Moody's cuts Commerzbank rating

Moody's Investors Service said it downgraded Commerzbank AG's long-term senior unsecured debt and issuer ratings to A2 from A1 and changed the outlook to stable from negative. Concurrently, the agency affirmed Commerzbank's Baa2 junior senior unsecured debt ratings.

“Today's one-notch downgrade of Commerzbank's senior unsecured debt and long-term issuer ratings to A2 from A1 was prompted by the expected reduction in the volume of this loss-absorbing debt class, relative to the size of the bank's balance sheet. This development results in a higher loss severity for senior unsecured debt under Moody's advanced loss given failure (LGF) analysis,” the agency said in a press release.

Moody’s said the stable outlook considers, “Commerzbank's achieved milestones on its strategic transformation, including initial momentum in its targeted sustained improvement in profitability, and the elevated uncertainty for Germany's economy related to the necessary adjustments for a significant share of the corporate sector towards materially reduced availability of attractively priced commodities, at least temporarily threatening the competitiveness of the industrial backbone of the German economy.”

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