CORPORATES

CREDIT OPINION2 October 2018

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

Francesco Bozzano +33.1.5330.1037Analystfrancesco.bozzano@moodys.com

Yasmina Serghini +33.1.5330.1064Associate Managing Directoryasmina.serghini@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

SummaryDeutsche Bahn AG’s (DB) Aa1 issuer rating incorporates a three-notch uplift from its a1Baseline Credit Assessment (BCA), reflecting the relationship between the company and theGovernment of Germany (Aaa stable).

The a1 BCA is weakly positioned, owing to a number of challenges, particularly in termsof profitability, leverage and free cash flow (FCF) generation, which reflect the increasingcompetition in both the cargo and passenger businesses. DB's management has started arestructuring programme to reduce costs and improve service quality, entailing substantialinvestments (in excess of €4 billion in annual net capital spending) through 2021. We expectthis large capital spending to strain DB's FCF, which we estimate will remain negative (around€1 billion deficit) in the next 12-18 months, and bring leverage to 5.5x through 2019, a levelthat is still high for the current 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.

Exhibit 1

Low profit margin remains the main credit challengeMoody's-adjusted revenue (€ billion) and EBITA margin (%)

3.6%

1.7%

2.6%3.0%

2.5%

3.8%4.1%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

37

38

39

40

41

42

43

44

45

46

2014 2015 2016 2017 LTM June2018 2018(f) 2019(f)

EU

R b

illio

n

Revenue (EUR 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 otherwise. LTM = Last 12 monthsended 30 June 2018.Source: Moody’s Financial Metrics™

Credit strengths

» Solid business profile, supported by a predictable operating environment

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

MOODY'S INVESTORS SERVICE CORPORATES

Credit challenges

» Continued pressure on profitability

» FCF generation strained 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 German government. Thisreflects the fact that any significant adjustment in the rating of the German government would cause us to reassess the amount of credituplift incorporated in DB’s rating. In addition, a further weakening in DB’s BCA could exert negative pressure on the company’s Aa1 rating.

Factors that could lead to an upgradeDB’s rating is one notch lower than the sovereign rating and we expect this gap to remain because we do not expect any strengtheningin government support beyond the 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 the Moody's-adjusted EBITA margin exceeding 6% on a sustained basis

» Moody's-adjusted debt/EBITDA well below 5.0x on a sustained 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 the Moody's-adjusted EBITA margin remaining below4.5%

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

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

» A major decline 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.

2 2 October 2018 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

Key indicators

Exhibit 2

Deutsche Bahn AG's Key indicators

EUR Millions Dec-13 Dec-14 Dec-15 Dec-16 Dec-17

LTM

(Jun-18) Dec-18(f)

Revenue 39,779 40,328 40,986 41,154 43,355 43,877 44,123

EBITA Margin % 4.1% 3.6% 1.7% 2.7% 3.0% 2.5% 3.8%

EBITA / Average Assets 2.9% 2.5% 1.2% 1.8% 2.1% 1.7% 2.7%

Debt / Book Capitalization 65.0% 66.4% 69.0% 71.7% 68.8% 69.9% 70.5%

Debt / EBITDA 5.0x 5.3x 6.2x 6.4x 5.7x 6.2x 5.9x

FCF / Debt -2.6% -0.5% -4.8% -1.1% -6.9% -5.9% -8.6%

RCF / Net Debt 17.5% 20.0% 20.8% 18.7% 20.8% 19.2% 13.8%

(FFO + Interest Expense) / Interest Expense 5.8x 6.2x 7.5x 7.6x 7.9x 7.5x 6.1x

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 2018.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 2017, DB generated €42.7 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 (20%) passenger railways in Germany; mass-transit transportation services through the subsidiaries DBArriva (13%) and DB Cargo (10%); logistic services through the subsidiary DB Schenker (38%); and railway stations and infrastructuremanagement (8%).

Exhibit 3

Revenue breakdown by segment2017

Exhibit 4

Revenue breakdown by region2017

DB Long-Distance10%

DB Regional20%

DB Arriva13%

DB Cargo10%

DB Schenker38%

DB Netze Track4%

DB Netze Stations1%

DB Netze Energy3%

Other1%

External revenue.Source: Company report

Germany57%

Europe (excl. Germany)31%

Asia/Pacific7%

North America4%

Rest of the world1%

External revenue.Source: Company report

3 2 October 2018 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

Detailed credit considerationsLow profitability will remain a key credit concernDB’s weak profitability remains our main credit concern because we expect the company's EBITA margin (on a Moody’s-adjusted basis)to remain between 3% and 4% through 2018, which we consider low for the current BCA. Besides restrictions in rail operations, in recentyears, DB's profitability has been hurt by (1) weak performance in the rail freight division (DB Cargo); and (2) increasing competition,particularly in the regional rail services business, with some of DB's existing contracts awarded to competitors, which exerted significantpressure on prices and volume.

We expect DB's profitability to remain subdued in the next 12-18 months, mainly as a result of continued prices and traffic growth andinflationary pressure on the cost structure.

DB’s management is implementing a restructuring programme to address weaknesses in operating performance via service improvements,cost-saving initiatives. However, the improving profitability trend started in 2015 was partially reversed in the first half (H1) 2018 asoperating costs increased faster than revenues. Profitability, as measured by Moody's-adjusted EBITA margin decreased to 2.5% in thelast twelve months(LTM) to June 2018, from 3% in 2017. The decline is attributed to higher personnel costs, increasing energy costs,digitalisation costs. Revenues in H1 2018 increased by 2.3% compared to H1 2017 supported by favourable macroeconomic conditionswhich resulted in (1) an increase in the number of passengers and volumes sold mainly in Germany; and (2) a recovery in world trade,with a significant increase in both ocean and air freight volumes. This growth was partially offset by negative FX developments , mainlyfor DB Arriva, operational restrictions in some European countries and the decline in the cargo business , mainly in Germany. Cargo trafficreduction was affected by the difficulties in the domestic automotive industry and the closure of coal-fired plants across the country.

High and increasing capital spending will keep leverage high for the BCA and FCF under strainWe expect DB to maintain leverage (measured as Moody’s-adjusted gross debt/EBITDA) around 5.5x over the next 12-18 months, downfrom 6.2x in the LTM to June 2018 , which is still high for the current BCA. We expect reported net debt to marginally increase to around€20 billion by year-end 2019 from €18.6 as of year-end 2017 as a result of the company's ongoing dividend payments and the expectedhigher capital spending requirements above €4 billion annually, on average, in 2018-21. Similarly, this large capital spending will strainthe company's FCF, which we estimate will remain negative (around €1 billion deficit) through the forecast period.

Exhibit 5

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

5.3x

6.2x

6.4x

5.7x

6.2x

5.9x

5.5x

4.8x

5.0x

5.2x

5.4x

5.6x

5.8x

6.0x

6.2x

6.4x

6.6x

26

27

28

29

30

31

32

33

34

35

2014 2015 2016 2017 LTM june 2018 2018(f) 2019(f)

EU

R b

illio

n

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

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 2018.Source: Moody’s Financial Metrics™

4 2 October 2018 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

More positively, the decision of the federal government to provide a support package totalling more than €2.7 billion over 2017-21,of which €1.7 billion has been completed, will ease some pressure on DB's financial leverage in the coming years. These decisions alsomitigate the credit-negative announcement made by DB's management that the possible partial privatisation plans of DB's subsidiaries, DBArriva (passenger transport services outside Germany) and DB Schenker (logistics services) or both — aimed at containing the company’sincreasing 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 set-up is unusual in the European rail operators market, where the infrastructure and rail operatingbusinesses are mostly managed and run separately. We believe that the combination of the two businesses provides DB with an advantage,given the breadth of its operations. Therefore, DB can accommodate higher leverage in the a1 category than other rail operators. Forexample, in France, the railway operator SNCF Mobilités (BCA: baa1 and long-term rating: Aa3 stable) has a similar leverage level (5.7xMoody's-adjusted debt/EBITDA in the 12 months ended June 2018), while the infrastructure manager SNCF Réseau (Aa2 positive) hasleverage 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 expected to remain in the high teens(in percentage terms)

3.5x

4.0x

4.5x

5.0x

5.5x

6.0x

6.5x

7.0x

2012 2013 2014 2015 2016 2017 2018(f)

Deutsche Bahn (Aa1) SNCF Mobilités (Aa3)

Ceske drahy (Baa2)

*SNCF leverage increase in 2018 is mainly due to the impact of strikes on EBITDASource: Moody's Financial Metrics™

11%

13%

15%

17%

19%

21%

23%

25%

2012 2013 2014 2015 2016 2017 2018(f)

Deutsche Bahn (Aa1) 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 infrastructure;(2) budgeting of funds in the medium-term planning process 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 freight havebeen declining gradually. However, this decline has been 1%-2% per year (based on our analysis and external market research) and, in thepassenger segment, has been offset by an increase in the absolute number of passengers, and is, therefore, manageable. Moreover, DB’sbusiness profile is supported by its large size and broad diversification by both business segment (rail and bus passenger transport, railfreight, logistics and rail infrastructure) and geography (around 43% of revenue in 2017 was generated abroad, including 31% in Europe(excluding Germany), 7% in Asia-Pacific and 4% in North America, mainly in the cargo and logistics 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.

5 2 October 2018 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

No changes expected to 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 between DB and the government

» The high probability of support from the government

Our assessment of a 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 factorsare 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 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 €3.7 billion as of June 2018,(2) its fully available €2 billion commercial paper programme, (3) €2 billion of unused committed credit lines, and (4) its sizeable cashflow from operations, which we forecast to be €3.8 billion in 2018. Major cash needs include high capital spending, which we estimate atabout €4.5 billion in 2018, net of grants from the German government and around €1.5 billion in debt maturities in the next 12 months(until June 30, 2019).

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.

6 2 October 2018 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

Rating methodology and scorecardDB’s BCA of a1 is one notch higher than the grid-indicated outcome of our Global Passenger Railway Companies rating methodology,published in June 2017. The one-notch differential reflects our view that DB can accommodate higher leverage in the a1 category thanother rail operators, owing to its integrated business model, with the railways network and rail operations under one roof.

Exhibit 8

Rating factors

Deutsche Bahn AG

Passenger Railway Industry Grid [1][2] Current

LTM 6/30/2018

Moody's 12-18 Month

Forward View

As of 9/21/2018 [3]

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

a) Revenue ($ Billion) $52.3 Aaa $47.8 - $48.8 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 2.5% Caa 3.9% - 4.2% B

b) EBITA / Avg. Assets 1.7% B 2.7% - 2.9% B

Factor 4 : CAPITAL STRUCTURE (15%)

a) Debt / Book Capitalisation 69.9% A 69% - 71% Baa

b) Debt / EBITDA 6.2x B 5.4x - 5.6x Ba

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

a) FCF / Debt -5.9% B -5% - -2% Ba

b) RCF / Net Debt 19.2% Baa 13% - 15% Baa

c) (FFO + Interest) / Interest 7.5x Aa 6.3x - 6.5x A

Rating:

a) Indicated Rating from Grid A2 A2

b) Actual Rating Assigned (BCA) a1 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 6/30/2018(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™

7 2 October 2018 Deutsche Bahn AG: Update to credit analysis

MOODY'S INVESTORS SERVICE CORPORATES

Appendix

Exhibit 9

Peer comparison table

(in US millions)FYE

Dec-16

FYE

Dec-17

LTM

Jun-18

FYE

Dec-16

FYE

Dec-17

LTM

Jun-18

FYE

Dec-16

FYE

Dec-17

LTM

Dec-17

Revenue $45,535 $48,985 $52,343 $33,766 $35,965 $37,366 $1,362 $1,460 $1,460

EBITDA $5,614 $6,318 $6,376 $3,374 $4,125 $3,992 $394 $397 $397

EBITA Margin 2.7% 3.0% 2.5% 4.0% 5.4% 4.3% 7.7% 5.9% 5.9%

EBITA / Avg. Assets 1.8% 2.1% 1.7% 3.1% 4.2% 3.1% 2.8% 2.2% 2.2%

FFO + Int Exp / Int Exp 7.6x 7.9x 7.5x 6.2x 8.0x 6.8x 6.2x 6.6x 6.6x

Total Debt/Capital 71.7% 68.8% 69.9% 69.0% 69.7% 62.6% 52.5% 49.3% 49.3%

Debt / EBITDA 6.4x 5.7x 6.2x 5.9x 5.4x 5.7x 4.4x 4.3x 4.3x

FCF / Debt -1.1% -6.9% -5.9% -5.9% -1.0% -2.6% -1.6% 3.8% 3.8%

RCF / Net Debt 18.7% 20.8% 19.2% 13.9% 19.8% 15.2% 22.3% 23.5% 23.5%

(P)Aa1 Stable Aa3 Stable Baa2 Stable

Deutsche Bahn AG SNCF Mobilites Ceske drahy, a.s.

All figures & ratios calculated using Moody’s estimates & standard adjustments. FYE = Financial Year-End. LTM = Last Twelve Months. RUR* = Ratings under Review, where UPG = forupgrade and DNG = for downgrade.Source: Moody's Financial Metrics™

Exhibit 10

Moody's-adjusted debt breakdownDeutsche Bahn

(in EUR Millions)FYE

Dec-13

FYE

Dec-14

FYE

Dec-15

FYE

Dec-16

FYE

Dec-17

LTM Ending

Jun-18

As Reported Debt 19,313.0 20,334.0 22,428.0 22,481.0 22,076.0 23,468.0

Pensions 3,562.0 4,357.0 3,688.0 4,522.0 3,940.0 3,940.0

Operating Leases 4,452.1 4,223.0 4,013.7 5,037.5 5,310.0 5,310.0

Securitizations 0.0 0.0 144.0 323.0 375.0 375.0

Moody's-Adjusted Debt 27,327.1 28,914.0 30,273.7 32,363.5 31,701.0 33,093.0

Source: Moody's Financial Metrics™

Exhibit 11

Moody's-adjusted EBITDA breakdownDeutsche Bahn

(in EUR Millions)FYE

Dec-13

FYE

Dec-14

FYE

Dec-15

FYE

Dec-16

FYE

Dec-17

LTM Ending

Jun-18

As Reported EBITDA 5,039.0 5,092.0 4,387.0 4,536.0 4,572.0 4,341.0

Pensions -4.0 -51.0 -85.0 -96.0 8.0 8.0

Operating Leases 1,112.5 1,221.1 1,337.9 1,419.9 1,770.0 1,770.0

Interest Expense – Discounting -52.0 -87.0 -51.0 -50.0 0.0 0.0

Unusual -617.0 -720.0 -707.0 -703.0 -744.0 -766.0

Non-Standard Adjustments -3.0 -8.0 -22.0 -33.0 -14.0 -8.0

Moody's-Adjusted EBITDA 5,475.5 5,447.1 4,859.9 5,073.9 5,592.0 5,345.0

Source: Moody's Financial Metrics™

8 2 October 2018 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 (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

9 2 October 2018 Deutsche Bahn AG: Update to credit analysis

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 2 October 2018 Deutsche Bahn AG: Update to credit analysis

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11 2 October 2018 Deutsche Bahn AG: Update to credit analysis