S&P downgrades Commerzbank’s credit rating

Deutsche Bank and Commerzbank

The rating agency warns of a significant deterioration in results.

(Photo: dpa)

Frankfurt The rating agency Standard & Poor’s (S&P) has given it a thumbs-up because of the economic impact of the corona crisis at Commerzbank, Deutsche Bank and other German financial institutions. At Commerzbank, S&P downgraded the credit rating by one grade to “BBB +”, the outlook remains “negative”, as the credit rating officers announced on Thursday.

At Deutsche Bank, S&P confirmed the rating of the creditworthiness with “BBB +”, but lowered the outlook to “negative” from “stable”. While the creditworthiness guards doubt that Commerzbank can implement its new strategy “Commerzbank 5.0”, including the planned sale of the Polish subsidiary mBank as planned, they see the restructuring of Deutsche Bank basically on track. Commerzbank and Deutsche Bank declined to comment.

With “BBB +” the credit ratings of the two largest German private banks are still three levels above the junk level. A negative outlook means that the credit rating is in danger of being lowered.

S&P warns that even if the economy begins to recover in the third quarter, all banks will see a significant deterioration in results, credit quality and, in some cases, capital resources. The risks that the economy will recover later and the situation will worsen are considerable.

At the Sparkassen-Finanzgruppe Hessen-Thüringen, which includes Landesbank Hessen-Thüringen (Helaba), S&P confirmed the credit rating with “A”, but lowered the outlook to “negative” from “stable” due to the corona crisis.

At the leasing provider Grenke The rating with “BBB +” also remained stable, here too the outlook was reduced to “negative” from “stable”. At Deutsche Pfandbriefbank (pbb), S&P left both the credit rating “A-” and the outlook “negative”.

More: False incentives, fraud, debts – the side effects of the corona crisis.


Moody’s warns – bondholders face high defaults

Dusseldorf The risk for international bond creditors caused by Corona is given a house number for the first time: corporate bonds totaling more than $ 174 billion, the rating agency Moody’s announced on Wednesday, are currently among the financial stocks threatened by the epidemic.

This figure corresponds to the outstanding bonds of those 25 percent of the large companies rated speculatively (“non-investment grade”) by Moody’s that have lost a large part of their current income due to official orders: above all the non-food retail trade, followed by the Car industry to the leisure and catering trade.

The energy sector is also indirectly affected, which represents a further 2.4 percent of the group bonds issued worldwide. The oil price shock is throwing business on them these days.

“We will also see a contagion effect in other industries,” warns Moody’s manager Jeanine Arnold. Business service providers, chemical companies and raw material suppliers are exposed to high risks as suppliers.

Even the telecommunications sector, which is hardly affected by the corona crisis at the moment, could be affected at different times. There is usually a correlation between sales development and gross national product, observes Moody’s. With the “unprecedented shock” for the economy of the G20 countries, it is expected there, telecommunications revenues will shrink – but with a delay of one year.

Investors have suspected that the biggest failures from the non-food retail sector are to be feared, not only since the protective shield procedures for the Esprit fashion retailer and the Essen-based department store group Karstadt Kaufhof. A look at the latest reports from the rating agency Standard & Poor’s confirm the concern.

In the past two weeks alone, she has classified industry giants such as Fossil, Levi Strauss, the US department store Neiman Marcus and the British fashion retailer in this sector Matalan down – all now with a non-investment grade. S&P even certified the last two with an “CCC” rating, an acute risk of late payment. Even the hotel chains Hilton and Wyndham, which also got a speculative “BB” thanks to Corona at Easter, are still stable in comparison.

Rapid descent

For bond artists, the situation has escalated at an immense pace. Among the speculative European bonds – that is, from a rating of “Ba1” downwards – there will be a default of 7.8 percent by the end of the year, Moody’s expects. By March 2021, it could even be eight percent. In the twelve months to March 2020, however, the default rate was just 1.7 percent.

Between early March 2020 and April 9, 22 percent of all companies rated by Moody’s as “speculative” received a devaluation. Companies from retail and the automotive industry in particular were often down several levels.

“In addition, the corona crisis will significantly widen the gap between relatively financially strong and financially weak companies,” warns Moody’s manager Arnold. For example, issuers classified as moderately speculative (“Ba”) only had three devaluations between the beginning of March and April 9 that made up more than one meter, while the poorer credit ratings (“B” and below) gave 33.

Speculative issuers tend to have weaker market positions, are more geographically defined and focus on fewer customers and suppliers, Moody’s explains. In some cases, they would have a higher fixed cost share, which limits operational flexibility. This makes it difficult for them to react to the suddenly and unforeseen restrictions.

Investment grade companies, on the other hand, would typically have better access to sources of finance, often to equity. In addition, there would often be levers to limit the outflow of funds – for example through dividend cuts or the provision of investments.

Such conditions currently count not least for government aid programs. In Britain, for example, the government has made the CCFF program explicitly available to investment grade companies. In other countries, including Germany, the banks have to guarantee part of the government loans. Moody’s believe that this limits the prospects for companies that were considered “speculative” even before the corona crisis. The tour operator Tuiwho received a EUR 1.8 billion KfW loan is an exception here.

More: With Daimler, BMW and ford It hit the first: The corona crisis is causing rating agencies to downgrade car companies. It can go further down.


Rating agency S&P confirms top rating for Germany

The rating agency expects GDP in Germany to drop by almost two percent. Source: dpa
Rating agency S&P

The rating agency expects GDP in Germany to drop by almost two percent.

(Photo: dpa)

Berlin The rating agency S&P has confirmed Germany’s top rating. The country holds the grade “AAA / A-1 +”. The assessment reflects the strong financial buffer that Germany has. Government finances are in good shape and have enabled a strong response to the economic impact of the coronavirus pandemic.

The rating agency assumes that gross domestic product in Germany will shrink by 1.9 percent this year.

More: Read all current developments regarding the corona pandemic here.

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Softbank argues with the rating agency Moody’s

Lettering from Softbank

The Japanese technology group sells investments on a large scale and wants to use the proceeds to reduce its debts.

(Photo: Getty Images; Per-Anders Pettersson)

Tokyo The situation with the Japanese technology investor Soft bench coming to a head. Just three days after the company triggered a price rally on the stock exchange with a € 38 billion emergency program, the credit rating agency Moody’s devalued the rating of the technology investor drastically. Instead of Ba1, the credit rating is now Ba3. Softbank retaliated promptly and withdrew Moody’s rating order shortly thereafter. “There is no reasonable explanation for the two-stage devaluation,” the company said.

Moody’s had justified his tough action with Softbanks “aggressive financial behavior”. In particular, the credit analysts were disturbed by the plan to sell holdings for EUR 38 billion in order to buy back their own shares and to repay debts, in other words, of the program with which the company’s founder Masayoshi Son wanted to strengthen the balance sheet and the share price.

Son was rewarded for his program on the stock exchange. Since Monday, investors have pushed the price up by 57 percent to 4,170 yen in just three days. Concerns about huge book losses from Softbank’s $ 100 billion Vision Fund had previously plunged the stock price by 55 percent since mid-February.

Moody’s complains that the plan “comes just when the fall of the stock markets puts the value and liquidity of the portfolio under stress”. Motoki Yanase, a vice president of the rating agency, warns: “In the current downturn with falling movements and a flight to high-quality values, selling assets is challenging.”

Further downgrading possible

In addition, Yanase warns that the credit quality of Softbank’s 27 trillion yen (224 billion euro) portfolio could deteriorate if the company sells its most liquid and best rated assets.

“It is unclear why Softbank is undertaking such drastic recapitalization in a time of great volatility,” said the Moody’s analysts. They are even checking to further downgrade Softbank’s rating. In the next step, Softbank would slide into the area of ​​highly speculative junk bonds.

Softbank opposes this. The Japanese accuse Moody’s of deviating significantly from their own criteria. Management has repeatedly explained the plans to the rating agency. But the rating agency did not take note of the planned improvement in Softbank’s credit quality. In order to avoid misunderstandings among the investors, the group decided to ask Moody’s to withdraw the valuations.

Softbank’s tough reaction has a reason: The 62-year-old Son wants to prevent his life’s work from falling victim to the corona crisis. Son wants to build Softbank into the world’s leading corporation in the age of artificial intelligence and all-encompassing networking. However, there have been some setbacks recently.

Son’s Saudi partners accused the investor of buying stakes that were too aggressive and too high. Then also lost several big bets from the Japanese like the rideshare Over and above all the office provider WeWork massive in value. The book losses of the Vision Fund already pushed Softbank into the loss zone at the end of last year. The Coronacrash should increase the losses.

More: Softbank wants to appease investors with a generous share buyback.