GERMANY - HSH Nordbank is to dismantle its real estate business in the United States and later Western Europe as part of its plans to downsize and cope with the tough economic climate.
The German bank's management board said it will realign the bank's strategy and strengthen its capital base by reducing its balance sheet by half, keeping only the most promising business segments and portfolios and disposing of or reducing the rest.
"As early as September 2008, HSH Nordbank decided in line with an extensive catalogue of measures to divest itself of certain business areas within the near future. One of these is the real estate business in the United States," said a spokeswoman for HSH Nordbank.
"In the medium term, we are planning to withdraw from the real estate business in Western Europe. For the time being, though, we will remain active, with in-house teams on the ground, in the United Kingdom, France, the Netherlands, and in the Nordic region," he added.
HSH Nordbank has not set a date for dismantling the Western European real estate business but is considering doing so towards the end of 2012.
Other businesses to be phased out include the credit investment portfolio, the international leveraged buyout business, the commodity trade finance segment and the energy division in the United States.
Dirk Jens Nonnenmacher, chief executive of HSH Nordbank, said: "Essentially, we have healthy segments that can propel the bank forward again. In order to achieve this, however, it will be necessary to make systematic corrections to our course."
"Through this bundle of measures we lay the necessary foundations to ensure lending for the northern German economy while bracing ourselves for any risks resulting from a protracted economic crisis", added Nonnenmacher.
Preliminary reports suggested HSH Nordbank suffered €2.8bn of net losses in 2008 before restructuring costs, taxes and loss participation as a result of the financial crisis.
Commenting on how the Western European real estate businesses performed in 2008, Hoffmann added: "Compared to 2007, earnings in the business area of Western Europe were raised through selective, low-risk new lendings. Here, as elsewhere, the slow market situation was reflected to some extent in the loan loss provision."
The 2008 earnings in the New York branch remained similar to those of 2007, said Hoffmann, and the costs of the financial market crisis were taken into account by setting aside conservative provisions for losses.
By 2012, HSH Nordbank hopes to reach €115bn assets and reduce the number of full-time employees by 1,100, although this figure includes the job cuts announced last September.
The bank is aiming to concentrate on its home regions of Hamburg and Schleswig-Holstein and take a more proactive approach in German client segments, like private banking, real estate and savings banks.