Deutsche Bank not shopping for Hang Seng

PUBLISHED : Monday, 02 July, 2007, 12:00am
UPDATED : Monday, 02 July, 2007, 12:00am

Speculation that Hang Seng Bank might have a suitor in the wings was short-lived.

The speculation followed wire reports that Deutsche Bank disclosed to the Hong Kong stock exchange that it had increased its stake in Hang Seng Bank to 8.14 per cent.

However, the report did not mean that one of Hong Kong's most respected banks was a potential takeover target - the explanation was much more down to earth.

Deutsche Bank, one of the world's biggest custodians, was apparently doing some housekeeping and triggered the 5 per cent threshold in the process.

It was likely to be a consolidation of various divisions and their clients at the bank, a source said.

The source added that by consolidation, the shares rose to above 5 per cent and trigged the disclosure level.

The German lender held 141.7 million shares in Hang Seng at an average price of HK$105.91 on June 22 and became the second-largest shareholder, according to a filing with the stock exchange. It held 0.73 per cent of Hang Seng before the transaction.

Sauw Yim, a spokeswoman for Deutsche Bank, declined to unveil more details. Hang Seng Bank could not be reached for comment.

An analyst said it did not make sense for Deutsche Bank to make a strategic investment in Hang Seng as HSBC still held more than 62 per cent in Hang Seng.

'They would not have an impact on the bank at all, even if they were the second-largest shareholder of Hang Seng,' he added.

Kenny Tang Sing-hing, an associate director at Tung Tai Securities, agreed that it was likely that Deutsche Bank bought the stake or was holding the stake on behalf of its clients.

'It may be something related to the issuing of derivatives products,' Mr Tang said.

He said it was quite common for investment banks to buy underlying stock in order to issue warrants or other derivative papers for hedging purposes. A reduction in Deutsche Bank's stake soon would not be a surprise, Mr Tang added.

He said the shares of Hang Seng would not benefit from the news as the bank traded only at about four times its book value.

Hang Seng Bank closed at HK$105.80 on Friday, down 0.38 per cent.