FT, August 23, 2019
by David Crow & Stephen Morris
Deutsche Bank is preparing to transfer up to 800 staff to BNP Paribas as part of its retreat from investment banking, according to several people briefed on the plan.
The deal will see the French lender assume control of Deutsche’s prime brokerage unit that services hedge funds, the people said, with tens of billions of euros of assets also changing hands.
Last month the banks announced a preliminary agreement to “provide continuity” to Deutsche’s clients in a move that could also help BNP strengthen its presence in prime brokerage, the potentially lucrative business of lending money to hedge funds and handling their trading.
A more formal agreement is set to be unveiled in the coming weeks, the people said, and Deutsche’s clients will receive letters explaining how the transfer will work.
Deutsche and BNP declined to comment.
One of the people said BNP could pay a nominal cash sum to Deutsche to assume control of the business, but the main advantage of the deal is that the German bank, which is shedding 18,000 jobs in a radical restructuring, will not have to pay redundancy to staff who switch over.
When the agreement was first announced, the banks had hoped the vast majority of Deutsche’s hedge fund clients would switch their balances, which total a little less than $200bn, to BNP.
However, some clients have decided to move to competitors such as Barclays, which has won roughly $20bn in prime brokerage balances.
On a recent call with analysts to discuss Barclays’ first-half results, Jes Staley, chief executive, said: “It is true that we gained some prime balances recently, roughly in that neighbourhood.”
The total number of staff that will be transferred to to BNP will depend on the number of clients that make the switch rather than taking their business elsewhere, one of the people said. Most of the affected employees are based in London and New York but some back-office staff based in India will also move.
With banks increasingly squeezed by low interest rates, anaemic trading volumes and slowing economic growth, many big lenders have been pumping extra resources into prime broking in the hope of winning market share from European players in retreat.
In recent years Deutsche and BNP have been ranked seventh to ninth in the global prime brokerage league tables, behind the five big Wall Street investment banks and Barclays, according to data provider Coalition.
As part of the deal, BNP will also receive the underlying technology behind Deutsche’s electronic equities and prime brokerage platforms, one of the people said.
Deutsche’s app-based system, branded “autobahn”, is seen as one of the better platforms in the industry. The German bank will keep the foreign exchange part of the autobahn system.