HSH Nordbank successfully stays on its restructuring course
Hamburg/Kiel, August 27, 2010 - HSH Nordbank made a substantially larger improvement to its earnings in the first half of 2010 than forecast.
Thanks to a positive contribution of EUR 60 million to earnings in the second quarter, the net loss before restructuring in the year to 30 June 2010 contracted to EUR -110 million (previous year: net loss of EUR -378 million). The Bank has thus remained on its successful restructuring course. A Group net loss of EUR -380 million (previous year: Group net loss of EUR -619 million) was sustained after an expense for government guarantees of EUR -303 million (previous year: EUR -150 million), a restructuring expense of EUR -14 million (previous year: EUR -72 million) and an income tax rebate of EUR 47 million (previous year: income tax charge of EUR -19 million).
The Core Bank in particular managed to improve its performance, posting substantial net income before restructuring of EUR 307 million (previous year: net loss of EUR -13 million) and net income before taxes of EUR 128 million (previous year: net loss before tax of EUR -148 million).
“All told, we can see that the uptrend in earnings emerging in the past few quarters is gradually getting steadier. Even so, this gives us no reason to decrease our effort yet. Our goal remains to return the Bank to profit-making territory in 2011,” says Dirk Jens Nonnenmacher, Chairman of the Management Board of HSH Nordbank.
The Bank’s business was bolstered in the first half by the recovery of the global economy and, related to this, the substantially reduced loan loss provision requirements. However, this was offset by strains on the financial markets, concern about sovereign debt of some countries in the euro zone and the appreciation of the US dollar.
Trends in exchange rates are also reflected in total assets, which despite the continuing portfolio wind-down in the Restructuring Unit increased slightly over March 2010 to EUR 176 billion but were down by around EUR 22 billion year on year (previous year: EUR 198 billion). The Bank’s Tier 1 capital ratio including market-risk items stood at 9.8 percent at the end of June 2010 (31 December 2009: 10.5 percent).
Earnings affected by dollar exchange rate
The Bank’s earnings in the first half of 2010 were significantly affected by the focus on business activities and the exchange rate of the dollar. New disbursements to clients were chiefly related to loan renewals and obligations under firm loan commitments. Investment demand remained weak. Despite muted new business, the Bank’s net interest and commission income remained steady, contracting only as a result of the reduction in total assets to EUR 896 million (previous year: EUR 1,006 million).
A net trading loss of EUR -378 million (previous year: net trading income of EUR 446 million) was sustained. The bulk of the strain arising in the first half of 2010 resulted from currency translation effects due to the sharp appreciation in the US dollar. Net income from financial investments benefited from the reduction of risk positions, rising to EUR 114 million as of 30 June 2010 (previous year: net loss from financial investments of EUR -313 million).
Despite tight market liquidity and trends in the dollar, the Credit Investment Portfolio (CIP) was reduced to around EUR 16 billion in the first half of 2010 (previous year: EUR 19 billion). At the same time, the strain caused by the CIP on overall earnings contracted sharply to EUR -92 million (previous year: EUR -208 million).
Thanks to the improved condition of many clients’ business as well as the significant professionalisation of the Bank’s risk management with considerably more sophisticated risk management, it was possible to substantially reduce the need for loan loss provisions in the first half of 2010. In total loan loss provision charges came to EUR -307 million in the first half of the year (previous year: EUR -1,195 million). The large allocations made to loan loss provisions in the preceding quarters enabled us to write back a total of EUR 22 million in the second quarter of 2010 for the first time since the outbreak of the financial crisis.
Cost-cutting taking hold
The Bank’s cost-cutting programme is reflected in administrative expenses, which contracted by EUR 34 million to EUR -402 million, down from EUR -436 million in the same period one year earlier. This decrease was due to personnel expenses. Adjusted for the companies consolidated for the first time as of 31 June 2010 in the context of bail-out purchases, personnel expenses would have been a further EUR 6 million lower. The number of full-time employees (FTEs) rose by 886 in the first half of 2010 due to the first-time consolidation of these companies. Adjusted for the companies consolidated for the first time the number of employees continued to drop to 3,437 FTEs as of 30 June 2010 (31 December 2009: 3,610).
HSH Nordbank continued its realignment in the first half of the year in line with its plans, thus coming closer to achieving its objective of becoming a consistently stable and successful financial institution in its region.
In addition to the continuing reduction of risk positions within the Bank’s internal Restructuring Unit, the comprehensive revisions of the internal structures, processes and monitoring systems in the areas accounting, risk management and loan decision contributes to making the Bank fit for the future.
The underlying macroeconomic conditions continued to get brighter up to mid 2010. The gradual stabilisation of the markets should also continue to be felt in the second half. “Despite the recovery in many sectors, effects of the crisis must still be managed and uncertainties remain, amongst others, regarding further economic developments. Accordingly, our foremost objective must still be to implement our strategic realignment so as to permanently safeguard the Bank’s continued existence,” stresses Dirk Jens Nonnenmacher, Chairman of the Management Board of HSH Nordbank.
|Income statement in EUR millions||H1/2010||H1/2009|| Change
|Net interest income||802||900||-11|
|Loan loss provisions||-307||-1,195||-74|
|Net interest income after loan loss provisions||495||-295||>100|
|Net commission income||94||106||-11|
|Result from hedging||3||90||-97|
|Net trading income||-378||446||>-100|
|Net income from financial investments||114||-313||>100|
|Other operating income||-36||24||>-100|
|Net income before restructuring||-1104||-378||71|
|Result from restructuring||-14||-72||81|
|Expenses for government guarantees||-303||-150||>100|
|Group net loss||-380||-619||39|
|Group net loss attributable to non-controlling interests||20||-22||>100|
|Group net loss attributable to HSH Nordbank shareholders||-400||-597||33|
|Balance sheet ratios for the HSH Nordbank Group||30.06.2010||31.12.2009|
|Total assets (EUR billion)||176||174|
|Tier 1 capital ratio* (%)||9,8||10,5|
|Regulatory capital ratio* (%)||14,1||16,1|
* including market-risk items after approval of the annual financial statements 2009
** fplus 886 FTEs from companies consolidated for the first time in the context of bail-out purchases
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