CORPORATES

CREDIT OPINION12 October 2017

Update

RATINGS

Deutsche Bahn AGDomicile Berlin, Germany

Long Term Rating Aa1

Type LT Issuer Rating - DomCurr

Outlook Stable

Please see the ratings section at the end of this reportfor more information. The ratings and outlook shownreflect information as of the publication date.

Contacts

Lorenzo Re 39-02-9148-1123VP-Senior Analystlorenzo.re@moodys.com

Yasmina Serghini 33-1-5330-1064Associate ManagingDirectoryasmina.serghini@moodys.com

Giuliana Cirrincione 39-02-91481-126Associate Analystgiuliana.cirrincione@moodys.com

CLIENT SERVICES

Americas 1-212-553-1653

Asia Pacific 852-3551-3077

Japan 81-3-5408-4100

EMEA 44-20-7772-5454

Deutsche Bahn AGUpdate to credit analysis

SummaryIn accordance with our Government-Related Issuers methodology, Deutsche Bahn AG’s (DB)Aa1 issuer rating incorporates a three-notch uplift from its a1 Baseline Credit Assessment (BCA,a measure of the company’s standalone credit risk), reflecting the relationship between thecompany and the Government of Germany (Aaa stable).

The a1 BCA is currently weakly positioned, owing to a number of challenges in DB’s financialprofile, particularly in terms of profitability, leverage and free cash flow (FCF) generation,which reflect the increasing competition in both the cargo and passenger businesses. DB'smanagement has started a restructuring programme to reduce costs and improve servicequality, which entails substantial investments (in excess of €4 billion in annual net capitalspending) through 2021. We expect this large capital spending to strain the company's freecash flow, which we estimate will remain negative (around €1 billion deficit) in the next 12-18months, and to keep leverage between 5.3x and 5.5x through 2019, a level that is high for thecurrent BCA.

DB’s BCA is supported by the company's size, geographical diversification and leading globalmarket position, as well as the predictability of the legal framework for railway companies inGermany and the stable environment in which the company operates in its domestic market,including the national government's commitment to maintaining DB's financial stability via acapital increase completed in September and annual dividend payment cuts.

Exhibit 1

Profit margin is improving, but it remains the main credit challengeMoody's-adjusted revenue (€ billion) and EBITA margin (%)

4.1%

3.6%

1.7%

2.6%2.9%

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

4.5%

38.0

38.5

39.0

39.5

40.0

40.5

41.0

41.5

42.0

42.5

43.0

FY2013 FY2014 FY2015 FY2016 LTM June 17 FY2017(f)

€b

illio

n

Revenue (€ billion) Moody's-adjusted EBITA Margin (%)

All figures and ratios are calculated using Moody’s estimates and standard adjustments. Moody's Forecasts (f) are Moody'sopinion and do not represent the views of the issuer. Periods are fiscal year end unless indicated. LTM = Last 12 months ended 30June 2017.Source: Moody’s Financial Metrics™

MOODY'S INVESTORS SERVICE CORPORATES

Credit strengths

» Solid business profile, supported by a predictable operating environment

» No changes expected in our assumptions of government support and default dependence

Credit challenges

» Continued pressure on profitability, despite some recovery

» Free cash flow generation under pressure because of an intense capital spending programme

Rating outlookThe stable outlook on DB’s rating is in line with the stable outlook on the Aaa rating of its support provider, the Government of Germany.This reflects the fact that any significant adjustment in the rating of the German government would cause us to reassess the amountof credit uplift incorporated in DB’s rating. In addition, a further weakening in DB’s BCA could put negative pressure on the company’sAa1 rating.

Factors that could lead to an upgradeCurrently, DB’s rating is one notch lower than the sovereign rating and we expect this gap to remain because we do not anticipate anystrengthening in government support beyond its current high level, nor do we expect any change in our dependence assumption.

The BCA would most likely come under upward pressure from an improvement in:

» DB’s operating performance, with a Moody's-adjusted EBITA margin exceeding 6% on a sustained basis

» Moody's-adjusted debt/EBITDA well below 5.0x on a sustainable basis

Factors that could lead to a downgradeDB’s Aa1 issuer rating is sensitive to any weakening in the likelihood of support from the federal government, which we expect toremain high, given the constitutional framework and the importance of DB to the economy.

In addition, any further weakening in the BCA could result in a downgrade of the Aa1 rating. This weakening could be caused by thefollowing:

» A permanent deterioration in the company’s operating performance, with a Moody's-adjusted EBITA margin below 4.5%.

» Moody's-adjusted debt/EBITDA increasing above 5.5x.

» Weakness in the company’s business profile resulting from a change in its integrated business model with the separation from theinfrastructure management activities.

» A major reduction in ongoing infrastructure subsidies, increasing the burden of infrastructure capital spending for the company.

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page onwww.moodys.com for the most updated credit rating action information and rating history.

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Key indicators

Exhibit 2

DB's Key Indicators

EUR Millions Dec-13 Dec-14 Dec-15 Dec-16

LTM

(Jun-17) Dec-17 (f)

Revenue 39,779 40,328 40,986 41,154 42,194 42,370

EBITA Margin % 4.1% 3.6% 1.7% 2.6% 2.9% 4.0%

EBITA / Average Assets 2.9% 2.5% 1.2% 1.8% 2.0% 2.8%

Debt / Book Capitalization 65.0% 66.4% 68.9% 71.0% 69.7% 69.7%

Debt / EBITDA 5.0x 5.3x 6.2x 6.2x 6.1x 5.3x

FCF / Debt -2.6% -0.5% -4.8% -0.6% -2.8% -3.2%

RCF / Net Debt 21.3% 23.2% 20.9% 19.4% 20.6% 20.5%

(FFO + Interest Expense) / Interest Expense 6.7x 7.0x 7.5x 7.7x 8.4x 7.5x

All figures and ratios are calculated using Moody’s estimates and standard adjustments. Moody's Forecasts (f) are Moody's opinion and do not represent the views of the issuer. Periods arefiscal year end unless indicated. LTM = Last 12 months ended 30 June 2017.Source: Moody’s Financial Metrics™

ProfileDeutsche Bahn AG (DB) is a vertically integrated rail and logistics group that owns and operates the German national rail transportationnetwork. DB is one of the largest rail and logistics companies in the world. In 2016, DB generated €41 billion of revenue and €4.5billion of reported EBITDA. The company includes rail track infrastructure, and passenger and freight transportation services under itsholding umbrella. DB holds leading market positions in most of the segments in which it operates. These segments include Long Distance(10% of revenue) and Regional (21%) passenger railways in Germany; mass-transit transportation services through the subsidiaries DBArriva (13%) and DB Cargo (10%); logistic services through the subsidiary DB Schenker (37%); and railway stations and infrastructuremanagement (9%).

Exhibit 3

Revenue breakdown by segmentFiscal 2016

Exhibit 4

Revenue breakdown by regionFiscal 2016

DB Long-Distance10%

DB Regional21%

DB Cargo10%

DB Netze Track4%

DB Arriva13%

DB Netze Energy3%

DB Schenker37%

DB Netze Stations1%

Other1%

Source: Company's annual report

Germany57%

Europe (excl. Germany)31%

Asia/Pacific7%

North America4%

Rest of world1%

Source: Company's annual report

Detailed credit considerationsProfitability will remain a key credit concernDB’s weak profitability remains its main credit concern because we expect the company's EBITA margin (on a Moody’s-adjusted basis)to remain between 3.5% and 4% through 2018, which we consider low for the current BCA. Besides strikes and unfavorable weatherconditions, in recent years, DB's profitability has been adversely affected by (1) weak performance in the rail freight division (DB Cargo),

3 12 October 2017 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

and (2) increasing competition in the German long-distance and regional rail services, with some of DB's existing contracts awarded tocompetitors, which put significant pressure on prices and volume.

However, DB’s management is implementing a restructuring programme to address weaknesses in operating performance via serviceimprovements, cost-saving initiatives and streamlining the company’s organisational structure. Results for the fiscal year ended 31December 2016 (FY2016) and the 12 months to 30 June 2017 already show some progress, with the Moody's-adjusted EBITA margin onan improving trend and reaching 2.9% in the 12 months to 30 June 2017, up from 1.7% and 2.6% in 2015 and 2016, respectively. DB'sreported EBITDA grew 6.6% like-for-like in the first half of 2017 (H1 2017) compared with the same period a year earlier, in particulardriven by the DB Long-Distance business unit. This improvement was also supported by more favorable macroeconomic conditions, whichresulted in (1) an increase in the number of passengers and volumes sold mianly in Germany, and (2) a recovery in world trade, with asignificant increase in both ocean and air freight volumes. Despite some improvement, weak performance in the DB Cargo division, whichcontinued to report a slight decrease in volume and revenue in H1 2017, contributed to keep DB's profit margin low.

We expect DB's profitability to remain subdued in the next 12-18 months, mainly as a result of continued pressure on prices fromcompetitors in rail services, as well as from alternative modes of transport such as car sharing, long-distance buses and low-cost flights.

High and increasing capital spending will keep leverage high for the BCA and free cash flow under strainWe expect DB to maintain leverage (measured as Moody’s-adjusted gross debt/EBITDA) between 5.3x and 5.5x over the next 12-18months, down from 6.1x in 2016 but still high for the current BCA. We expect reported net debt to remain stable or to marginally rise toaround €20 billion by the end of 2019 as a result of the company's ongoing dividend payments and the expected higher capital spendingrequirements of €4 billion annually, on average, in 2017-21. Similarly, this large capital spending will strain the company's free cash flow,which we estimate will remain negative (around €1 billion deficit) through the forecasted period.

Exhibit 5

Leverage will remain high for the BCAMoody's-adjusted gross debt (€ billion) and debt/EBITDA ratio

5.0x

5.3x

6.2x 6.2x 6.1x

0.0x

1.0x

2.0x

3.0x

4.0x

5.0x

6.0x

7.0x

25.0

26.0

27.0

28.0

29.0

30.0

31.0

32.0

FY2013 FY2014 FY2015 FY2016 LTM (Jun-17) FY2017(f)

€b

illio

n

Moody's-adjusted gross debt (€ billion) Moody's-adjusted Debt/EBITDA

Note: All figures and ratios are calculated using Moody’s estimates and standard adjustments. Moody's Forecasts (f) are Moody's opinion and do not represent the views of the issuer.Periods are fiscal year end unless indicated. LTM = Last Twelve Months ended 30 June 2017.Source: Moody’s Financial Metrics™

More positively, the decision of the federal government to provide a support package totallying more than €2.7 billion over 2017-2021and involving a €1 billion capital increase completed in September 2017 and dividend reductions, will ease some pressure on DB's financialleverage in the coming years. These decisions also mitigate the credit-negative announcement made by DB's management that thepossible partial privatisation plans of DB's subsidiaries DB Arriva (passenger transport services outside Germany) and DB Schenker (logisticsservices), or both — aimed at containing the company’s increasing debt load — have been put on hold.

Integration with infrastructure is credit positiveDB’s weak leverage and FCF coverage are largely driven by the company’s vertically integrated business model and substantial investmentneeds in rail track infrastructure. This setup is unusual in the European rail operators market, where the infrastructure and rail operatingbusinesses are mostly managed and run separately. We consider that the combination of the two businesses provides DB with anadvantage, given the breadth of its operations. Therefore, DB can accommodate a higher leverage in the a1 category than other rail

4 12 October 2017 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

operators. For example, in France, the railway operator SNCF Mobilités (BCA: baa1 and Long term rating: Aa3 stable) has a similarleverage level (6x Moody's-adjusted debt/EBITDA in December 2016), while the infrastructure manager SNCF Réseau (Aa2 stable) hasa leverage in excess of 30x.

Exhibit 6

DB's leverage is one of the highest among its European peers andwill remain elevatedMoody's-adjusted debt/EBITDA

Exhibit 7

Retained cash flow/net debt is on a downward trend but isexpected to remain in the high teens (in percentage terms)

2.0x

2.5x

3.0x

3.5x

4.0x

4.5x

5.0x

5.5x

6.0x

6.5x

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017(f)

Deutsche Bahn (Aa1) NSB (Aa2)

SNCF Mobilités (Aa3) Ceske drahy (Baa2)

Source: Moody's Financial Metrics™

5%

10%

15%

20%

25%

30%

FY2012 FY2013 FY2014 FY2015 FY2016 FY2017(f)

Deutsche Bahn (Aa1) NSB (Aa2)

SNCF Mobilités (Aa3) Ceske drahy (Baa2)

Source: Moody's Financial Metrics™

Solid business profile supported by a predictable operating environmentWe consider DB’s operating environment in Germany to be stable and supportive of the company's credit quality. Germany has set thepace for rail sector liberalisation. For this purpose, the government has put in place a stable legal framework, entailing (1) the government’sconstitutional obligation to provide functional rail infrastructure, implying that it will sustain most of the investments in the infrastructure;(2) budgeting in the medium-term planning process of funds for regional transportation; and (3) the existence of a service and financingagreement between DB and the federal government, with well-defined quality levels.

As a result of the opening of the German rail sector to competition, DB's market shares in both passenger transport and rail freighthave been declining gradually. However, this decline has been 1%-2% per year (based on our analysis and external market research)and is, therefore, manageable. Moreover, DB’s business profile is supported by its large size and broad diversification by both businesssegment (rail and bus passenger transport, rail freight, logistics and rail infrastructure) and by geography (around 43% of revenue infinancial 2016 was generated abroad, including 31% in Europe, 7% in Asia/Pacific and 4% in North America, mainly in the cargo andlogistics businesses, and from DB Arriva).

DB’s business profile is also underpinned by its leading market positions. DB is the market leader in the European rail freight businessand is the second-largest passenger railway operator after SNCF Mobilités. In addition, DB is one of the leading groups in European landtransport, air freight, ocean freight and contract logistics.

No changes expected in our assumptions of government support and default dependenceGiven DB's 100% ownership by the German government, we apply our Government-Related Issuers rating methodology for thecompany. Therefore, DB’s rating reflects a combination of the following inputs:

» A BCA of a1.

» The Aaa domestic-currency rating of the Federal Republic of Germany.

» The high default dependence on the government.

» The high probability of support from the government.

Our assessment of high default dependence between DB and the German government reflects (1) Germany's status as a key hub ofEuropean rail traffic; and (2) the strong integration of railway infrastructure into the international economy and trade flow. These factors

5 12 October 2017 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

are balanced by (1) DB’s geographical diversification, mainly via its international logistics and freight-forwarding activities; and (2) theincreasing presence of the company's rail freight activities in neighbouring European rail markets.

Our expectation that the government will provide DB with a high level of support in case of need is based on (1) the constitutionalrequirement that the government remains the owner of rail infrastructure in the country and is responsible for ensuring that it is functional;(2) DB’s 100% state ownership; (3) the strategic importance of a functioning, well-funded rail infrastructure for Germany’s economy; (4)an overall strong political consensus regarding the public role of DB and the importance of its activities for the German economy; and (5)DB’s dominant role as a regional transport provider, in addition to its de facto monopoly in the long-distance passenger rail segment.

Liquidity analysisWe expect DB to maintain satisfactory liquidity over the next 12 months, supported by (1) its cash position of €2.9 billion as of 30 June2017, (2) its €2 billion commercial paper programme fully available, (3) €2 billion of unused committed credit lines, and (4) its sizeable cashflow from operations, which we forecast to be between €3.8 billion and €4 billion per annum in 2017 and 2018. Major cash needs includehigh capital spending, which we estimate at €4.0 billion in 2017 and €4.4 billion in 2018, net of grants from the German government,and €2.1 billion in debt maturities in the next 12 months.

We also expect DB to maintain its excellent access to the capital markets. In addition, our liquidity assessment assumes that, in caseof need, the company would receive support from the federal government, which would provide timely cash injections. These liquidityinjections would go beyond the government’s statutory duty to preserve DB’s operations from insolvency.

Rating methodology and scorecardDB’s BCA of a1 is one notch higher than the outcome of our rating methodology grid for Global Passenger Railway Companies, published inJune 2017. The one-notch differential reflects our view of the company’s strong business profile. In particular, we value certain key strengthsof DB’s integrated business model, such as the combination of its network and rail operations under one roof, as well as the company'sdiversification into logistics and passenger transport markets outside of Germany. In our view, these strengths mitigate the weaknessesindicated by the quantitative factors of the methodology grid in terms of profitability, return on assets, leverage and cash flow coverage.

6 12 October 2017 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

Exhibit 8

Rating factors

Deutsche Bahn AG

Passenger Railway Industry Grid [1][2] Current

LTM 6/30/2017

Moody's 12-18

Month Forward View

As of 9/29/2017 [3]

Factor 1 : SIZE (15%) Measure Score Measure Score

a) Revenue ($ Billion) $46.0 Aaa $48 - $49 Aaa

b) Number of Passenger Transported (PKM billion) Aaa Aaa Aaa Aaa

Factor 2 : MARKET POSITION (40%)

a) Stability of Operating Environment Aaa Aaa Aaa Aaa

b) Market Characteristics Aaa Aaa Aaa Aaa

c) Competitive Environment Aa Aa Aa Aa

Factor 3 : COST POSITION AND PROFITABILITY (15%)

a) EBITA Margin 2.9% Caa 3.5% - 4% B

b) EBITA / Avg. Assets 2.0% B 2.5% - 3% B

Factor 4 : CAPITAL STRUCTURE (15%)

a) Debt / Book Capitalisation 69.7% A 69% - 70% A

b) Debt / EBITDA 6.1x B 5.3x - 5.5x Ba

Factor 5 : CASH FLOW AND INTEREST COVERAGE (15%)

a) FCF / Debt -2.8% Ba -3.6% - -3% Ba

b) RCF / Net Debt 20.6% Baa 19% - 21% Baa

c) (FFO + Interest) / Interest 8.4x Aa 7.4x - 7.5x Aa

Rating:

a) Indicated Rating from Grid A2 A2

b) Actual Rating Assigned (BCA) a1

Government-Related Issuer Factor

a) Baseline Credit Assessment a1

b) Government Local Currency Rating Aaa Stable

c) Default Dependence High

d) Support High

e) Final Rating Outcome Aa1 Stable

(1) All ratios are based on 'Adjusted' financial data and incorporate Moody's Global Standard Adjustments for Non-Financial Corporations. (2) As of 6/30/2017(L). This represents Moody'sforward view; not the view of the issuer; and unless noted in the text, does not incorporate significant acquisitions and divestitures.Source: Moody's Financial Metrics™

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MOODY'S INVESTORS SERVICE CORPORATES

Appendix

Exhibit 9

Peer comparison table

(in US millions)

FYE

Dec-15

FYE

Dec-16

LTM

Jun-17

FYE

Dec-15

FYE

Dec-16

LTM

Jun-17

FYE

Dec-14

FYE

Dec-15

FYE

Dec-16

FYE

Dec-15

FYE

Dec-16

LTM

Dec-16

Revenue $45,506 $45,535 $46,000 $32,527 $33,766 $33,943 $2,440 $1,910 $1,735 $1,346 $1,363 $1,363

EBITDA $5,396 $5,614 $5,597 $3,280 $3,374 $3,792 $608 $488 $290 $389 $413 $413

EBITA Margin 1.7% 2.6% 2.9% 3.0% 4.0% 5.3% 12.7% 14.1% 9.8% 7.6% 8.9% 8.9%

EBITA / Avg. Assets 1.2% 1.8% 2.0% 2.1% 3.1% 4.1% 6.9% 7.4% 4.7% 2.7% 3.2% 3.2%

FFO + Int Exp / Int Exp 7.5x 7.7x 8.4x 7.9x 6.2x 7.7x 8.1x 10.8x 13.3x 5.3x 6.3x 6.3x

Total Debt/Capital 68.9% 71.0% 69.7% 66.8% 70.6% 70.6% 63.7% 58.2% 42.8% 53.1% 52.6% 52.6%

Debt / EBITDA 6.2x 6.2x 6.1x 5.6x 6.0x 5.4x 4.2x 3.9x 3.1x 4.4x 4.2x 4.2x

FCF / Debt -4.8% -0.6% -2.8% -0.8% -5.8% -1.6% -5.0% -3.4% -1.0% -2.6% -1.6% -1.6%

RCF / Net Debt 20.9% 19.4% 20.6% 17.7% 13.5% 16.4% 17.3% 19.1% 10.5% 18.4% 22.5% 22.5%

Deutsche Bahn AG SNCF Mobilites Norges Statsbaner AS Ceske drahy, a.s.

(P)Aa1 Stable Aa3 Stable Aa2 Developing Baa2 Stable

All figures are calculated using our estimates and standard adjustments.Source: Moody's Financial Metrics™

Exhibit 10

Moody's-adjusted debt breakdownDeutsche Bahn

(in EUR Millions)

FYE

Dec-12

FYE

Dec-13

FYE

Dec-14

FYE

Dec-15

FYE

Dec-16

As Reported Debt 18,613 19,313 20,334 22,428 22,481

Pensions 3,404 3,562 4,357 3,688 4,510

Operating Leases 5,130 4,452 4,223 4,014 4,538

Moody's-Adjusted Debt 27,147 27,327 28,914 30,130 31,529

Source: Moody's Financial Metrics™

Exhibit 11

Moody's-adjusted EBITDA breakdownDeutsche Bahn

(in EUR Millions)

FYE

Dec-12

FYE

Dec-13

FYE

Dec-14

FYE

Dec-15

FYE

Dec-16

As Reported EBITDA 5,931 5,039 5,092 4,387 4,536

Pensions -21 -4 -51 -85 -96

Operating Leases 1,145 1,112 1,221 1,338 1,420

Interest Expense – Discounting -127 -52 -87 -51 -50

Unusual -874 -617 -720 -707 -703

Non-Standard Adjustments -14 -3 -8 -22 -33

Moody's-Adjusted EBITDA 6,040 5,475 5,447 4,860 5,074

Source: Moody's Financial Metrics™

8 12 October 2017 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

Ratings

Exhibit 12Category Moody's RatingDEUTSCHE BAHN AG

Outlook StableIssuer Rating -Dom Curr Aa1Senior Unsecured MTN -Dom Curr (P)Aa1Commercial Paper -Dom Curr P-1Other Short Term -Dom Curr (P)P-1

DEUTSCHE BAHN FINANCE GMBH

Outlook StableBkd Senior Unsecured Aa1Bkd Commercial Paper -Dom Curr P-1Bkd Other Short Term -Dom Curr (P)P-1

Source: Moody's Investors Service

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MOODY'S INVESTORS SERVICE CORPORATES

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MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferredstock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any rating, agreed to pay to MJKK or MSFJ (as applicable) for appraisal and rating services rendered by it feesranging from JPY200,000 to approximately JPY350,000,000.

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10 12 October 2017 Deutsche Bahn AG: Update to credit analysis

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11 12 October 2017 Deutsche Bahn AG: Update to credit analysis