DBRS Morningstar Finalises Provisional AA Rating on Deutsche Bank A.G. Conditional Pass-Through Structured Covered Bonds (Structured - Mortgages)

DBRS Ratings Limited (DBRS Morningstar) finalised its provisional rating of AA on the notes issued under the Deutsche Bank AG (DB AG or the Issuer) Conditional Pass-Through Structured Covered Bonds Programme (CPT SCB or the Programme). The Programme is guaranteed by SCB Alpspitze UG and is EUR 35 billion in size.

Series 3 is a EUR 500 million fixed-rate bond, paying a coupon of 0.050% and matures on 20 November 2024.

All covered bonds (CBs) issued under the Programme rank pari passu with each other and are currently rated AA by DBRS Morningstar.

The rating is based on the following analytical considerations:
-- A Covered Bonds Attachment Point (CBAP) of “A”, one notch below DB AG’s Long-Term Critical Obligations Rating (COR). DB AG is the Reference Entity (RE) for the programme. Deviating from the “Rating and Monitoring Covered Bonds” methodology, DBRS Morningstar assigned a CBAP that is one notch below the COR even if the Programme can be seen as strategic for the funding of the RE’s primary activity.
-- A Legal and Structuring Framework (LSF) Assessment of “Very Strong” associated with the Programme.
-- A Cover Pool Credit Assessment (CPCA) of BBB, which is the lowest CPCA in line with the LSF-Implied Likelihood (LSF-L).
-- An LSF-Implied Likelihood (LSF-L) of AA (low).
-- A one-notch uplift for good recovery prospects.
-- A committed minimum overcollateralisation (OC) of 15%. DBRS Morningstar gives full credit to such commitment in accordance with its “Rating and Monitoring Covered Bonds” methodology.

The transaction was analysed with the DBRS Morningstar European Covered Bond Cash Flow tool. The main assumptions focused on the timing of defaults and recoveries of the assets and interest rate stresses.

Everything else being equal, a downgrade of the CBAP by one notch would lead to a downgrade of the LSF-L by one notch, resulting in a downgrade of the CB ratings by one notch. In addition, all else unchanged, the CB ratings would be downgraded if any of the following occurred: (1) the CPCA was downgraded below BBB; (2) the LSF Assessment associated with the Programme was downgraded to Average or below; or (3) the quality of the cover pool (CP) and the level of OC were no longer sufficient to support a one-notch uplift for good recovery prospects.

For further information on the Programme, please refer to the rating report at www.dbrs.com.

Notes:
All figures are in euros unless otherwise noted.

The principal methodology applicable to the rating is: “Rating and Monitoring Covered Bonds”

In DBRS Morningstar’s opinion, the changes under consideration do not require the application of the entire principal methodology. Therefore, DBRS Morningstar focused on the cash flow analysis.

Other methodologies referenced in this transaction are listed at the end of this press release.

These may be found on www.dbrs.com at: http://www.dbrs.com/about/methodologies.

For a more detailed discussion of the sovereign risk impact on Structured Finance ratings, please refer to “Appendix C: The Impact of Sovereign Ratings on Other DBRS Credit Ratings” of the “Global Methodology for Rating Sovereign Governments” at: https://www.dbrs.com/research/350410/global-methodology-for-rating-sovereign-governments.

The sources of data and information used for this rating include investor reports provided by the Issuer.

DBRS Morningstar did not rely upon third-party due diligence in order to conduct its analysis.

At the time of the initial rating, DBRS Morningstar was not supplied with third-party assessments. However, this did not impact the rating analysis.

DBRS Morningstar considers the data and information available to it for the purposes of providing this rating to be of satisfactory quality.

DBRS Morningstar does not audit or independently verify the data or information it receives in connection with the rating process.

The last rating action on this transaction took place on 1 November 2019, when DBRS Morningstar assigned a provisional rating of AA to the notes expected to be issued under the Programme.

Information regarding DBRS Morningstar ratings, including definitions, policies and methodologies, is available on www.dbrs.com.

For further information on DBRS Morningstar historical default rates published by the European Securities and Markets Authority (ESMA) in a central repository, see: http://cerep.esma.europa.eu/cerep-web/statistics/defaults.xhtml.

Ratings assigned by DBRS Ratings Limited are subject to EU and US regulations only.

Lead Analyst: Roger Bickert, Vice President
Rating Committee Chair: Ketan Thaker, Senior Vice President
Initial Rating Date: 1 November 2019

DBRS Ratings Limited
20 Fenchurch Street
31st Floor
London
EC3M 3BY
United Kingdom
Registered and incorporated under the laws of England and Wales: Company No. 7139960

The rating methodologies used in the analysis of this transaction can be found at: http://www.dbrs.com/about/methodologies.

-- Rating and Monitoring Covered Bonds
-- Rating and Monitoring Covered Bonds Addendum: Market Value Spreads
-- Global Methodology for Rating Banks and Banking Organisations
-- Legal Criteria for European Structured Finance Transactions
-- Interest Rate Stresses for European Structured Finance Transactions
-- Master European Residential Mortgage-Backed Securities Rating Methodology and Jurisdictional Addenda
-- Operational Risk Assessment for European Structured Finance Originators
-- Operational Risk Assessment for European Structured Finance Servicers
-- Global Methodology for Rating Sovereign Governments

A description of how DBRS Morningstar analyses structured finance transactions and how the methodologies are collectively applied can be found at: http://www.dbrs.com/research/278375.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.