Deutsche Bank AG completed a deal with BNP Paribas SA to transfer its prime brokerage business to the French bank as part of the German lender’s biggest overhaul in recent history.
About 1,000 Deutsche Bank employees are to transfer to the French bank through 2021, people with knowledge of the matter said.
The two lenders expect that client balances — which dropped to about US$80 billion at the German bank — would recover now there is more certainty on the future of the business, the people said, asking not to be identified, as the matter is private.
Photo: Reuters
The two companies had agreed on a deal in principle in early July, as Deutsche Bank chief executive officer Christian Sewing retreats from equities trading, which includes the prime business serving hedge funds, but finalizing the accord has been complicated by a flood of client defections.
For Sewing’s counterpart at BNP, Jean-Laurent Bonnafe, a deal could bring the scale needed to compete with the bigger players.
The agreement could vault BNP Paribas into the global top four of prime brokerages over the next 12 months, one that might eventually have between US$250 billion and US$300 billion in client balances, according to the people.
Deutsche Bank would continue to manage the platform until clients can be passed over to the French lender, the two banks said yesterday.
“Now that the deal has been signed, we believe we have the basis to regain and expand on the business,” Deutsche Bank chief operating officer Frank Kuhnke said in a telephone interview.
The deal “provides tangible real benefits for our customers and gives our staff a way forward,” he said.
The deal comes just a few days after Deutsche Bank sold the first portfolio of equity derivatives, which is another key plank of its plan to close equities trading and get the associated assets off its balance sheet quickly and without incurring restructuring costs or write-downs.
The bank has said it would provide details about its progress during its third-quarter results presentation on Oct. 30.
Ashley Wilson is one of the coheads overseeing the German lender’s unwanted assets as part of Deutsche Bank’s retreat.
When the two European banking giants first discussed the deal, Deutsche Bank’s prime brokerage business was set to move about 150 billion euros (US$165 billion) of balances, people familiar with the matter have said.
Yet clients put off by the uncertainty pulled about US$1 billion of funds per day at one point, the people said at the time.
Prime-brokerage divisions cater specifically to hedge funds, lending them cash and securities and executing their trades, and the relationships can be vital for investment banks.
The prime business generated about US$18.3 billion in fees industrywide last year, about the same as revenue from trading corporate debt and currencies combined, data from Coalition Development Ltd show.
Deutsche Bank, which became a force on Wall Street in the wake of the financial crisis, has struggled to keep hedge-fund clients in recent years as it lurched from one problem to another.
US rivals JPMorgan Chase & Co, Morgan Stanley and Goldman Sachs Group Inc are the top three firms in the business, while Deutsche Bank was not among the top seven prime brokers last year, Coalition data show.
BNP has sought to profit from crisis before. The lender bought Bank of America Corp’s prime-brokerage business in June 2008 as the credit crunch raged, acquiring more than 500 clients and 300 employees. Still, the firm has one of the smallest prime units among global banks, according to Coalition.
Deutsche Bank’s hedge fund balances have been declining throughout the year as speculation swirled around Sewing’s intentions for the prime brokerage unit.
One major client — Renaissance Technologies — has been pulling money from the firm, people familiar said earlier.
Taiwan Transport and Storage Corp (TTS, 台灣通運倉儲) yesterday unveiled its first electric tractor unit — manufactured by Volvo Trucks — in a ceremony in Taipei, and said the unit would soon be used to transport cement produced by Taiwan Cement Corp (TCC, 台灣水泥). Both TTS and TCC belong to TCC International Holdings Ltd (台泥國際集團). With the electric tractor unit, the Taipei-based cement firm would become the first in Taiwan to use electric vehicles to transport construction materials. TTS chairman Koo Kung-yi (辜公怡), Volvo Trucks vice president of sales and marketing Johan Selven, TCC president Roman Cheng (程耀輝) and Taikoo Motors Group
Among the rows of vibrators, rubber torsos and leather harnesses at a Chinese sex toys exhibition in Shanghai this weekend, the beginnings of an artificial intelligence (AI)-driven shift in the industry quietly pulsed. China manufactures about 70 percent of the world’s sex toys, most of it the “hardware” on display at the fair — whether that be technicolor tentacled dildos or hyper-realistic personalized silicone dolls. Yet smart toys have been rising in popularity for some time. Many major European and US brands already offer tech-enhanced products that can enable long-distance love, monitor well-being and even bring people one step closer to
RECORD-BREAKING: TSMC’s net profit last quarter beat market expectations by expanding 8.9% and it was the best first-quarter profit in the chipmaker’s history Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), which counts Nvidia Corp as a key customer, yesterday said that artificial intelligence (AI) server chip revenue is set to more than double this year from last year amid rising demand. The chipmaker expects the growth momentum to continue in the next five years with an annual compound growth rate of 50 percent, TSMC chief executive officer C.C. Wei (魏哲家) told investors yesterday. By 2028, AI chips’ contribution to revenue would climb to about 20 percent from a percentage in the low teens, Wei said. “Almost all the AI innovators are working with TSMC to address the
Malaysia’s leader yesterday announced plans to build a massive semiconductor design park, aiming to boost the Southeast Asian nation’s role in the global chip industry. A prominent player in the semiconductor industry for decades, Malaysia accounts for an estimated 13 percent of global back-end manufacturing, according to German tech giant Bosch. Now it wants to go beyond production and emerge as a chip design powerhouse too, Malaysian Prime Minister Anwar Ibrahim said. “I am pleased to announce the largest IC (integrated circuit) Design Park in Southeast Asia, that will house world-class anchor tenants and collaborate with global companies such as Arm [Holdings PLC],”