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Hamburg Commercial Bank swings to H1 profit from year-ago loss

Hamburg Commercial Bank AG, formerly known as HSH Nordbank AG, reported first half group net result attributable to shareholders of €5 million, compared to a loss of €71 million in the same period in 2018, with the "very high" tax expense of €90 million as a result of the planned reversal of deferred tax assets.

Pretax net income amounted to €96 million, up from €6 million a year earlier. Net interest income came in at €227 million, down on a yearly basis from €293 million, while net commission income rose to €28 million from €23 million.

Net income from financial investments fell year over year to €7 million from €78 million. Net income before restructuring and privatization amounted to €104 million, down from the year-ago €195 million.

Administrative expenses came in at €190 million, compared to the adjusted €207 million in the first half of 2018. The lender said its agreed "extensive" job cuts will gradually take effect from the second half and significantly reduce expenses by 2021-end, with operating expenses also expected to drop due to the restructuring. The number of full-time employees in the group declined to 1,630 as of June 30, compared to 1,716 at the end of 2018, and will contract to about 950 by 2022.

Loan loss provisions stood at €25 million, down from €131 million a year earlier. The German lender did not incur expenses for government guarantees for the first half, compared to €158 million of expenses in the same period a year ago.

Pretax return on equity was 4.4% at the end of June, compared to 2.2% as of Dec. 31, 2018.

The bank's nonperforming exposure ratio declined to 1.7% in the first half from 2.0% at the end of 2018.

As of June 30, the common equity Tier 1 capital ratio stood at 17.0%, compared to 18.4% at 2018-end.

Hamburg Commercial Bank said it still expects a "modestly positive" International Financial Reporting Standards-based pretax group net result for 2019, subject to unforeseeable impacts of restructuring, transformation and geopolitical factors. CEO Stefan Ermisch noted that the lender will further step up its digital strategy and IT transformation.