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Barclays to take $20 bn portion of Deutsche Bank’s prime brokerage business

posted onJuly 26, 2019

London-based Barclays is planning to take some of Deutsche Bank’s prime brokerage clients with $20 billion worth of balances, according to media reports.

The news came a few weeks after Germany’s largest lender said that it would scrap its equities trading business, scale back its investment bank  and cut some of its fixed income operations, as part of a cost-cutting drive.

In the most dramatic overhaul in its recent history, the Frankfurt-based troubled lender also said that it planned to cut 18,000 jobs out of 74,000 around the world by 2022. 

After the German group announced its exit from the equities trading business, it also said that inked a preliminary deal with BNP Paribas that would have seen the French firm serving prime finance and electronic equities clients impacted by the plan.

However, some of Deutsche Bank’s clients may prefer to move balances to Barclays, Reuters and CNBC reported citing people with knowledge of the situation. 

As BNP Paribas and Deutsche Bank have been working out the details of the deal, the latter's clients have been pulling out as much as $1 billion in balances a day, Bloomberg reported last week. 

And according to Reuters, of the $20 billion worth of prime brokerage business that the British bank plans on taking control of, $10 billion comes from a single client.

“It is not unexpected and perfectly natural that some clients may wish to move balances to other providers as a temporary measure while our discussions with BNP Paribas are ongoing,” a Deutsche Bank spokesman said in a statement. “Our discussions with BNP Paribas are progressing well and we are confident that balances will move back once the deal has been completed.” 

Barclays, run by ex-J.P. Morgan executive Jes Staley, is trying to expand its trading operations to better compete with US firms.

Other financial institutions also interested in luring Deutsche Bank's hedge-fund clients are Wall Street majors Goldman Sachs and J.P.Morgan, CNBC reported.

(DB results at a glance Graph Source: DB)

Deutsche Bank results

On Wednesday (July 24) Deutsche Bank reported second-quarter net loss of 3.1 billion euros. reflecting the pain of its restructuring. It is the German lender's biggest quarterly net loss since the third quarter of 2015. 

Net revenues were 6.2 billion euros in the quarter, down 6%  compared to the same period last year. Revenues in the Corporate & Investment Bank (CIB) were 2.9 billion euros, down 18% year-on-year.

The Common Equity Tier 1 (CET 1) ratio was 13.4% at the end of the quarter, down from 13.7% at the end of the first quarter.

Deutsche Bank expects the radical overhaul plan to cost a total of 7.4 billion euros and is aiming to return to profit next year. 

The company's stock fell more than 5% in early trade Wednesday.  As of Thursday is down 2.15% year to date.