S&P hikes Deutsche outlook to positive from negative

FRANKFURT: S&P said it had raised the creditrating outlook of German lender Deutsche Bank to positive from negative, a vote of confidence as the bank undergoes a major overhaul.

S&P's move follows rosier outlooks from rating agency counterparts Moody's and Fitch over recent months, and it was announced along with a review of ratings of several major European banks. The bank embarked on a restructuring in 2019, closing some businesses and shedding thousands of staff in an effort to return to profitability. In 2020, the bank posted its first full-year profit since 2014.

"Our positive outlook acknowledges the huge progress made and the bank's likely resilience to the current adverse economic conditions," S&P said. It rates Deutsche at 'BBB+', below many of its competitors. S&P added that "the benefits of restructuring will emerge over the next 1224 months" and "lift Deutsche Bank's performance more into line with higher rated European peers".

S&P lowered Deutsche's outlook to negative last year amid uncertainty around the coronavirus crisis. Credit ratings are critical for any company but especially for a bank such as Deutsche, which, like all financial institutions, is a big issuer of debt securities.

Higher ratings can result in lower funding costs, helping Deutsche return to more sustainable profitability. "Once again, we have won recognition, from a key stakeholder, for disciplined execution of our transformation," Deutsche's finance chief James von Moltke wrote in a memo.