Hamburg Commercial Bank among the best-capitalized European banks in ECB stress test

Hamburg, July 30, 2021 - Hamburg Commercial Bank (HCOB) participated in this year’s stress test by the European Central Bank (ECB) and ranks among the best-capitalized and therefore most resilient banks in a Europe-wide comparison.

Usually conducted every two years, the ECB stress test simulates the effects of a global economic downturn and assesses the resilience of European banks. This is primarily measured in terms of the Common Equity Tier 1 capital (CET1) ratio and the leverage ratio. The full-year 2020 figures were used as the basis for the stress test calculations.

Based on an exceptionally solid capitalization, with starting values of 27.0% for the CET1 ratio and 12.2% for the leverage ratio, the ECB calculated a CET1 ratio of 15.8% and a leverage ratio of 8.5% for HCOB in the adverse scenario. These figures place HCOB in the top category for banks in Europe and are well above the normal regulatory requirements, even in the adverse scenario. The average value of the CET1 ratio after the stress scenario for the more than 50 banks that participated in ECB’s stress test is 11.3%

“Our very successful and well-advanced transformation over the past three years lays the foundation for our exceptionally strong capitalization, also in a Europe-wide comparison. With the CET1 ratio at 27.0 percent and the leverage ratio at 12.2 percent as starting values, we occupy leading positions in the current ECB stress test,” said Stefan Ermisch, CEO of HCOB. “In our view, the ECB's result in the macroeconomic stress case understates the true resilience of our bank, as the test’s methodology only takes HCOB’s dynamic realignment into account to a limited extent. For the coming years, we expect significantly lower deductions. Nevertheless, the peculiarities of such static assessments are well known and what matters is the confirmation that HCOB is one of the best-capitalized banks in Europe, both before and after the stress test.”

Regarding the deductions in the adverse scenario, due to the static methodology applied, the ECB indicates a value for Hamburg Commercial Bank that is higher than the average of the participating banks. To place this in context, the successful progress HCOB has made since 2018, in particular its improved credit quality, noticeable cost reductions and balance sheet restructuring, is only reflected to a limited extent in the stress test. Moreover, the positive developments in the current year and the switch to a less progressive model for calculating RWA at the beginning of 2021 could not be taken into account due to the reporting date approach. In addition, the very high CET1 ratio base value of 27.0% as of 31 December 2020 leads to increased stress sensitivity and has a negative impact within the calculations. These two factors alone played a significant role in the CET1 ratio deduction calculated by the ECB in the adverse scenario.

A pro-forma calculation prepared by HCOB, which fully takes into account the positive developments in the key indicators, results in a CET1 ratio decline of around half the officially determined depletion in the extreme stress case.

Moody’s rating agency acknowledged recently Hamburg Commercial Bank’s extensive transformation progress and its strengthened solvency profile by upgrading its financial strength and issuer rating.

ECB footnote on stress test results: “In line with paragraph 11 of the EBA methodological note, banks included in the exercise that are under or near the completion of a restructuring have been subject to the same methodology, including the static balance sheet assumption, as other banks in the sample. This in turn limits the extent to which restructuring measures can be reflected in the result, e.g. regarding expected future restructuring benefits.”

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