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HSH Nordbank books Q1 loss on one-off costs related to privatization

HSH Nordbank AG reported losses of more than €100 million for the first quarter, mainly due to expenses related to its privatization.

The German lender posted a group net loss attributable to shareholders of €104 million, compared to a profit of the same amount earned in the first quarter of 2017.

The bank booked €100 million of provisions for a settlement payment for premature termination of second-loss guarantee as agreed between the German states of Hamburg and Schleswig-Holstein and the bidders for the lender in February, bringing total expenses for government guarantees in the period to €131 million, compared to the year-ago €41 million.

Expenses for bank levy and deposit guarantee fund, meanwhile, fell year over year to €40 million from €45 million.

Net interest income fell on a yearly basis to €135 million from €290 million; net commission income declined to €11 million from the year-ago €18 million. Net income from financial investments was €39 million, up from €6 million a year ago.

The bank booked a reversal in loan provisions, including credit derivative, of €64 million in the period, compared to charges of €56 million in the year-ago period, owing to an accelerated reduction of legacy assets and restructuring of shipping loans.

HSH Nordbank said its nonperforming exposure ratio fell to 5.1% in the quarter from 10.4% at the end of 2017 as a consequence of the first-time adoption of the IFRS 9 accounting standards. Following the sale of its noncore banking business, the bank's NPE ratio would be around 2%, it added.

Christian Nieswandt, global head of shipping, also told Reuters that the bank is looking to reinvest in the shipping sector after its privatization, noting that it had an annual budget of €700 million until 2022 to invest in new shipping activities, including buying loans from other banks.

Nieswandt added that the bank is only considering buying performing loans and that it is in talks with two European lenders that are looking at off-loading part of their shipping loan portfolios, according to the June 14 report. Finance sources told the newswire that the bank could buy shipping loans from Commerzbank AG and Deutsche Bank AG and could spend as much as €100 million a year until 2022 on such transactions.

As of March 31, HSH Nordbank's common equity Tier 1 ratio was 15.5%, up from 15.4% a year earlier, while its cost-to-income ratio was 68%, up from the year-ago 32%.

The bank noted that it expects restructuring and privatization costs to continue to weigh on its 2018 results, with a projected pretax loss of roughly €100 million for the year. However, this could change once the privatization is closed, which is expected in the third quarter or fourth quarter at the latest, the bank added.