H1 2018 FCF CDS Spreads Monitor

FCF CDS Spreads Monitor

H1 2018 Agenda

EXECUTIVE SUMMARY

2 Executive Summary

The FCF Credit Executive Summary Default Swaps ▪ The FCF CDS Spreads Monitor is a comprehensive semi-annual analysis of the historic and current spreads of Credit Default Swaps Monitor is a (CDS) for banks most active in the German corporate lending market standardized report on Credit Default ▪ The analysis provides the short-term, medium-term and long-term market view on such banks’ credit default risks and is an indicator for Swap spreads of banks’ (re-)financing costs in the capital markets German and ▪ The FCF Credit Default Swaps Monitor targets the following audience: European banks, – Financial institutions active in the German – Investors midcap market and is – Corporates with existing bank financings and with further financing needs a reference for ▪ The FCF Credit Default Swaps Monitor is a standardized publication investors, corporates The selection of financial institutions is based on the YTD financing volumes (senior debt incl. 2nd lien) in the German midcap segment and professionals ▪ recorded by Debtwire: – Only institutions with actively traded CDS instruments are included More advanced, ▪ More advanced, detailed and / or customized reports can be ordered individually, offering subscribers the possibility to customize the detailed and / or following criteria (among others): customized reports Inclusion of international / US institutions are available upon – request – Selection / deselection of specific institutions – Specific solvency analysis (equity or debt analysis) – Monthly or quarterly updates ▪ To recommend colleagues or fellow investors to be added to the mailing list, kindly send an email with the respective contact information ▪ The FCF Credit Default Swaps Monitor is available on FCF’s website at “www.fcf.de“ ▪ All input data is provided by S&P Capital IQ and is not independently verified by FCF. For additional information and disclaimer, please refer to the last page ▪ If you have questions, comments or ideas, please do not hesitate to contact us Enjoy the reading

3 FCF OVERVIEW

4 FCF Overview

FCF seeks to provide Who We Are Capital Markets Capabilities and Services its clients with financing ▪ Specialized investment bank and financing specialist solutions Private / ▪ Venture capital ▪ Private equity (i) at the lowest cost, ▪ Advising public and private small / midcap companies Pre-IPO ▪ Growth capital

(ii) with the highest ▪ Advisor for structuring and placement of financing transactions: ▪ Initial Public Offering (IPO) pursued in tandem)

flexibility, Equity / Capital increase ▪ Private Investment in Public – All instruments: Unbiased approach to all available corporate Public (iii) in the shortest ▪ Dual-track (IPO and Equity (PIPE) financing instruments (no product selling approach), allowing alternative transaction ▪ Block trade period of time, for customized financing structures (iv) with the highest ▪ Receivables / Factoring / ▪ Working capital / Revolving – All investors: Close and trusted relationships with senior Short-term ABS credit facility closing probability, executives of virtually all relevant equity and debt investors Debt ▪ Borrowing base / ▪ Guarantees / and with – Fast process: Process management skills and direct / personal Inventory Letter of Credit (v) financing partners access to institutional debt and equity investors enable fast ▪ Bank loan facility / ▪ Promissory note that integrate well transactions Straight debt (Schuldscheindarlehen)

Debt Long-term into their strategy ▪ Sale-and-lease back ▪ High-yield / PIK bond ▪ More than 100 transactions with a total placement volume in Debt ▪ Corporate bonds (public / (public / private) excess of EUR 4.0 billion since foundation in 2005 private placement) ▪ Second lien ▪ Approx. 10 professionals headquartered in Munich Mezzanine ▪ Mezzanine capital ▪ Convertible bonds

Selected Transactions

5 FCF Facts & Figures

More than More than 100 2000 # 1 10 Network Completed Contacts to Family Financing Advisor in Investment Banking Access to more than Transactions Offices and Ultra Germany, purely Professionals 4000 international High Net Worth focusing on corporate financial institutions Individuals financing transactions worldwide

More than Close to More than More than 4 bn Leading 100 120 25 Total volume of Advisor for Years of aggregated, Articles and International advised & closed Financing investment banking / research papers conferences transactions since Transactions with financing experience published organized 2005 EIB in the DACH region

6 INTRODUCTION

7 Introduction

Credit Default Swaps Definition

Credit Default Swaps (CDS) are, in simplest terms, very much like insurance policies. The main difference between a classical insurance policy and a CDS is that those buying the CDS can trade in and out of their contracts.

A CDS is a privately negotiated contract in which one party, the Protection Buyer (the one seeking to shed the risk, for example a lender to a bank), pays a fee (also premium or “spread”) to the Protection Seller (the one taking on the risk, for example specialized financial institutions) for protection against a loss that may be incurred from the exposure to a loan in case of unforeseen developments (e.g. non-repayment of / default on the loan). The development is known as a credit event, indicating that the borrower (the reference entity) on which the CDS contract is written is unable to pay its debts. If, such a credit event occurs, the Protection Seller will make a payment to the Protection Buyer of the contract.

For example: A typical contract provides for the Protection Buyer to pay the Protection Seller 500 bps per year (5.0% p.a.) for protection against a default of Bank A on its senior debt. The contract’s notional size is for EUR 10m. This means that the Protection Buyer pays EUR 500,000 per year (4 quarterly payments of EUR 125,000). If another bank, Bank B, has a CDS spread priced at 250 bps (2.5% p.a.), Bank B is perceived to have a lower credit risk than Bank A.

The higher the credit risk of a bank (as seen in the CDS spread), the greater funding costs that a bank will incur to be able to borrow in the institutional / inter-bank market (funding cost risk premium). As a direct consequence, the funding cost risk premium has a direct impact on the rates that a bank will charge its clients: Bank B will be able to offer i) cheaper, longer financing conditions and ii) less erratic responses (more lenient) during periods of stress with their clients (corporates), ceteris paribus.

Aside from the direct impact on a banks’ lending rates, the CDS spread is also a good proxy of a banks´ current / future behavior towards its corporate clients in times of market (macro) or client specific (micro) volatility / stress.

Premium

Protection Seller Payment Protection Buyer No Credit Event (Investor) (Investor) Credit Event

No Payment

Credit

Interest Repayment

Reference Borrower

Source: S&P Capital IQ 8 KEY FINDINGS

9 Key Findings

The FCF Credit Default Key Findings Swaps Monitor highlights the key ▪ CDS spreads of banking institutions reveal two fundamental market principles that have significant implications for borrowers: developments in the i. Solvency / crisis resistance: CDS put a price on the future solvency of a bank according to all information currently available in the German midcap market and signal the bank´s ability to remain operational in periods of crisis / illiquid markets. Banks with lower, more stable CDS financing market spreads should respond less erratically during periods of stress with their borrowers (i.e. covenant breaks), ceteris paribus ii. Pricing: CDS spreads indicate the perceived solvency of banks, hence their future ability to refinance (funding costs). Consequently, The FCF Credit Default banks with lower, more stable CDS spreads generally have to pay lower risk premia as part of their funding costs, enabling them to Swaps Monitor outlines several key factors that offer cheaper, longer financing conditions to their customers / borrowers, ceteris paribus should be considered ▪ Both German and European banks experienced significant increases in perceived credit risk during the Euro crisis in 2010 / 2011. prior to (re)financing of Since then, confidence in the banking institutions have strengthened (please see pages 13, 20, 27) existing financial liabilities – As of July 2018 CDS spreads for German and European banks active in Germany remain at near record lows, however showing slight upticks lately due to increasing market volatility. Nonetheless, the current market situation provides an ideal opportunity for borrowers to (re)finance existing financial liabilities and reduce interest expenses ▪ German banks with the best perceived solvency across 1-, 5- and 10-year terms are the LBBW and DZ Bank. The European banks with consistently low CDS spreads across 1-, 5- and 10-year terms are the French Crédit Mutuel and the Dutch ING Bank

▪ A general trend can be uncovered between European and German banks, especially across mid- and long-term horizons, whereby European banks are perceived to be more solvent than their German peers

▪ A high variation in short-term CDS spreads highlights the importance of considering the perceived solvency of the bank prior to selecting an institution as a lending bank (short-term CDS spreads accentuate the differential in current perceived solvency). For example, the ratio between the least and most solvent bank is 21.3x for 1-year CDS spreads (please see page 14); the same ratio falls to 4.1x for 10-year CDS spreads (please see page 28)

▪ Across longer time horizons, German banks exhibit a higher probability of a future rating downgrade, exhibiting higher CDS spreads than their current rating would indicate, where the Deutsche Bank and HSH Nordbank appear most susceptible to a future rating downgrade (please see page 32)

10 League Table

1 2 3 4 FCF allocated scores of Rank Bank Country (HQ) CDS 1Y CDS 5Y CDS 10Y Rating Total 1 (low) to 14 (high) to H1H2 ´18 Trend ´18 vs. ´17 Price Score STD (L3Y) Score Price Score STD (L3Y) Score Price Score STD (L3Y) Score Rating Score Score the 14 German and 1 8.8 13 7.1 14 41.8 12 15.7 12 61.4 12 12.5 13 1 14 90 European banks under

review, based on: 2 5.5 14 10.9 12 33.2 14 10.2 13 59.1 13 15.8 12 4 9 87 1 1-Year CDS price and standard deviation; 3 11.9 12 11.6 10 34.5 13 20.7 11 51.0 14 24.5 9 4 9 78

2 5-Years CDS price and 4 40.4 5 7.6 13 69.1 7 5.2 14 78.1 10 4.4 14 2 13 76 standard deviation; 3 10-Years CDS price 5 15.3 11 11.2 11 43.5 11 21.5 10 69.8 11 21.4 10 5 8 72 and standard deviation; 6 25.3 9 12.6 9 56.5 10 24.3 8 86.3 9 26.9 6 4 9 60 4 Public ratings (Fitch,

Moody´s, S&P) 7 25.6 8 15.1 7 66.4 9 22.5 9 100.3 7 27.4 5 4 9 54

Based on the total 8 25.0 10 19.4 6 91.3 4 26.0 6 136.3 4 25.3 7 6 6 43 score, FCF created a league table (high to 31.9 7 13.1 8 89.7 5 26.1 5 111.5 6 24.9 8 7 4 43 low) 10 32.2 6 25.4 5 88.3 6 42.2 4 120.4 5 46.6 3 6 6 35 The ranking in the league gives an 11 75.0 3 25.7 4 170.0 2 25.0 7 209.3 1 20.6 11 10 1 29 indication on the bank´s 12 50.9 4 34.8 2 68.5 8 49.4 2 87.8 8 49.5 1 9 2 27 expected future stability

and crisis resistance 13 75.4 2 34.2 3 145.3 3 47.7 3 178.8 3 48.6 2 8 3 19

The German Landes- 14 117.3 1 56.8 1 176.4 1 52.3 1 208.6 2 43.7 4 7 4 14 bank Baden-Württem- berg (score 90) heads the league table, whereas Deutsche Bank is placed at rank 14 (score 14)

Source: S&P Capital IQ as of July 02nd, 2018, FCF Research 11 Note: Score 1 (low) -14 (high) 1-YEAR CDS SPREADS

12 1-Year-Spread – Overview & Historical Analysis

challenging years ’08 - Annual 10-Year Price Development (in bps) 3-Year Changes (in %) Long-Term Ratings ’09 and ’10 - ’11, CDS 1 2 3 Volatility European Institutions 31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 02/07/2018 Δ 15-18* Δ 16-18* Δ 17-18* 90 Days S&P Moody's Fitch prices have remained Banco Santander, S.A. 101.9 43.2 206.2 301.7 121.1 12.5 37.1 74.5 43.2 8.5 32.2 -56.9% -25.5% 279.5% 107.3% A A2 A- fairly stable Banque Fédérative du Crédit Mutuel - Société Anonyme1.9 1.9 80.2 266.7 59.0 37.5 23.4 24.9 7.3 3.8 5.5 -78.0% -24.4% 43.6% 29.1% A Aa3 A+ BNP Paribas SA 67.1 36.9 44.1 220.1 29.0 20.8 28.9 25.3 38.2 10.8 25.3 0.1% -33.6% 135.2% 112.0% A Aa3 A+ HSBC Holdings plc 8.9 69.2 70.0 111.9 39.3 23.5 23.0 37.6 25.7 13.8 25.6 -32.0% -0.5% 85.9% 64.7% A A2 AA- ING Bank N.V. 123.9 24.9 87.8 151.1 22.9 11.8 15.4 17.1 28.2 5.4 11.9 -30.5% -57.9% 117.9% 119.6% A+ Aa3 A+ 2 In H1 2018 the CDS NIBC Bank N.V. na 171.5 138.5 516.9 145.5 183.0 109.9 67.7 124.0 47.2 50.9 -24.9% -59.0% 7.7% 27.0% BBB - BBB prices generally remain UniCredit S.p.A. 114.9 54.3 147.4 566.4 149.9 23.1 62.6 67.7 83.7 18.2 75.4 11.3% -9.9% 313.9% 159.1% BBB Baa1 BBB Min 1.9 1.9 44.1 111.9 22.9 11.8 15.4 17.1 7.3 3.8 5.5 -78.0% -59.0% 7.7% 27.0% at near record lows with Max 123.9 171.5 206.2 566.4 149.9 183.0 109.9 74.5 124.0 47.2 75.4 11.3% -0.5% 313.9% 159.1% slight upticks relative to Median 84.5 43.2 87.8 266.7 59.0 23.1 28.9 37.6 38.2 10.8 25.6 -30.5% -25.5% 117.9% 107.3% Mean 69.8 57.4 110.6 305.0 81.0 44.6 42.9 45.0 50.0 15.4 32.4 -30.1% -30.1% 140.5% 88.4% 2017 Annual 10-Year Price Development (in bps) 3-Year Changes (in %) Long-Term Ratings 1 2 3 Volatility All Institutions 31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 02/07/2018 Δ 15-18* Δ 16-18* Δ 17-18* Last 90 Days S&P Moody's Fitch 3 All selected banks show Min 1.9 1.9 44.1 104.5 10.2 11.8 15.4 17.1 7.3 3.8 5.5 -78.0% -59.0% 0.9% 8.9% slight increases in CDS Max 269.8 230.4 206.2 566.4 149.9 183.0 110.3 115.0 124.0 74.3 117.3 156.3% 118.1% 360.1% 159.1% Median 108.4 43.2 90.8 247.4 39.3 23.1 30.1 40.0 40.7 15.2 28.8 -31.3% -27.8% 68.0% 59.4% spreads over the last six Mean 96.7 70.0 109.6 267.9 61.3 40.2 41.8 46.4 49.7 21.1 38.6 -18.1% -16.2% 115.4% 68.4% months, indicating a Annual 10-Year Price Development (in bps) 3-Year Changes (in %) Long-Term Ratings general increase in Volatility market risk, especially 1-Year Government Interest Rates 31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 02/07/2018 Δ 15-18* Δ 16-18* Δ 17-18* Last 90 Days S&P Moody's Fitch EU Central Government Bond 184.4 81.2 60.3 9.4 -3.8 9.4 -9.0 -39.7 -82.2 -73.8 -72.0 -81.5% 12.4% 2.4% 21.6% AAA Aaa AAA Deutsche Bank, United Kingdom Government Debt 57.0 64.0 57.0 31.7 32.2 51.9 28.5 42.4 1.4 40.6 68.3 61.1% 4,778.6% 68.2% 66.2% AAA Aaa AAA UniCredit and Note: * denotes YTD Santander

Source: S&P Capital IQ as of July 02nd, 2018 13 Note: All calculations based on mid prices 1-Year-Spread – Pricing, Rating, Volatility & Development

1 Based on the latest 1- CDS Mid-Price as of 02/07/2018 (in bps) 1-Year Change in CDS Mid-Price (in bps) year CDS prices, the most solvent banks are Deutsche Bank 117.3 NIBC Bank -43.6 3 the French Crédit UniCredit S.p.A 75.4 HSH Nordbank -17.1 Mutuel, the German HSH Nordbank 75.0 Landesbank Baden-Württemberg 1.2 Landesbank Baden- NIBC Bank 50.9 Crédit Mutuel 1.5 Württemberg and the DZ Bank 40.4 DZ Bank 3.4 Dutch ING Bank, in- Banco Santander 32.2 Norddeutsche Landesbank 4.0 Norddeutsche Landesbank dicated by CDS prices 31.9 21.3x 2 ING Bank 5.0 HSBC Holdings clearly below 15 bps 25.6 Bayerische Landesbank 7.1 BNP Paribas 25.3 Commerzbank AG 9.7 Commerzbank AG 25.0 2 The ratio between the BNP Paribas 15.1 Bayerische Landesbank 15.3 HSBC Holdings 16.0 least and most solvent ING Bank 11.9 Banco Santander 21.0 bank is 21.3x (117.3 / Landesbank Baden-Württemberg 8.8 1 UniCredit S.p.A 44.4 5.5), signalling a large Crédit Mutuel 5.5 Deutsche Bank 95.6 gap in the perceived short-term solvency amongst European Long-Term Rating* as of 02/07/2018 Annual Volatility (Last 90 days) as of 02/07/2018 banks HSH Nordbank BBB- UniCredit S.p.A 159.1% 4 NIBC Bank BBB 3 NIBC Bank recorded the ING Bank 119.6% UniCredit S.p.A BBB+ largest improvement in BNP Paribas 112.0% Norddeutsche Landesbank A- Banco Santander 107.3% CDS prices, decreasing Deutsche Bank A- Commerzbank AG 81.7% by 43.6 bps compared Commerzbank AG A Deutsche Bank 77.1% with 1 year prior Banco Santander A HSBC Holdings 64.7% Bayerische Landesbank A+ Bayerische Landesbank 54.1% 4 Overall, European ING Bank AA- DZ Bank 51.8% HSBC Holdings AA- banks exhibit higher Landesbank Baden-Württemberg 47.6% BNP Paribas AA- levels of volatility in their Crédit Mutuel 29.1% Crédit Mutuel AA- CDS spreads over the NIBC Bank 27.0% DZ Bank A+ last 90 days, most Norddeutsche Landesbank 18.1% Landesbank Baden-Württemberg A notably UniCredit HSH Nordbank 8.9%

Source: S&P Capital IQ as of July 02nd, 2018 14 Note: All calculations based on mid prices; * S&P Rating notches 3-Year Development of 1-Year-Spread of German vs. European Institutions

German and European bps banks generally follow 120 the same trend over the past 3 years

Mean and median CDS 100 prices have generally been lower for European banks, in particular since the beginning of 2016 80

Volatility remains consistent across both German and European 60 banks over the 3 year period, exhibiting standard deviations (median) of approximately 15 bps 40

The Deutsche Bank and UniCredit turmoil caused the large spike 20 in mean CDS prices during Q1 2016 and H1 2018 (next pages) 0 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18

Median German Mean German Median European Mean European

Source: S&P Capital IQ as of July 02nd, 2018 15 Note: All calculations based on mid prices 3-Year Development of 1-Year-Spread of German Institutions

Over the last 3 years, bps Deutsche Bank and 300 HSH Nordbank were the most volatile German banks with standard deviations of 250 57 bps and 26 bps, respectively

Deutsche Bank reached the highest CDS price 200 over the last 3 years (292 bps, 11/02/2016)

Landesbank Baden- 150 Württemberg and DZ Bank were the least volatile (standard deviations of 7 bps and 8 bps respectively) 100

From the highs in Q1 2016, CDS prices for German banks have 50 been steadily declining, some reaching new record lows 0 The internal Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 reorganisation at Bayerische Landesbank Commerzbank AG Deutsche Bank Aktiengesellschaft DZ Bank Deutsche Bank in H1 2018 caused the strong HSH Nordbank AG Landesbank Baden-Württemberg Norddeutsche Landesbank Girozentrale increase in CDS price

Source: S&P Capital IQ as of July 02nd, 2018 16 Note: All calculations based on mid prices 3-Year Development of 1-Year-Spread of European Institutions

Over the last 3 years, bps NIBC Bank and 180 UniCredit were the most volatile European banks with standard 160 deviations of 35 bps and 34 bps, respectively 140 UniCredit reached the highest CDS price over 120 the last 3 years (181 bps, 11/02/2016)

Crédit Mutuel and ING 100 Bank were the least volatile (standard 80 deviations of 11 bps and 12 bps respectively) 60 From the highs in Q1 2016, CDS prices for European banks have 40 been steadily declining, some reaching new 20 record lows

The political instability and the macro- 0 economic situation in Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Italy and Spain caused Banco Santander, S.A. Banque Fédérative du Crédit Mutuel - Société Anonyme BNP Paribas SA HSBC Holdings plc ING Bank N.V. NIBC Bank N.V. the strong increase in UniCredit S.p.A. CDS prices of UniCredit and Santander Source: S&P Capital IQ as of July 02nd, 2018 17 Note: All calculations based on mid prices 1-Year-Spread – CDS vs. Rating

The comparison of 120 implied trend risk for a future rating action current CDS prices with Deutsche Bank current ratings, (downgrade) highlights the relationship between these forward- and 100 backward-looking solvency indicators

A strong correlation 80 exists between CDS UniCredit S.p.A HSH Nordbank prices and rating (40% of the variation in CDS prices can be explained 60 via ratings) NIBC Bank

The slope implies (on CDS Price (inbps)CDS Price average) that a 1 notch 40 DZ Bank fall in rating would Banco Santander Norddeutsche Landesbank result in a higher 1-year HSBC Holdings CDS price by approx. 8 BNP Paribas Commerzbank AG bps 20 ING Bank Bay erische Landesbank Banks above the trendline seem to Landesbank Baden-Württemberg Crédit Mutuel possess greater R² = 0.4022 0 solvency risk than their AAA1 AA+2 AA3 AA4- A+5 A6 A7- BBB+8 BBB9 BBB10 - BB+11 12BB rating would imply; a possible indicator for a Rating

future rating Year -

“downgrade” PD

0.10% 0.16% 0.15% 0.52% 0.64% 0.42% 0.86% 2.30% 2.17% 4.94% 6.47% 9.98% S&P 5 S&P

Source: S&P Capital IQ as of July 02nd, 2018 18 Note: All calculations based on mid prices; rating according to S&P Rating notches; S&P 5-Year PD represents the 5-year probability of default for each respective rating notch 5-YEAR CDS SPREADS

19 5-Year-Spread – Overview & Historical Analysis

challenging years ’08 - Annual 10-Year Price Development (in bps) 3-Year Changes (in %) Long-Term Ratings ’09 and ’10 - ’11, CDS 1 2 3 Volatility European Institutions 31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 02/07/2018 Δ 15-18* Δ 16-18* Δ 17-18* 90 Days S&P Moody's Fitch prices have remained Banco Santander, S.A. 100.5 81.8 248.6 355.7 270.6 123.2 79.6 139.7 119.3 31.8 88.3 -36.8% -25.9% 177.4% 77.6% A A2 A- fairly stable Banque Fédérative du Crédit Mutuel - Société Anonyme5.0 5.0 108.9 318.6 150.1 109.1 64.8 41.9 24.0 26.5 33.2 -20.7% 38.4% 25.4% 18.5% A Aa3 A+ BNP Paribas SA 69.9 60.1 114.5 259.0 137.0 83.3 69.6 70.8 85.6 22.5 56.5 -20.1% -34.0% 151.7% 66.0% A Aa3 A+ HSBC Holdings plc 17.4 78.0 99.4 153.4 93.5 65.4 52.1 83.1 81.2 35.3 66.4 -20.1% -18.2% 88.2% 51.1% A A2 AA- ING Bank N.V. 117.0 64.4 144.6 221.9 109.2 81.2 54.8 52.4 64.4 16.9 34.5 -34.2% -46.5% 104.5% 55.8% A+ Aa3 A+ 2 In H1 2018 the CDS NIBC Bank N.V. na 240.2 220.4 458.0 272.5 271.2 178.6 159.8 182.0 70.0 68.5 -57.1% -62.4% -2.2% 24.2% BBB - BBB prices generally remain UniCredit S.p.A. 122.0 94.3 197.2 537.3 299.5 146.6 128.0 132.7 173.8 61.4 145.3 9.5% -16.4% 136.6% 97.9% BBB Baa1 BBB Min 5.0 5.0 99.4 153.4 93.5 65.4 52.1 41.9 24.0 16.9 33.2 -57.1% -62.4% -2.2% 18.5% at near record lows with Max 122.0 240.2 248.6 537.3 299.5 271.2 178.6 159.8 182.0 70.0 145.3 9.5% 38.4% 177.4% 97.9% slight upticks relative to Median 85.2 78.0 144.6 318.6 150.1 109.1 69.6 83.1 85.6 31.8 66.4 -20.7% -25.9% 104.5% 55.8% Mean 72.0 89.1 162.0 329.1 190.4 125.7 89.6 97.2 104.3 37.8 70.4 -25.6% -23.6% 97.4% 55.9% 2017 Annual 10-Year Price Development (in bps) 3-Year Changes (in %) Long-Term Ratings 1 2 3 Volatility All Institutions 31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 02/07/2018 Δ 15-18* Δ 16-18* Δ 17-18* Last 90 Days S&P Moody's Fitch 3 All selected banks (with Min 5.0 5.0 99.4 153.4 92.4 65.4 52.1 41.9 24.0 16.9 33.2 -57.1% -62.4% -2.2% 9.4% exception of DZ Bank Max 322.5 240.2 248.6 537.3 299.5 271.2 193.8 187.0 182.0 147.6 176.4 82.7% 38.4% 177.4% 97.9% Median 103.4 81.8 147.1 287.2 137.0 101.0 78.4 86.8 100.7 45.5 68.8 -20.4% -20.2% 49.8% 50.4% and NIBC) show slight Mean 107.2 102.0 159.0 299.8 156.6 117.6 93.1 99.1 106.8 53.7 83.9 -15.4% -19.1% 69.7% 48.8% increases in CDS Annual 10-Year Price Development (in bps) 3-Year Changes (in %) Long-Term Ratings spreads over the last six Volatility months, indicating an 5-Year Government Interest Rates 31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 02/07/2018 Δ 15-18* Δ 16-18* Δ 17-18* Last 90 Days S&P Moody's Fitch EU Central Government Bond 295.1 263.7 214.8 155.5 58.3 107.1 7.1 1.7 -47.3 -16.6 -27.2 -1,665.4% 42.5% -64.1% 1531.7% AAA Aaa AAA increase in risk, United Kingdom Government Debt 243.0 279.0 220.0 86.4 84.9 204.2 113.1 125.6 48.0 72.0 101.6 -19.1% 111.7% 41.1% 44.6% AAA Aaa AAA especially Deutsche Bank, UniCredit and Note: * denotes YTD Santander

Source: S&P Capital IQ as of July 02nd, 2018 20 Note: All calculations based on mid prices 5-Year-Spread – Pricing, Rating, Volatility & Development

1 Based on the latest 5- CDS Mid-Price as of 02/07/2018 (in bps) 1-Year Change in CDS Mid-Price (in bps) year CDS prices, the most solvent banks are Deutsche Bank 176.4 NIBC Bank -97.2 3 the French Crédit HSH Nordbank 170.0 HSH Nordbank -10.2 Mutuel, the Dutch ING UniCredit S.p.A 145.3 DZ Bank -7.5 and the German Commerzbank AG 91.3 Norddeutsche Landesbank 0.0 Landesbank Baden- Norddeutsche Landesbank 89.7 Landesbank Baden-Württemberg 4.5 Württemberg and Bay- Banco Santander 88.3 ING Bank 5.6 erische Landesbank, DZ Bank 69.1 5.3x 2 Crédit Mutuel 6.2 NIBC Bank 68.5 Bayerische Landesbank indicated by CDS prices 8.3 HSBC Holdings 66.4 BNP Paribas 20.1 clearly below 50 bps BNP Paribas 56.5 Commerzbank AG 20.4 Bayerische Landesbank 43.5 HSBC Holdings 21.4 2 The ratio between the Landesbank Baden-Württemberg 41.8 Banco Santander 35.0 least and most solvent ING Bank 34.5 1 UniCredit S.p.A 54.0 bank is 5.3x (176.4 / Crédit Mutuel 33.2 Deutsche Bank 94.8 33.2), signalling a moderate gap in the perceived medium-term Long-Term Rating* as of 02/07/2018 Annual Volatility (Last 90 days) as of 02/07/2018 solvency amongst HSH Nordbank BBB- European banks UniCredit S.p.A NIBC Bank BBB 97.9% 4 Banco Santander 77.6% UniCredit S.p.A BBB+ 3 NIBC recorded the BNP Paribas 66.0% Norddeutsche Landesbank A- Deutsche Bank 64.2% largest improvement in Deutsche Bank A- DZ Bank 60.3% CDS prices, decreasing Commerzbank AG A ING Bank 55.8% by 97 bps com-pared Banco Santander A HSBC Holdings 51.1% Bayerische Landesbank A+ with 1 year prior Commerzbank AG 49.7% ING Bank AA- Landesbank Baden-Württemberg 47.3% 4 HSBC Holdings Overall, European AA- Bayerische Landesbank 45.2% BNP Paribas banks exhibit higher AA- NIBC Bank 24.2% levels of volatility in their Crédit Mutuel AA- Crédit Mutuel 18.5% DZ Bank CDS spreads over the A+ HSH Nordbank 15.9% Landesbank Baden-Württemberg A Norddeutsche Landesbank last 90 days, most 9.4% notably UniCredit

Source: S&P Capital IQ as of July 02nd, 2018 21 Note: All calculations based on mid prices; * S&P Rating notches 3-Year Development of 5-Year-Spread of German vs. European Institutions

German and European bps banks generally follow 180 the same trend over the past 3 years

160 Mean and median CDS prices have generally been lower for 140 European banks, in particular since the beginning of 2016 120

Volatility remains consistent across both 100 German and European banks over the 3 year period, exhibiting 80 standard deviations (median) of approximately 23 bps 60

The Deutsche Bank and UniCredit turmoil 40 caused the large spike in mean CDS prices during Q1 2016 and H1 20 2018 (next pages)

0 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Median German Mean German Median European Mean European

Source: S&P Capital IQ as of July 02nd, 2018 22 Note: All calculations based on mid prices 3-Year Development of 5-Year-Spread of German Institutions

Over the last 3 years, bps Deutsche Bank and 300 Commerzbank were the most volatile German banks with standard deviations of 52 bps 250 and 26 bps, respectively

HSH Nordbank reached the highest CDS price 200 over the last 3 years (289 bps, 14/02/2016)

DZ Bank and Landesbank Baden- 150 Württemberg were among the least volatile (standard deviations of 5 bps and 16 bps 100 respectively)

From the highs in Q1 2016, CDS prices for 50 German banks have been steadily declining, some reaching new record lows 0 The internal Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 reorganisation at Bayerische Landesbank Commerzbank AG Deutsche Bank Aktiengesellschaft DZ Bank Deutsche Bank in H1 HSH Nordbank AG Landesbank Baden-Württemberg Norddeutsche Landesbank Girozentrale 2018 caused the strong increase in CDS price Source: S&P Capital IQ as of July 02nd, 2018 23 Note: All calculations based on mid prices 3-Year Development of 5-Year-Spread of European Institutions

Over the last 3 years, bps UniCredit and 300 Santander were the most volatile European banks with standard deviations of 48 bps 250 and 32 bps, respectively

NIBC Bank reached the highest CDS price over 200 the last 3 years (268 bps, 06/10/2016)

Crédit Mutuel and ING Bank were the least 150 volatile (standard deviations of 10 bps and 21 bps respectively) 100

From the highs in Q1 2016, CDS prices for European banks have 50 been steadily declining, some reaching new record lows

The political instability 0 and the macro- Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 economic situation in Banco Santander, S.A. Banque Fédérative du Crédit Mutuel - Société Anonyme BNP Paribas SA Italy and Spain caused HSBC Holdings plc ING Bank N.V. NIBC Bank N.V. the strong increase in UniCredit S.p.A. CDS prices of UniCredit and Santander Source: S&P Capital IQ as of July 02nd, 2018 24 Note: All calculations based on mid prices 5-Year-Spread – CDS vs. Rating

The comparison of 200 current CDS prices with implied trend risk for a future rating action current ratings, highlights the 180 (downgrade) Deutsche Bank relationship between UniCredit S.p.A these forward- and 160 backward-looking solvency indicators HSH Nordbank 140 A strong correlation exists between CDS prices and rating (42% 120 of the variation in CDS prices can be explained 100 via ratings) NIBC Bank DZ Bank Banco Santander The slope implies (on 80 HSBC Holdings

average) a 1 notch fall (inbps)CDS Price Norddeutsche Landesbank in rating would result in 60 BNP Paribas a higher 5-Year CDS Commerzbank AG price by approx. 12 bps ING Bank Bay erische Landesbank 40 Banks above the Landesbank Baden-Württemberg Crédit Mutuel trendline (predom- inantly German banks) 20 seem to possess R² = 0.4194 greater solvency risk 0 than their rating would AAA1 AA+2 AA3 AA4- A+5 A6 A7- BBB+8 BBB9 BBB10 - BB+11 12BB imply; a possible

indicator for a future Rating Year Year

rating “downgrade” -

PD 0.10% 0.16% 0.15% 0.52% 0.64% 0.42% 0.86% 2.30% 2.17% 4.94% 6.47% 9.98% S&P 5 S&P

Source: S&P Capital IQ as of July 02nd, 2018 25 Note: All calculations based on mid prices; rating according to S&P Rating notches; S&P 5-Year PD represents the 5-year probability of default for each respective rating notch 10-YEAR CDS SPREADS

26 10-Year-Spread – Overview & Historical Analysis

Annual Over the past 10 years, 1 10-Year Price Development (in bps) 2 3-Year Changes (in %) 3 Long-Term Ratings Volatility trends in CDS spreads German Institutions 31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 02/07/2018 Δ 15-18* Δ 16-18* Δ 17-18* Last 90 Days S&P Moody's Fitch have been strongly Bayerische Landesbank 102.3 108.1 195.8 295.1 106.5 132.3 97.2 100.0 95.9 62.5 69.8 -30.2% -27.3% 11.5% 91.1% - A1 A- Commerzbank AG 89.3 75.8 153.8 297.9 184.4 158.2 120.6 121.9 152.2 90.4 136.3 11.8% -10.5% 50.8% 32.6% A- A2 A- influenced by Deutsche Bank Aktiengesellschaft 133.4 92.0 115.3 210.7 123.5 128.3 112.8 125.4 172.4 112.2 208.6 66.3% 21.1% 86.0% 46.1% BBB+ A3 BBB+ macroeconomic events DZ Bank 110.7 110.7 131.6 178.1 113.8 93.3 83.6 83.1 87.6 83.0 78.1 -6.0% -10.8% -5.9% 59.8% AA- Aa1 AA- HSH Nordbank AG 314.4 220.5 195.3 362.4 194.5 223.2 220.7 210.9 200.3 181.5 209.3 -0.8% 4.5% 15.3% 16.0% - Baa3 BBB- (i.e. financial crisis, Euro Landesbank Baden-Württemberg 103.6 128.6 168.1 291.7 104.9 73.1 71.8 75.9 68.5 55.8 61.4 -19.0% -10.2% 10.1% 46.4% AAA A1 A- crisis) Norddeutsche Landesbank Girozentrale na na na na na na 124.9 136.8 133.3 96.6 111.5 -18.5% -16.3% 15.5% 9.1% - Baa3 A- Min 89.3 75.8 115.3 178.1 104.9 73.1 71.8 75.9 68.5 55.8 61.4 -30.2% -27.3% -5.9% 9.1% Max 314.4 220.5 195.8 362.4 194.5 223.2 220.7 210.9 200.3 181.5 209.3 66.3% 21.1% 86.0% 91.1% Median 107.2 109.4 161.0 293.4 118.7 130.3 112.8 121.9 133.3 90.4 111.5 -6.0% -10.5% 15.3% 46.1% 1 Apart from the Mean 142.3 122.6 160.0 272.7 137.9 134.7 118.8 122.0 130.0 97.4 125.0 0.5% -7.1% 26.2% 43.0% challenging years ’08 - Annual 10-Year Price Development (in bps) 3-Year Changes (in %) Long-Term Ratings ’09 and ’10 - ’11, CDS 1 2 3 Volatility prices have remained European Institutions 31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 02/07/2018 Δ 15-18* Δ 16-18* Δ 17-18* 90 Days S&P Moody's Fitch Banco Santander, S.A. 100.3 91.0 247.7 366.4 295.6 174.5 114.7 172.5 157.9 57.7 120.4 -30.2% -23.7% 108.5% 55.0% A A2 A- fairly stable Banque Fédérative du Crédit Mutuel - Société Anonyme8.8 8.8 120.9 330.8 181.6 145.8 93.4 75.2 46.0 50.2 59.1 -21.5% 28.5% 17.7% 14.5% A Aa3 A+ BNP Paribas SA 68.7 65.1 122.9 274.8 172.2 117.6 101.4 98.1 119.6 49.4 86.3 -12.0% -27.8% 74.7% 42.8% A Aa3 A+ HSBC Holdings plc 27.7 85.4 108.1 176.7 113.0 78.5 62.4 127.3 116.6 61.5 100.3 -21.2% -13.9% 63.2% 31.8% A A2 AA- 2 In H1 2018 the CDS ING Bank N.V. 118.6 77.2 151.7 239.9 127.4 125.2 78.2 79.2 95.8 38.2 51.0 -35.6% -46.8% 33.5% 89.7% A+ Aa3 A+ NIBC Bank N.V. na 240.1 231.4 453.6 295.8 297.7 197.2 185.9 197.0 92.4 87.8 -52.8% -55.5% -5.1% 19.5% BBB - BBB prices generally remain UniCredit S.p.A. 125.4 106.0 202.8 529.1 320.4 194.7 179.9 176.2 213.7 94.9 178.8 1.5% -16.4% 88.4% 62.2% BBB Baa1 BBB at near record lows with Min 8.8 8.8 108.1 176.7 113.0 78.5 62.4 75.2 46.0 38.2 51.0 -52.8% -55.5% -5.1% 14.5% Max 125.4 240.1 247.7 529.1 320.4 297.7 197.2 185.9 213.7 94.9 178.8 1.5% 28.5% 108.5% 89.7% slight upticks relative to Median 84.5 85.4 151.7 330.8 181.6 145.8 101.4 127.3 119.6 57.7 87.8 -21.5% -23.7% 63.2% 42.8% 2017 Mean 74.9 96.2 169.4 338.8 215.1 162.0 118.2 130.6 135.2 63.5 97.7 -24.5% -22.2% 54.4% 45.1%

Annual 10-Year Price Development (in bps) 3-Year Changes (in %) Long-Term Ratings 1 2 3 Volatility 3 All selected banks (with All Institutions 31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 02/07/2018 Δ 15-18* Δ 16-18* Δ 17-18* Last 90 Days S&P Moody's Fitch exception of DZ Bank Min 8.8 8.8 108.1 176.7 104.9 73.1 62.4 75.2 46.0 38.2 51.0 -52.8% -55.5% -5.9% 9.1% Max 314.4 240.1 247.7 529.1 320.4 297.7 220.7 210.9 213.7 181.5 209.3 66.3% 28.5% 108.5% 91.1% and NIBC) show slight Median 103.0 92.0 153.8 295.1 172.2 132.3 107.1 123.7 126.4 72.8 94.0 -18.7% -15.1% 25.6% 44.5% increases in CDS Mean 108.6 108.4 165.0 308.3 179.5 149.4 118.5 126.3 132.6 80.4 111.3 -12.0% -14.6% 40.3% 44.0%

spreads over the last six Annual 10-Year Price Development (in bps) 3-Year Changes (in %) Long-Term Ratings months, indicating a Volatility 10-Year Government Interest Rates 31/12/2008 31/12/2009 31/12/2010 31/12/2011 31/12/2012 31/12/2013 31/12/2014 31/12/2015 31/12/2016 31/12/2017 02/07/2018 Δ 15-18* Δ 16-18* Δ 17-18* Last 90 Days S&P Moody's Fitch general increase in risk, EU Central Government Bond 368.8 376.0 336.2 264.5 172.3 224.1 64.9 76.9 25.8 52.2 38.4 -50.0% 48.8% -26.4% 72.4% AAA Aaa AAA especially Deutsche United Kingdom Government Debt 322.0 412.0 351.0 196.5 181.4 303.0 175.7 193.9 124.0 119.0 128.2 -33.9% 3.4% 7.7% 36.2% AAA Aaa AAA

Bank, UniCredit and Note: * denotes YTD Santander

Source: S&P Capital IQ as of July 02nd, 2018 27 Note: All calculations based on mid prices 10-Year-Spread – Pricing, Rating, Volatility & Development

1 Based on the latest 10- CDS Mid-Price as of 02/07/2018 (in bps) 1-Year Change in CDS Mid-Price (in bps) year CDS prices, the most solvent banks are HSH Nordbank 209.3 NIBC Bank -96.3 3 the Dutch ING Bank and Deutsche Bank 208.6 DZ Bank -11.6 the French Crédit UniCredit S.p.A 178.8 ING Bank -3.2 Mutuel and the German Commerzbank AG 136.3 Norddeutsche Landesbank -1.2 Landesbank Baden- Banco Santander 120.4 HSH Nordbank -0.4 Württemberg and Bay- Norddeutsche Landesbank 111.5 Bayerische Landesbank 6.0 erische Landesbank, HSBC Holdings 100.3 5.3x Landesbank Baden-Württemberg 7.4 indicated by CDS prices NIBC Bank 87.8 2 Crédit Mutuel 9.1 BNP Paribas 86.3 BNP Paribas clearly below 75 bps 19.3 DZ Bank 78.1 HSBC Holdings 24.2 Bayerische Landesbank 69.8 Commerzbank AG 28.9 2 The ratio between the Landesbank Baden-Württemberg 61.4 Banco Santander 36.3 least and most solvent 1 Crédit Mutuel 59.1 UniCredit S.p.A 50.0 bank is 4.1x (209.3 / ING Bank 51.0 Deutsche Bank 89.5 208.6), signalling a lower gap in the perceived long-term Long-Term Rating* as of 02/07/2018 Annual Volatility (Last 90 days) as of 02/07/2018 solvency amongst HSH Nordbank BBB- European banks Bayerische Landesbank 91.1% 4 NIBC Bank BBB ING Bank 89.7% UniCredit S.p.A BBB+ 3 NIBC recorded the UniCredit S.p.A 62.2% Norddeutsche Landesbank A- DZ Bank 59.8% largest improvement in Deutsche Bank A- Banco Santander 55.0% CDS prices, decreas-ing Commerzbank AG A Landesbank Baden-Württemberg 46.4% by 96 bps com-pared Banco Santander A Deutsche Bank 46.1% with 1 year prior Bayerische Landesbank A+ BNP Paribas 42.8% ING Bank AA- Commerzbank AG 32.6% 4 Overall, German and HSBC Holdings AA- HSBC Holdings 31.8% BNP Paribas AA- European banks exhibit NIBC Bank 19.5% Crédit Mutuel AA- similar levels of volatility HSH Nordbank 16.0% DZ Bank A+ in their CDS spreads Crédit Mutuel 14.5% Landesbank Baden-Württemberg A over the last 90 days Norddeutsche Landesbank 9.1%

Source: S&P Capital IQ as of July 02nd, 2018 28 Note: All calculations based on mid prices; * S&P Rating notches 3-Year Development of 10-Year-Spread of German vs. European Institutions

German and European bps banks generally follow the same trend over the 200 past 3 years

180 Mean and median CDS prices have generally been lower for 160 European banks, in particular since the beginning of 2016 140

Volatility remains consistent across both 120 German and European banks over the 3 year 100 period, exhibiting standard deviations of approximately 26 bps 80

The Deutsche Bank and UniCredit turmoil 60 caused the large spike in mean CDS prices during Q1 2016 and H1 40 2018 (next pages)

0 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Median German Mean German Median European Mean European Source: S&P Capital IQ as of July 02nd, 2018 29 Note: All calculations based on mid prices 3-Year Development of 10-Year-Spread of German Institutions

Over the last 3 years, bps Deutsche Bank and 300 Commerzbank were the most volatile German banks with standard deviations of 44 bps and 25 bps, 250 respectively

HSH Nordbank reached the highest CDS price over the last 3 years 200 (294 bps, 15/02/2016)

DZ Bank and Landes- bank Baden- Württemberg were 150 among the least volatile (standard deviations of 4 bps and 12 bps respectively) 100 From the highs in Q1 2016, CDS prices for German banks have been steadily declining, 50 some reaching new record lows

The internal reorganisation at 0 Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 Deutsche Bank in H1 2018 caused the strong Bayerische Landesbank Commerzbank AG Deutsche Bank Aktiengesellschaft DZ Bank increase in CDS price HSH Nordbank AG Landesbank Baden-Württemberg Norddeutsche Landesbank Girozentrale Source: S&P Capital IQ as of July 02nd, 2018 30 Note: All calculations based on mid prices 3-Year Development of 10-Year-Spread of European Institutions

Over the last 3 years, bps NIBC and UniCredit 300 were the most volatile European banks with standard deviations of 50 bps and 44 bps, respectively 250 NIBC Bank reached the highest CDS price over the last 3 years (289 bps, 06/10/2016) 200

Crédit Mutuel and ING Bank were the least volatile (standard deviations of 15 bps 150 and 24 bps respectively)

From the highs in Q1 2016, CDS prices for 100 European banks have been steadily declining, some reaching new record lows 50 The political instability and the macroeconomic situation in Italy and Spain caused 0 the strong increase in Jun-15 Sep-15 Dec-15 Mar-16 Jun-16 Sep-16 Dec-16 Mar-17 Jun-17 Sep-17 Dec-17 Mar-18 Jun-18 CDS prices of UniCredit Banco Santander, S.A. Banque Fédérative du Crédit Mutuel - Société Anonyme BNP Paribas SA and Santander HSBC Holdings plc ING Bank N.V. NIBC Bank N.V. UniCredit S.p.A. Source: S&P Capital IQ as of July 02nd, 2018 31 Note: All calculations based on mid prices 10-Year-Spread – CDS vs. Rating

The comparison of 250 current CDS prices with current ratings, implied trend risk for a future rating action highlights the (downgrade) relationship between Deutsche Bank HSH Nordbank these forward- and 200 backward-looking solvency indicators UniCredit S.p.A

A strong correlation exists between CDS 150 prices and rating (51% Commerzbank AG of the variation in CDS prices can be explained Banco Santander via ratings) Norddeutsche Landesbank 100 HSBC Holdings The slope implies (on

BNP Paribas NIBC Bank CDS Price (inbps)CDS Price average) that a 1 notch DZ Bank fall in rating would result Bay erische Landesbank Landesbank Baden-Württemberg in a higher 10-Year Crédit Mutuel CDS price by approx. 50 ING Bank 17 bps

Banks above the trendline (predom- R² = 0.5093 inantly German banks) 0 seem to possess AAA1 AA+2 AA3 AA4- A+5 A6 A7- BBB+8 BBB9 BBB10 - BB+11 12BB greater solvency risk Rating

than their rating would Year Year

imply; a possible - PD indicator for a future 0.10% 0.16% 0.15% 0.52% 0.64% 0.42% 0.86% 2.30% 2.17% 4.94% 6.47% 9.98% rating “downgrade” 5 S&P

Source: S&P Capital IQ as of July 02nd, 2018 32 Note: All calculations based on mid prices; rating according to S&P Rating notches; S&P 5-Year PD represents the 5-year probability of default for each respective rating notch CONTACT DETAILS & DISCLAIMER

33 Contact Details & Disclaimer

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