ShippingWatch

HSH Nordbank pumps fresh capital into shipping

The ECB stress test will have zero impact on HSH Nordbank's exposure to shipping. As one of the world's largest shipping banks HSH expects new business worth more than EUR one billion this year alone, the bank tells ShippingWatch.

Shipping will continue to be a core segment for German HSH Nordbank, a bank that has taken its fair share of beatings during the crisis years, though it can now breathe a sigh of relief following completion of the European Central Bank's (ECB) stress test, a spokesperson from the bank tells ShippingWatch.

Before the stress test, the German shipping banks in particular were deemed to be at risk due to their shipping loans, which according to financial observers made them more vulnerable and risk-fraught in terms of the impending capital reserve evaluations. But things did not work out this way, and ahead of the stress test HSH Nordbank was confident that it would pass the ordeal - the bank tells ShippingWatch - in spite of prior speculations concerning uncertainties at HSH Nordbank's executive management.

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The bank began reducing its portfolio of non-performing loans to shipping and handling costs already at an early stage in the process.

New business for EUR 1 billion

Even though the German banks finished the test without being forced to increase their capital reserves, the banks still have to deal with losses and provisions for covering risky lending, while also increasing the figure from currently EUR 4.1 billion to EUR 5.2 billion. HSH Nordbank does not inform how much this figure will be increased, but the bank says:

"From today's perspective the stress test has no direct impact on our income statement," says the spokesperson in an e-mail, stressing that the bank has not changed its view on shipping:

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"Ship financing is and will remain a core segment of HSH Nordbank's business. From today's perspective the stress test of the ECB has no impact on our activities in this segment. In the first half of 2014 we generated new business of EUR 0.7 billion (2013: EUR 0.3 billion), thereof 80 percent with international clients, 20 percent with German shipping companies. For the full year 2014, we expect to generate new business of more than EUR 1.0 billion."

HSH Nordbank preparing new large divestments

However, the continued focus on shipping does not change the bank's efforts to scale down its non-performing loans to the industry, a process that will be done by divesting loans and performing mergers between struggling so-called "one ship" carriers, to enable them to secure fresh capital

The bank has reduced its risk positions in 2014, and predicts that this process will continue going forward:

"We will thus further improve the risk profile of the bank by a combination of further wind-down of legacy assets and expanding our new business with high quality assets. Thereby we will improve the bank's risk/return profile."

HSH Nordbank has closed two smaller structured deals so far this year, but further deals are underway and will be announced in due course.

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