Deutsche Bank to set up €50bn ‘bad bank’ as part of overhaul
Astana. June 17. KazTAG- Deutsche Bank is preparing a deep overhaul of its trading operations including the creation of a so-called bad bank to hold tens of billions of euros of assets as chief executive Christian Sewing shifts Germany’s biggest lender away from investment banking, reports The Financial Times.
The plan would see the bad bank house or sell assets valued by the German lender in its accounts at up to €50bn after adjusting for risk.
Deutsche’s equity and rates trading businesses outside continental Europe will be severely shrunk or closed entirely as part of the revamp, although the final decision is pending, according to four people briefed on the plan. Managers are also set to unveil a new focus on transaction banking and private wealth management.
The proposed bad bank, which is known internally as the non-core asset unit, will comprise mainly of long-dated derivatives, the people said.
Mr Sewing is likely to announce the changes with the bank’s half-year results in late-July. Shares in Deutsche Bank rose 3 per cent in early trading to €6.22 on the plans.
The final scale of the non-core unit has not been decided and the number “continues to oscillate”, but executives are discussing at least €30bn of risk-weighted assets with an eventual size of €40bn to €50bn most likely, two of the people said. At the upper end, it would account for 14 per cent of Deutsche’s balance sheet.
“The cuts need to be radical,” said one senior figure at the bank. “It makes sense for us to put all these long-term, nil-revenue assets in a non-core unit.”
The person added: “We now have the capital and liquidity freedom to do what needs to be done; we couldn’t have acted decisively much sooner because we needed to have built up those buffers.”
The lender said in a statement: “Deutsche Bank is working on measures to accelerate its transformation so as to improve its sustainable profitability. We will update all stakeholders if and when required.”
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