OREANDA-NEWS. Fitch Ratings has maintained Deutsche Postbank's (PB) Long-term Issuer Default Rating (IDR) of 'A-' and Short-term IDR of 'F1' on Rating Watch Negative (RWN). At the same time, the agency has placed PB's Support Rating of '1' on RWN. PB's senior debt ratings of 'A-'/'F1' have also been maintained on RWN. A full list of rating actions is at the end of this rating action commentary.

PB's IDRs and senior debt ratings reflect the continued expectation of support from Deutsche Bank (DB, A/Negative/a), Postbank's majority owner, until the planned sale of PB is finalised, which Fitch does not expect to happen before 2017. DB owned 96.8% of PB at end-2Q15 and plans to squeeze out the remaining shareholders by end-2015. In our view, there is an extremely high likelihood that DB would support PB if needed as long as it remains the bank's majority owner.

The RWN on PB's Long- and Short-term IDRs, SR and senior unsecured debt ratings reflects the low likelihood, in Fitch's view, that a new owner would have the ability and propensity to support PB at the current 'A-' rating. We also believe it is unlikely that PB could support its current IDRs with its own financial strength if it is subject to an initial public offering (IPO).

KEY RATING DRIVERS
IDRS, SENIOR DEBT AND SR
PB's IDRs are rated one notch below DB's to reflect that despite the initiated sale process there is an extremely high likelihood that DB would support PB if needed as long as it remains the majority owner.

Support is underpinned by a control and profit and loss transfer agreement (PLT) between PB and DB Finanz-Holding GmbH (the wholly-owned subsidiary of DB that holds the majority of shares in PB) and a declaration of backing from DB. PB's SR also reflects this backing from DB. The PLT can be terminated at the earliest on 31 December 2016 with six months' notice, or at any time for "good cause". We understand that the currently planned transfer of the shares held by the remaining shareholders (minority shareholders) of PB to DB as majority shareholder in return for adequate cash compensation (squeeze-out)gives DB the flexibility to end the PLT earlier than December 31, 2016 in light of the envisaged deconsolidation of PB. .

If there is an IPO of PB, its Long-term IDR would be based on its own financial strength and standalone creditworthiness. Fitch expects to assess PB's standalone creditworthiness and assign a Viability Rating (VR) to PB after more information about the details of the deconsolidation is available, most likely at the end of 2015 or beginning of 2016. If there is a sale of PB to a large, highly-rated bank which would be a strategic owner, PB's IDRs could be determined by the new owner's ability and propensity to support PB. However, the identities of potential acquirers and the timing of a transaction currently remain uncertain.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
Hybrid capital issued by PB's issuing vehicles are currently notched down from DB's VR in accordance with Fitch's assessment of each instrument's respective non-performance and relative loss severity risk profiles and our expectation that DB's support for PB would extend to its hybrid instruments. They will likely be notched from Postbank's future VR, absent a sale of PB to a strong bank with strategic interests. Fitch will start notching the hybrids off PB's VR when the RWN on PB's IDR is concluded, so when the sale of PB is finalised.

POSTBANK'S LEGACY UNSECURED GUARANTEED DEBT RATINGS ISSUED BY DSL
The ratings of the legacy guaranteed debt (originally issued by the former DSL and acquired and ultimately merged with PB), reflect the grandfathered deficiency guarantee on these notes from the Federal Republic of Germany (AAA/Stable), which relate to its sovereign ownership and policy role prior to privatisation.

RATING SENSITIVITIES
IDRS, SENIOR DEBT, AND SR
Postbank's IDRs, SR and senior debt ratings are primarily sensitive to the conclusion of its sale. Consequently, Fitch expects to resolve the RWN on PB's IDRs, SR and senior debt ratings once the sale has been finalised, at which point its IDRs and senior debt ratings will reflect the higher of its standalone creditworthiness, as indicated by a VR, and the ability and propensity of any new owner to provide institutional support in case of need. Prior to a sale, the bank's IDRs and debt ratings will move in the same direction as those of DB, reflecting Fitch's expectation of DB's propensity to continue to provide support.

The SR could be downgraded to as low as '5' depending on the new owner and Fitch's assessment of its ability and propensity to provide support in case of need. However, Fitch's view on DB's propensity to support PB is unlikely to change during the sale process, even if the PLT is terminated before the sale of PB is concluded. Fitch believes that a default of a domestic subsidiary would have huge reputational consequences for DB.

The ratings of the legacy guaranteed debt is sensitive to a change to Germany's IDR or to a change in Fitch's assessment of the likelihood that Germany will honour the guarantee.

SUBORDINATED DEBT AND OTHER HYBRID SECURITIES
The hybrid capital securities issued by PB's issuing vehicles are primarily sensitive to the sale of the bank by DB. Upon completion of a sale they will likely be notched from PB's VR. Prior to that, the securities' ratings are sensitive to a change in their notching from DB's VR if Fitch's assessment of support available from DB to PB changes, for example if there are changes to the PLT between PB and DB Finanz-Holding GmbH.

We expect to downgrade the hybrids after a potential termination of the PLT by one notch, mirroring the downgrade of senior debt by one notch in April 2015 when DB announced its deconsolidation plans for PB. If the PLT is terminated before the sale of PB is finalised the risk that a coupon deferral trigger could be met is somewhat higher, because balance sheet losses are not being contractually absorbed by DB.

The rating actions are as follows:

Postbank
Long-term IDR: 'A-'; maintained on RWN
Short-term IDR: 'F1'; maintained on RWN
Support Rating: '1'; placed on RWN
Senior debt, including programme ratings: 'A-'/'F1'; maintained on RWN
Unsecured guaranteed bonds issued by former DSL Bank: affirmed at 'AA'

PB Finance (Delaware); Inc:
Commercial paper: 'F1'; RWN maintained

Deutsche Postbank Funding Trust I (Germany): 'BBB-' maintained on RWN
Deutsche Postbank Funding Trust II (Germany 'BBB-' maintained on RWN
Deutsche Postbank Funding Trust III (Germany): 'BBB-' maintained on RWN
Deutsche Postbank Funding Trust IV (Germany): 'BBB-' maintained on RWN
ProSecure Funding Limited Partnership (LP Jersey): 'BBB' maintained on RWN