HSH Nordbank still on budget
• Bank with good operating start to the year
• Risk-provisioning down
• Trading result weighed down by dollar exchange rate
• Total assets further reduced in the course of the year
Hamburg/Kiel, May 26, 2010 - Despite fresh uncertainties on the international financial markets, cyclically induced muted demand for loans and a further reduction in its total assets, HSH Nordbank performed in line with its forecasts in the first quarter of the year.
The net income before restructuring came to EUR -170 million in January to March 2010 (previous year: EUR -111 million).
The substantially reduced strain caused by the credit investment portfolio and stable net interest and commission income relative to total assets exerted a favourable effect compared with the previous year. The improved economic situation of many of the Bank's clients is particularly reflected in reduced risk-provisioning expense. The Group net loss amounted to EUR -276 million (previous year: net loss of EUR -231 million). In addition to the favourable effect from income taxes of EUR 44 million (previous year: expense of EUR -72 million), the Group’s result also include the cost of the government guarantees of EUR -151 million (previous year: EUR -20 million). Of this, a sum of EUR -100 million alone (previous year: EUR 0 million) is accounted for by payments to the states of Hamburg and Schleswig-Holstein for the second-loss guarantee.
"Although this marks the fifth quarter in succession that HSH Nordbank has performed in line with its forecasts, we cannot reduce our efforts to resolutely continue the process of strategic realignment," said Dirk Jens Nonnenmacher, HSH Nordbank's CEO.
In the first quarter of 2010, the Bank continued to scale back its business as planned, with total assets contracting by around 16 percent year on year from just under EUR 207 billion to around EUR 173 billion. Following the approval of the annual financial statements, the Tier 1 capital ratio including market-risk positions stands at 9.8 % (31.12.2009: 10.5 %) and thus remains competitive by international standards.
Against the backdrop of substantially reduced total assets and still extremely muted demand for loans, net interest and commission income was on budget in the first quarter. The figure was down year on year from EUR 534 million to EUR 449 million in line with the targeted decline in total assets. Interest income was weighed down by an negative result from hybrid financial instruments in the amount of EUR -37 million. New loans primarily took the form of renewals and the settlement of binding commitments in the core segments' business with existing clients. The Bank's ability to obtain margins which were adequate in the light of the risk exposure assumed also buoyed earnings.
Net income from financial investments and net trading income benefited from the further stabilisation of the credit investment portfolio in the first quarter, although the recent widening of credit spreads in the wake of economic uncertainty as well as the US-dollar appreciation exerted pressure. Net result of foreign currency valuation had a significant impact on net trading income, resulting with EUR -160 million (previous year: EUR -26 million), primarily of risk provisions in foreign currencies. Accordingly, a net income of EUR -132 million was sustained from trading in the first three months of 2010, marking a sharp reversal of the previous year's net trading income of EUR 210 million. Net income from financial investments improved sharply to EUR 27 million after a net trading income of EUR -269 million was recorded in the previous year.
The first time since the beginning of the restructuring of HSH Nordbank the allocation to the loan-loss provisions declined notedly. Loan-loss provisions came to EUR -329 million in the first quarter (previous year: EUR -424 million), down roughly 22 percent on the first quarter of 2009 and down some 65 percent on the previous quarter. This favourable performance was due to the progress made in the systematic efforts to clean up the Bank's portfolio together with a slight economic recovery, which resulted in improved business for many of the Bank's clients as well as an easing of the situation in the shipping markets.
Further decline in costs
Administrative expenses reflect the continued benefits of the Bank's cost-cutting program, contracting as they did by EUR 17 million to EUR -197 million, down from EUR -214 million in the same quarter one year earlier. The decline of EUR 13 million in personnel expense was chiefly due to continuing redundancies. Operating expenses dropped by EUR 4 million as a result of various cost cuts.
Restatement of the previous year’s figures
The interim financial report for the first quarter includes a restatement of the 2009 consolidated financial statements (in accordance with IAS 8). As a result of an oversight in the work process, write-ups were applied as of 31 December 2009 in the case of four impaired securities; as a result of the same oversight, a small amount of impairment losses failed to be reversed in the case of three securities positions. The adjustments made result in a change of EUR -64 million in the Group net loss, which therefore now comes to EUR -743 million as of 31 December 2009 and is still better than the Bank’s planning for fiscal year 2009. The restatement did not have any impact on either the comparatives IFRS figures as of 31 March 2009 or the financial statements for 2009 prepared in accordance with German GAAP.
HSH Nordbank will be gradually expanding new business in its realigned regional and sector-based business units as demand for loans picks up.
“The still volatile market conditions continue to call for strict risk management together with support for clients in overcoming the current challenges. Despite the appreciable signs of an improvement in the situation in various sectors and industries, underlying conditions remain prone to setbacks particularly on account of the worries surrounding efforts to overcome the debt crisis," says Dirk Jens Nonnenmacher, CEO of HSH Nordbank. "We continued working on realigning the Bank in the first quarter of 2010 and see our business performance as vindicating our actions," he adds.
The bank plans to regain profitability in 2011 and expects to be able to pay a dividend for fiscal year 2012.
|Income statement in EUR million||Q1/2010||Q1/2009|| Change
|Net interest income||407||483||-16|
|Loan loss provisions||-329||-424||-22|
|Net interest income after loan-loss provisions||78||59||+32|
|Net commission income||42||51||-18|
|Result from hedging||4||44||-91|
|Net trading income||-132||210||>-100|
|Net income from financial investments||27||-269||>100|
|Other operating income||8||8||0|
|Net income before restructuring||-170||-111||-53|
|Result from restructuring||1||-28||>100|
|Expenses for government guarantees||-151||-20||>-100|
|Income tax expenses||44||-72||>100|
|Group net loss for the year||-276||-231||-20|
|Group net income attributable to non-controlling interests||3||-21||>100|
|Group net income attributable to HSH Nordbank shareholders||-279||-210||-33|
|Key balance sheet ratios for the HSH Nordbank Group||31.3.10||31.12.09|
|Total assets (EUR billion)||173||175|
|Tier 1 capital ratio* (%)||9.8||10.5|
|Equity capital ratio* (%)||15.0||16.1|
* including market-risk items, after approval of the annual financial statements for 2009
** full-time employees
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