HSH Nordbank steers a successful course
- Operating profit after risk provisions up more than 10%
- RoE before tax on target at 15.5%
Hamburg/Kiel, August 23, 2007 - In the first half of 2007, HSH Nordbank Group again surpassed the previous year’s strong results. Operating profit after risk provisions grew by more than 10% to EUR 521 million; this impressive performance was attributable to very good net trading income, lower credit risk provisioning and proceeds from the sale of equity holdings.
“The results for the first half of 2007 confirm that we are on track. Our business areas have performed well, thanks not least to innovative new capital market products,” said Hans Berger, Chairman of the Management Board of HSH Nordbank AG, on presenting the interim results in Hamburg.
Operating income influenced by exceptional factors
The HSH Nordbank Group reported a slight fall in operating income to EUR 1,115 million in the first half of 2007 (down 2%). This item was negatively affected by changes to accounting standards: unlike in the previous year, income that has already been economically earned but will only be received in the second half of the year has not been included in the financial statements for the first six months.
Administrative expenses moderately higher
Administrative expenses totaled EUR 457 million, a moderate 3% or so higher than the year-earlier figure.
Risk provisions reduced further
The item risk provisions/valuation was EUR 137 million – a gratifying 40% lower than in the previous year.
However, large write-downs were also required, in the second quarter in particular. Overall, though, within our widely diversified securities portfolio, these were considerably less significant than the positive effects. Some of the value adjustments that were carried out were directly or indirectly related to the crisis on the international financial markets.
Increased operating profit
Operating profit after risk provisions grew by more than 10% to EUR 521 million, thanks to the further reduction in the risk provisions item.
Net income increased by 8% to EUR 271 million, after taking into account significantly higher income taxes (up 27%) and a 4% rise in payouts on silent participations.
Pre-tax return on equity on course for 2007 target
HSH Nordbank recorded a 15.5% pre-tax return on equity, which is in line with the target for 2007. This marks a 0.5 percentage point improvement over June 30, 2006, and also over December 31, 2006.
The cost/income ratio rose by 2.3 percentage points versus June 30, 2006, to 41.0%, while an improvement of 1.3 percentage points was posted versus December 31, 2006. The ratio of costs to earnings therefore remains good relative to those of other banks.
The tier 1 capital ratio pursuant to the German Banking Act (KWG) improved marginally to 7.0% (previous year: 6.9%).
Segment report for the 1st half of 2007
The segment structure was adapted to HSH Nordbank’s new business model with effect from January 1, 2007. The Global Transportation Markets and Global Real Estate Markets segments position the Bank as an international sector specialist. HSH Nordbank’s positioning as a leading commercial bank in northern Europe is underlined by the Corporates and Institutions & Private Banking segments, while the Financial Markets segment highlights the Bank’s role as an international capital markets expert and risk manager.
Global Transportation Markets
Global Transportation Markets recorded operating profit after risk provisions of EUR 228 million – up 37%. Its return on equity improved from 18.8% to 22.1%.
Global Real Estate Markets
The financing business experienced a significant upturn in the second quarter on the back of the sustained investment market boom; pressure on margins persisted, however, as a result of stiff competition. Overall, operating profit after risk provisions jumped to EUR 145 million (previous year: EUR 114 million). Return on equity climbed from 18.2% to 22.3%. The quality of the results has further improved. This is mainly attributable to the close cooperation with the relationship managers in the other business units.Thanks to its structuring expertise, HSH Nordbank again managed several complex, cross-border financing transactions for important real estate investors. Once again, the lion’s share of the EUR 7.1 billion of new business (previous year: EUR 6.5 billion) originated from outside Germany.
In the Corporates segment, operating profit after risk provisions rose to EUR 252 million (previous year: EUR 187 million). This includes income from sales of shares in the amount of EUR 64 million. However, profit rose even without this one-off effect, thanks to successful credit and services business with medium-sized companies. The Bank once again enjoyed particular success in the area of structured finance. As a consequence, return on equity improved significantly, from 31.7% to 37.6%.
Institutions & Private Banking
The segment’s operating profit after risk provisions came in at just under EUR 75 million (previous year: EUR 77 million), and return on equity was 25.4% (previous year: 24.8%). The Private Banking division significantly increased its focus on high net worth private clients, while in savings banks business the aim is to significantly expand the provision of tailored services for these banks and their customers throughout Germany. Leasing clients are increasingly being offered a comprehensive product range spanning the entire leasing company value chain.
With operating profit after risk provisions of EUR 196 million (previous year: EUR 200 million), the Financial Markets segment fared well in what was, overall, a tight market environment. Return on equity was 19.8% (previous year: 19.5%). The quality of the results has further improved. This is mainly attributable to the close cooperation with the relationship managers in the other business units. As part of its internationally oriented refinancing strategy, HSH Nordbank successfully placed several major issues on the capital market in the first six months of the year. In June, the Bank placed its first unsecured euro benchmark issue (with a volume of EUR 1.5 billion) since the abolition of state guarantees.
| HSH Nordbank Group
|1.1. to 6.30.2007||1.1. to 6.30.2006||Change in %|
|Net interest income||720.0||811.8||-11.3|
|Net commission income||225.9||239.1||-5.5|
|Net trading income||139.9||66.8||+109.4|
|Other operating income||29.4||24.8||+18.5|
|Other operating expenses||223.9||223.5||+0.2|
|Operating profit after risk provisions||521.0||471.9||+10.4|
|Taxes on income||111.7||88.2||+26.6|
|Payouts on silent participations||138.4||133.5||+3.7|
| HSH Nordbank Group
|2nd quarter 2007||2nd quarter 2006||Change in %|
|Net interest income||411.5||421.8||-2.5|
|Net commission income||109.2||118.2||-7.6|
|Net trading income||62.1||31.9||+94.7|
|Other operating income||21.8||10.8||+101.9|
|Other operating expenses||105.4||109.8||-4.0|
|Operating profit after risk provisions||260.6||230.1||+13.3|
|Taxes on income||55.6||44.9||+23.8|
|Payouts on silent participations||70.1||66.9||+4.8|
|HSH Nordbank Group||1.1. to 6.30.2007||1.1. to 6.30.2006|
|Total assets (EUR billion)||205.2||190.0|
|Business volume (EUR billion)||263.2||238.2|
|Cost/income ratio (%)||41.0||38.7|
|Return on equity (%)||15.5||15.0|
| Tier 1 capital ratio (%),
German Banking Act
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.
This press information can contain forward-looking statements. These statements are based on our beliefs and assumptions, on information currently available to us which we consider reliable. Forward-looking statements include all statements which are not historical facts, including information concerning future growth prospects and future economic developments.
Such forward-looking statements are based on assumptions relating to future events and are subject to uncertainties, risks and other factors, a large number we cannot influence. Thus actual events can differ considerably from the forward-looking statements made. We make no warranty for the correctness or completeness of these statements or the actual occurrence of the statements made. Furthermore, we assume no obligation for updating the forward-looking statements after this information has been published.