Frankfurt am Main, June 22, 2012 -- Moody's Investors Service has today downgraded by one notch the long-term senior debt and deposit ratings of Deutsche Postbank AG (Postbank) to A2 from A1, prompted by the lowering of Postbank's standalone credit assessment to ba1 from baa3, within the D+ standalone bank financial strength rating (BFSR) category. The D+ BFSR and the Prime-1 short-term debt and deposit ratings were confirmed and the outlook on all of Postbank's ratings is stable.

Moody's says that the lowering of Postbank's standalone credit assessment reflects (i) the rating agency's view that there are tail risks associated with the bank's still-large non-core asset exposures; and (ii) Postbank's limited capital-generation capacity and moderate capitalisation.

Moody's notes several mitigating factors that have limited the extent of today's downgrades. These include (i) Postbank's recurring and relatively stable core earnings capacity; (ii) the bank's robust liquidity and funding structure; as well as (iii) Moody's assessment of a very high probability of parental support from Deutsche Bank following the recent domination agreement.

The downgrade of the long-term ratings reflect the lowering of the bank's standalone credit assessment and the weakening credit profile of Postbank's parent, Deutsche Bank, which was downgraded to A2 deposits, stable; BFSR C-/ BCA baa2, stable from Aa3 deposits; BFSR C+/ BCA a2 on 21 June 2012.

In addition to the above rating actions, Postbank's subordinated debt ratings were downgraded to Baa3 from Baa2, following the lowering of its standalone credit strength. Moody's has also upgraded several junior subordinated debt and hybrid securities, reflecting Moody's revised parental support assumptions. The instruments are now notched off Postbank's baa2 adjusted standalone strength assessment in line with Moody's notching approach for hybrid debt securities.

Today's actions on Postbank's BFSR and long-term ratings conclude the review initiated on 15 February 2012 (see "Moody's reviews Ratings for European Banks" - http://www.moodys.com/research/Moodys-Reviews-Ratings-for-European-Banks--PR_237914).

For a detailed list of ratings affected, refer to the end of the press release. For additional information on bank ratings, please refer to the webpage containing Moody's related announcements: http://www.moodys.com/bankratings2012.

RATINGS RATIONALE --- STANDALONE CREDIT ASSESSMENT

STANDALONE FINANCIAL STRENGTH RATING MARGINALLY WEAKER AT Ba1

Moody's confirmed Postbank's D+ BFSR and lowered the mapping of the standalone credit assessment of ba1 from baa3 previously. This reflects Postbank's increased risk to asset quality deterioration in the current environment due to (i) the bank's large investment securities portfolio, including comparatively large exposures to European peripheral sovereign debt, which equates to most of the bank's Tier 1 capital base; (ii) the bank's still sizeable non-core asset exposures from structured credits; and (iii) continued asset quality deterioration from its internationally diversified commercial real-estate exposures.

When combined with Postbank's still weak overall capital-generation capacity and moderate capitalisation (which stood at a Tier 1 capital ratio of 10.8% at year-end 2011), and a relatively high leverage ratio of 34 times (measured as total assets divided by total shareholders' equity), Moody's believes that all of these factors render the bank vulnerable to tail risks and unexpected losses in a stressed economic environment.

MITIGATING FACTORS

Moody's notes several mitigating factors that have limited the extent of today's downgrade. Postbank has a strong consumer banking franchise in Germany that continues to prove resilient, thereby providing a certain degree of earnings stability. Moody's anticipates that Postbank's earnings capacity from these core activities could help to absorb potential losses that might arise from its non-core asset exposures.

Postbank's liquidity and funding position has remained robust throughout the euro area crisis and reflects the bank's sizeable and granular deposit base. As a typical retail bank, Postbank's main funding source is retail deposits and -- to a lesser extent -- corporate deposits, which together account for most of its total liabilities. In addition, Moody's says that the bank's large liquidity portfolio -- mainly invested in ECB-eligible securities -- has the potential to mitigate risks emanating from the current, challenging funding environment.

RATINGS RATIONALE --- DEBT & DEPOSIT RATINGS

The downgrade of Postbank's long-term debt and deposit ratings to A2 from A1 reflects its lower standalone credit strength of ba1 and the weakening credit profile of its parent, following the two-notch downgrade of Deutsche Bank's long-term ratings to A2 from Aa3.

Following the recent conclusion of a domination and profit & loss transfer agreement between Postbank and its parent Deutsche Bank, Moody's assumes a very high probability of parental support for Postbank, which results in five notches of rating uplift. The assumption of a very high probability of parental support is underpinned by several aspects, including (i) Postbank's strategic role in the group with its well entrenched domestic consumer banking franchise which should provide for a longer-term sustainable earnings contribution; as well as (ii) a domination and profit & loss transfer agreement, (between Postbank and DB Finanz-Holding GmbH), which obliges Deutsche Bank to absorb any of Postbank's losses, based on local GAAP accounting, at least over the next five years.

RATINGS RATIONALE --- SUBORDINATED DEBT AND HYBRID RATINGS

The downgrade of Postbank's subordinated debt to Baa3 from Baa2 reflects the bank's lower standalone credit strength of ba1 and is one notch below Postbank's adjusted standalone credit assessment (baa2), thereby reflecting its parent's unsupported credit strength of baa2.

Moody's has upgraded the ratings of the bank's junior subordinated debt and several hybrid securities, reflecting Moody's revised parental support assumptions. These instruments are now notched off Postbank's baa2 adjusted standalone strength rating in line with Moody's notching approach for hybrid debt securities.

As a result, Postbank's junior subordinated debt ("Genussschein") was upgraded to Ba2(hyb) from B1(hyb) and is now positioned three notches below the bank's adjusted standalone credit strength, reflecting its junior subordinated claim in liquidation and cumulative deferral features tied to the breach of a net loss trigger (local GAAP basis, "HGB"). Moody's considers these instruments to be fully performing, after the full write-back of principal and payment of coupons omitted for the fiscal years 2008 and 2009. Hence, Moody's has applied its notching approach to these instruments' ratings.

The junior subordinated debt issued by ProSecure Funding Limited Partnership was upgraded to Ba1(hyb) from Ba2(hyb) and is now positioned two notches below the bank's adjusted standalone credit strength, reflecting its junior subordinated claim in liquidation and cumulative coupon skip mechanism tied to the breach of a balance sheet loss trigger (local GAAP basis, "HGB"). We have also attached a hybrid (hyb) indicator to this debt in accordance with our Rating Symbols and Definitions published in June 2012. In addition, Moody's has relabelled this security as "junior subordinated"; it was initially mislabelled as "subordinated" due to an internal administrative error.

The hybrid securities issued by Deutsche Postbank Funding Trust I, II, III, and IV were upgraded to Ba2(hyb) from Ba3(hyb) and are now rated three notches below the bank's adjusted standalone credit strength, reflecting their deeply subordinated claim in liquidation and non-cumulative coupon skip mechanism tied to the breach of a balance-sheet loss trigger (local GAAP basis, "HGB").

RATIONALE FOR STABLE OUTLOOK

The stable outlooks on all the ratings captures Moody's view that the currently foreseen risks to creditors are now reflected in these ratings. Nevertheless, negative rating momentum could develop if conditions deteriorate beyond the rating agency's current expectations.

WHAT COULD MOVE THE RATINGS DOWN/UP

Downwards rating pressure on Postbank's BFSR may be exerted from depressed earnings and capital-generation capacity, as a result of (i) asset-quality deterioration of its structured credit and CRE exposures; (ii) unexpected structural weakness in residential mortgage loans; and (iii) further unexpected losses from its investment portfolio. Also, if Postbank's near-term performance challenged the adherence to its stated financial goal of a 9.5% Tier 1 ratio (including market risk), this would equally increase downwards rating pressure.

Postbank's long-term ratings would be downgraded as a result of (i) a downgrade of its own D+ BFSR; (ii) in the event of a downgrade of Deutsche Bank's A2 long-term ratings; or (iii) due to a re-assessment of our parental support assumptions.

With its well-entrenched retail franchise, Postbank is principally well-positioned to regain a standalone rating in the lower investment grade range. However, this would be subject to sufficient evidence that the bank's de-leveraging and de-risking strategy leads to a better-balanced asset profile with sustained improvement in its overall risk-adjusted profitability and further improved capitalisation, including an improvement in its quality of capital.

Any mild upward pressure on the D+/ba1 standalone credit strength is unlikely to lead to an upgrade of the long-term ratings given the very high uplift factored into these ratings.

LIST OF AFFECTED RATINGS

The following ratings of Postbank were downgraded:

- Senior debt and deposits ratings to A2 from A1;

- Senior unsecured MTN rating to (P)A2 from (P)A1;

- Subordinated debt ratings to Baa3 from Baa2;

- Subordinated MTN rating to (P)Baa3 from (P)Baa2;

The following ratings of Postbank were confirmed:

- D+ BFSR, now mapping to a standalone credit assessment of ba1 from baa3;

- Prime-1 short-term debt and deposit ratings;

The following ratings of Postbank or related entities were upgraded:

- Junior subordinated debt to Ba2(hyb) from B1(hyb);

- Junior subordinated debt issued by ProSecure Funding Limited Partnership to Ba1(hyb) from Ba2(hyb);

- Hybrid securities issued by Deutsche Postbank Funding Trust I, II, III, and IV to Ba2(hyb) from Ba3(hyb).

The methodologies used in this rating were Bank Financial Strength Ratings: Global Methodology published in February 2007, and Incorporation of Joint-Default Analysis into Moody's Bank Ratings: A Refined Methodology published in March 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

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Swen MetzlerAsst Vice President - Analyst Financial Institutions Group Moody'sDeutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Carola Schuler MD - Banking Financial Institutions Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Deutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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