FINANCIAL INSTITUTIONS

ISSUER COMMENT2 February 2017

Contacts

Peter E. Nerby, CFA 212-553-3782Senior Vice Presidentpeter.nerby@moodys.com

Ross J Hampson 4420-7772-1440Associate Analystross.hampson@moodys.com

Laurie Mayers 44-20-7772-5582Associate ManagingDirectorlaurie.mayers@moodys.com

Robert Young 212-553-4122MD-FinancialInstitutionsrobert.young@moodys.com

Deutsche Bank AGFull Year 2016 Results Commentary: Re-EngineeringStrengthens Capital Position Despite Significant LitigationProvisions

Deutsche Bank AG reported a EUR 2.4 billion pre-tax loss for 4Q 2016 and a full year pre-taxloss of EUR 810 million. Excluding litigation, impairments and the one-off gain on the saleof the stake in Hua Xia, the pre-tax loss totalled EUR 563 million in 4Q 2016 and a pre-taxprofit of EUR 2.1 billion for the full year, which translates to a return on EUR 358 billion ofrisk weighted assets (RWA) of 58 basis points, compared to 123 basis points in 2015.

Overall, we consider the 4Q results as credit neutral. Despite reporting an operating loss inthe fourth quarter, Deutsche Bank was able to strengthen its liquidity and capital positionduring the quarter. The firm was able to shrink and close out the Non-Core OperationsUnit and made significant progress on outstanding litigation. In December, Deutsche Banksettled with the US Department of Justice (DOJ) regarding civil claims in connection withthe bank's issuance and underwriting of residential mortgage-backed securities (RMBS) andrelated securitization activities between 2005 and 2007. For more information please see“Moody's Affirms Baa2 Debt and A3 Deposit Ratings of Deutsche Bank AG. Outlook Stable”,27th December 2016. Deutsche Bank also recently announced settlements with both theNew York Department of Financial Services (DFS) and the UK Financial Conduct Authority(FCA) for a total of $630 million in relation to the Russian ‘mirror’ trading investigation.This settlement was fully covered by existing provisions, however there remain outstandingenquiries into the mirror trades by criminal authorities which are not yet resolved. At end-December 2016 litigation reserves amounted to EUR 7.6 billion of which EUR 4.7 billion hasbeen earmarked for the above settlements, leaving EUR 2.9 billion remaining reserves tocover other outstanding litigation. The estimate of possible contingent liabilities stood atEUR 2.2 billion compared to EUR 1.6 billion at end-September 2016, demonstrating thatsignificant litigation tail risks remain.

Deutsche Bank was modestly profitable in its core divisions in 2016 (see Exhibit 1) , andimproved its key capital ratios despite absorbing the litigation charges during the fourthquarter. Progress on reengineering continued in the quarter. Adjusted costs were downyear-on-year and the Non-Core Operating Unit (NCOU) was closed with a residual EUR 9billion RWA being redistributed back to the core divisions. Nonetheless, management facescontinuing challenges in order to successfully execute its strategic plan including: resolvingremaining litigation uncertainties, renewing the technological platform, growing less-capitalintensive businesses and maintaining revenue momentum while shrinking the balance sheetand exiting less profitable client relationships.

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Exhibit 1

Pre-tax income by division (excluding impairments and restructuring)

Source: Moody's Investors Service on Company Data

The key capital, liquidity and earnings trends are detailed below;

As demonstrated in Exhibit 2, Deutsche Bank’s key capital metrics improved over the quarter. The fully loaded CRDIV Common EquityTier 1 (CET1) ratio increased to 11.9% benefitting from reductions in risk weighted assets including deconsolidation of the Abbey Lifestake and gains on the sale of the stake in Hua Xia, which more than offset the negative net income during the quarter. In December,Deutsche Bank published its revised Supervisory Review and Evaluation Process (SREP) requirement for 2017, lowering the amount atwhich there would be mandatory restrictions on dividends and coupons on Deutsche Bank’s Additional Tier 1 instruments to 9.51% asof 1 January 2017. This must be met throughout the year, and is calculated on a phased-in basis, which equalled 12.76% as of 1 January2017. The CRD IV Leverage Ratio stood at 3.5%, unchanged on the previous quarter.

Exhibit 2

Fully Loaded CET1 and Tier 1 Leverage Ratios

Source: Moody's Investors Service on Company Data

Liquidity remained a relative strength of the bank, improving from the third quarter end, with a reported liquidity reserve of EUR 218billion as of end-December 2016. The bank also reported a Liquidity Coverage Ratio (LCR) of 128% as of end-December 2016.

In Exhibit 3 we show Deutsche Bank's quarterly pre-tax profits by business line.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

2 2 February 2017 Deutsche Bank AG: Full Year 2016 Results Commentary: Re-Engineering Strengthens Capital Position Despite Significant Litigation Provisions

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Exhibit 3

Quarterly Pre-Tax Profits by business line (excluding impairments and restructuring)

Source: Moody's Investors Service on Company Data

Noteworthy credit trends within LOBs included:

The Global Markets division reported a pre-tax loss of EUR 737 million, compared to a EUR 954 million loss in 4Q 2015. Revenueswere down 3%, driven in part by Strategy 2020 business exits and negative market sentiment regarding Deutsche Bank, followingthe disclosure of DOJ’s initial USD 14 billion settlement offer in September. This particularly affected equities sales and tradingwhere revenues were down 23%. Debt sales and trading where revenues increased 11% (a lower increase than US peers, due in partto business mix differences). Management noted that since settling with the DOJ, there has been a meaningful recovery in clientengagement and performance in this business in January.

Corporate and Investment Banking reported a pre-tax profit of EUR 304 million compared to EUR 310 million profit for the sameperiod last year. Revenues were up a modest 2% as a result of a recovery in corporate finance business in the second half of 2017,offsetting weaker transactional banking revenues. Debt origination revenues were up 57% following a normalisation in the leveragedloan market, offsetting weaker revenues in both trade finance (-9%) and institutional cash and securities services (-6%). The latter wasimpacted by weaker demand and the low interest rate environment, although the global transactional banking business continues to bea steady revenue generator for Deutsche Bank.

Private, Wealth and Commercial Clients reported a pre-tax profit of EUR 701 million (including a EUR 756 million gain on Hua Xia)compared to a EUR 527 million loss for the same period last year (including EUR 587 million restructuring charges). Revenues weredown 7% (excluding Hua Xia and Private Client Services unit), as a result of the continued low interest rate environment and lowermanagement fees following net outflows of invested assets of EUR 24 billion caused by the negative market sentiment about DeutscheBank during October. However, there was continued progress on non-interest expenses due lower restructuring costs, despite on-goingIT infrastructure investment.

Deutsche Asset Management (DAWM) reported a pre-tax loss of EUR 753 million compared to EUR 173 million pre-tax profit a yearpreviously. Excluding the EUR 1,021 million goodwill impairment on the value of the Abbey Life business following announcement of itssale, DAWM reported a pre-tax profit of EUR 268 million. Excluding Abbey Life, revenues decreased 4% as a result of negative fair valueeffects and lower active management fees, with operating expenses down 23% due to lower compensation costs. Net asset outflowstotalled EUR 13 billion for the quarter, and EUR 41 billion for the full year as a result of low yielding liquidity products.

Postbank reported a pre-tax loss of EUR 2 million compared to a EUR 312 million loss in 4Q 2015. Revenues were up 34% followingan interest provision relating to the Bauspar (building society) taken in 4Q 2015, with operating expenses down 12% on the sameperiod last year, following a focus on costs and headcount reduction.

Finally, the NCOU reported a pre-tax loss of EUR 1,504 million, driven by significant litigation charges of EUR 1,350 millionpredominantly related to the DOJ settlement regarding RMBS. RWAs in the NCOU declined by EUR 9 billion in the quarter to EUR 9

3 2 February 2017 Deutsche Bank AG: Full Year 2016 Results Commentary: Re-Engineering Strengthens Capital Position Despite Significant Litigation Provisions

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billion, in line with the EUR <10 billion by end-December 2016 target, resulting in the closure of the unit, with all residual assets beingtransferred back to the core divisions.

As Exhibit 4 demonstrates Deutsche Bank continued to make progress on its structural cost challenges throughout the year. Adjustedcosts were up EUR 329 million in the quarter to EUR 6.2 billion but down 9% year-on-year. Adjusted costs were EUR 24.7 billion for thefull year, lower than the guidance provided in their strategic plan and management recommitted to its target to a EUR 22 billion costbase by 2018.

Exhibit 4

Trend in Reported and Adjusted Costs (excluding goodwill impairments)

Source: Moody's Investors Service on Company Data

Asset quality measures remained stable with a modest 1% decrease in impaired loans to EUR 7.5 billion, largely the result of the de-risking following a modest increase in impairments in across the core divisions, predominantly driven by exposures to the Shipping,Metals & Mining and Oil & Gas sectors during 2016. Reserve coverage remained unchanged at 61%.

Exhibit 5

Loan Loss Coverage (Loan Loss Reserves / Problem Loans)

Source: Company Data, Moody's Investors Service.

Deutsche Bank has a baseline credit assessment of ba1 and is rated A3 for deposits, Baa2 for senior debt and is assigned a Counterparty RiskAssessment of A3(cr)/Prime-2(cr). The outlook on the ratings is stable and incorporates expectations of only limited profitability in 2017.

4 2 February 2017 Deutsche Bank AG: Full Year 2016 Results Commentary: Re-Engineering Strengthens Capital Position Despite Significant Litigation Provisions

MOODY'S INVESTORS SERVICE FINANCIAL INSTITUTIONS

Moody's Related ResearchCredit Opinions

» Deutsche Bank AG, November 2016 (1049810)

Issuer Comment

» Potential Litigation Costs Pose a Hurdle for Deutsche Bank’s Reengineering Efforts, October 2016 (192450)

» Deutsche Bank Looks to Settle US Mortgage Legal Exposure at a Reasonable Cost, September 2016 (192220)

Issuer In-Depth

» Barclays, Credit Suisse, Deutsche Bank, Royal Bank of Scotland and UBS: De-risking Will Slow with Heightened Market Uncertainty,October 2016 (1042606)

» Brexit-related Costs and Uncertainties Pose Fresh Challenge to Non-UK GIBS’ Pan European Business Models, July 2016 (1033749)

Rating Action

» Moody's Affirms Baa2 Debt and A3 Deposit Ratings of Deutsche Bank AG. Outlook Stable, December 2016

» Moody's assigns senior-senior unsecured bank debt ratings to 14 German banks and upgrades 350 bonds to the new rating level,November 2016

» Moody's downgrades Deutsche Bank's ratings (senior debt to Baa2, long term deposits to A3 and counterparty risk assessment toA3(cr)); outlook stable, May 2016

Banking System Outlook

» Germany, October 2016 (1038523)

Rating Methodology

» Banks, January 2016 (186998)

To access any of these reports, click on the entry above. Note that these references are current as of the date of publication of thisreport and that more recent reports may be available. All research may not be available to all clients.

5 2 February 2017 Deutsche Bank AG: Full Year 2016 Results Commentary: Re-Engineering Strengthens Capital Position Despite Significant Litigation Provisions

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6 2 February 2017 Deutsche Bank AG: Full Year 2016 Results Commentary: Re-Engineering Strengthens Capital Position Despite Significant Litigation Provisions