Shipping and Transportation units reporting substantial gains

  • Sharp increase in operating profit after risk provisions
  • Lively demand for ship finance
  • Higher return on equity

Hamburg/Kiel, August 23, 2007 - HSH Nordbank is for the first time releasing the results of its new Global Transportation Markets segment, which was set up at the start of the year. The combined Shipping and Transportation units reported an operating profit after risk provisions totaling EUR 228 million. In the same period last year it reported EUR 166 million, which corresponds to an increase of 37.1 percent. The return on equity rose from 18.8 to 22.1 percent.


New business was up from EUR 4.6 billion in the first half of 2006 to approx. EUR 6.7 billion, thanks to vibrant demand for ship finance. More than half of this sum was paid out to international clients. The steady increase in arranger mandates together with further complex business transactions provided a boost. As a result, net commission income climbed significantly year-on-year increase.

Net interest income, too, rose sharply, although the pressure on margins remained very perceptible on account of intense competition. The rise in operating profit after risk provisions to EUR 179 million (prev. year: EUR 139 million) was also attributable to large-volume individual transactions and to the sale of an equity holding.

Rising fuel costs (bunker) are at present prompting many ship owners to hedge their risks by means of derivatives. On this competitive market the price of bunker oil, which accounts for a large share of variable costs, cannot be passed on to customers in full. This has a considerable impact on earnings. “HSH Nordbank has had gratifying success on the market with its hedging strategies, which are tailored to this situation,” commented Peter Rieck, Deputy CEO of HSH Nordbank and responsible for the Global Transportation Markets Business Unit. At present, the focus is, moreover, on acquisition finance for shipping companies. Over the past few months HSH Nordbank has arranged several such transactions. Two large-volume transactions alone totaled a good one billion dollars and involved the provision of finance to a bidding syndicate for the acquisition of a renowned U.S. tanker shipping company. Acting in collaboration with HSH Corporate Finance, the Shipping unit will be increasing its activities in this area in the future.

Transportation (Air, Rail, Logistics/Infrastructure):

Following on from last year’s good results, the favorable performance of this business unit continued amid a setting characterized by global momentum on the global transportation markets. New business volume in the first half of 2007 rose by more than one third to EUR 2.2 billion (prev. year: EUR 1.4 billion). This result was well above the average for the sector, despite persistently strong competitive pressure. Sharp increases in net interest and net commission income followed. Furthermore, the need for risk provisioning remained low due to the high quality of the portfolio. Operating profit after risk provisions grew significantly: from EUR 27 million in the first half of 2006 to EUR 49 million.

In June, sale-and-leaseback transactions took off in the Aviation Business Unit with a Boeing B737-900ER and an Airbus A320 for the HSH Global Aircraft Fund I, whose assets are managed by Amentum Capital Ltd. HSH Nordbank holds 60 percent in this joint venture, with the remaining stake owned by Deutsche Anlagen-Leasing (DAL). HSH Global Aircraft Fund I offers institutional and high net-worth private investors an attractive portfolio consisting of 25-30 modern aircraft – as such a first on the fund market, which has been initiated by HSH Nordbank.

Moreover, a large number of significant transactions were concluded. Thus in April HSH Nordbank arranged the acquisition finance for four new B737-900ER for Indonesian airline Lion Air. The European aviation team structured the advance payment finance for two B777-200LR freight carriers for Avion Aircraft Trading (AAT) in Iceland. At our New York office we made a liquidity facility available as part of an asset-backed finance transaction for aircraft leasing company Aircastle.

The European Rail team acted as joint lead arranger in the finance for new tank wagons and containers for a leading European leasing company. The sector is booming, the need for fresh investments is high and it is characterized by high occupancy rates, rising prices and rentals.

In June 2007, the Logistics / Infrastructure Business Unit of HSH Nordbank took a key role in refinancing Brussels Airport, acting as joint lead arranger and bookrunner. As part of this transaction – three years after the acquisition of 70 percent of shares by Australian investment bank Macquarie – HSH Nordbank underwrote part of the refinancing total. In the second half, further renowned transactions in airport, container and other infrastructure financing are due to be completed.

“Despite the perceptible pressure on margins, further volume and earnings growth is to be expected in the areas of transportation finance in the second half," said Peter Rieck, Deputy CEO of HSH Nordbank and responsible for the Global Transportation Markets Business Unit.

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