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Established in 2006 as a Community of Reality

Welcome to the Neno's Place!

Neno's Place Established in 2006 as a Community of Reality


Neno

I can be reached by phone or text 8am-7pm cst 972-768-9772 or, once joining the board I can be reached by a (PM) Private Message.

Established in 2006 as a Community of Reality

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Established in 2006 as a Community of Reality

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    Deutsche Bank Joins Retreat From China

    Lobo
    Lobo
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    • Post n°1

    Deutsche Bank Joins Retreat From China Empty Deutsche Bank Joins Retreat From China

    Post by Lobo Tue Dec 29, 2015 4:30 pm

    Deutsche Bank Joins Retreat From China

    By QUENTIN WEBB DEC. 29, 2015

    Deutsche Bank is joining peers in cashing out of China. The German lender is selling a $3.8 billion, 19.9 percent holding, in Hua Xia Bank to local insurer PICC Property and Casualty.

    Like such rivals as Goldman Sachs and Bank of America Merrill Lynch before it, Deutsche Bank is crystallizing a solid return — while acknowledging that minority stakes on the mainland are of little use.

    Given China’s troubles, this is a less-than-ideal time to sell. Shares of the bank, which is listed in Shenzhen, trade at just 6.5 times forward earnings, or 0.9 times book value, both roughly one-third below their 10-year average, Thomson Reuters StarMine data shows.

    But the foray was still worth the effort. In total, Deutsche Bank invested about 1.3 billion euros from 2006 to 2011. The final sale price will depend on how Hua Xia’s shares trade. But at the midpoint of the stated range, €3.45 billion, plus €400 million or so of previous dividends, Deutsche Bank will have nearly tripled its money on a gross basis.

    That is not to be sniffed at, even if taxes on dividends and capital gains will presumably cut the net return significantly. Goldman Sachs made about 3.5 times its money investing in Industrial and Commercial Bank of China, albeit over a shorter time frame.

    Moreover, Deutsche Bank gets a clear capital benefit: a 30- or 40-basis point uplift to its Common Equity Tier 1 ratio, currently at 11.5 percent. Basel III rules make holding small stakes in other financial institutions an extra burden. The German bank is also now off the hook should Hua Xia need shareholders’ help in shoring up its balance sheet.

    Shareholders will be heartened in other ways, too. Minority positions with little influence, and no prospect of future control, look badly out of place when banks are struggling to make sustainable returns. This holds doubly true given China’s slowdown.

    The era of Western investment in Chinese banks is not quite over — HSBC is a notable holdout, firmly committed to its stake in Bank of Communications. But further retreats are likely, such as a sale by Standard Chartered of its holding in Agricultural Bank of China. The exodus will go on.

    http://www.nytimes.com/2015/12/30/business/dealbook/deutsche-bank-joins-retreat-from-china.html?partner=rss&emc=rss&_r=0
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