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8 December 2015 World Outlook 2016: Managing with less liquidity European Credit Strategy: To follow the US or march to its own beat? Credit markets do have a late cycle feel about them but it will likely make a big difference to performance over the next 12 months if this cycle ends in 2016 or extends until at least 2017. Fundamentals - US deteriorating. Eutope steadier but past peak As Oleg Melentyev has alluded to in his US section, US credit quality has deteriorated. However Europe credit quality remains much more stable. Figure I: US 10 total and net leverage 2.5 moo Total Leverage mum Net Leverage 23 2.1 1.9 1.7 ?11 0.1.97 nn 1111 111 11111 2006 2007 2008 2009 2010 2011 2012 2013 2014 2016 Net (floored at $01—ex-Energy/Metals 2 Souc• bueictidt Bat Reawirch I igurti 2. US HY total and net leverage Total Leverage SS Net Leverage ox Energy/Mining 6.5 6.0 5.5 5.0 3.0 4.5 4.0 2.5 3.5 2006 2007 2008 2009 2011 2012 2013 2014 San, Oetatli• BM Parrett In Europe there are sign that earnings have been drifting lower but debt accumulation has been nowhere near as aggressive as in the US market thus helping the ratios. European credit has far less exposure to the Energy and Materials sectors, which has helped create some of the divergence. Figure 3: Euro IG (left) and HY (right) credit fundamentals 22 20 18 16 14 12 I0 2002 2001 20.06 2008 2010 2012 2014 2000 Sown Deuath• ant Reno% Blerembro Anent* LP 4.5 4.0 3.5 3.0 2.5 2.0 2007 2009 2011 ≥013 2005 Net Debt/E8ITDA —EBITDA/Interest Another reason for diverging fundamentals has been corporate activity. US M&A has risen much more sharply than in Europe. For share buybacks the divergence between the US and Europe is even more extreme. Europe has actually seen less in buybacks in 2015 than what was seen over the past decade whereas the US volume remains historically high even if not quite reaching peak levels. Deutsche Bank AG/London 2015 Page 51 CONFIDENTIAL - PURSUANT TO FED. R. CRIM. P. 6(e) DB-SDNY-0119158 CONFIDENTIAL SDNY_GM_00265342 EFTA01458983