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Report: Deutsche Bank's derivatives exit to cost more than €1B

Deutsche Bank AG's plan to withdraw from derivatives trading, under which it would off-load assets to its envisaged capital release unit, will cost more than €1 billion, insiders told Reuters.

The Frankfurt-based lender has already allotted roughly €1 billion for the matter as part of the estimated €7.4 billion cost of its global restructuring, the sources said, adding that the bank is still sounding out interest in the assets before putting them for sale.

Under the sweeping restructuring, the bank will create a bad bank for €288 billion of unwanted assets, including equity derivatives and long-dated interest rate and credit derivatives, which would eventually be wound down or sold, the newswire wrote Aug. 2.

The bank will reportedly put the equity derivatives portfolio in a formal auction in the next two months, to be followed by the long-dated interest rate and credit derivatives. However, they may be sold at a discounted price since the assets offer low returns and require high levels of capital to be held against them.

If the cost of selling the assets go beyond anticipated, the bank would likely hold them beyond the 2022 deadline to get rid of them, the sources added. Deutsche Bank aims to lower the assets it holds in the unit to €9 billion by then from €119 billion at present.