Deutsche Bank has set a September deadline for bids on the vast portfolio of equity derivatives it is selling, as the struggling lender looks to expedite a key part of its ambitious restructuring.
The derivatives are among the assets earmarked for disposal in Deutsche’s bad bank, which it is relying on to free €10bn to help foot the bill for the overhaul as well as fund investments in technology, compliance and control functions.
The so-called capital release unit, or CRU — the second non-core unit Deutsche has created since the financial crisis — stands in contrast to traditional “bad banks” which have often been used for defaulting property loans and other toxic assets. Alongside equity derivatives, Deutsche’s CRU includes cash equities that it is looking to offload as well as interest-rate trades with poor returns.
“We’ve had a huge amount of interest, people saying they want to be part of the auction process, and expect to start getting firm bids in September,” Ashley Wilson, the cohead of the CRU told the Financial Times in his first public comments since taking the role. The bank will begin auctioning the equity derivatives portfolio in the middle of next month.
The bank has wound down almost all of its cash equities positions, Mr Wilson added, despite only announcing it would close the trading business three weeks ago. The business is one of the casualties of Deutsche chief executive Christian Sewing’s effort to refocus the struggling lender on its German retail operations and banking services to corporate Europe.
The cash equities business has already been “de-risked” after the bank exited block positions with its clients and eliminated its central risk books, which it uses to offset risks both for customers and itself.
French rival BNP Paribas is in talks to buy Deutsche’s prime broking business, as well as its electronic equities platform.
“Right now, we’ve been focused on de-risking and selling the equities portfolio,” Mr Wilson said.
A senior investment banker at rival to Deutsche Bank said there was “a lot of appetite” for the German lender’s assets, with international banks, private equity firms and hedge funds all considering the portfolio.
“Quite a few people who are very well funded are looking for yield,” he added. “The big question
obviously will be the price.” However, any sales of equity derivatives will probably take months to complete as buyers must complete the arduous process of taking over individual client accounts.
Deutsche has said that it plans to sell or run down 60 per cent of the CRU holdings by the end of 2019, but has not given timetables for specific assets.
Mr Wilson’s division, which he co-heads with Louise Kitchen, also has around €80bn of fixed-income assets. Mr Wilson said those assets had been “categorised and prioritised and we are close to completing the de-risking strategy for each asset class”.
