Global Multinational Investment bank, Deutsche is trying to revive after five consecutive years of losses totaling more than 15 billion euros (13 billion pounds) but this time the problem is new called the COVID-19 crisis.
For the recovery of the bank, it must shed off 44 billion euros worth of complex assets held in a so-called “capital release unit” or “bad bank” that has scarred the bank’s balance sheet for years.
But the coronavirus pandemic followed by stringent lockdowns is gluing up the market. Deutsche Bank is trying to sell, which means the biggest threat to the lender’s capital levels is likely to come from its bad bank, analysts, derivatives experts, and sources within the bank said.
Last year, Chief Executive Christian Sewing disclosed a plan to revive the bank by shrinking its investment bank and axing 18,000 jobs globally, but now the virus is delaying the execution.
The bad bank is enabling Deutsche Bank to shed unwanted assets like risky-illiquid derivatives and delinquent loans. Also, it is helping to free up capital that can support Deutsche’s core businesses.
According to Deutsche, its plan to dump most of the assets within the bad bank by 2022 was on track.
The bank added it “continues to see active participation in its disposal program” in the second quarter.
Thus, the bank believes that the current market crisis is not a major hindrance to the plans.