Deutsche Bank is preparing to transfer up to 1,000 staff to BNP Paribas as part of the firms’ joint deal to assume control of the German lender’s prime brokerage operations, the French bank said in a statement on Monday.
The two banks announced today they had struck a preliminary agreement to smooth the transfer process covering the business that serves hedge funds, including details on personnel.
Deutsche’s clients will receive letters explaining how the transfer will work. However, some of them have already moved to competitors such as Barclays, which has won roughly $20 billion in prime brokerage balances.
The news came as Germany’s largest lender was in talks with potential buyers for a wide range of its assets amid wider cuts at its US equities business, including prime brokerage and equity derivatives, part of its most dramatic overhaul in recent history.
Although Deutsche Bank’s unit is ranked in the top 10 largest prime brokers globally, the business contracted recently, with investors pulling $1 billion in assets since its CEO announced “tough cutbacks” at its investment bank.
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Deutsche Bank said earlier this year that it is gearing up to cut hundreds of jobs in its equities trading and research, as well as derivatives trading, as part of a cost-cutting drive. The German lender plans to eliminate as many as 18,000 jobs, joining a growing list of global banks that have announced multiple jobs reduction rounds this year.
US banks return to the area
Germany’s biggest bank also faces pressure from investors to push ahead with further cost cuts this year and pull out of businesses where it isn’t profitable, especially after the collapse of merger talks with Commerzbank.
Prime brokers came under scrutiny during the financial crisis as their capital-intensive business inflates balance sheets since they finance their clients’ transactions by extending credit.
The increase in banking regulation, which mandates increased minimum levels of capital and increases in reporting expenses, has resulted in a lot of banks leaving the prime broking space.
However, BNY Mellon and some other US banks are returning to the area after they were forced earlier to clean up their balance sheets.