HNA Is Being Probed Over Reporting of Deutsche Bank Stake

Updated on
  • German probe comes after Swiss critique of another HNA deal
  • Chinese conglomerate has built almost a 10% stake in the bank

Deutsche Bank’s largest shareholder is being probed over whether it accurately reported its holdings when building its stake in the German bank, according to two people with knowledge of the matter.

BaFin, the German financial supervisor, is investigating China’s HNA Group Co., which has a 9.9 percent stake in the Frankfurt-based lender, the people said, asking for anonymity discussing non-public information. A HNA spokesman said the company’s voting rights communications have always been correct, while a representative for the regulator declined to comment.

HNA first bought shares in Deutsche Bank in late 2016 and became the top investor after a capital increase in April. The company has come under scrutiny in China and abroad in recent months after making more than $40 billion in foreign acquisitions since the beginning of 2016. Some Wall Street banks have also shied away from the company this year amid a lack of clarity on its funding and ownership structure, according to people familiar.

BaFin previously dropped a probe into allegations that HNA was coordinating its investment with Qatar’s royal family, a person familiar with the matter said last month.

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The Chinese investor may still face scrutiny by the European Central Bank, which has been considering a so-called owner control procedure against HNA, a person familiar with the matter has said previously. Typically, the ECB would start the procedure once a shareholder’s stake exceeds 10 percent, but it can do so earlier if the investors are deemed to exert considerable influence.

Ownership control procedures are conducted to see if an investor in a bank is a reliable shareholder. That can be affected by several factors, such as their reputation and any involvement in illicit activities or their financial strength, should an institution require the support of its owners.

News of the probe by BaFin comes after the Swiss Takeover Board, in a separate case, said it found that HNA provided some false information and failed to disclose that company executives held the biggest stake in its takeover of Zurich-based Gategroup Holding AG. Sueddeutsche Zeitung reported the German probe earlier.

Adam Tan, HNA’s chief executive officer, has said the Chinese conglomerate is considering selling assets, signaling it is bowing to government pressure to reversing the shopping spree that strained its finances. Assets that could be sold include buildings and holdings in industries where investment is being restricted by the Chinese government, Tan told a media gathering during a forum hosted by Caijing Magazine in Beijing last month. Disposals would improve the company’s liquidity and cash flow, he said.

Deutsche Bank shares have risen 4.8 percent this year, less than the 7.9 percent gain for the 44-member Bloomberg Europe 500 Banks and Financial Services Index.

— With assistance by Nicholas Comfort

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