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Deutsche Bank Sells Equity Derivatives to Goldman, Barclays

Donal Griffin and Steven Arons
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Deutsche Bank Sells Equity Derivatives to Goldman, Barclays

(Bloomberg) -- Deutsche Bank AG completed the first in a series of auctions of equities-trading assets as the German lender exits the business after years of underperformance.

The portfolios of equity derivatives, split into European, Asian and U.S. books, were sold to three different bidders, according to spokesman Charlie Olivier, who declined to comment further. Barclays Plc placed the winning bid for the European assets, Goldman Sachs Group Inc. purchased the Asian batch and Morgan Stanley bought the U.S. trades, according to people familiar with the matter.

Spokesmen for the buyers declined to comment.

Selling the derivatives is a key element of Chief Executive Officer Christian Sewing’s plan to pull out of equities trading, shrink the balance sheet and cut costs. Most of the assets formerly held in the stocks trading division have been placed in a capital release unit, or CRU, where they’re being wound down.

Investors use equity derivatives to speculate and as hedges against possible losses. They are more complex than common stocks and thus more lucrative but also riskier for the firms that trade them. The world’s biggest banks generated about $6.7 billion in revenue from the business in the first half of 2019, led by JPMorgan Chase & Co., Goldman Sachs and Societe General SA, compared with just $4.6 billion from dealing in shares, according to Coalition Development Ltd.

Deutsche Bank’s equity-derivatives unit often struggled during the years running up to Sewing’s decision to exit, and executives frequently blamed the business for slumps in performance. The firm hired Peter Selman, who helped lead equity derivatives at Goldman Sachs, as overall head of the stocks unit in a bid to turn the division around, to no avail.

The first auction focused on assets known as flow equity derivatives, which are less complex than exotic derivatives. The sale of the latter will be much more difficult, a person briefed on the matter said.

Another element of the disposal plan is the transfer of Deutsche Bank’s hedge fund assets, technology and staff to BNP Paribas SA. The two banks struck a preliminary agreement earlier this year, but the deal has yet to be finalized.

(Updates with buyers from second paragraph.)

To contact the reporters on this story: Donal Griffin in London at dgriffin10@bloomberg.net;Steven Arons in Frankfurt at sarons@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel

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