HNA Group has embarked on the latest leg of its overseas buying spree by raising its stake in Deutsche Bank to 9.9 per cent; making the acquisitive Chinese conglomerate the biggest single investor in one of Europe’s most important banks.
The move comes as Germany’s biggest lender is in the middle of a multiyear effort to restore its fortunes after racking up billions of euros of losses in 2015 and 2016.
Deutsche completed an €8bn capital raising — its third since 2013 — last month, and chief executive John Cryan is working to simplify the bank’s structure and reduce its costs. In the first quarter, it made a net profit of €575m.
HNA first showed its hand in February, when it revealed it had built up a 3 per cent stake in Deutsche. A spokesman for C-Quadrat, the Austrian asset manager through which HNA bought its stake, said at the time that it might buy more shares. However, he said that it did not plan to go over the 10 per cent threshold above which stake purchases must be approved by Germany’s financial watchdog.
Some analysts reckon that this regulatory oversight means it is unlikely that HNA — which has also shown an interest in the north German Landesbank HSH Nordbank — would attempt to buy Deutsche outright.
“I think that the extreme case — that HNA wants to bid for the whole bank — is off the table. I think they would recognise that it’s a bit like Danone — it is not biddable,” said Neil Smith, an analyst at Bankhaus Lampe. “And if the investment is a financial rather than a strategic one, it must be good news, since it means that they think that Deutsche is a good investment, and that now is a good entry point.”
HNA’s exact motives are unclear. In regulatory filings, C-Quadrat said it thought Deutsche’s shares were undervalued. However, one adviser who has come across HNA as the Chinese group has sounded out various investments across the financial services sector, said that its interest in Deutsche seemed motivated by more than purely economic interests.
He thought HNA viewed an equity stake in the German bank as a way to get an important seat at the table of what he said was the most important financial institution in continental Europe.
Other observers see the conglomerate as being close to the Chinese state. The “blistering pace” of HNA’s acquisitions “couldn’t happen without substantial governmental support, both in terms of bank debt and forex,” said Brock Silvers, managing director of Kaiyuan Capital, a Shanghai-based investment advisory firm. “At what point does the company start to resemble a quasi-sovereign wealth fund?”
HNA ranked number one among Chinese outbound investors so far this year, sealing $5.5bn in deals or about 13 per cent of Chinese overseas deals by value before the latest Deutsche purchase. Last year, it ranked second with 12 per cent, including purchases made through entities it controls, according to Dealogic.
Founded as a two-jet airline based in Hainan Island, the group’s recent acquisitions have turned it into an international financial operator. Holdings include stakes in Old Mutual’s US asset management business, New Zealand’s largest non-bank lender and SkyBridge Capital, the hedge fund platform previously owned by American financier Anthony Scaramucci.
By Courtesy of FT