Moody’s downgrades Deutsche Bank Mexico

Moody's de Mexico said it downgraded the long-term local and foreign currency deposit ratings of Deutsche Bank Mexico, SA to Ba1 from Baa3 with a stable outlook.

The short-term local and foreign currency deposit ratings were downgraded to Not Prime from Prime-3, respectively, and the long-term Mexican National Scale (NSR) deposit rating was downgraded to A1.mx from Aa2.mx. The short-term NSR was affirmed at MX-1.

In addition, Deutsche Bank Mexico's adjusted baseline credit assessment was lowered to ba1 from baa3. Its ba2 standalone baseline credit assessment was not affected by this action.

At the same time, the long- and short-term counterparty risk assessments were lowered by one notch to Baa3(cr)/Prime-3(cr), from Baa2(cr)/Prime-2(cr).

Moody's also downgraded the long- and short-term local currency issuer ratings of Deutsche Securities Mexico, SA de CV's (Deutsche Securities Mexico) to Ba1/Not Prime from Baa3/Prime-3, long-term Mexican National Scale issuer rating to A1.mx from Aa2.mx and affirmed the short-term rating was affirmed at MX-1.

The outlook is stable.

Moody’s said the downgrades of Deutsche Bank AG's (deposits A2/senior unsecured Baa1 negative, BCA baa3) Mexican subsidiaries reflect its revised view of the likelihood that Deutsche Bank would provide extraordinary support to these entities in the unlikely event they face severe financial stress.

In light of Deutsche Bank's announced intention to exit these operations along with others in various countries, as part of its 2020 strategic plan, the agency reduced its assessment of the likelihood of support from Deutsche Bank to High from Very High. Given that Deutsche Bank no longer considers the Mexican banks' limited franchises core, Moody's believes there is a reduced likelihood of Deutsche Bank supporting them in a stress situation, notwithstanding their high degree of integration into Deutsche Bank's global operations.

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