- Further sales from the legacy portfolio expected by mid-year
- CET1 ratio up by 0.1 pp
- NPE ratio down by about 1.3 pp
- CEO Ermisch: “Important milestone on the road to a change of ownership”
HAMBURG/KIEL HSH Nordbank has taken a further step along the road to avchange of ownership and has again eased the pressure on its balance sheet by divesting an extensive portfolio of legacy assets totalling EUR 1.64 billion. At the same time, it forged ahead with the sale of further non-performing legacy loans from the years up to 2009.
With this first part of the market transaction, HSH Nordbank’s non-performing exposure (NPE) ratio will drop by around 1.3 percentage points. This was most recently reported at 17 percent as at 30 September 2016. The legacy assets now sold on the market date from the period leading up to 2009 and are covered on the loss side by the guarantee of the federal states dating from that year. As another effect of the portfolio sale, the CET1 ratio, which measures capital strength, will rise by 0.1 percentage point, having stood at 13.7 percent on 30 September 2016.
Specifically, HSH has entered into a sale and purchase agreement for the legacy portfolio comprising aviation finance with a volume of some EUR 800 million EaD and loans for continental European commercial real estate (Scandinavia, Netherlands and Germany) with a volume of around EUR 540 million EaD, which also forms part of HSH Nordbank’s noncore business. Following a competitive process, the aviation portfolio has been acquired by Macquarie Bank, an Australian regulated bank, while the real estate loans will be acquired by Bank of America Merrill Lynch. The parties agreed not to disclose the acquisition price.
Additional relief of EUR 300 million was achieved by HSH Nordbank with individual sales to further investors and with repayments during the marketing of this market portfolio assisted by UBS since autumn 2016.
The transaction forms part of an EU agreement between the EU, the German federal government and the federal states on the change of ownership at HSH Nordbank. It is subject to the approval by the oversight and cartel authorities and other conditions and is expected to close in the second quarter of 2017. The Bank is permitted to sell a guarantee-backed legacy loan portfolio totalling EUR 3.2 billion on the market with an accelerated settlement of the loan loss provisions it set aside earlier against the guarantee, dating from the year 2009.
“This has been a transparent and competitive process that attracted very strong interest from international banks and debt investors. It ensures that the Bank will be further relieved of legacy assets, as agreed with the EU. We are currently involved in talks at an advanced stage about the sale of further packages from this market portfolio. These also relate to nonstrategic legacy exposures in the areas of energy as well as international real estate,” Stefan Ermisch, Chief Executive Officer of HSH Nordbank, explained. “The sale marks another important milestone on the road to a change of ownership.”
According to the EU decision of May 2016, the Bank is permitted to sell non-performing exposures (NPE) of an amount up to EUR 8.2 billion EaD ahead of the change of ownership and to offset the resultant losses in an accelerated process against the guarantee by the majority owners, Hamburg and Schleswig-Holstein. Effective 30 June 2016, a portfolio of nonperforming
shipping loans with a volume of EUR 5 billion EaD (as per 31.12.2015) was transferred to the balance sheet of a company of the owner states.
In operational terms, HSH Nordbank can look back on a satisfactory year. The Core Bank – which pools the Bank’s key business areas –reported net income before taxes of EUR 535 million after the first nine months of 2016. The trend of new business was highly satisfactory in a challenging market setting and is at the strong pre-year level. As previously announced,
the Bank is projecting a profit for 2016 as a whole that is, however, expected to be below the strong previous year’s result. Moreover, the Bank expects to reach its target of a further improved and strong CET1 ratio ahead of the change of ownership.