Deutsche Bank (“DB”) will be issuing a new 4NC3 SGD senior non-preferred notes at the initial price guidance (“IPG”) of 4.70%. The new notes are expected to be issued on 5 April 2024, with the call date of 5 April 2027 and the maturity date of 5 April 2028. If uncalled, the coupon will reset at the prevailing 1-year SORA-OIS plus the initial spread (determined upon issuance). The new issuance is made available only to accredited and institutional investors.
DB is a leading German bank with strong European roots, alongside a vast global footprint. Well-established in major emerging markets, DB taps into the rapid growth of these fast-growing economies, including the Asia-Pacific region, Central and Eastern Europe and Latin America.
For the full year ended 31 December 2023 (“FY23”), DB saw another year of strong financial results after its restructuring. The Group’s revenue improved 6% year-on-year (“YoY”) from EUR 27.2b in FY22 to EUR 28.9b in FY23. On the other hand, its profit fell from EUR 5.7b in FY22 to EUR 4.9b in FY23, primarily due to higher tax expenses recorded for FY23. Net interest income (“NII”) remains a strong contributor of income for DB in FY23 despite a marginal in Group NII from EUR 13.7b in FY22 to EUR 13.6b in FY23.
The credit and solvency profile remained stable for DB across FY23. The CET1 ratio stood at 13.7% as of December 2023, which was a slight increase from 13.4% as of December 2022. DB expects the CET1 to sustain at around 13.5% until 2025. Meanwhile, DB’s leverage ratio stood at 4.5% as of December 2023, mostly constant against the 4.6% as of December 2022. Liquidity reserves are at EUR 261b as of 4Q23, with EUR 219b being high-quality liquid assets. As a result, DB holds a liquidity coverage ratio of 140% and a net stable funding ratio of 121%, both being above the regulatory requirements of 100%.
DB is rated A-/A/A1 by S&P/Fitch/Moody’s respectively, with a stable outlook across the three rating agencies. For the new issue, it is expected to be rated A-/BBB/Baa1 respectively. Investors should note that the final price guidance is likely to adjust downwards from the IPG of 4.7%. Additionally, given the non-preferred nature of these senior bonds, we wish to highlight that the new issuance will come with loss absorption features, which might not be suitable for risk-averse investors.
While the new issue offers a higher yield as compared to DB 5.000% 05Sep2026 Corp (SGD), the Group’s other senior note, we find Tier 2 subordinated papers with a similar credit rating more attractive. LLOYDS 5.250% 22August2033 Corp (SGD) and BPCEGP 5.000% 08Mar2034 Corp (SGD) will be good alternatives to consider, given the yields to call of 4.77% and 4.97% respectively. However, the DB new issuance will be suitable for those looking for a relatively short-duration paper, given the 4NC3 structure, and also higher seniority.
Declaration: For specific disclosure, at the time of publication of this report, IFPL (via its connected and associated entities) holds a position in LLOYDS 7.086% 31Aug2033 Corp (AUD), and the analyst who produced this report hold a NIL position in the abovementioned securities.
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