Daily Management Review

Chinese HNA to sell its stake in Deutsche Bank


Chinese conglomerate China's HNA Group Co., the largest investor of Deutsche Bank AG, is planning to abandon its stake in the German bank. This is reported by The Wall Street Journal and Bloomberg, citing sources familiar with the situation.

Tony Webster
Tony Webster
According to the latest data, HNA owns a 7.6% stake in Deutsche Bank. The stake price is about € 1.5 billion at the current share price.

According to WSJ sources, HNA intends to abandon a vast majority of foreign investments that the company made in recent years.

The Chinese government has demanded that HNA focus on its aviation business, according to Bloomberg's interlocutors. It is unclear how and for what period HNA will sell its stake in Deutsche, which it controls through a series of complex derivatives, notes Bloomberg. According to WSJ, the Chinese conglomerate plans to gradually get rid of its stake in Deutsche over the next 18 months.

In 2017, HNA owned 9.9% of Deutsche Bank shares directly and through options, but since then the company has reduced investments and replaced actual shares with cheaper financial instruments amid lower quotations.

Earlier this year, the Chinese authorities agreed to help HNA raise funds, providing support to the conglomerate, which was experiencing difficulties due to a large debt. The government instructed HNA to focus on its main aviation business and stop diversifying assets through acquisitions, sources told Bloomberg.

Sale of HNA's stake in Deutsche Bank could put additional pressure on the bank's shares amid speculation about its merger with another lender. American private equity fund Cerberus Capital, led by Steven Feinberg, owns shares of Deutsche Bank, and also has a large stake in Commerzbank AG. Earlier this triggered speculation that he could advocate consolidation of the banks.

Many analysts came to the conclusion that merger of Deutsche and Commerzbank would make sense in the long term, as they could cut costs and strengthen their market positions, but banks are too weak to take such a step right now.

The reduction in the market capitalization of Deutsche Bank and Commerzbank means that both banks are likely to be excluded later this month from the prestigious European stock indexes. Deutsche will leave Euro Stoxx 50, the index of leading European companies, on September 24. Meanwhile, Commerzbank is preparing to leave Dax, the blue chip index of Germany.

source: bloomberg.com, wsj.com