GERMANY - The HSH Nordbank is to pull out of international real estate financing as a  after recieving approval of its 2009 bailout by the European Commission.

As with a number of regional banks, the HSH Nordbank - which counts the province of Schleswig-Holstein and the City of Hamburg as main shareholders - struggled during the market downturn in the wake of the Lehman Brothers collapse and had to apply for emergency financial aid from the Commission.

The €13bn in state support it received in 2009 was approved by the Commission in late September, with several  binding conditions attached, including a restructuring of the business and that the institution would reduce balance sheet by over 60% - to €82bn - by 2014.

To comply with these conditions HSH Nordbank, one of the major providers of external financing for real estate, has now announced it will no longer lend money for international deals but focus on northern Germany and major German cities instead.

"However, we will not terminate any existing contracts in this area but professionally service them to the end of their term," noted Peter Axmann, head of the real estate client business at the bank.

Currently the volume of HSH Nordbank's real estate financing business is around €12bn with €2bn in international financing.

Axmann said he was "glad to finally have a clear focus on where the business is heading" after the turbulences in 2008/09.

Announcing the conditions for the financial aid earlier this year, Joaquín Almunia, vice president of the European Commission responsible for competition policy said: "The plan puts HSH back on the path to long-term viability by addressing the weaknesses at the origin of its problems."
 
According to him these were mainly the high leverage and reliance on wholesale funding, particularly in US dollars.

However, he also noted the bank's "high proportion of highly cyclical operations", such as aircraft and ship financing - with HSH Nordbank completely ceasing the former and reducing activities in the latter.

The bank further noted that operational results had grown over the first nine months to €839m per end-September - before the restructuring measures  - compared to €157m in the same period last year.

However, for the first nine months 2011 the bank posted another after-tax loss of €224m mainly due to a special payment of €500m the EU demanded it should make to its owners.

Last year the bank had posted a loss of €119m for the same period.

"The strategic focus on our core business as well as the continuing risk reduction in the bank is paying off more and more in the development of our operative business," noted Paul Lerbinger, chairman of the board at HSH Nordbank.
 

Topics