Deutsche Bank has developed plans to create a ‘bad bank’ to hold up to €50bn (£44.6bn) of assets as part of a major overhaul of its trading operations.
The bad bank, known internally as the non-core asset unit, would house or sell assets valued at up to €50bn after adjusting to risk – mainly made up of long-date derivatives, according to reports.
The bank’s equity and rates trading businesses outside of Europe could also be closed or scaled down as part of the overhaul, the Financial Times first reported.
It is part of a major restructuring of the lender’s struggling investment bank, which has weighed on earnings in recent years.
The bank’s shares, which have stayed close to all-time lows over the past month, rose more than two per cent to €6.18 after reports of the plan emerged.
Last month chief executive Christian Sewing told shareholders the German lender was prepared to make “tough cutbacks” at its investment banking division.
In a bid to win back investor confidence, Sewing said “far-reaching changes” were needed to transform the bank, at May’s annual meeting.
Germany’s largest lender was forced to slash its revenue targets earlier this year after talks over a merger with rival Commerzbank collapsed.
The bank said it expected revenue to be flat this year as it reported that revenue in the first quarter was down nine per cent year-on-year to €6.4bn.
Major shareholders have criticised the board’s strategy and the bank’s poor performance, calling for change.
Germany’s biggest bank has endured a torrid couple of years, facing money laundering allegations, failed stress tests, all-time share price lows and poor performance.
In a statement, the bank said: “Deutsche Bank is working on measures to accelerate its transformation so as to improve its sustainable profitability.
“We will update all stakeholders if and when required.”