HNA reduces Deutsche Bank stake to 7.9 per cent after allowing derivatives to expire

HNA Group, one of Deutsche Bank’s biggest shareholders, cut its stake in the company two months after saying it wouldn’t as the Chinese conglomerate tries to raise US$16 billion to deal with financing problems at home.

HNA, which shot to international prominence by spending more than US$40 billion on acquisitions across six continents since 2015, reduced its holding in the German lender to 7.9 per cent from 8.8 per cent as it allowed portions of a complex derivatives arrangement to expire, according to a filing on Saturday.

The move follows a string of negative news stories about Deutsche Bank, including a tumultuous management revamp and a report by Bloomberg News showing the company had inadvertently transferred 28 billion euros (US$35 billion) to one of its outside accounts.

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HNA said it’s still committed to remain a “major investor” in Deutsche Bank. That’s the same language the Chinese company used in mid-February when it lowered its stake from about 9.9 per cent and said no further cut was planned. The decision was made “due to the current market environment,” a spokesman said by email on Saturday.

HNA doesn’t generate enough profit to cover its interest payments and its short-term debt soared to more than 185 billion yuan (US$29 billion) in the first half of 2017, exceeding its cash reserves. 

HNA is seeking to sell some or all of its roughly US$6.5 billion stake in Hilton Worldwide Holdings, as part of a global asset purge. It also postponed a planned share sale in its aircraft ground-handling company Swissport Group, roughly two weeks after abandoning a similar plan for its Swiss airline caterer, Gategroup Holding.

Deutsche Bank shares have fallen 27 per cent this year. The only company that has performed worse on the Bloomberg Banks & Financial Services Index is Banca Monte dei Paschi di Siena SpA, which was rescued by the Italian state.

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A weeks-long leadership tussle at Deutsche Bank claimed the scalps of Chief Executive Officer John Cryan and two of his top lieutenants and prompted widespread criticism of chairman Paul Achleitner for his handling of the matter. The transfer error happened after Cryan had tried to improve controls that had failed the lender in the past.

Kim Hammonds, the bank’s chief operating officer and head of IT, is among those set to depart. The transfer error, which was quickly reversed and caused no financial harm, didn’t contribute to the dismissal of either Hammonds or Cryan, two people with knowledge of the matter said.

A veteran of Boeing and Ford Motor, Hammonds had ruffled feathers by calling the bank “the most dysfunctional company” she’d ever worked for at an internal meeting. She never disowned the comments after they leaked to the press.