Deutsche Bank Slumps After China's HNA Trims Stake in German Lender

Deutsche Bank AG (DB) shares fell Friday after its biggest investor trimmed part of its stake in the struggling German lender. 

Hainan Jiaoguan Holding Co., better known as HNA, cut its stake to 9.2% from a previous holding of 9.9%. "but will will continue to be a significant investor in Deutsche Bank", according to C-Quadrat, an Austrian asset management firm based in London that oversees the HNA stake. 

Deutsche Bank shares were marked 2.9% lower in Frankfurt and changing hands at €12.47 each following the statement, extending their year-to-date decline past 21%.

The sale is likely to add further pressure on CEO John Cryan, who has attempted to steer the bank into profitability following its massive mortgage-selling settlement with U.S. authorities and a $9 billion capital increase in early 2017.

The bank posted its third consecutive annual loss thanks in part to a $1.8 billion charge linked to last year's U.S. corporate tax overhaul and a slump in trading revenues.

Deutsche Bank posted a full year loss of €497 million for 2017, the bank said in a statement, a figure that was notably steeper than the €290 million tally anticipated by analysts. Overall revenue fell 19% in the final three months of the year to €5.7 billion, well shy of the €6.2 billion forecast, thanks to a 29% plunge in trading revenues at its bond trading unit.

The bank also said the reduction of the U.S. corporate tax rate to 21% from 35% would force the revaluation of some of the tax credits that sit on its balance sheet and reduce its core capital base about around 10 basis points.

"Only a charge related to US tax reform at the end of the year meant that we had to post a full-year after-tax loss," said Cryan. "We believe we are firmly on the path to producing growth and higher returns with sustained discipline on costs and risks. We have made progress, but we are not yet satisfied with our results."

HNA's stake had, however, proven controversial, however, after it was revealed through Securities and Exchange Commission that UBS AG helped finance the increase -- from just over 3% to just under 10% in May of last year -- with complex derivatives trades that could theoretically reduce the cash HNA had to commit to the holding while simultaneously protecting itself against a potential decline in the value of the shares.

The process was also flagged by the ECB, which acts as Europe's banking regulator and, according to Germany's Sueddeutsche Zeitung, is considering an "ownership control procedure" that would probe the HNA stakebuild.

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