HSH Nordbank defies financial crisis

  • Operating income up 13 percent
  • Nine month earnings at record level
  • Best 3rd quarter since HSH Nordbank was established

Hamburg/Kiel, November 7, 2007 - HSH Nordbank boosted its consolidated earnings to a new record level in the first nine months of 2007. Earnings before risk provisioning rose 18 percent to nearly EUR 1.1 billion. The reasons for this strong growth were above all significantly higher interest income and a disproportionately small increase in costs. Despite the strains of the financial crisis and greater contingency reserves, pre-tax consolidated earnings rose by 14 percent to EUR 772 million.

“Our strong, profitable growth more than offset the fallout from the credit crunch. We have achieved the best nine-month earnings and the best third quarter since HSH Nordbank was established”, said Hans Berger, CEO of HSH Nordbank, upon presentation of the quarterly figures in Hamburg. “There is, from today’s perspective, no reason to retract from our ambitious targets for 2007.” Berger does not, however, dismiss the fact the market sentiment has deteriorated significantly in the past few weeks. “We banks must produce more transparency and build confidence,” says Berger.

Operating earnings up

In the first nine months of 2007, HSH Nordbank Group generated operating earnings of EUR 1,800 million – an increase of considerable 13 percent.

Net interest income rose by a significant 11 percent year on year to EUR 1,268 million. New business in the Global Transportation segment made a crucial contribution to this increase. HSH Nordbank grew especially strong in the United States, Asia and in London. As a result of preparing for IFRS accounting, net interest income as a matter of principle no longer includes income from the sale of investments. In the future this will be recognized in the investment result under the item risk provisioning / measurement. Net commission income rose to about EUR 346 million and topped the very good figure of the previous year by more than 4 percent. Net trading income improved by 85 percent to EUR 142 million. The reason for this was higher income on the one hand due to switching measurement to the mark-to-market method and, on the other hand, to successful trading operations.

Cost-income ratio improved

The ratio between costs and income within HSH Nordbank Group showed an improvement on September 30, 2007. The cost-income ratio contracted by 2.3 percentage points to 39.3 percent (41.6 percent in the previous year). Administrative expenses were, at EUR 708 million, nearly 7 percent up on the previous year’s figure.

Personnel expenses rose by just over 10 percent year on year to EUR 358 million. To meet its growth targets, HSH Nordbank recruited additional staff – above all in London and New York, The Bank employed 4,685 people on the closing date – an increase of nearly 6 percent. Operating expenses rose by 4 percent to EUR 350 million due to expansion of the international business.

Based on its good business performance and the disproportionately low increase in costs, HSH Nordbank is reporting an increase in operating income before risk provisioning to EUR 1,092 million.

Risk provisioning topped up

The Bank topped up the item Risk provisioning / Measurement by 27 percent at the end of the nine-month period, to EUR 319 million (from EUR 250 in the previous year). This includes EUR 235 million (previous year: EUR 185 million) in so-called voluntary risk provisioning (Art, 340 f+g of the German Commercial Code).

In the lending business, risk provisioning was down to EUR 77 million (from EUR 120 million in the previous year) and thus by more than one third. The contributing factors here were the good performance of the economy and ongoing improvement of risk management. In the securities business, write downs during the year more than cancelled out positive results from the sale of securities. In the third quarter, write downs either directly or indirectly related to the crisis on the international credit markets, amounted to about EUR 91 million. The item securities trading result showed a negative amount of EUR 23 million on September 30, 2007 (EUR +24 million one year earlier). Net investment income dropped from EUR 31 million one year earlier to EUR 15 million after the first nine months of 2007. Good business performance allowed HSH Nordbank to top up its voluntary contingency reserve by EUR 235 million (EUR 185 million in the previous year).

Operating profit up significantly

Operating profit after risk provisioning improved, despite the increased risk-provisioning item, by nearly 14 percent to the record level of EUR 772 million. Taking into consideration significantly higher income taxes (+27 percent) and increased payouts on silent partnerships (+3 percent), after-tax earnings were up 12 percent to EUR 337 million. The rise in income taxes is due mainly to implementation of the Corporate Tax Reform Act (reassessment of deferred taxes).

Operating profit increased by 52 percent year on year to EUR 685 million in the period from July through September 2007. Administrative expenses rose by 14 percent to EUR 251 million in the third quarter. Operating profit before risk provisioning grew by 89 percent to EUR 434 million (EUR 229 million in the previous year). Despite the higher risk provisioning, operating profit after risk provisioning improved by 21 percent to EUR 251 million.

Pre-tax return on equity on target

HSH Nordbank recorded a 15.3 percent return on equity before taxes after nine months and is thus on target, Compared with the figure on September 30, 2006, this represents a further improvement by 0.8 of a percentage point. The Tier 1 capital ratio pursuant to the German Banking Act dropped slightly to 6.5 percent (from 6.6 percent in the previous year) due to enlargement of the balance sheet.

Reports by segment (January 1 through September 30)

Global Transportation Markets

HSH Nordbank again benefited from the good performance of the global economy and the increasing degree of globalization. The Global Transportation segment once again grew at double-digit pace. Operating profit after risk provisioning rose by 43 percent to EUR 362 million. The 22.6 percent return on equity likewise exceeded the previous year’s figure of 19 percent,

Business with shipping industry clients was very vibrant in the first nine months. The volume of business closed to September 30 amounted to more than EUR 10.2 billion (previous year: EUR 7.0 billion). HSH Nordbank performed successfully in its Transportation division. At EUR 3.3 billion, the volume of new business remained at the previous year’s level, by earnings improved significantly.

Global Real Estate Markets

Operating profit after risk provisions rose to EUR 193 million (from EUR 183 million in the previous year). The return on equity dropped slightly to 18.6 percent (from 18.8 in the previous year). The volume of new business was up to EUR 11.8 billion (previous year: EUR 11.3 billion). HSH Real Estate in the third quarter acquired 50 percent of the equity in the fund company US Treuhand for a joint venture with its subsidiary HGA Capital. In terms of equity placed, it ranks number two on the market for closed-end real estate funds.


Earnings performance was encouraging in the first nine months of 2007. Adjusted for the higher income from disposal of investments in the previous year, there was a significant increase in operating profit. Net commission income grew especially strongly, but there was also an uptrend in interest income. Unadjusted non-recurring items, the earnings were at the previous year’s level with a figure of EUR 352 million. There was a decidedly positive trend in the areas of renewable energy.

Institutions & Private Banking

Operating profit after risk provisions was, at EUR 110 million, about one percent down year on year (from EUR 111 million). The return on equity improved to 24.9 percent (previous year: 23.5 percent). The products on offer for savings banks were widened further in the third quarter, accompanied by extension of regional presence for Private Banking clients around Hanover.

Financial Markets

The fallout from the credit crisis affected earnings because of write downs on the securities portfolio. Operating profit after risk provisions dropped by 63 percent year on year to EUR 114 million.

The return on equity came to 7.1 percent (20.1 percent in the previous year).


HSH Nordbank is confident with respect to fourth-quarter performance. The prerequisite is that the trepidation on the markets, which has increased again in the past few weeks, settles down again.

With targeted expansion of its range of products and services while focusing on attractive customer markets, the Bank will be able to maintain the course of growth on which it has embarked. CEO Hans Berger: “We have, from today’s perspective, taken all discernable risks into account, The year-on-year top-up by EUR 50 million in voluntary risk provision to EUR 235 million underscores the high quality of earnings in our interim financial statements.”

HSH Nordbank Group
(EUR millions)
Jan 1 to
Sep 30, 2007
Jan 1 to
Sep 30, 2006
Change in %
Operating income 1,799.9 1,592.0 +13.1
Net interest income 1,267.7 1,141.3 +11.1
Net commission income 345.5 331.2 +4.3
Net trading income 141.9 76.8 +84.8
Other operating income 44.8 42.7 +4.9
Administrative expenses 708.1 662.8 +6.8
Personnel expenses 357.8 326.7 +9.5
Operating expense 350.3 336.1 +4.2
Operating result 1,091.8 929.2 +17.5
Risk provisioning 319.4 250.2 +27.7
Operating profit 772.4 679.0 +13.8
Extraordinary earnings 6.4 0 -
Income taxes 220.8 174.3 +26.7
Payouts on silent participations 207.8 202.8 +2.5
After-tax earnings 337.4 301.8 +11.8
HSH Nordbank Group
(EUR millions)
3rd quarter 2007 3rd quarter 2006 Change in %
Operating income 684.7 449.5 +52.3
Net interest income 547.7 329.5 +66.2
Net commission income 119.6 92.1 +29.9
Net trading income 2.0 10.0 - 80.0
Other operating income 15.4 17.9 -14.0
Administrative expenses 251.0 220.3 +13.9
Personnel expenses 124.6 107.7 +15.7
Operating expense 126.4 112.6 +12.3
Operating result 433.7 229.2 +89.2
Risk provisioning 182.3 22.1 +724.9
Operating profit 251.4 207.1 +21.3
Extraordinary earnings 6.4 0 -
Income taxes 109.1 86.1 +26.7
Payouts on silent participations 69.4 69.3 +0.1
After-tax earnings
HSH Nordbank Group 9/30/2007 9/30/2006
Total assets (EUR billion) 206.4 192.1
Business volume (EUR billion) 261.8 244.3
Employees (number) 4,685 4,433
Cost-income ratio (%) 39.3 41.6
Return on equity (%) 15.3 14.5
Tier 1 capital ratio (%) pursuant to
German Banking Act
6.5 6.6

The information contained in this press release does not constitute an offer for the sale of any type of Hamburg Commercial Bank AG securities. Securities of Hamburg Commercial Bank AG may not be sold in the United States without registration pursuant to US securities legislation, unless such a sale takes place on the basis of relevant exceptional provisions.

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