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Deutsche Bank rating downgraded by Moody’s

Deutsche Bank has had its rating downgraded two places by credit agency Moody’s.

The financial institution’s rating was reduced from Aa1 to fourth highest Aa3 while its financial strength was lowered to C-plus from B, the agency announced.

According to the body, the rating was downgraded following delays in the acquisition of Deutsche Postbank AG.

A lack of transparency surrounding the bank’s activity in the capital markets and subsequent concern over the organisation’s exposure to risk were cited as the reasons behind the downgrade.

Other businesses with the bank have also been exposed to more earnings volatility than expected.

However, Dirk Hoffmann-Becking of Sanford C Bernstein told the Wall Street Journal that the downgrade will not affect the bank’s ability to raise funds.

“We don’t think it matters. All the points being discussed by Moody’s as the reason for the downgrade are very well known."

Potential losses on “legacy assets” including commercial real estate and leveraged finance also contributed to the lowering of the bank’s rating.

Adding more leverage and risk would be a way to increase stability, the agency explained.

By Jim Ottewill