HSH Nordbank announces details of realignment

Hamburg/Kiel, February 17, 2009 - The Management Board of HSH Nordbank has presented its concept for the Bank’s strategic realignment and the sustained strengthening of its capital resources to the Supervisory Board. A decision on implementing the concept will be taken next week.

According to the concept, the business segments with potential for the future are to be pooled in a core bank. Non-strategic units and portfolios are to be dismantled or sold off. To strengthen the capital base, the Management Board has recommended to the Supervisory Board that HSH Nordbank’s capital be increased in an amount of EUR 3 billion and the Bank be shielded from further risks in an amount of EUR 10 billion.

“We are aware of our responsibilities. In particular, it is against the backdrop of the current macroeconomic setting that we, HSH Nordbank, are called upon more than ever to ensure lending to businesses and to key local industries. Our business purpose is clear: we are the top address for clients in our home region and for the shipping, transportation and renewable energies sectors,” said Dirk Jens Nonnenmacher, CEO of HSH Nordbank.

The key pillars of the strategic realignment are as follows:

• Focusing on the home regions of Hamburg and Schleswig-Holstein.

• More proactive positioning in the regional client segments, i.e. corporate clients, private banking, as well as in savings banks and real estate across Germany.

• Strengthening Northern Germany’s key industries: shipping, aviation, transport-related infrastructure and renewable energies.

• Concentrating capital-market activity on product development for the Bank’s client segments in tandem with a significantly reduced risk profile.

The Bank’s potential realignment will go hand in hand with a considerable reduction in its size. For this purpose the size of the balance sheet of HSH Nordbank will be reduced approximately by half. The target for the core bank in 2012 are total assets of EUR 115 billion. The reduction is to be achieved by running down, dismantling or selling non-strategic business segments and portfolios. “Essentially, we have healthy segments that can propel the Bank forward again. In order to achieve this, however, it will be necessary to make systematic corrections to our course. Thanks to decisive realignment, HSH Nordbank will remain a strong partner for business," explained Dirk Jens Nonnenmacher.

These measures will also entail a further shedding of jobs. All told, by 2012 the number of full-time employees at HSH Nordbank is to fall by around 1,100 to about 3,250 within the Group. This includes the reduction of jobs that was announced in September 2008.

The planned business segments to be dismantled include the Credit Investment Portfolio, the international leveraged-buy-out business and the real estate business in the U.S. Moreover, the Bank’s operations in the areas of container financing, refinancing of leasing companies, conventional energies in Europe, the corporate business in Asia and Scandinavia are to be discontinued. Over the medium term, the Bank will dispose of its real estate business in Western Europe, its energy business in the United States, its equity holding in Deutsche Anlagen-Leasing (DAL) and the Commodity Trade Finance segment. The withdrawal from these operations will be carried out gradually and in in-depth dialog with those affected.

“Through this bundle of measures we lay the necessary foundations to ensure lending for the northern German economy while bracing ourselves for any risks resulting from a protracted economic crisis", continued Nonnenmacher.

Results of fiscal 2008

According to preliminary non-audited IFRS group figures, HSH Nordbank closed 2008 with a consolidated net loss of around EUR 2.8 billion before restructuring costs, taxes and loss participation (previous year: net profit of EUR 285 million). This figure includes the impairments of around EUR 1.6 billion (previous year: EUR 1.3 billion) on the credit investment portfolio. Further writedowns necessitated by the crisis afflicting the financial market are valued at EUR 0.9 billion and include, among other things, adjustments in connection with the Lehman insolvency and the collapse of Icelandic banks. HSH Nordbank has responded to the heightened risks in its lending business in the wake of the current economic crisis by substantially increasing loan-loss provisioning to EUR 1.4 billion (previous year: EUR 1 million income). This is due to an increased need for loan-loss provisions following an heightened risk of default due to the current economic crisis. Nonnenmacher showed restraint with respect to the outlook for the coming fiscal years until 2010: “I expect the financial and economic crisis to continue until the end of 2010. Leaving aside the charges resulting from the financial crisis, the earnings contribution of the operating business segments that will form part of the core bank was, however, satisfactory in 2008", said Nonnenmacher. At EUR 2 billion, interest and commission income was just above the pre-year level (2007: EUR 1.9 billion).