Deutsche Bank has drawn up plans for a radical restructuring which will involve the creation of a “bad bank” to hold tens of billions of euros of toxic assets and a round of severe cuts to its investment banking operations, according to reports.
The bad bank would house or sell assets valued at up to €50bn (£45bn) comprising mainly of long-term trades that have been a major drag on the struggling bank’s balance sheet, the Financial Times reported, citing four people briefed on the plan.
The creation of the bad bank – a tactic used by failed UK banks after the 2008 crisis – would enable chief executive Christian Sewing to shift the lender away from the highly profitable but risky world of investment banking and focus instead on mainstream banking and private wealth management.
As part of the restructuring, the lender’s stocks and interest rates trading units outside continental Europe would be shrunk or closed entirely, the report said.
The bank is planning cuts at its US equities business, including prime brokerage and equity derivatives, to win over shareholders unhappy about its performance, four sources familiar with the matter told Reuters in May.
The bank’s overhaul could involve major job losses in the UK, where it employs 8,500 people, and the US where it has around 10,000 staff.
“As we said at the AGM on 23 May, 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,” DeutscheBank said in an emailed statement on Sunday in response to the FT report.
Sewing could announce the changes along with Deutsche Bank’s half-year results in late July, the FT reported.
Deutsche Bank has been beset by a series of crisis in the past year including money laundering allegations, failed merger talks with Commerzbank and concerns about the lender’s dealings with Donald Trump and his son-in-law Jared Kushner.
Deutsche’s shares closed near a record low of €6.03 on Friday, charting a spectacular fall from grace for the bank. The stock was worth €107 in 2008 before the global financial crisis and has never recovered its preeminence.