HSH Nordbank: Good Real Estate earnings in 2007 despite difficult fourth quarter
Hamburg/Kiel, April 9, 2008 - Earnings were driven by net interest income, the largest earnings component, which rose to EUR 343 million (2006: EUR 330 million). The volume of new business came to EUR 14.9 billion, almost reaching last year’s high level (EUR 16.1 billion), despite a weaker fourth quarter in the wake of the crisis on the financial markets. The Real Estate Business Unit once again did most of its new business outside Germany, where it assisted a large number of finance deals with top international investors. The list was headed by U.S. business worth EUR 4.1 billion, followed by the finance business in the United Kingdom amounting to EUR 2.7 billion and EUR 1.8 billion being generated in the Nordic region. New business in the Netherlands came to a very encouraging EUR 900 million. New business in Germany also went well, generating more than EUR 2.6 billion.
“The conditions underlying our business last year were marked to a great extent by heavy demand for real estate investments. Margin pressure persisted on almost all markets, due to intense competition. Nevertheless, the average interest margin of our business remained encouragingly at a virtually unchanged level. We have noticeably consolidated our strong position as an international sector specialist“, explained Peter Rieck, Deputy Chief Executive Officer of HSH Nordbank AG.
Thanks to the very positive valuation of property loan portfolios and to the substantial decline in individual impairments, loan-loss provisioning even boosted earnings by EUR 22 million Net commission income and net trading income remained almost unchanged at a high level, totaling EUR 108 million (2006: EUR 113 million). “A boost to this business was provided by an expanded scope of services thanks to a closer linkup with other HSH Nordbank business segments, particularly with Capital Markets, Private Banking and Transaction Services,” stressed Rieck. Weaker new business in the fourth quarter exerted some strain.
Growth was hampered by the impact of the crisis on the financial markets. Securitization and syndication markets largely came to a standstill, particularly in the fourth quarter, thereby perceptibly limiting the scope for further fresh commitments.
The real estate subsidiary HSH Real Estate AG made a notable contribution to good business performance of the Real Estate Business Unit. The international orientations of our business as well as our image as an international sector specialist were systematically enhanced. In its business with real estate funds HSH Real Estate further extended its international coverage by purchasing 50 percent of the shares of US Treuhand. The fund und business was marked by sales of HGA Aviation I, HGA Airport in Hamburg and SIGNA 05/HGA Luxemburg.
The sale of equity holdings and project developments in particular helped to boost earnings. In the year under report, the remaining direct and indirect holdings totaling 15 percent in GEHAG GmbH, a Berlin-based residential housing company, were sold. The sale of project developments in Kiel (Quer Passage) and Hamburg (Atlantic Haus) had a key impact on the Project Development segment. The Services unit of HSH Real Estate successfully assisted in significant consulting mandates, including transaction consulting for Robert Vogel GmbH on the sale of an office portfolio in Hamburg to IVG Immobilien AG. Our real estate subsidiary substantially strengthened its market coverage in this segment via joint asset-management companies with Pirelli Real Estate and TAG.
With respect to the guidance for the current year, Rieck commented as follows: “The business prospects of the Real Estate Business Unit are also determined to a decisive extent by the further trend of the conditions underlying the capital market.” An easing of the situation on the securitization and syndication markets would boost the volume of new business, whereas a continuation of the crisis would limit the opportunities for growth.
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