S&P hikes Deutsche Bank credit rating outlook to positive from negative

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S&P’s move follows rosier outlooks from rating agency counterparts Moody’s (NYSE:MCO) 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 12-24 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 seen by Reuters.