progresses with its restructuring plan.

“Deutsche Bank could be upgraded if it makes significant progress in refocusing on activities with a better risk/return profile and capital usage, primarily by reducing volatile and underperforming investment banking. The rating could also benefit if Deutsche Bank can generate stronger returns from its core commercial banking, private banking, asset management and smaller investment banking businesses, and to contain and reduce losses associated with the restructuring,” it said.

The bank is reportedly axing 18,000 jobs, with many due to go in centres such as London. The wealth management side of Deutsche Bank will not be directly affected, however. In fact, it has announced plans to boost its client-facing headcount by up to 300 people between now and 2021.

Deutsche Bank’s fortunes have waned in recent years. High costs, weak profits and the sluggish performance of the eurozone (even though Germany is the zone’s largest economy) have been burdensome. Its equities trading and sales activities, and aspects of investment bank, are threatened by new technology and by a need for banks to cut risk assets and bolster capital. A number of other major banks such as UBS, JP Morgan, BNP Paribas and Credit Suisse have restructured and cut risk exposures in recent years.

“The plan shows management's determination to strengthen the bank's business model and address its key weaknesses. Cutting back volatile, capital-intensive and underperforming sales and trading activities, and further reducing the cost base should improve profitability and strengthen leverage, but execution risks are high. The outlook is evolving, indicating that the rating could move in either direction over a one-to-two-year horizon,” Fitch Ratings said.

(By comparison, Standard & Poor’s has a “BBB+” issuer credit rating, and Moody’s Investors Service has an A3 long-term issuer and A3 deposits rating on the bank. (Source: Deutsche Bank.)

In June this year Fitch cut Deutsche Bank’s Derivative Counterparty Rating and Long-term Senior Preferred Debt Rating from A- to BBB+. The rating agency also downgraded the bank's non-preferred ratings to BBB, leavng it still in investment grade territory. The outlook was revised from “negative” to “evolving”.

The agency noted that Deutsche Bank is now aiming for a return on tangible equity of 8 per cent by 2022 compared with just -0.1 per cent in 2018. Fitch said this target compares with the weighted average annualised return on equity achieved by banks in the European Banking Authority’s risk dashboard in recent quarters (around 7 per cent).

Even after the cuts, the investment banking side of Deutsche will remain large, taking up 38 per cent of its risk-weighted assets in 2022.

“Execution risk is material for the rating. The restructuring measures involve large staff cuts and significant leadership changes, which could disrupt the aim to improve core earnings. The economic slowdown could also hamper revenue growth,” Fitch said.