Long-term investor

Chinese firm backs Deutsche Bank management

Investor Alexander Schuetz in seiner Wohnung in der Wiener Innenstadt
Alexander Schütz, HNA's Austrian representative on Deutsche Bank's board of directors, says the Chinese firm considers its share ownership in the bank a core investment. Source: picture alliance/APA/picturedesk.com

Shadowy Chinese conglomerate HNA Group plans to stick with Deutsche Bank, in which it is the largest shareholder. The group also considers John Cryan an able CEO and believes that the bank is on the right track with its restructuring plan, according to the Austrian manager who represents HNA on the bank’s board of directors.

“Deutsche Bank is a core investment for HNA and our participation has a high prestige factor,” said Alexander Schütz, the founder of Austrian asset management firm C-Quadrat, which is majority owned by HNA. “Deutsche Bank is very popular in Asia. We are assuming that HNA will stick with this commitment in the long term.”

Mr. Schütz dismissed reports of bad blood between Mr. Cryan and HNA’s CEO Adam Tan. According to news reports, Mr. Cryan had resisted meeting Mr. Tan, but the two men finally caught up with one another in early November.

“We believe in the success of Deutsche Bank.”

Alexander Schütz, HNA's representative on the Deutsche Bank board of directors

“We believe in the success of Deutsche Bank,” Mr. Schütz told Handelsblatt. “The bank had to clean up some bad debts. The CEO, John Cryan, did that very well.” He added that Mr. Cryan is “a very intelligent manager who is just the man for this moment in the bank’s business.”

HNA’s complex ownership has caused concern from some regulators, such as in New Zealand, where the Overseas Investment Office has blocked HNA’s acquisition of UDC, the country’s largest non-bank lender, because of what it called uncertainty about HNA’s ownership structure.

But Mr. Schütz said that his firm had submitted documentation to the Austrian financial regulator over HNA’s purchase of a majority stake in C-Quadrat and that it had reached a different conclusion than the New Zealand authorities.

“We are confident that we know all the people involved in HNA and we have always had an open and friendly relationship with them,” he said.

HNA is a hotels and casino firm as well as an airline. It has borrowed nearly €50 billion to finance overseas acquisitions over the last year, but Mr. Tan said the company may sell off some non-core holdings to meet Chinese government demands for a reduction in overseas investment.

Bloomberg has reported that the German financial regulator BaFin is also conducting an inquiry to determine if HNA accurately reported its share purchases in Deutsche Bank, Germany’s largest lender, when it began building its stake during a capital increase last April.

Mr. Schütz told Handelsblatt that HNA had always planned to be a long-term shareholder in Deutsche Bank despite its use of short-term derivatives as part of its financing of the share purchase. “This misunderstanding stems from the fact that the first derivative structure only lasted for a year,” he said. “The new structure has a three-year term, which shows that HNA is oriented to the long-term and has no interest in selling.

He said that HNA was using derivatives because they secure HNA against large losses and the firm makes profits when the bank’s shares increase in value. Also, he said refinancing costs are lower using derivatives than buying the shares outright.

He also said that HNA welcomed the decision of US buyout fund Cerberus to take a 3-percent stake in Deutsche Bank last month.

Yasmin Osman covers banks for Handelsblatt in Frankfurt. Charles Wallace, an editor for Handelsblatt Global in New York, adapted this article into English. To contact the author: osman@handelsblatt.com.

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