Deutsche Bank AG (NYSE: DB) formally announced the sale of $50 billion in unwanted assets to Goldman Sachs Group Inc. (NYSE: GS) on Wednesday as part of an overhaul of its emerging-market debt holdings, according to Reuters.
To conduct the transaction, Deutsche is using a capital release unit — a bad bank — to unwind $195 billion in leverage exposure to poor-performing securities. The firm aims to reduce leverage exposure by almost 50% by the end of this year.
In July, Deutsche outlayed its turnaround plan, which consists of the following:
- Exit of global equities and a reduction in banking risk-weighted assets.
- Restructuring of workforce and infrastructure.
- Updated capital and leverage targets.
“DBK’s structural challenges, as we see them, fall into three categories: the absence of a high-return platform, elevated funding costs and uncertainty around the scope of its IB business,” Goldman Sachs said in a statement on Deutsche's restructuring efforts.
In essence, the restructuring has targeted a shift to cash management, hedging and trade finance.
The sale of unwanted assets, alongside a deal to transfer Deutsche's prime brokerage business to BNP Paribas S.A. (OTC: BNPQY), an international retail banking group based in France, puts Deutsche in a better position to address the needs of clients, a vision held by the bank's CEO Christian Sewing.
Deutsche Bank shares were trading 0.75% higher at $7.34 at the time of publication, while Goldman Sachs shares were trading down slightly at $222.36.
File photo by Dustin Blitchok.
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