Detailed Rationale CRISIL Ratings has reaffirmed its 'CRISIL A1+' rating on the certificates of deposit programme of Deutsche Bank A. G. (India Operations).
The rating continues to be based on the long-term issuer credit rating of ‘A-/Positive/A-2’ by S&P Global (S&P Global) on Deutsche Bank AG. The rating on Deutsche Bank AG (India) also reflects its strong capital position, evidenced by a capital adequacy ratio (CAR) of 15.22% as on December 31, 2022, and its comfortable asset quality. These rating strengths are partially offset by the modest scale of lending operations.
CRISIL Ratings has reduced the rated quantum of Certificate of Deposit (CD) of Deutsche Bank A.G to Rs 5000 crore at the bank’s request and based on third party confirmation. This is in line with CRISIL Ratings' withdrawal policy. |
Analytical Approach For arriving at the rating, CRISIL Ratings has mapped the rating on Deutsche Bank (India) to S&P Global’s rating on Deutsche Bank AG., translated to the CRISIL scale. |
Key Rating Drivers & Detailed Description Strengths: Strategic importance to, and strong support from Deutsche Bank A.G: The rating on Deutsche Bank AG (India) is based on the long-term issuer credit rating of ‘A-/Positive/A-2, issued by S&P Global on Deutsche Bank AG. India remains of high importance to the global operations of Deutsche Bank AG. Over the years, Deutsche Bank (India) has been focusing on deepening and expanding its coverage of Indian corporates; a large part of the customer base of Indian operations also includes global clients of Deutsche Bank AG whose affiliates/subsidiaries are operating in India. Over the years, Deutsche Bank AG has regularly infused equity aggregating to around Rs 3946 crore during 2018-2021 in the Indian operations. Deutsche Bank (India) is expected to remain strategically important and receive strong operational and managerial support from its parent, Deutsche Bank AG.
Strong capitalisation Deutsche Bank (India) has strong capitalisation, backed by continued support from Deutsche Bank, which has infused around Rs 3,946 crore during 2018-2021. As on December 31, 2022, the networth for Deutsche Bank (India) stood at Rs 21,761 crores with Tier I capital ratio and overall CAR too were comfortable at 13.77% and 15.22%, respectively, as on December 31, 2022 (14.73% and 16.18%, respectively as on March 31, 2022).
Comfortable asset quality The asset quality metrics for the bank have remained comfortable with GNPA and NNPA for the bank improving to 3.1% and 0.98% respectively as on December 31, 2022 from 4.62% and 2.26% as on March 31, 2022. The improvement stemmed from an upgrade from one large NPA account. Even in terms of restructuring, the bank has done very limited restructuring in its portfolio. CRISIL Ratings expects asset quality metrics to remain comfortable over the medium term owing to global risk management standards and dedicated credit team in India.
Weakness: Strong presence in wholesale banking activities, yet modest scale of lending operations and earnings profile Gross Advances stood at Rs 60,231 crore as on December 31, 2022 (Rs 59,076 crore as on March 31, 2022). However, the bank has maintained strong focus on wholesale banking activities, such as corporate financing, investment banking, treasury and derivatives operations, wealth management business and transaction banking, and is a leading player in many of these segments. Even in terms of the deposit profile, the bank had a deposit base of around Rs 76,375 crore as on December 31, 2022 (Rs 79,908 crore as on March 31, 2022). As on December 31, 2022, bank’s CASA stood at around 46% as compared to 44% as on March 31,2022.
Further, the earnings profile of the bank remains modest with RoA of around 0.9% in the first nine months of fiscal 2023 (1.1% for fiscal 2022). The bank is able to pass on the rate hike as majority of its lending is market linked. Hence NIM (based on total income) of the bank remain comfortable at around 3.7% in first nine months of fiscal 2023 (4.3% in fiscal 2022). Operating expense and credit costs stood at 2.0% and 0.1% respectively as on December 31, 2022, as against 1.9% and 0.4% as on March 31, 2022. |
Liquidity: Strong Liquidity is comfortable, with Liquidity Coverage Ratio at 203% as on December 31, 2022, against the regulatory requirement of 100%. The bank benefits from access to systemic sources of funds, such as the liquidity adjustment facility from Reserve Bank of India, access to the call money market, access to Repo market and borrowings from the parent also support Deutsche Bank (India). As on April 30, 2023, the bank had repayments of Rs 30,552 crore for the three months till July 2023. Against the same, the bank has total liquidity of Rs. 41,318 crore (adjusted for regulatory SLR requirement). |
Rating Sensitivity Factors Downward Factors:
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About the Bank Deutsche Bank, founded in 1870 in Berlin, is one of the world's leading providers of international financial services. The bank focuses on three main businesses: corporate and investment banking, private clients, and asset management and corporate investments. It had 1,536 branches across the world, and total asset base of over EUR 1337 billion as on December 31, 2022.
Deutsche Bank commenced operations in India in 1980. Its focus has been on investment banking, corporate and transaction banking, treasury and derivatives operations, and private wealth management. The bank launched retail-banking services near the end of 2005. For the first nine months of fiscal 2023, Deutsche India had a profit after tax (PAT) of Rs 916 crore on a total income (net of interest expense) of Rs 3,765 crore, against Rs 1,474 crore and Rs 6,002 crore, respectively, reported for the fiscal 2022. It had a total asset base of Rs 126,920 crore and net worth of Rs 21,761 crore as on December 31, 2022. |
Key Financial Indicators
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Any other information: Not applicable |
Note on complexity levels of the rated instrument: |
Annexure - Details of Instrument(s)
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| Annexure - Rating History for last 3 Years | ||||||||||||||||||||||||||||||||||||||||||||||||||||
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Criteria Details
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