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Investor PresentationHSH Nordbank AG, Group Results IFRS 2010

April 1st, 2011

Dr. Paul Friedrich Lerbinger (55)Chief Executive Officer

1976-84 Studied business administration in Munich and San Francisco; Ph.D in banking business administration

1984-87 BMW AG in Group- / Capital market finance

1987-90 Vice President at J.P. Morgan 1990-95 Vice President at S.G. Warburg, London, Board Member

(from 1993), Board Member S.G. Warburg, Frankfurt (from 1995)

1995-02 Managing Director at Deutsche Bank, London and Frankfurt, responsible for Investment Banking Division Germany and Equity Capital Markets for German speaking countries

2002-10 Managing Director and member of the Management Board at Citigroup Global Markets Deutschland AG & Co. KGaA and Deputy Chairman of the Management Board(from 2008)

Agenda

1. Overview

2. Group Results IFRS 2010

3. Segment Report 2010

4. Balance Sheet, Capital and Funding

5. Outlook

Bank targets reached in 2010

Finance

Strategy

Governance

■ Financial targets comfortably achieved

■ Significant progress with respect to liquidity and funding

■ SoFFin guarantees gradually reduced

■ Second-loss guarantee of state owners served

■ Risk led model implemented

■ Down-sizing of RU portfolio continued

■ Potential conditions set by EU Commission being

implemented

■ Business model further sharpened

■ Internal control system introduced

( )(( )

13.04.2011 | Page 4

From crisis to successful strategic realignment

Before the financial crisis 2008 – 2010 Financial Crisis and Strategic Realignment

2011/2012 Stabilization of business model

■ Merger of LB Kiel and Hamburgische Landesbankto form HSH Nordbank AG

■ Abolition of state guarantees

■ Entry of private investor J.C. Flowers

■ Fast expansion in preparation for IPO

■ Significant losses, in particular book value losses in structured credit portfolio

■ State support by SoFFin-guarantees and capital injection of EUR 3 bn

■ Risk shield in form of second loss guarantee of EUR 10 bn

■ Strategic realignment of Bank

■ Start of EU state aid proceedings

■ Supporting core clients during the crisis

■ Completion of EU state aid proceedings

■ Gradual reduction of support received from SoFFin and shareholders

■ Return to the market with new business compatible with the Core Bank’s risk profile

■ Continuous optimization of internal structures and processes

■ Regaining trust and reputation of the capital markets and with clients

■ Preparing the Bank for a change in ownership structure

| 13.04.2011 | Page 5

Recent figures document successful realignment

Result before Restructuring EUR m

545

-718

-2796

129

1195

-170

60

211

444

20102009200820072006

Q1 Q2 Q3 Q4

■ The successful strategic realignment is increasingly evident in the results

■ Following two years of losses the Bank returns to profit with positive group result of EUR 48 m

■ Three successive quarters with positive results before restructuring

■ Substantially better development than envisaged in the restructuring plan

■ Main drivers were lower risk provisions in lending business against the backdrop of a decisive revamping of the portfolio and a strong economic rebound in 2010

2010

| 13.04.2011 | Page 6

HSH Nordbank with future oriented structure – Core Bank with positive result

■ Core Bank benefits from strategic focus on attractive business segments

■ Economic recovery leads to lower loan loss provisions in lending business

2009 2010

* incl. consolidation

Core Bank (EUR 88 bn)

Shipping

Regional Bank Others

Aviation

Energy&Infrastructure

Real Estate Clients

Corporate Clients

Savings Banks

Private Banking

Financial Markets

Corporate Center

Sector Bank

Restructuring Unit (EUR 63 bn)Wind-down

Loans Special Loans Divestments

■ Substantial improvement of result in Restructuring Unit

■ Focused wind-down of non-core business successfully continued

2009 2010

Result before Restructuring*in EUR m

Result before Restructuring*in EUR m

+62% +97%

-1,072 -29

574

354

| 13.04.2011 | Page 7

Agenda

1. Overview



4. Balance sheet, capital and funding

5. Outlook

Key figures 2010

174151Total assets (EUR bn)

9.5%15.4%Tier-1 capital ratio2 (in %)

3,610

-743

-718

-2,794

2,332

20091 ∆ %

Employees (FTE)

Net income after taxes / group net loss

Result before restructuring

Risk provisions

Net interest and commission income

In EUR m

3,388

2010

48

545

-129

1,720

1) After adjustments; 2) Incl. Market risk positions, before adoption of financial statement

-26%

+95%

>100%

>100%

-13%

+5.9 PP

-6%

Net interest income lower in line with reduced assets

Net interest income

EUR m

■ Net of valuation effects of hybrid financial instruments (IAS 39.A8), net interest income decreased sub-proportional to balance-sheet reduction of 13%

■ Stable results in client segments due to risk-adjusted margins

Net commission income

EUR m

■ Commission income from restructurings compensates effects of lower new business

■ Selective new business concentrated on core clients

2009 2010

-29 %

2009 2010

+3 %

2,121

1,502 211 218

Adverse effects in trading result partially compensated by strong income from financial investments

Net trading income

EUR m

■ Burden from currency conversion of loan loss provisions on balance sheet

■ Higher counterparty risks in derivatives lead to negative valuation effect

■ Adverse valuation effects due to widening spreads impacting the Credit Investment Portfolio (CIP) and government bonds

Net income from financial investmentsEUR m

■ Valuation gains in Credit Investment Portfolio

■ Profit generated through sale of risk positions

■ Reversal of portfolio impairments

■ Losses recognized in unwinding of equity investments

568

-359

>-100%

2009 2010

>100 %

2009 2010

-170

230

Distribution of LLP

EUR m

Additions to LLP

EUR m

■ Lower additions to specific LLP due to economic recovery

■ Portfolio reduction progressing

■ Selective reversal of portfolio LLPs

Risk provisioning significantly lower

-95%

2009 2010

-2,794 -129

Core Bank

Restructuring Unit

-853 -1,941 94 -223

2009 2010

Administrative expenses

* Incl. depreciation on property, plant and equipment and amortization of intangible assets (2009: EUR -39 m, 2010: EUR -43 m)

Operating expenses*

EUR m

Personnel expensesEUR m

Administrative expenses*

EUR m

■ Project costs and consultancy fees for major projects (i.e. change of IT-platform for transaction services)

■ Focused hiring of specialists

■ Including effects of a temporary consolidation of a bail-out purchase (Brinkhof Group)

+3%

-442 -457

2009 2010

+6%

-388 -410

2009 2010

-830 -867

2009 2010

+4 %

2009 2010

Germany Abroad

Reduction of employees above plan

Total Employees

Year-end (Full-time positions)

601698

2009 2010

Employees Abroad

Year-end (headcount)

Employees in Germany

Year-end (headcount)

2009 2010

-7 %

-14%

3,490 3,251

-6%3,610 3,388

2,958

2,824

652564

Results document pronounced improvement

--4Net income from financial Investments valued by Equity-Approach

>100 %-1,32517Net income before taxes

+93 %42331Income tax

>100 %-90248Net income after taxes / Group net loss

12/31/200912/31/2010

-13 %174151Total assets (EUR bn)

>100 %-718545Net income before restructuring

-44 %2,8761,603Total income

>100 %-170230Net income from financial investments

+93 %-124-9Result from restructuring

>-100 %30-62Other operating result

4 %-830-867Administrative expenses

-95 %-2,794-129Loan loss provisions

+7 % -483-519Expenses for government guarantees

Net trading income

Result from hedging


Net interest income

Group Income Statement in EUR m ∆ %2009*2010

>-100 %568-359

-95 %1468

+3 %211218

-29 %2,1211,502

* After adjustments

Core Bank achieves positive result before taxes

-301318Result before taxes

-29574Net income before restructuring

5001,103Total income

242-8Net income from financial investments

-272-256Restructuring and guarantee cost

-8-54Other operating result

-298-569Administrative expenses

-22394Loan loss provisions

6388Segment assets 12/31/2010 in EUR bn

Net trading income

Result from hedging


Net interest income

2010 in EUR m* Restructuring UnitCore Bank

-40647

–8

95123

569933

* Incl. consolidation

Agenda

1. Overview




5. Outlook

Sector Specialist Bank segment continues recovery course – positive result and reversal of loan loss provisions

■ Overall pronounced recovery of shipping, transport and renewable energy markets following the downturn in 2009

■ Charter rates and ship values of container vessels stabilize on recovered levels

■ Rebound in aviation markets has gathered momentum

■ Long term growth trend in renewable energy markets remains stable

■ Selective new business, extensions and fulfillment of existing commitments dominate; higher average margins

■ Significantly reduced loan loss provisions for credit risks; noticeable reversals of loan loss provisions, especially in Shipping

-279363Result before restructuring

32

-713

598

-27

625

2009

Segment assets (EUR bn)

Loan loss provisions

Total income

Net trading income and income from financial investments


EUR m 2010

31

27

553

-81

634

■ Strong economic upswing benefits domestic corporate and real estate clients

■ German real estate markets gather momentum: significant increase of transactions; rental markets experience strong demand; market for project development expands at faster pace

■ Assets under Management in Private Banking develop remarkably stable. Demand for investments by private clients slowly strengthens

■ Savings Banks business develops positively, in particular due to successful placement of bonds to Savings Banks’clients, which constituted one of the major investor groups for HSH Nordbank in 2010

■ Client deposits increased across all units

Regional Bank segment – positive contribution despite lower interest and commission income

181130Result before restructuring

2523Segment assets (EUR bn)

-135

595

36

559

2009


Total income



EUR m 2010

-148

487

1

486

Segment Other

■ Client-driven financial market business remains stable (EUR 120 m)

■ Negative result in Segment Other in 2010 impacted by adverse effect of valuations of hybrid financial instruments (IAS 39/AG8 effect vs. 2009: EUR -538 m)

■ Sale of Asset and Risk Management products to support core client segments

■ Cross-selling financial products became more lively over the course of the year

■ Against backdrop of low interest rate environment, interest rate hedges and hedge adjustments in particular demand; commodity and currency hedges increasingly well established

■ Refinancing activities expanded and investor base broadened; refinancing through savings banks increased, in particular

507-192Result before restructuring


25

594

77

517

2009


Total income



EUR m 2010

49

-9

137

-146

Restructuring Unit – portfolio reduction successfully continued with minimal adverse effects on P/L

■ Portfolio reduction significantly faster than planned (EUR 14 bn / -18% since 12/31/2009)■ Capital market portfolios experienced pronounced decrease despite difficult market

environment and high USD volatility■ Wind-down progress in loan portfolio dependent on market development in respective asset

class■ Trading result impacted by USD/EUR volatility effect on existing loan loss provisions and spread

widening in public sector finance■ Risk provisioning significantly reduced in line with improved market conditions

-1,072-29Result before restructuring


-1,941

1,120

308

812

2009*


Total income



EUR m 2010*

-223

500

-164

664

* Incl. consolidation Restructuring Unit

Agenda

1. Overview




5. Outlook

13.04.2011 | Page 22

With solid capital position well placed to face regulatory changes

208

174

112

151

91

41

2008 2009 2010

8.68.4

6.4

2008 2009 2010

*before adoption of financial statements

Total assets and RWAEUR bn

Tier-1 capitalEUR bn

Tier-1 capital ratio*in %

7.5

9.5

15.4

2008 2009 2010

■ Strategic realignment focused on reduction of risk-weighted assets (RWA)■ Recovery in major client markets and second-loss guarantee reduce RWA in addition to overall

lower total asset base■ Core-capital ratio of 15.4% is competitive in international comparison and provides solid base for

regulatory changes (Basel III)■ Reduction of core capital and RWA in 2010 due to large extent to recognition of first-loss tranche

changed to deducted from equity capital■ First partial reduction of second-loss guarantee by EUR 1 bn in 2011 / Q1

| 13.04.2011 | Page 23

HSH Nordbank AG well positioned for Meeting Basel III requirements of capital buffer

* incl. deductions; until 2019 requirements for Core- tier-1 ratio increases to 7% (incl. Conservation Buffer)

6.45.8

1.31.9

Regulatory core capital before deductions

Core tier-1(share capital, capital reserve, § 340 g HGB)

Other capital (i.e. Silent participations)

7.7

Basel III Deduction of Silent Participations by 10% p.a. starting 2013

Core capital as at 12/31/2010 (pro forma Basel III )

EUR bnCapital ratios

in %

Core capital as at 12/31/2010

Basel IIIRequirement* HSH Target

Core Tier-1 ratio

Tier-1 ratio

4.5%

6%

>7%

>9%

2015

High capital ratio allows stabilization of business model within restructuring timeframe

15.4%

Deductions according to KWG und SolvV

Regulatory Core capital after deductions

RU portfolio wind-down progresses faster than planned – risk-oriented and with minimal effect on P/L

Wind-down targets overachieved by pro-active sales

■ Reduction of RU assets along well defined guidelines: limiting potential adverse effects on P/L, utilization of recovery in values, liquidity savings and cost efficiency

■ Focus on reduction of risky portfolios, in particular: Credit Investment Portfolio (CIP) was decreased despite difficult market environment

■ Besides scheduled repayments pro-active measures contributed to the wind-down success in the credit portfolios

Wind-down of Restructuring Unit PortfolioTotal assets in EUR bn

63

77

95

2008 2009 2010

-34%

Wind-down of Credit Investment Portfolio (CIP)Nominal volume in EUR bn

12

22

2008 2009 2010

-45%

Rating distribution of Credit Investment Portfolio

17

64%

4%12% 20%

AAAInvestment Grade (AA+ - BBB-)Below Investment GradeDefaulted/Non-rated

13.04.2011 | Page 25

Long-Term Funding Capital Market 2011 EUR bn

Funding relevant LiabilitiesEUR bn as at 12/31/2010

Funding plan 2010 successfully achieved –plan figures for 2011 at slightly higher level

* Difference to balance sheet size due to market values of derivatives, trading liabilities, reserves and other positions

Deposits26

Covered Bonds14

Senior Unsecured62

Equity 13

Repos12

Development Banks

5

EUR 132 bn*5.7

2010 2011 Plan

8.0

4.5

1.2

2.5

5.5

■ Refinancing costs could be reduced significantly in comparison to 2009

■ Broadened activities with Savings banks in 2010 (73% of total funding, in particular retail)

■ Strengthening of existing refinancing channels as well as selective widening of refinancing base

■ Broadly diversified funding mix■ High share of long term funding (Senior

unsecured, Covered bonds, Equity capital, Development banks)

■ Covered funding builds on three highly rated cover pools

■ Additional reserves of EUR 16 bn in unutilized collateral pool (annual average)

Covered Bonds

Senior Unsecured

13.04.2011 | Page 26

Agenda

1. Overview



4. Balance sheet, capital and refinancing position

5. Outlook

13.04.2011 | Page 27

Perspectives for Core Bank –a profitable bank based on a conservative risk philosophy

Core Bank2010 Target 2015

Total income 1,103 ~1,600

EUR m

Risk provisions 94 ~-200

Cost Income Ratio (in %) 52 ~40-45

Income before restructuring 574 ~750

Total assets (in EUR bn) 88 ~115

Tier-1 Capital ratio (in %)1

15.4 >9

1) Tier-1 Capital Ratio for HSH Nordbank (Core and Restructuring Unit)

13.04.2011 | Page 28

■ Market recovery in major client segments continues at slower pace – risk provisioning needs decrease further

■ Return to the market with expansion of new business focused on Core Bank clients

■ Further reduction of SoFFin guarantees by EUR 3 bn

■ Partial reduction of risk-shield provided by state-owners in 2011 leads to managed reduction of capital ratios and positive P/L effect

■ Remaining in profit zone in 2011 and first dividend payments for FY 2012 expected

■ Further reduction of balance sheet size and continuous optimization of structures and processes

■ Positive decision on EU state aid proceedings expected in summer 2011

■ Preparing the Bank for a change in ownership structure

■ Rebuilding confidence and reputation in the capital markets and with clients

Outlook – key topics for 2011

13.04.2011 | Page 29

Contacts

Günter Femers

Head of Investor Relations / Rating

Tel: +49 (0)431-900 14601

Fax:+49 (0)431-900 [email protected]

HSH Nordbank AG

Gerhart-Hauptmann-Platz 50

20095 Hamburg

Thomas Fischler

Deputy Head Investor Relations / Rating

Tel: +49 (0)40 3333 10277

Fax:+49 (0)40 3333 6 [email protected]

HSH Nordbank AGGerhart-Hauptmann-Platz 5020095 Hamburg

13.04.2011 | Page 30

The information presented here is not an offer for sale within the United States of any security of HSH Nordbank AG. Securities of HSH Nordbank AG may not be offered or sold in the United States absent registration under U.S. securities laws or unless exempt from registration under such laws. Information and opinions contained herein have been compiled or arrived at from sources believed to be reliable, any statements about the Bank´s market position are based on HSH Nordbank´s own estimates, unless otherwise stated. HSH Nordbank AG makes no representation as to the accuracy or completeness of any of the information contained in these documents and accepts no liability for loss arising from the use of the information provided. This document is not to be relied upon as such or used in substitution for the exercise of independent judgment. Any opinions expressed herein reflect a judgment at the date of presentation and are subject to change without notice. Attendees at this presentation must be aware that the information provided may be dated and not current information. This document has been prepared separately from any proposed offering of any security and as such information in this document must not be relied upon as having been authorized or approved by the issuer of such security. The decision to purchase any security should be made only on the basis of the information memorandum made available at the time of the issue of such security.

This presentation contains forward-looking statements. These forward-looking statements include all matters that are not historical facts. By their nature, forward-looking statements involve risks and uncertainties because they relate to events and depend on circumstances that may or may not occur in the future. We caution you that forward-looking statements are not guarantees of future performance and that HSH Nordbank AG’s actual financial condition, results of operations and cash flows, and the development of the industry and markets in which HSH Nordbank AG operates, may differ materially from those made in or suggested by the forward-looking statements contained in this presentation.

This information presented may not be passed on, or reproduced in whole or in part under any circumstances without express written consent from HSH Nordbank AG. HSH Nordbank AG is not responsible for the lawfulness of the acquisition of any security by a prospective investor or for compliance by that prospective purchaser with any law, regulation or policy applicable to it. A prospective investor may not rely on this presentation when making determinations in relation to these matters.

Neither this presentation, any documentation provided herewith nor any presentation thereof may be sent or taken or transmitted into the United States or distributed, directly or indirectly, in the United States or to any U.S. person (within the meaning of Regulation S under the U.S. Securities Act of 1933, as amended) except to a limited number of Qualified Institutional Buyers as defined in rule 144A under the U.S. Securities Act of 1933, as amended. This presentation may not be reproduced or distributed to any other person. Any failure to comply with this restriction may constitute a violation of U.S. securities laws. This presentation does not constitute an offer to sell, or a solicitation of an offer to purchase, any security. Neither this presentation nor any copy hereof may be distributed in any jurisdiction where its distribution may be restricted by law. Persons who receive this report should make themselves aware of and adhere to any such restrictions.

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20110331 hsh ergebnis engl final · 2020-05-14 · project costs and consultancy fees for major...

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