Deutsche Bank held talks with Citi, BNP on shedding chunk of equities business: Wall Street Journal

(Reuters) – Deutsche Bank (DBKGn.DE) has held talks with Citigroup Inc (C.N), BNP Paribas SA (BNPP.PA) and others over the possible sale of parts of its equities business, the Wall Street Journal reported on Tuesday.

FILE PHOTO: The financial district with the headquarters of Germany’s largest business bank, Deutsche Bank , is photographed on early evening in Frankfurt, Germany, January 29, 2019. REUTERS/Kai Pfaffenbach/File Photo

Deutsche Chief Executive Officer Christian Sewing said in May that he planned to make cutbacks to the bank’s investment banking and trading operations to appease investors unhappy about its underperformance. Shares in the German lender hit a record low last month.

Sources told Reuters last month that Deutsche plans to cut the size of its U.S. equities business, leaving only a skeleton operation to service corporate and high-net-worth clients. The business has struggled to compete with Wall Street rivals.

Deutsche Bank, Citigroup and BNP Paribas declined to comment.

Reuters reported in May that Deutsche’s prime brokerage services, which serves hedge funds, would be a key focus of the cutbacks.

Deutsche is also planning to set up a separate unit, or “bad bank,” to house toxic assets worth up to 50 billion euros ($56 billion). Deutsche Bank’s supervisory board is expected to meet on July 7 to finalize its plans.

The unit is expected to hold mainly long-dated derivatives, sources familiar with the matter say. Those assets have been a burden on the bank’s capital position since tougher rules were introduced after the 2007-09 financial crisis.

Deutsche wants to wind down the assets or sell them. However, it may struggle to find other banks willing to take them on, analysts say, though they say private equity buyers could be interested in taking them at a deep discount.

“I think it’s possible buyers could emerge but Deutsche would have to take a mighty big write-down,” said David Hendler, an independent analyst at New York-based Viola Risk Advisors.

The discussions could involve Deutsche employees moving to one or more other banks alongside client balances, systems and derivative positions, some held by Deutsche Bank to offset bets taken by its clients, the WSJ reported, citing people familiar with the matter.

No agreements have been reached in the talks involving multiple parties, the report said.

Editing by Maju Samuel and Dan Grebler

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