Deutsche Bank to sell stake in China lender for up to $4 billion

Tue Dec 29, 2015 4:04am EST
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By Maria Sheahan and Daria Hsu

FRANKFURT/HONG KONG (Reuters) - Deutsche Bank (DBKGn.DE: Quote) has agreed to sell its entire 20 percent stake in Beijing-based Hua Xia Bank (600015.SS: Quote) to Chinese insurer PICC Property and Casualty Co (2328.HK: Quote) - a deal worth up to $4 billion that will help lift its capital ratios.

Deutsche Bank, which has embarked on drastic restructuring under new CEO John Cryan, becomes the latest Western financial institution to scale back in China where caps on foreign ownership have made it difficult to attain the strategic growth many firms first envisioned.

Reducing stakes in Chinese lenders has, however, often resulted in multi-billion profits for European and U.S. banks. Deutsche too is likely to make a tidy profit, with shares in Hua Xia trading at 11.44 yuan as of Monday's close, compared with below 4 yuan per share in 2006 when it first invested.

Deutsche will gain between 23.0 billion and 25.7 billion yuan, or 3.2 billion to 3.7 billion euros from the stake sale at current exchange rates, depending on Hua Xia's share price ahead of the sale's completion.

"As we execute on Deutsche Bank's strategic agenda, now is the right time for us to sell this investment," Cryan said in a statement on Monday.

While it is pulling out of Hua Xia, Deutsche continues to run a securities joint venture and an asset management business in China.

The 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.

Seeking to bolster its finances, Deutsche Bank has also announced plans to slash 15,000 jobs, shed businesses employing some 20,000 staff and suspend dividends for two years..   Continued...

The Deutsche Bank headquarters are seen in Frankfurt, Germany October 28, 2015.   REUTERS/Kai Pfaffenbach