Deutsche Bank AG sold another chunk of unwanted assets to Goldman Sachs Group Inc as part of a radical restructuring that’s seeing the German firm exit businesses where it’s been unable to compete.
The nation’s largest lender recently sold securities with a notional value of about £40bn ($51bn) to the US bank, people briefed on the matter said. The assets are tied to emerging market debt and were previously housed in Deutsche Bank’s wind-down unit, one person said. They asked not to be identified discussing the private deal.
The balance sheet reduction is a cornerstone of CEO Christian Sewing’s restructure. Bloomberg’s Steven Arons reports.
Representatives for Deutsche Bank and Goldman Sachs declined to comment.
Deutsche Bank shares rose as much as 1.9% on the news, paring this year’s decline to about 3.6%. That compares with a slight increase for the wider industry.
It’s at least the second time that Goldman Sachs bought securities that Deutsche Bank has earmarked for disposal as part of its latest turnaround plan. In September, the US investment bank purchased the Asian portion of a portfolio of equity derivatives that the German lender had put up for sale, people familiar with the matter said at the time.
Deutsche Bank’s wind-down unit is a cornerstone of the sweeping revamp that chief executive officer Christian Sewing unveiled in July. Its goal is to release tied-up capital by reducing assets quickly while avoiding deep write-downs on them. Ultimately, that’s expected to help the bank replenish its capital buffers, which the CEO is currently drawing down to cover the costs of the restructuring.
Sewing has vowed to cut the leverage exposure — a regulatory measure of risk — in the wind-down unit to €119bn ($131bn) at the end of the year, from €177bn at the end of September. He previously reached an agreement to transfer the hedge fund business to BNP Paribas SA and sold other portions of the equity derivatives portfolio to Barclays Plc and Morgan Stanley, people familiar with the matter have said.
The unit trading emerging-market debt had a weak third quarter, though momentum picked up at the end of the period, the bank said in late October. Deutsche Bank plans to maintain a “robust, broad-based” Emerging Markets debt trading platform, it said. The portfolio just sold to Goldman Sachs was moved into the wind-down unit in July, one person said.
It’s not clear how much the latest sale will contribute to Sewing’s goal since an asset’s notional value says little about its impact on the balance sheet.
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