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HSH Nordbank to sell more bad loans before year-end

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HSH Nordbank to sell more bad loans before year-end

HSH Nordbank AG still expects to make a full-year 2016 profit and will seek to off-load more bad loans out of its noncore business by the end of the year, it said Dec. 9.

The German lender reported group net income attributable to shareholders of €163 million for the first nine months of 2016, up from €23 million reported in the year-ago period. Net interest income declined to €503 million from €612 million in the first nine months of 2015, "as the portfolio was deliberately wound down."

Net commission income also decreased over the same period to €69 million from €88 million. Net trading income amounted to €66 million, compared to €90 million in the year-ago period, while net income from financial investments increased on a yearly basis to €90 million from €54 million, due to securities sales, according to the bank.

The bank booked loan loss provisions on shipping loans of €979 million during the period, 98% of which applied to the noncore bank. New lending in the shipping segment was "entered into on a very selective basis in the course of the year," with nine-month new lending totaling €200 million and no new business in the third quarter.

The lender received compensation of €1.12 billion from the German states of Hamburg and Schleswig-Holstein under the guarantee agreement they provided in 2009. That meant that the lender booked net gains from loan loss provisions of €149 million, compared to gains of €40 million in the first nine months of 2015.

HSH Nordbank CEO Stefan Ermisch said the bank is aiming to close out 2016 "with a profit within the group," despite the difficult situation on the shipping markets and also preparing for its impending ownership change.

The bank has already transferred €5 billion of nonperforming loans to Hamburg and Schleswig-Holstein under the agreements between the federal states and the European Commission, and is able to off-load a further €3.2 billion on the market and charge any resulting losses against the guarantee. The bank said it aims to sell a "substantial proportion" of the portfolio during the fourth quarter and to complete the disposal by mid-2017.

The bank's common equity Tier 1 capital ratio stood at 13.7% under Basel III transitional rules at the end of September, compared to 12.3% at year-end 2015. Its leverage ratio, which measures capital as a proportion of total assets, was 7.5% at Sept. 30, up from 6.3% nine months earlier.