Deutsche Bank is about to kick off the most gigantic balance sheet cleaning operation that finance remembers. According to advances reported by the Financial Times, the German banking giant has decided to transfer assets for an estimated value of around 50 billion euros to a bad bank, equal to 14% of the institution's budget.
The new container will be renamed, with Teutonic euphemism, non-core assets division. Unlike a normal bad bank – already created in the past by Deutsche Bank – it will not only contain toxic and high-loss securities, but non-strategic assets, mainly long-term derivatives, with a particular focus on transaction banking and private wealth management.
In other words, it will be a gigantic bail-in, which will undoubtedly have repercussions on the prospects of the Banking Union.
"It will be a radical cut – explains an anonymous source to the British newspaper – We are doing it today because we have put together enough means to manage the operation. We couldn't before."
Deutsche Bank CEO Christian Sewing will officially announce the transaction in mid-July, when the institute will present the half-yearly financial statements.
Again according to the Financial Times, the reorganization initiated by the Bank also provides for a strong scaling – if not even closure – of trading activity outside continental Europe.
Sewing's goal is to reverse the trend of stock price reversals that have left Deutsche Bank with the lowest price-to-book ratio among 37 lenders in the Bloomberg Europe 500 Banks and Financial Services Index.
