Deutsche Bank sells China’s Hua Xia Bank stake for up to $4 billion
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Deutsche Bank has agreed to sell its 20 percent stake in China’s Hua Xia Bank to insurer PICC Property and Casualty Co for up to 25.7 billion yuan ($4 billion) as it seeks to raise cash and reduce its balance sheet exposure.
“As we execute on Deutsche Bank’s strategic agenda, now is the right time for us to sell this investment,” Chief Executive John Cryan said in a statement on Monday.
Deutsche Bank has announced plans to slash 15,000 jobs, shed businesses employing some 20,000 staff and suspend dividends for two years as it seeks to bolster its finances.
The stake in Hua Xia will generate between 23.0 billion and 25.7 billion yuan ($3.6-4.0 billion), or 3.2 billion to 3.7 billion euros at current exchange rates, depending on Hua Xia’s share price ahead of the sale’s completion.
At the end of September, the stake was in Deutsche Bank’s books at a fair value of 3.038 billion euros.
When Deutsche Bank first invested in Hua Xia in 2006 to tap into China’s retail banking sector, the Chinese lender’s stock stood below 4 yuan a share, compared with 11.44 yuan at Monday’s close.
The stake sale will help boost the German bank’s common equity tier 1 capital ratio as of Sept. 30 by about 0.3 to 0.4 percentage points from 11.5 percent, it said.
PICC said it expected relatively steady investment returns from its stake in Hua Xia, in addition to the benefits of a strategic cooperation.
Questions & Answers
Q.What is the primary reason Deutsche Bank is selling its stake in Hua Xia Bank?
What is the primary reason Deutsche Bank is selling its stake in Hua Xia Bank?
Deutsche Bank is selling its stake to raise cash and reduce its balance sheet exposure. This sale is part of its strategic agenda to bolster finances, which also involves job cuts and suspending dividends.
Q.How much does Deutsche Bank expect to receive from the sale of its Hua Xia Bank stake?
How much does Deutsche Bank expect to receive from the sale of its Hua Xia Bank stake?
The bank expects to generate between 23.0 billion and 25.7 billion yuan, or $3.6 billion to $4.0 billion. This amount is equivalent to 3.2 billion to 3.7 billion euros at current exchange rates, depending on the share price.
Q.How will this sale impact Deutsche Bank's financial standing?
How will this sale impact Deutsche Bank's financial standing?
The stake sale is expected to boost Deutsche Bank’s common equity tier 1 capital ratio by about 0.3 to 0.4 percentage points. This will improve its ratio from the 11.5 percent recorded at the end of September.
Q.What was the original purpose of Deutsche Bank's investment in Hua Xia Bank?
What was the original purpose of Deutsche Bank's investment in Hua Xia Bank?
Deutsche Bank originally invested in Hua Xia Bank in 2006 to gain access to China's retail banking sector. At that time, Hua Xia's stock was below 4 yuan per share.