HSH Nordbank’s Shipping Loan Loss Provisions Still High

Due to persistently difficult conditions in the shipping market seen during the first half of 2016, loan loss provisions for shipping at Germany’s HSH Nordbank, one of the world’s biggest providers of shipping finance, remained high.

These conditions led to further restructuring requirements for legacy shipping loans in the first half of the year, thus accounting for a large proportion of the high pre-guarantee net loan loss provisions of EUR -520 million, compared to EUR -119 million reported in the first half of 2015.

Compensation for the guaranteed portfolio came to EUR 671 million, against last year’s EUR 326 million, resulting in positive post-guarantee net loan loss provisions of EUR 151 million seen in the first half of 2016, compared to EUR 127 million reported in the same period a year earlier.

After a muted start to the year, HSH Nordbank increased its profit for the first half of the year. This was particularly underpinned by real estate and corporate client business, a swifter reduction of legacy assets in the shipping business and the systematic cost-cutting course, the bank said.

At the end of the first half, HSH Nordbank achieved a group net result after tax of EUR 160 million, up from EUR 147 million seen a year earlier, and “is well on course for the change of ownership planned for 2018.”

However, the bank’s CEO Stefan Ermisch said that the profit reported in the first six months is no indication of the bank’s full-year performance due to the persistently difficult conditions in the shipping markets and the historically low interest rates.

Even so, Ermisch said that he is confident that the Core Bank “will continue to perform well in 2016 and that, along with the group as a whole, it will be able to report a positive result, albeit a substantially lower one than in the previous year.”

At the end of June 2016, the bank transferred a portfolio of non-performing loans from ship financing with a volume of EUR 5 billion to hsh portfolio-management AöR of majority owners Hamburg and Schleswig-Holstein, and was thus relieved of an appreciable volume of legacy assets.