(Nov 10): Deutsche Bank AG is close to completing a significant risk transfer deal with the European Investment Fund (EIF), according to people familiar with the matter.
The so-called SRT in which EIF will be investing is tied to a portfolio of about €1 billion of Italian auto loans, said the people, who asked not to be identified because the matter is private.
EIF, which is part of the European Investment Bank group, has been regularly investing in synthetic securitisations, whereby a bank keeps the loans it makes on its books — but transfers the risk to someone else. It’s part of a strategy to help commercial banks free up capital that can then be re-deployed into new loans in priority areas such as innovation or sustainability.
Representatives at Deutsche Bank and EIF declined to comment.
Significant risk transfers, or SRTs, are frequently issued in the form of credit-linked notes to pension, sovereign wealth and hedge funds, allowing the issuer to unlock capital they would otherwise use to meet regulatory requirements. Typically, a lender obtains default protection for between 5% and 15% of the loans’ value.
Deutsche Bank and the EIF signed a similar transaction in 2023, according to a statement from the European Investment Bank, which provided a guarantee to the exposure taken by the EIF at that time.
Deutsche Bank freed up capital with two securitisations in the second quarter, helping lift a key metric of financial strength, according to an earnings presentation in July. The lender priced an SRT deal tied to a portfolio of US$6.9 billion of corporate loans in June, more than double the initial size of the deal, people familiar with the matter said in June.
Deutsche Bank’s retained exposures related to synthetic SRTs rose to €38.7 billion as of Sept 30 compared with €33.7 billion at the end of 2024, according to a regulatory report. The Frankfurt-based lender is scheduled to hold its investor day on Nov 17.
The global SRT market is set to expand 11% annually on average in the next two years, according to a recent Bloomberg Intelligence survey. Commerzbank AG, Banco Santander SA, HSBC Holdings plc are among European lenders that are currently discussing or finalising such deals.
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