FRANKFURT (Reuters) - 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.
Reporting by Maria Sheahan; editing by Georgina Prodhan and Jason Neely