Deutsche Bank AG. Issuer Rating Report. Deutsche Bank AG. Issuer Rating Report. Overview. Highlights. 19 December 2017 Financial Institutions

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1 19 December 2017 Financial Institutions Deutsche Bank AG Deutsche Bank AG Stable OUTLOOK BBB+ Overview Scope Ratings assigns an Issuer Rating of BBB+ and senior unsecured debt ratings of BBB to Deutsche Bank AG. Scope s methodology states that, as a general rule, all senior unsecured debt that may be specifically allocated to or eligible for MREL and/or TLAC should be rated at least one notch below the Issuer Rating. The short-term rating is S-2. The bank s Additional Tier 1 (AT1) carries a B rating, incorporating a total differentiation of six notches from the level of the senior unsecured rating. All ratings have a Stable Outlook. The ratings were downgraded on 15 November Lead Analyst Michaela Seimen Howat m.seimenhowat@scoperatings.com Team Leader Sam Theodore s.theodore@scoperatings.com The ratings were not solicited by the issuer. Both ratings and analysis are based solely on publicly available information. For a full list of ratings, see the Ratings section at the end of this report. The ratings are not applicable to unguaranteed debt issued by subsidiaries of Deutsche Bank AG. Highlights The ratings on Deutsche Bank reflect our 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. After the financial crisis, Deutsche Bank has continued to operate as a global universal bank with an emphasis on wholesale and investment banking, alongside a more marginally profitable domestic retail franchise, which has been weighing on the bank s cost base. However, the current dynamics of the global wholesale and investment banking markets driven primarily by technology, a change in client behaviour, less demand, and heightened regulations 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, which is ongoing since 2015, was updated in March 2017 and should gradually address many of the intrinsic weaknesses in Deutsche Bank s business model and fundamentals. Nevertheless, we consider that the process of business-model streamlining, cost-cutting, further deleveraging and capacity reduction has already taken a toll on medium-term profitability and is likely to continue to do so. Material execution risks remain and the end game is far from clear. Recently, the previous relative cross-cycle resilience of Deutsche Bank s wholesale and investment bank revenue streams has been challenged. Difficult market and operating conditions, combined with reputation risks and the associated loss of client business, have resulted in weaker performance compared to peers. Substantial restructuring needs, which may involve wider-reaching headcount reductions, as well as remaining uncertainties, especially related to outstanding and further potential litigation cases, are likely to slow down the bank for some time. Despite these challenges, we have a positive view of the recently announced integration and merger with Postbank which may help unlock as-yet unfulfilled efficiency and cross-selling potential in the retail segment. Deutsche Bank s reporting on the implementation of Strategy 2020 has improved slightly, although clear evidence of any successful impact is still somewhat lacking, partially undermining confidence in the underlying competitiveness of the bank s wholesale and investment banking franchise. 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 Scope Ratings AG Suite Angel Square London EC1V 1NY Phone Headquarters Lennéstraße Berlin Phone Fax Service info@scoperatings.com Bloomberg: SCOP 19 December /12

2 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. Rating drivers (summary) The rating drivers, in decreasing order of importance in the rating assignment, are: 1. A challenged business model with a high cost base; Strategy 2020 is tackling the weaknesses, but at a relatively slow pace. 2. Prudent capital and liquidity ratios should provide the bank with some temporary stability to overhaul its business model. 3. Internal capital generation capacity remains unclear for the short and medium term due to large restructuring needs and related costs, further uncertainties regarding litigation charges, as well as the impact of reputational risks. 4. Deutsche Bank s previously resilient investment banking earnings have come up against general market shifts, driven primarily by technology, changed client behaviour, less demand, and heightened regulation. Rating-change drivers The integration of Postbank into the retail banking franchise of Deutsche Bank could provide some efficiency and profitability gains in the medium to longer term. An overall track record of a successful restructuring, including downsized, more targeted and profitable businesses in the corporate and investment banking as well the private and commercial banking segments Although we welcome the financial direction taken by Strategy 2020, we nonetheless see material execution risk. It is still not clear what the end game will be for Deutsche Bank and, as a consequence, we cannot exclude ongoing riskreturn challenges and stresses which would continue to undermine the group s credit fundamentals. A further deterioration in the bank s profitability and a lack of greater efficiency, especially with regard to reduced adjusted cost levels, would place downward pressure on the bank s ratings. 19 December /12

3 Rating drivers (in detail) 1. A challenged business model with a high cost base; Strategy 2020 is tackling the weaknesses, but at a relatively slow pace Deutsche Bank s core business model is based on that of a global bank, servicing a range of institutional, corporate and private clients, combined with a relatively strong home base in Germany. The bank outlined a multi-year strategy in October 2015 aimed at building on the core strengths of its business model and client franchise. The four key goals for the bank were defined as becoming simpler and more efficient, less risky, better capitalised and better run with more disciplined execution. However, macroeconomic, geopolitical, and regulatory changes, as well as substantial challenges specific to Deutsche Bank, resulted in an update of the bank s strategy in March 2017 with the objective of reinforcing the bank s roots in its home market of Germany and its position as a leading European bank with global reach. As a consequence, the bank has reorganised its business divisions into three units, with the goal of strengthening the business of each unit, enhancing client coverage, improving market share and driving efficiencies and growth: The Corporate & Investment Bank (CIB) combines markets, advisory, financing and transaction banking business The Private & Commercial Bank (PCB) combines Postbank and Deutsche Bank s existing private, commercial and wealth management business The operationally segregated Deutsche Asset Management (Deutsche AM) Figure 1: Distribution of assets per business unit Figure 2: Distribution of total revenues (outer ring) and income before income tax (inner ring) per business unit Source: Company data, Scope Ratings The integration of Postbank and Deutsche Bank s German Private & Commercial Clients (PCC) business reflects the bank s aim of creating a leading retail presence in Germany, with greater efficiency by means of economies of scale and the potential for better earnings and funding stability for Deutsche Bank. In addition to the more straight-forward process of organisational and business unit restructuring, we note the positive development of a change in management culture at the group level, towards increased cost awareness and faster decision-making processes. The top management teams have introduced a culture of transparency, which is considered a welcome improvement. It is our understanding that John Cryan, the bank s current CEO, is putting long-term plans before short-term profits and is strongly focused on the establishment of a cost reduction programme aimed at achieving adjusted costs of approximately EUR 21bn by 2021 (EUR 24.7bn as of YE 2016), which would include the impact of retaining Postbank s adjusted costs (EUR 2.7bn as of YE 2016). Deutsche Bank s complex structure and business model has so far been a leading cause of the bank s unsustainable cost base, combined with various (and partly already reversed) restructuring efforts, as well as severance and litigation costs. There are still considerable uncertainties regarding severance and litigation costs, which may seriously affect the bank going forward. With regard to longer-term prospects, Scope expects Deutsche Bank to tackle its compensation and benefits cost structure, given the fact that around 51% of adjusted costs are based on this component (Figure 4). However, cost savings in this area will be 19 December /12

4 harder to achieve and take longer as they will be mainly linked to a sharp reduction in the number of employees (Figure 3) and a renewal of compensation structures. Figure 3: Group headcount (full-time equivalents, at period end) Source: Company data, Scope Ratings We also expect IT costs to remain considerably high, based on the bank s efforts to redevelop its IT infrastructure and advance its digitalisation efforts across its business platforms (Figure 4). Figure 4: Deutsche Bank breakdown (EUR m) of adjusted costs* 9M M 2016 YoY change Compensation and benefits 8,783 8,827-1% IT costs 2,799 2,784 1% Professional service fees 1,260 1,592-21% Occupancy 1,345 1,380-3% Bank levy % Other 2,538 3,003-15% Adjusted costs 17,489 18,309-4% *Note: Total non-interest expenses excluding restructuring and severance, litigation, impairment of goodwill and other intangibles as well as policyholder benefits and claims; Source: Company data, Scope Ratings 2. Prudent capital and liquidity ratios should provide the bank with some temporary stability to overhaul its business model In March 2017, Deutsche Bank initiated its most recent capital increase, which was completed at the beginning of April with gross proceeds of approximately EUR 8bn, bringing the bank s capital ratios more in line with those of its European peers (see also Appendix A: Peer comparison). Although a prudent capital ratio will help buy some time for the bank s restructuring, due to improved client and counterparty confidence, this can only be regarded as a minor contributor to improving profitability and performance. As of Q3 2017, the bank s CET 1 ratio on a fully loaded basis stood at 13.8%; its total capital ratio at 18.4%. At present, the bank s capital provides a sufficient buffer based on the most recent SREP requirements (Figure 5). 19 December /12

5 Figure 5: Deutsche Bank SREP requirements versus current CET 1 ratios (in %) Source: Company data, Scope Ratings Deutsche Bank is also progressing with a partial initial public offering for up to EUR 2bn of Deutsche Asset Management with a completion timeline of 24 months since its announcement in March The proceeds will help to further strengthen the bank s capital basis. Although the bank will maintain a controlling and super-majority stake in the asset management business, we nevertheless regard this step as adding complexity to an already strongly shareholder-driven banking model. With regard to the latter, recent changes in Deutsche Bank s shareholder structures (with various strategic investors, including the Chinese HNA group, Qatar, Blackrock and Cerberus, acquiring larger stakes) may lead to external pressure on senior management, raising doubts about the bank s ability to honor long-term management commitments over short-term profitability gains, as well as evoking potential larger strategic changes. Deutsche Bank s leverage ratio on a fully loaded basis stood at 3.8% as of September While this is a slight improvement compared to the year-end results, it is, however, still lagging the ratios of the bank s peers, particularly in the United States where this measure is a central focus. Given Deutsche Bank s experience of undermined market access, especially in 2016, the bank has shored up its liquidity reserves, amounting to around EUR 279bn as of 30 September 2017, up from EUR 219bn as of YE 2016 and representing around 25% of the funded balance sheet. The liquidity coverage ratio amounted to around 141%, representing a EUR 73bn buffer above the 100% level required in The bank s payment capacity for Additional Tier 1 securities remains one area of concern for investors. Deutsche Bank s AT1 capital amounted to EUR 8.6bn as of September The calculation of available distributable items (ADI) is based on Deutsche Bank AG s stand-alone result according to the German Commercial Code (HGB). As of year-end 2016, the bank has reported around EUR 1.2bn of available funds to cover interest payments on AT1 notes and other Tier 1 instruments. However, ADI capacity calculations are usually finalised with the publication of the bank s year-end results which is typically some time during the first quarter of the following fiscal year. Hence, there are events, such as litigation charges for example, which could still influence the bank s ADI capacity up to that point in time. 3. Internal capital generation capacity remains unclear for the short and medium term due to large restructuring needs and related costs, further uncertainties regarding litigation charges, as well as the impact of reputational risks In the past years, Deutsche Bank s overall profitability has been relatively volatile; the bank s somewhat weakening operating income leaving little room for a clear and defensible business strategy. If we look at Deutsche Bank s performance across business segments, results in 2017 have been influenced by more muted client activities in general as well as low market volatility in 19 December /12

6 combination with continued low eurozone interest rates. Although the bank s peers have encountered the same market issues, their earlier business restructuring work, combined with higher efficiencies and less headline risk, have resulted in better results. Figure 6: Profitability track record Source: Company data, Scope Ratings In addition to the current dynamics of the global wholesale and investment banking markets driven primarily by technology, changed client behaviour, less demand, and heightened regulations Deutsche Bank also faces various intrinsic difficulties on the path towards adjusting its business model and restoring healthier profitability metrics, more in line with those of global peers. Furthermore, the group s retail franchise, although it may potentially be improving (possibly supported by Postbank s integration into Deutsche s own retail and commercial bank franchise), appears not to be on par with similar franchises of other large European banks with ratings in the A range. Headwinds due to regulatory reforms have not abated and the impact of Brexit on the bank s business is uncertain. Deutsche Bank is one of the largest dealers of euro-denominated derivatives in London. Any changes to clearing procedures and a move away from the main hub of London could result in the internal restructuring of business units including the relocation of staff. The risk also persists that capital charges for bank processing of euro-denominated derivative trades in London could increase sharply. Despite considerable progress made in this respect, continuing litigation risks may still influence the bank s profitability for some time and involve some reputational risks; the bank is subject to a number of legal proceedings, tax examinations and regulatory investigations. Litigation expenses are difficult to predict and may be of a somewhat cyclical nature; for example, while litigation charges were more limited in the first three quarters of 2017, the bank expects them to rise in the last quarter of Given the bank s apparent backlog with regard to restructuring efforts, considerable restructuring costs, mainly based on labour agreements related to the planed integration of the German retail business, as well as other potential restructuring efforts, are still to materialise. As per the strategy update in March 2017, the bank anticipates restructuring and severance costs of approximately EUR 2bn over the 2017 to 2021period, approximately 70 % of which is expected to be incurred within the next two years. 4. Deutsche Bank s previously resilient investment banking earnings have come up against general market shifts, driven primarily by technology, changed client behaviour, less demand, and heightened regulation Deutsche Bank s performance in its core Corporate and Investment Bank (CIB) segment, is in the spotlight. Over the past years, the bank s general performance has been supported by good, resilient results in the underlying segments. However, CIB seems to have been hit hardest by the ongoing crisis of confidence affecting the bank. In recent presentations, senior bank management has stated that some of the bank s lost client relationships, mainly during the past two years, have been regained, but the full impact is difficult to ascertain. 19 December /12

7 Investment banking revenues have experienced a sharp decline between 2012 and 2017 due to factors including costly internal restructuring efforts combined with reputational risks, as well as challenging markets for fixed income and currencies (FIC) sales and trading. Furthermore, between 2011 and 2013, assets in the Investment Banking segment dropped by around 30%. In the past, the bank was considered a warehousing trading house, however, regulatory changes and increased capital costs have undermined this business set-up with the consequence that trading strategies are now more flow focused. As of Q3 2017, CIB has represented around 68% of risk-weighted assets (EUR 242bn). Within CIB, the target is for Origination & Advisory, Transaction Banking and Financing to comprise 65% of risk-weighted assets with Sales & Trading accounting for the remaining 35%. Deutsche Bank s revenue generation in Investment Banking decreased from 40.4% of profits in 2012 down to 33.2% in 2016 (Figure 7), with revenues of FIC sales and trading decreasing by around 42% during that same period. Figure 7: Total revenue breakdown (EUR m) Investment banking Global transaction banking Retail banking Corporate banking Wealth management Note: Figures exclude non-core activities and adjustments of EUR 0.5bn in 2012 and negative EUR 0.8bn in Source: Company data, Scope Ratings Investment banking revenue breakdown (EUR m) Equity origination Debt origination Advisory Equity sales and trading FIC sales and trading Source: Company data, Scope Ratings Note: For the purposes of comparison, data for Origination and Advisory as well as Sales and Trading have been extracted from CIB and reclassified in this context as Investment Banking. Deutsche Bank still regards the CIB as its core business and will focus on defending a leading European CIB franchise, with the aim of achieving the scale and strength to resume the pursuit of growth options globally. Any proof of stabilising revenues and growing profitability in this business segment should have a positive impact on the bank s credit standing. 19 December /12

8 Appendix A: Peer comparison Cost income ratio (%) Net interest margin (%) Tier 1 leverage ratio (%) Asset risk intensity (RWA % total assets) Common equity Tier 1 ratio (transitional) (%) Total capital ratio (%, transitional) Source: SNL, Scope Ratings *National peers: Commerzbank, Deutsche Bank, DZ Bank **International peers: BNP Paribas, Societe Generale, Deutsche Bank, UBS, Credit Suisse, Barclays, HSBC 19 December /12

9 Selected financial information Deutsche Bank Group 2012Y 2013Y 2014Y 2015Y 2016Y 2017H1 Balance sheet summary (EUR m) Assets Cash and interbank assets NA 118, , , ,246 NA Total securities 1,289, ,243 1,020, , , ,749 of which, derivatives 776, , , , , ,659 Net loans to customers 436, , , , , ,049 Other assets NA 139, , , ,570 NA Total assets 2,022,275 1,611,400 1,708,703 1,629,130 1,590,546 1,568,734 Liabilities Interbank liabilities NA 114, , , ,094 NA Senior debt 376, , , , ,690 NA Derivatives 756, , , , , ,987 Deposits from customers 577, , , , ,110 NA Subordinated debt 20,876 21,044 15,620 14,845 14,135 NA Other liabilities NA 186, , , ,247 NA Total liabilities 1,968,035 1,556,434 1,635,481 1,561,506 1,525,727 1,497,524 Ordinary equity 54,001 54,719 68,351 62,678 59,833 66,258 Equity hybrids 0 0 4,619 4,675 4,669 4,674 Minority interests Total liabilities and equity 2,022,275 1,611,400 1,708,703 1,629,130 1,590,546 1,568,734 Core tier 1/ common equity tier 1 capital 37,957 38,534 60,103 52,429 47,782 44,465 Income statement summary (EUR m) Net interest income 15,975 14,834 14,272 15,881 14,707 6,175 Net fee & commission income 11,809 12,308 12,409 12,765 11,744 5,773 Net trading income 4,992 3,333 3,239 3, ,150 Other income 706 1,041 1,789 1,250 1, Operating income 33,482 31,516 31,709 33,374 28,827 13,961 Operating expense 28,777 26,703 27,079 32,417 27,659 12,042 Pre-provision income 4,705 4,813 4, ,168 1,919 Credit and other financial impairments 1,881 2,126 1,183 1,062 1, Other impairments 2, ,994 1,409 NA Non-recurring items NA NA Pre-tax profit 814 1,457 3,116-6, ,701 Discontinued operations Other after-tax Items Income tax expense , Net profit attributable to minority interests Net profit attributable to parent ,663-6,794-1,402 1,018 Source: SNL, Scope Ratings. 19 December /12

10 Appendix C: Ratios Deutsche Bank Group 2012Y 2013Y 2014Y 2015Y 2016Y 2017H1 Funding and liquidity Loans/deposits (%) 68.8% 85.4% 90.1% 92.3% 91.1% NA Liquidity coverage ratio (%) NA NA 119.0% 119.3% 127.2% 144.2% Asset mix, quality and growth Loans/assets (%) 21.6% 24.1% 24.4% 27.3% 26.3% 26.7% Impaired & delinquent loans/loans (%) 4.1% 4.4% 3.7% 2.8% 2.7% NA Loan-loss reserves/impaired loans (%) 45.4% 55.1% 55.8% 61.7% 61.0% 59.2% Net loan growth (%) -4.7% -10.9% 7.4% 6.5% -5.7% 0.0% Impaired loans/tangible equity & reserves (%) 23.1% 21.8% 14.7% 13.0% 12.3% 10.1% Asset growth (%) -6.6% -20.3% 6.0% -4.7% -2.4% -2.7% Earnings and profitability Net interest margin (%) 0.8% 0.9% 1.0% 1.0% 1.0% 0.9% Net interest income/rwas (%) 4.4% 4.7% 3.7% 3.8% 3.8% 3.5% Net interest income/revenues (%) 47.7% 47.1% 45.0% 47.6% 51.0% 44.2% Fees & commissions/revenues (%) 35.3% 39.1% 39.1% 38.2% 40.7% 41.4% Cost/income ratio (%) 85.9% 84.7% 85.4% 97.1% 95.9% 86.3% Operating expenses/rwas (%) 7.9% 8.4% 7.1% 7.8% 7.1% 6.8% Pre-provision income/rwas (%) 1.3% 1.5% 1.2% 0.2% 0.3% 1.1% Loan-loss provision charges/pre-provision income (%) 40.0% 44.2% 25.6% 111.0% 122.0% 11.0% Loan-loss provision charges/gross loans (%) 0.4% 0.5% 0.3% 0.2% 0.3% 0.1% Pre-tax profit/rwas (%) 0.2% 0.5% 0.8% -1.5% -0.2% 1.0% Return on average assets (%) 0.0% 0.0% 0.1% -0.4% -0.1% 0.1% Return on average RWAs (%) 0.1% 0.2% 0.4% -1.6% -0.3% 0.6% Return on average equity (%) 0.6% 1.2% 2.6% -9.2% -2.0% 3.1% Capital and risk protection Common equity tier 1 ratio (%, fully loaded) 11.4% 12.8% 11.7% 11.1% 11.8% 11.8% Common equity tier 1 ratio (%, transitional) 11.4% 12.8% 15.2% 13.2% 13.4% 12.6% Tier 1 capital ratio (%, transitional) 15.1% 16.9% 16.1% 14.7% 15.6% 15.0% Total capital ratio (%, transitional) 17.1% 18.5% 17.2% 16.2% 17.4% 16.8% Tier 1 leverage ratio (%) 3.0% 3.5% 5.6% 4.7% 4.3% 3.7% Asset risk intensity (RWAs/total assets, %) 16.5% 18.6% 23.2% 24.4% 22.4% 22.6% Market indicators Price/book (x) 0.6x 0.6x 0.5x 0.5x 0.4x 0.5x Price/tangible book (x) 0.8x 0.9x 0.6x 0.6x 0.5x 0.6x Dividend payout ratio (%) 274.8% 115.2% 57.3% NA NA NA Source: SNL, Scope Ratings. 19 December /12

11 Ratings* Issuer Rating Outlook BBB+ Negative Ratings history (Issuer Rating) First assignment A Outlook change Positive A- Senior unsecured debt BBB Additional Tier 1 instruments B Short-term debt rating S-2 Short-term debt rating outlook Stable Senior secured Hypothekenpfandbriefe AAA Outlook Stable Outlook change Stable A Outlook change Negative A Upgrade methodology update A Downgrade A Downgrade BBB+ The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months. A rating change is, however, not automatically ensured. * The ratings are not applicable to debt issued by unguaranteed subsidiaries of the rated parent. Regulatory Disclosures Information pursuant to Regulation (EC) No 1060/2009 on credit rating agencies, as amended by Regulations (EU) No. 513/2011 and (EU) No. 462/2013 Responsibility The party responsible for the dissemination of the financial analysis is Scope Ratings AG, Berlin, District Court for Berlin (Charlottenburg) HRB B, Executive Board: Torsten Hinrichs (CEO), Dr. Stefan Bund and Dr. Sven Janssen. The rating analysis was prepared by Michaela Seimen Howat, Executive Director Responsible for approving the rating: Sam Theodore, Group Managing Director The rating outlook indicates the most likely direction of the rating if the rating were to change within the next 12 to 18 months. A rating change is, however, not automatically ensured. Information on interests and conflicts of interest The rating was prepared independently by Scope Ratings without a mandate (unsolicited rating) and without participation of the issuer / rated entity. As at the time of the analysis, neither Scope Ratings AG nor companies affiliated with it hold any interests in the rated entity or in companies directly or indirectly affiliated to it. Likewise, neither the rated entity nor companies directly or indirectly affiliated with it hold any interests in Scope Ratings AG or any companies affiliated to it. Neither the rating agency, the rating analysts who participated in this rating, nor any other persons who participated in the provision of the rating and/or its approval hold, either directly or indirectly, any shares in the rated entity or in third parties affiliated to it. Notwithstanding this, it is permitted for the above-mentioned persons to hold interests through shares in diversified undertakings for collective investment, including managed funds such as pension funds or life insurance companies, pursuant to EU Rating Regulation (EC) No 1060/2009. Neither Scope Ratings nor companies affiliated with it are involved in the brokering or distribution of capital investment products. In principle, there is a possibility that family relationships may exist between the personnel of Scope Ratings and that of the rated entity. However, no persons for whom a conflict of interests could exist due to family relationships or other close relationships will participate in the preparation or approval of a rating. Key sources of Information for the rating Website of the rated entity/issuer, Annual reports/quarterly reports of the rated entity/issuer, Current performance record, Data provided by external data providers, External market reports, Press reports / other public information. Scope Ratings considers the quality of the available information on the evaluated company to be satisfactory. Scope ensured as far as possible that the sources are reliable before drawing upon them, but did not verify each item of information specified in the sources independently. Examination of the rating by the rated entity prior to publication Prior to publication, the rated entity was given the opportunity to examine the rating and the rating drivers, including the principal grounds on which the credit rating or rating outlook is based. The rated entity was subsequently provided with at least one full 19 December /12

12 working day, to point out any factual errors, or to appeal the rating decision and deliver additional material information. Following that examination, the rating was not modified. Methodology The methodologies applicable for this rating Bank Rating Methodology (May 2016) & & Bank Capital Instruments Rating Methodology (May 2016) are available on The historical default rates of Scope Ratings can be viewed on the central platform (CEREP) of the European Securities and Markets Authority (ESMA): A comprehensive clarification of Scope s credit rating, definitions of rating symbols and further information on the analysis components of a rating can be found in the documents on methodologies on the rating agency s website. Conditions of use / exclusion of liability 2017 Scope SE & Co. KGaA and all its subsidiaries including Scope Ratings AG, Scope Analysis GmbH, Scope Investor Services GmbH (collectively, Scope). All rights reserved. The information and data supporting Scope s ratings, rating reports, rating opinions and related research and credit opinions originate from sources Scope considers to be reliable and accurate. Scope cannot, however, independently verify the reliability and accuracy of the information and data. Scope s ratings, rating reports, rating opinions, or related research and credit opinions are provided as is without any representation or warranty of any kind. In no circumstance shall Scope or its directors, officers, employees and other representatives be liable to any party for any direct, indirect, incidental or otherwise damages, expenses of any kind, or losses arising from any use of Scope s ratings, rating reports, rating opinions, related research or credit opinions. Ratings and other related credit opinions issued by Scope are, and have to be viewed by any party, as opinions on relative credit risk and not as a statement of fact or recommendation to purchase, hold or sell securities. Past performance does not necessarily predict future results. Any report issued by Scope is not a prospectus or similar document related to a debt security or issuing entity. Scope issues credit ratings and related research and opinions with the understanding and expectation that parties using them will assess independently the suitability of each security for investment or transaction purposes. Scope s credit ratings address relative credit risk, they do not address other risks such as market, liquidity, legal, or volatility. The information and data included herein is protected by copyright and other laws. To reproduce, transmit, transfer, disseminate, translate, resell, or store for subsequent use for any such purpose the information and data contained herein, contact Scope Ratings AG at Lennéstraße 5 D Berlin. Rating issued by Scope Ratings AG Lennéstraße Berlin 19 December /12