S&P cuts troubled Deutsche Bank’s rating by a notch to BBB+

Deutsche Bank last month announced it would slash 7,000 jobs around the world as part of its revamp. (AFP)
Updated 01 June 2018

S&P cuts troubled Deutsche Bank’s rating by a notch to BBB+

FRANKFURT: Ratings agency S&P on Friday downgraded German giant Deutsche Bank’s long-term credit rating from A- to BBB+, a day after a US banking regulator classified the firm’s American subsidiary as an at-risk institution.
Standard & Poor’s revised rating comes at a tumultuous time for Germany’s largest lender, whose newly appointed chief executive Christian Sewing has tried to reassure investors that Deutsche is ready to do what it takes to return to profitability after years of losses.
Deutsche last month announced it would slash 7,000 jobs around the world as part of its revamp.
“While we consider management is taking tough, although likely inevitable, actions and proposes a logical strategy to successfully restore the bank to more solid, sustainable profitability over the medium to long term, the bank appears set for a period of sustained underperformance compared with peers, many of whom have now finished restructuring,” Standard & Poor’s said in a statement.
“We see significant execution risks in the delivery of the (bank’s) updated strategy amid a continued unhelpful market backdrop, and we think that, relative to peers, Deutsche Bank will remain a negative outlier for some time,” it added.
S&P’s revision comes a day after the US Federal Deposit Insurance Commission classified Deutsche among its “problem banks.”
The Federal Reserve has also branded it as being in “troubled condition.”


Israel cenbank’s Abir says buying corporate bonds to prevent layoffs

Updated 08 July 2020

Israel cenbank’s Abir says buying corporate bonds to prevent layoffs

JERUSALEM: The Bank of Israel’s decision to start buying corporate bonds should enable companies to issue debt and prevent further layoffs as a result of the coronavirus pandemic, deputy governor Andrew Abir said.
On Monday, the bank held its benchmark interest rate at 0.1 percent but said it would buy 15 billion shekels ($4 billion) of higher-rated corporate bonds in the secondary market.
“It’s not that the corporate bond market was not functioning or because spreads have widened dramatically, but rather the understanding that over the next 6-12 months, there’s going to be a need for issuance in that market,” Abir told Reuters.
The central bank began purchases on March 15 of up to 50 billion shekels of government bonds, which has helped reverse a spike in government and corporate yields.
The index of bonds issued by Israel’s 20 largest firms has gained 1.4 percent following the central bank’s announcement, following three weeks of declines.
Noting that more than 40 percent of corporate credit comes from the bond market, Abir said that fear of being frozen out the market could lead to cash hoarding and cost-cutting, including jobs.
“We want to prevent a situation where a company is having question marks in its ability to fund themselves (and) lays off another 1,000 workers.”
Unemployment is already more than 20 percent and could worsen after some COVID-19 restrictions were reimposed.
Abir said risks to the central bank’s scenario of a record six percent economic contraction in 2020 will be “to the downside” if the infection rate stays high.
Analysts are split over whether the central bank will lower its key rate to zero percent or negative. The Bank of Israel has indicated it is reluctant to do so.
“We still have more measures that we can do. QE can be increased. We haven’t run out of our policy options,” Abir said.