Deutsche Bank to cut prime brokerage leverage by €50 billion

Prime brokerage was one of the top revenue fallers for Deutsche Bank in 2017, due to its balance sheet-intensive nature and has over the years made major cuts with certain hedge fund clients.

By Joe Parsons

Deutsche Bank has announced it will reduce its leverage exposure in prime finance by around €50 billion as part of the latest series of cuts to its equities business.

The slash to prime finance, along with the 7,000 job cuts to the global equities sales and trading unit, will amount to a decrease in leverage exposure for its corporate and investment bank of over €100 billion.

“We are Europe’s alternative in the international financing and capital markets business. However, we must concentrate on what we truly do well,” said Christian Sewing, chairman of the  management board, Deutsche Bank.

The German-based bank said these cuts will accelerate the pace of cost reduction.

Prime brokerage was one of the top revenue fallers for Deutsche Bank in 2017, due to its balance sheet-intensive nature and has over the years made major cuts with certain hedge fund clients.

In 2016, a small group of hedge funds that carry out their derivatives business with Deutsche Bank cut ties with the prime brokerage unit due to fears over its health.

It has also seen the departure of its most senior prime brokerage experts over the years, including Mark Haas to BNY Mellon and Murray Roos to Citi.

In April Deutsche Bank said it would significantly reduce headcount in the business in the US and Asia, as well as considerably shrinking its balance sheet, “where the focus will be on maintaining our deepest client relationships by reprioritising the deployment of resources,” the bank stated at the time.

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