The struggling German lender will move poorly performing assets and drastically shrink its investment banking arm, the FT says

Deutsche Bank has reportedly drawn up plans for a radical restructuring that will involve the creation of a “bad bank” to hold tens of billions of euros of toxic assets and a round of severe cuts to its investment banking operations.

The bad bank would house or sell assets valued at up to €50bn (£45bn), consisting mainly of long-term trades that have been a major drag on the struggling bank’s balance sheet, the Financial Times reported, citing four people briefed on the plan.

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The creation of the bad bank – a tactic used by failed UK banks after the 2008 crisis – would enable chief executive Christian Sewing to shift the lender away from the highly profitable but risky world of investment banking and focus instead on mainstream banking and private wealth management.

As part of the restructuring, the lender’s stocks and interest rates trading units outside continental Europe would be shrunk or closed entirely, the report said.

The bank is planning cuts at its US equities business, including prime brokerage and equity derivatives, to win over shareholders unhappy about its performance, four sources familiar with the matter told Reuters in May.

The bank’s overhaul could involve major job losses in the UK, where it employs just under 8,000 people, and in the US, where it has around 10,000 staff. The move would be a further blow to Deutsche Bank’s London workforce, which was also hit by 7,000 job losses announced in 2018.

The German lender is one of the City’s major employers, boasting more workers in the UK than its American rivals Morgan Stanley and Goldman Sachs. It is understood that Deutsche Bank has not sent communication to London staff to either confirm or deny the FT report.

“As we said at the AGM on 23 May, 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,” Deutsche said in an emailed statement on Sunday in response to the FT report.

Sewing could announce the changes along with Deutsche Bank’s half-year results in late July, the FT reported.

Deutsche Bank has been beset by a series of crisis in the past year, including money laundering allegations, failed merger talks with Commerzbank, and concerns about the lender’s dealings with Donald Trump and his son-in-law, Jared Kushner.

Deutsche’s shares closed near a record low of €6.03 on Friday, charting a spectacular fall from grace for the bank. The stock was worth €107 in 2008 before the global financial crisis and has never recovered its pre-eminence.