Deutsche Bank downgraded by S&P on restructuring plans

Deutsche Bank’s chief executive sought to reassure staff on Friday that the lender was financially sound, after a ratings downgrade and a share price slide in the wake of a report saying the U.S. regulator viewed the lender as “troubled” last year.

Christian Sewing acknowledged in a message Friday to staff that “many of you are sick and tired of bad news” but assured them that the bank has solid capital buffers.

He noted that the ratings agency predicts the bank will eventually return to steady profits and that its outlook was rated as “stable,” meaning further downgrades are not envisioned.

“In this respect, there’s good news in the bad: they trust us to succeed with the change which is required,” Sewing wrote. “But that also means we have to deliver – speedily and rigorously. And that’s exactly what we’re doing.”

Sewing took over as CEO in April after predecessor John Cryan was shown the door after three years of annual losses. The bank has suffered from high costs and heavy fines and penalties for past misconduct. Sewing announced last week that the bank would cut its workforce from 97,000 to under 90,000 and refocus its global investment banking business on its European core, while cutting back on stocks trading operations in New York and London.

The report in Thursday’s Wall Street Journal was followed on Friday by a Standard & Poor’s downgrade of Deutsche’s credit rating to BBB+ from A-. The ratings agency questioned whether the CEO could deliver a strategy to return the bank to profit.

“At group level, our financial strength is beyond doubt,” new CEO Christian Sewing said in a letter to staff, candidly admitting that the newsflow around the bank was “not good”.

In its report on Friday, S&P questioned Sewing’s ability to deliver on a plan to scale back Deutsche’s global investment bank and refocus on Europe and its home market to chart a return to profitability after three years of losses.

S&P said that “relative to peers, Deutsche Bank will remain a negative outlier for some time.”

The bank, which is headquartered in Frankfurt, Germany, lost 735 million euros ($927 million) last year after U.S. tax changes cost it 1.4 billion euros.

Deutsche Bank shares hit an all-time low on Thursday after reports that the U.S. Federal Reserve rated the condition of the bank’s U.S. business as “troubled” about a year ago. Shares in the bank, Germany’s biggest, rose 2.8 percent Friday to 9.53 euros.