EU Commission concludes state aid proceedings

• HSH Nordbank's future secured long term

Hamburg/Kiel, September 20, 2011 - The EU Commission today formally concluded the state aid proceedings relating to HSH Nordbank.

This means that the additional capital measures provided to the Bank by its main shareholders, the federal states of Hamburg and Schleswig-Holstein, in spring 2009 which the EU Commission classified as state aid, have now been finally approved. This decision paves the way for the Bank’s continued existence over the long term. HSH Nordbank will continue to operate on the market as an independent institute. The requirement for the federal states of Hamburg and Schleswig-Holstein to give up their controlling majority in the Bank, which had been under discussion for a long time, is now also finally off the table as a result of today's decision.

This decision is based on the business concept presented to the EU Commission and on a catalogue of conditions and undertakings the Management Board began implementing in late August. The concept aims to restructure HSH Nordbank into a leading commercial bank for corporate mid-caps in the North. At an international level, the "new HSH Nordbank" will in future focus on the shipping and energy & infrastructure segments. At a regional level, the Bank will focus on the areas involving corporate clients, real estate clients, private banking and savings banks.

"I welcome the fact that the EU state aid proceedings, which have been ongoing for more than two years, have been concluded with today's decision by the EU Commission. Indeed this decision will lead to deep changes at HSH Nordbank, but at the same time provides HSH Nordbank with the opportunity to position itself in a forward-looking and viable manner," said Peter Harry Carstensen, Prime Minister of the federal state of Schleswig-Holstein.

"The business of HSH Nordbank that is also important for the federal states of Hamburg and Schleswig-Holstein will remain. This is the important message at the conclusion of the state aid proceedings. I would like to extend my thanks to EU Commissioner Almunia and Germany's Minister of Finance Schäuble for their great cooperation in this matter. I am convinced that HSH Nordbank together with its employees will do everything it can to take advantage of the opportunities it is now being offered," said Olaf Scholz, First Mayor of the Free and Hanseatic City of Hamburg.

"We welcome the EU Commission's decision. After more than two years of negotiations we have finally been given the legal and planning certainty we require to quickly implement our strategy. What the decision also shows is that the Commission believes in the long-term stability and earning power of HSH Nordbank. We will remain on the market and will position ourselves on a sustainable basis as a focused and strong-selling 'Bank for entrepreneurs' in the SME sector. HSH Nordbank will be a reliable partner for businesses and entrepreneurs in their home region and beyond," stated Paul Lerbinger, Chief Executive Officer of HSH Nordbank.

The Bank had already announced the key points of the agreement reached with the EU Commission in August. All these points were confirmed by today's decision.

HSH Nordbank initiated a thorough restructuring at the start of the financial market crisis. In addition, the Bank committed itself in the wake of the EU state aid proceedings to scale back its business activities further. This will be achieved in particular by winding down the aircraft-based aviation finance and the international real estate businesses. In the shipping segment the Bank has committed itself to reducing assets within the Core Bank to approx. EUR 15 billion by 2014. Total consolidated assets will be reduced by more than 40 percent to EUR 120 billion by the end of 2014 in comparison with 2008. Of this figure, EUR 82 billion will be allocated to the forward-looking Core Bank and EUR 38 billion to the Restructuring Unit, where non-strategic business areas and portfolios will be wound down on a loss-minimising basis and with minimum disruption to the market.

The EU Commission moreover imposed further measures on the Bank and the federal state aimed at offsetting competitive distortions and at spreading the restructuring charges. These measures also include further conditions regarding the second loss guarantee from the federal states of Hamburg and Schleswig-Holstein. Beyond the current fee for the second loss guarantee the EU Commission has imposed an additional one-off payment of EUR 500 million that is to be made by the Bank to the guarantors. This payment will be retransferred to the Bank within four months following the formal EU decision by way of a contribution in kind. Moreover, the Commission has obliged the Bank to make a compensation payment based on the law on state aid totalling 3.85 percent of the total outstanding guarantee, however this payment is only to be made if the Bank actually has recourse to the guarantee.

In addition to the non-cash capital increase, the Commission has imposed further conditions on the Bank that are designed to strengthen its equity ratio. For instance, the Bank has undertaken towards the Commission to pay no dividend to its shareholders up to and including fiscal 2014.

"As of today the Bank has again clear perspective and will be positioned on the market as a competitive bank with solid capitalisation. At the same time, we are conscious of the great trust that the Commission and our shareholders have placed in us. We will not betray this trust,” stressed Paul Lerbinger.

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