RAROC profile and corporate credit pricing model derived from Pillar 3 disclosures.
Deutsche Bank is a Germany-based bank with approximately EUR 244bn of corporate credit exposure (EAD) under the Mixed approach to credit risk capital. The numbers below come directly from Deutsche Bank's most recent Pillar 3 CR6 regulatory filings and are used to model how this bank prices corporate credit facilities.
Deutsche Bank's Corporate Bank segment has been repositioned since 2019 around transaction banking and German Mittelstand lending, away from the structured-credit book that drove pre-2019 capital consumption. The F-IRB designation and relatively high funding spread versus French or US peers keep its minimum viable spread on BBB+ term lending above the European median.
Deutsche Bank is a smaller corporate book by disclosed EAD (35 of 59). Its cost-to-income ratio of 64.0% is in line with the European large-bank average (+14.2pp vs the 59-bank cross-section average of 49.8%). The corporate portfolio is weighted toward sub-IG obligors, with an EAD-weighted average PD of 4.3% against a cross-bank average of 2.1%.
The consolidated book blends A-IRB and F-IRB sub-portfolios, so the headline PD and LGD averages mask meaningful dispersion between segments — relevant when benchmarking specific sectors or geographies. Unsecured LGD disclosed at 31.1% is -5.7pp against the 36.8% cross-bank average, indicating recovery assumptions that are more favourable than the peer median — often a feature of senior-unsecured lending to large investment-grade obligors.
On the standardised BBB+ EUR 25M 5-year term loan used across every bank profile, Deutsche Bank lands in the lower half of the pricing ranking (#52 of 59), with a RAROC of 6.70% and a minimum spread of 268bp to reach the 12% hurdle. Within Germany specifically, the bank ranks #1 of 2 on this same calculation.
| Parameter | Value | What it means |
|---|---|---|
| IRB approach | Mixed | How the bank computes risk-weighted assets |
| Cost-to-income ratio | 64.0% | Operating cost share of net revenue |
| Effective tax rate | 26.8% | Applied to RAROC numerator after EL and funding |
| Average corporate PD | 4.26% | EAD-weighted probability of default |
| Avg LGD (unsecured) | 31.1% | Loss share if borrower defaults, no collateral |
| Avg LGD (secured) | 20.0% | Loss share with eligible collateral |
| Funding spread | 20bp | Bank's wholesale funding cost above risk-free |
| Corporate EAD | EUR 244bn | Total exposure at default to corporates |
On a representative BBB+ rated, 5-year term loan of EUR 25M at 150bp spread with a 20bp commitment fee, Deutsche Bank would generate an estimated RAROC of 6.70% against a typical 12% bank hurdle rate. To hit that hurdle on this exact deal, the bank would need a minimum spread of 268bp. This deal is significantly below target — the bank would either reprice it or decline.
| Component | Value |
|---|---|
| Annual revenue (spread + fees) | EUR 385,000 |
| Operating cost | EUR 154,000 |
| Expected loss (PD × LGD × EAD) | EUR 28,750 |
| Capital required (FPE) | EUR 2,451,320 |
| RAROC (after tax) | 6.70% |
| Min spread to hit 12% RAROC | 268bp |
Out of 59 banks in the OpenRAROC dataset, Deutsche Bank ranks #52 by RAROC on this sample deal.
| Rank | Bank | Country | RAROC | Min spread |
|---|---|---|---|---|
| 1 | Qatar National Bank | Qatar | 9.00% | 203bp |
| 2 | DBS Group | Singapore | 8.18% | 224bp |
| 3 | JP Morgan | United States | 8.12% | 231bp |
| 4 | ICBC | China | 8.06% | 233bp |
| 5 | China Construction Bank | China | 8.06% | 233bp |
| 51 | Santander | Spain | 6.76% | 269bp |
| 52 | Deutsche Bank | Germany | 6.70% | 268bp |
| 53 | Raiffeisen Bank International | Austria | 6.69% | 266bp |
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