3.2% of total loans at end-June 2005 from 6.2% at end-2002; asset quality appears sound despite reserve coverage of only 49%. The bank has also managed down its market risk, in particular from its industrial holdings. Fitch expects the Tier 1 ratio to remain at the top end of management's targeted 8%-9% range until sustainable strong underlying profitability can be demonstrated. A full report on DB is available to subscribers at www.fitchresearch.com.
Contact: Chaiyapat Paitoon, Vincent Milton, Bangkok Tel: +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.
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