Deutsche Bank to cut leverage exposure by €50 billion

Deutsche Bank’s prime finance division will cut its leverage exposure by a quarter, roughly €50 billion (£43 billion).

In a statement on May 24, Germany’s largest bank announced plans to “significantly reshape” its global equities sales and trading business.

The balance sheet intensive prime brokerage arm, which caters to hedge funds, is one of the units impacted.

Equity derivatives, sourcing hard-to-borrow securities, capital introduction and collateral monitoring are some of the services provided by Deutsche's prime brokerage desks.

Hedge funds obtain financial leverage from their prime brokers in the form of securities lending, margin loans, repo and derivatives agreements.

In cash equities, Deutsche Bank said it will "concentrate on electronic solutions" and its "most significant clients" globally.

Around 7,000 jobs are to be axed across the company's corporate and investment banking (CIB) business.

“We think the headcount cut in equities could be 2k with the rest coming from back- and mid-office functions,” UBS analyst Daniele Brupbacher wrote in a note to clients.

In April, Deutsche Bank announced plans to scale back its US rates and equities trading businesses.

Global Investor revealed on May 3 that Jim Lailey, a director in Deutsche Bank’s US prime business, had left the bank.

“We remain committed to our CIB and our international presence – we are unwavering in that,” Christian Sewing, Deutsche Bank's chief executive, said in a statement on May 24.

“We are Europe’s alternative in the international financing and capital markets business. However, we must concentrate on what we truly do well.”

Sewing recently took up the reins at Deutsche Bank following the exit of former boss John Cryan in April.