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November 4, 2016

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Deutsche Bank gets approval for Hua Xia sale

DEUTSCHE Bank’s sale of a 20 percent stake in Chinese peer Hua Xia to PICC Property & Casualty has received regulatory approval, Germany’s flagship lender said on Thursday.

Hopes to expand into the Chinese banking market never materialized for Deutsche Bank as for several other Western lenders. Bank of America reacted in 2013 by divesting a shareholding in China Construction Bank, while Citigroup sold its stake in Chinese lender Guangfa earlier this year.

Deutsche Bank, which faces large legal costs for cleaning up past missteps, decided the sale of the Hua Xia stake, in which Deutsche Bank invested in 2006, in December 2015.

But it took Hua Xia longer than expected to obtain clearance for the deal from the China Banking Regulatory Commission, weighing on the price of the sale.

While Deutsche Bank said last year that it was selling the stake for 3.2-3.7 billion euros (US$3.6-4.1 billion), a move in exchange rates means that the price has come down to 3-3.5 billion euros. At the beginning of 2015, the stake’s market value stood at 4 billion euros, but it plunged in a selloff of Chinese equities.

Deutsche Bank wrote down the value of the stake to 2.8 billion euros as of September 30.

The Hua Xia divestment frees up capital and boosts Deutsche Bank’s capital ratio to 11.6 percent. New bank rules make it disadvantageous for banks to hold minority stakes in other lenders.


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