trending Market Intelligence /marketintelligence/en/news-insights/trending/-RjtazZvFcA6HfvGELGyLQ2 content esgSubNav
In This List

Deutsche unlikely to expand bad bank any time soon, ING analyst says

Podcast

Street Talk Episode 87

Blog

A New Dawn for European Bank M&A Top 5 Trends

Blog

Insight Weekly: US banks' loan growth; record share buybacks; utility M&A outlook

Blog

Banking Essentials Newsletter 2021: December Edition


Deutsche unlikely to expand bad bank any time soon, ING analyst says

Deutsche Bank AG is unlikely to look to expand its bad bank for the time being, ING credit analyst Suvi Platerink Kosonen said in a Sept. 19 note, in response to a media report saying bank executives had considered adding more assets to the unit.

In its latest restructuring attempt launched in early July, the troubled German group announced the transfer of €74 billion in risk-weighted assets and €288 billion of leverage exposure to a new capital release unit. The assets held in the CRU should be wound down or sold off.

Bank executives considered moving more assets to the unit if the group disposes of CRU-held businesses fast enough, Reuters reported the same day, citing three sources familiar with senior management discussions. A spokesman for Deutsche Bank has rejected any plans for expanding the CRU, Reuters said.

The shedding of the risk-weighted assets currently held in the CRU will result in €7 billion of additional costs, Kosonen said, adding that any increase in the assets held into the unit will lead to more restructuring costs and could eat into Deutsche's capital. This is something that the bank will likely wish to avoid for now, the analyst said.

The latest restructuring plan of Deutsche Bank is expected to take years to complete and given the high execution risk and Deutsche's low profitability, ING remains cautious on the bank, according to Kosonen.

The German group has adjusted its long-term restructuring plan at least once each year since its launch in late 2015. The latest rejiggle is considered the most radical to date as it seeks to halve risk-weighted assets and leverage exposure of the group's corporate and investment bank by 2022 and includes an exit of the equities sales and trading business as well as 18,000 job cuts. The plan marks the end of Deutsche's investment banking-focused strategy, which the group pursued for the previous two decades.

In the future, the group's resized investment bank arm will focus on "traditional strengths in financing, advisory, fixed income and currencies," Deutsche said at the launch of the new plan in July.