hsh nordbank: setting the focus - hcob-bank.de · 28 february 2007 page 3 overview of business...

HSH Nordbank:Leading the way

Preliminary Results 2006

Peter RieckDeputy CEO

London, 28 February 2007

February 2007

Jochen Friedrich (43)

responsible for:

Global Markets

Treasury

Securities S.A.

London Branch

New board member

February 2007

Agenda

1. Results for 2006

2. Segment reporting 2006

3. Outlook

4. Annex

February 2007

Overview of business development in 2006

Operating income € 2,172 mn

Loan loss provisions € 212 mn

Net income € 460 mn

Return on equity* 15.0 %

Cost/income ratio 42.3 %

+ 2.5%

-3%

+ 0.9 ppt

+ 1.1 ppt

+15%

Further increase

At previous year’s level

Improved result

2006 target achieved

Slight increase

* Pre-tax RoE

February 2007

Further increase in operating income

Net interest income€ mn

2005 2006

Net commission income€ mn

Net trading income€ mn

- 5%424

315

2005 2006

+ 35%141

136

2005 2006

+ 3%

1,608

1,535

February 2007

450465

2005 2006

Focus on costs

Operating expenses€ mn

919873

2005 2006

+ 5%

Other operating expenses€ mn

Personnel expenses€ mn 469

408

2005 2006

+ 15%

- 3%

February 2007

Loan loss provisions at previous year’s level

€ mn 2005 2006

220 212

-29

-75

200

309

-43

38

418

633

Loan loss provisions

Risk provisions in securities business

Risk provisions for equity holdings

Reserves (§ 340 f+g German GAAP)

Total

February 2007

Another increase in profits

Operating profit€ mn

Operating profit after risk provisions€ mn

Net income€ mn

2005 2006

+ 0.6%

+ 15%

945

613

2005 2006

+ 54%1,246

1,254

460400

2005 2006

February 2007

6.77.0

2005 2006

41.242.3

2005 2006

Further improvement in pre-tax ROE

Return on equityPre-tax RoE in %

Cost/income ratioin %

Tier 1 capital ratio(KWG) in %

15.0

14.1

2005 2006

+0.9 ppt +0.3 ppt

+1.1 ppt

February 2007

Agenda

1. Results for 2006


3. Outlook

4. Annex

February 2007

17.520.1

2005 2006


Highlights: Shipping Clients

Strong growth in new business

Keen competition puts pressure on margins

Demonstrated structuring know-how and placing power in the offshore segment

Return on equity pre-tax RoE in %

248261

2005 2006

-5%-2.6 ppt

February 2007

19.621.3

2005 2006

Highlights: Real Estate Clients

Operating profit after riskprovisions€ mn

232

260

2005 2006

Return on equityRoE before taxes in %

+ 12%

-1.7 ppt

Substantial increase in new business volume

Realised increasing number of complex financingstructures

Structured the financing of student residences in UK

February 2007

Highlights: Corporate Clients

Operating profit after riskprovisions€ mn

261

399

2005 2006

24.4

32.5

2005 2006


+ 53% +8.1 ppt

Strong demand for structured financing

Structured Corporate Finance an independent division sinceOctober 2006

Mezzanine capital for SMEs

February 2007

234237

2005 2006

Highlights: Special Corporate and Institutional Clients

Operating profitafter risk provisions€ mn

22.1

24.5

2005 2006


-2.4 ppt- 1%

Transport: joint venture structured for Cargolux

Leasing: securitization of leasing receivables for UTA

Savings banks/FI: debt management for municipal authorities

February 2007

Highlights: Private Clients

Operating profitafter risk provisions€ mn

38

47

2005 2006


+ 25% 20.3

25.5

2005 2006

+5.2%-P.

Structured investment products well received by the market

Innovative asset management successful

Luxembourg based PB grew nicely

February 2007

457296

2005 2006

Highlights: Financial Markets


Return on equity RoE before taxes in %

26.9

16.5

2005 2006

- 35%-10.4 ppt

Increased focus on sale of innovative products

First benchmark 2 bn USD 13mth FRN issued in USA after loss of state gtees (extendible note)

First public sector Jumbo Pfandbrief (covered bond) issued

1.75 bn EUR LT2 successfully placed in Europe

February 2007

Agenda

1. Results for 2006


3. Outlook

4. Annex

February 2007

HSH Nordbank has clear goals

Leading commercial bank in Northern Europe with strongroots in the region

International capital markets expert and risk manager with first-class product and structuring competence

International sector specialistwith leading position in transport and real estate

February 2007

Avg. 17.9 commercial banksAvg. 11.8 LandesbanksAvg. 12.6 commercial banksΑvg. 9.1 Landesbanks

Landesbanks: business models have stabilized,…but ROE gap has widened

Operating RoE* in %

12,8

16,117,2

18,6191919,2

21,222,222,4

24,225,3

10,410,610,710,810,8

13,4

8,88,8

4,4

8,89,29,4

18,622,222,423,3

27,9

6,57,57,67,78,3

10,711,912,112,4

0,1-0,1

ING BankSan PaoloNordeaBarclaysDeutsche BankSEBBNP ParibasDZ BankBanca IntesaIKBHSH NordbankLBLBLBDresdner BankHVBCommerzbankRabobankLBLB

San PaoloSEBNordeaBarclaysBNP ParibasLBBanca IntesaHSH NordbankING BankLBDeutsche BankLBIKBCommerzbankLBHVBRabobankLBDZ BankDresdner Bank

*Definition for purposes of comparability operating RoE = (total income – administrative expenses – risk provisions)/balance sheet equity, *100. Source: McKinsey

20052000

∆6.1∆3.5

February 2007

Business models geared to the future

HSH Nordbank

Nationalbanks

Regional banks

Sectorspecialist

Global universal banks

MNCs

Large inter-national com-panies

Companies focus-ing on domesticbusiness

SMEs

ShippingTransportationInfrastructure/LogisticsReal estate

Regional Bank

February 2007

Well positioned along the global trade flows

Branches and officesof HSH Nordbank

60 % of ourearningsgenerated fromcross-borderbusiness of ourclients

February 2007

Goals 2007

Become eligible for stock market listing

Expand position as one of the leading Northern European banks

Convert silent participations amounting to € 750 mn

Strengthen capital base

Achieve RoE before taxes of 15.5 percent

February 2007

Upcoming dates

Our next analyst and investor meeting to present the2007 interim results will take place on:

Friday, 24 August 2007at 12.00 a.m.

in London

Bild

February 2007

HSH Nordbank blue race

Tackling challenges.Relishing competition.

Northern route- Start: Newport (R.I.) / New York- 3,500 miles across the Atlantic- Finish: Hamburg

First start 16 June 2007

February 2007

Agenda

1. Results for 2006


3. Outlook

4. Annex

February 2007

Overview of business segments

Overview

2006Operating Profit(% of Total)¹FY 2005

Undisputed No. 1 financier worldwide

17%

Leading domestic market positionExpanding international business

17%

Leading franchise in northern GermanyExpanding presence in the Nordic region

27%

Tailored services to high net worth individuals / professional clients

3%

Active risk managerInnovative capital markets partner

20%

Note: HSH Nordbank’s pre-tax RoE on group level does not correspond to the weighted average of the respective segment RoE, since the “Other/Reconciliation” segment is not included1) Excluding “Other/Reconciliation” segment.

Avg. RWA (% of Total)¹FY 2005

20% 19% 18% 3%

Transport financeLeasing company financingSavings banks / public sector / financial institutions

16%

15% 26%

Shipping Real Estate Corporates Private Clients Financial Markets

Special Cor-porate / Insti-

tutional Clients

18% 16% 18% 16% 3% 31%

21% 17% 17% 3%15% 27%

February 2007

Shipping Clients

(€ m) 2005 2006

Net interest income 289.5

97.5

0.0

387.0

58.4

65.1

263.5

2.1

296.4

261.4

+

+ Net trading income 0.0

= Total income 393.9

-

-

=

-

Personnel expenses 65.1

Other operating expenses 58.2

Risk provisions/ evaluations 22,4

Net commission income 97.5

=

270.6

248.2

Operating profit before risk provisions

Operating profit after risk provisions

New business volume up 37% to 10 bn Euro in spite of strong competition

Net interest income reached all-time high in light of continuing margin pressure

Net commission income at par with previous year´s good level

Lead-managed our biggest transaction so far for an offshore client – SiemOffshore Inc.

Total income rose to 394 mn up from 387

Risk provisions markedly up, but still at a comparatively low level

(€ m) 2005 2006

Ø risk positions 20,703

1,303

20.1

31.9

Ø equity allocated

22,705

1,418

17.5RoE

CostIncome ratio (%)

31.3

577167 6771 6566

46

Operating profit after risk provisions€ m

Q1 Q2 Q3 Q4

2005

Q1 Q2

2006

Q3 Q4

February 2007

Real Estate Clients

(€ m) 2005 2006


133.4

0.0

470.3

68.4

92.0

309.9

77.7

339.5

232.2

+



-

-

=

-

Personnel expenses 87,3


Risk provisions/ evaluations 37.7


=

297.4

259.7



Total income rose 2% to 478 m Euro, due to strong new business of 16.1 bn Euro

In spite of strong competition we managed to stabilize margins in new business

International markets contributed more than 66 percent to new business

Risk provisions/ evaluations fell to 38 mn due to profits from the sale of an equity holding (86 mn Euro)

Operating profit after risk up to 260 mn

As sole arranger, underwriter and facility agent, we provided a credit line of GBP 300 million to finance student residences in major British cities

(€ m) 2005 2006


1,091

21.3

34.1

Ø equity allocated

21,256

1,328

19.6RoE

Cost income ratio (%) 37.8

25

6256 5135

67

116

80


Q1 Q2 Q3 Q4

2005

Q1 Q2

2006

Q3 Q4

February 2007

Corporate Clients / Structured Finance

(€ m) 2005 2006


127.2

0.0

484.0

68.4

88.3

327.3

66.0

364.6

261.3

+



-

-

=

-



Risk provisions/ evaluations -20.7


=

378.2

398.9



Interest income benefited from strong credit demand and rose to 365 mn Euro

Net commission income improved 42% to 181 mn Euro based on a large number of arranger mandates

Positive result of risk provisions/ evaluation (20.7m) due to stable economic environment and the sale of an equity holding

Operating profit after risk strongly up to 399 mn from 261 mn Euro

Together with partner banks, we provided our small and medium-sized corporate clients with profit participation capital within the framework of the SmartMezzanine programme

(€ m) 2005 2006


1,072

24.4

32.4

Ø equity allocated

19,644

1,227

32.5RoE


54

9469

93

47

165

91

47


Q1 Q2 Q3 Q4

2005

Q1 Q2

2006

Q3 Q4

February 2007

Special Corporate and Institutional Clients

(€ m) 2005 2006


140.3

0.0

387.2

54.9

81.9

250.4

13.4

265.2

237.0

+


= Total income 396,3

-

-

=

-





=

254.7

233.7



68

4853 54

33

56

8376


Q1 Q2 Q3 Q4

2005

Q1 Q2

2006

Segment comprises Transportation, Leasing and Savings Banks/FI business units

Operating profit after risk almost unchanged 234 mn Euro (237 mn)

Transportation realized good new business of 4.6 bn Euro (3.5 bn), mainly in the aircraft finance business

New business in Leasing up 24% to 3.6 bn Euro;

Savings Banks/FI established a new consulting product aimed at enabling municipalities to optimise interest payments on their debts

(€ m) 2005 2006


966

24.5

35.3

Ø equity allocated

16,937

1,058

22.1RoE


Q3 Q4

February 2007

Private Clients

(€ m) 2005 2006


30.3

0.0

94.3

23.8

30.9

39.6

1.8

68.4

37.8

+



-

-

=

-





=

52.4

47.3



Operating profit after risk up 25% to 47 mn Euro

Net interest income rose to 68 mn Euro (64 mn Euro) due to higher deposits

Net commission income up 23% to 37 mn Euro - succesful placement of structured products as well as the overall favourable market development

Rising profit contribution from international business via HSH Nordbank Private Banking Luxemburg

Risk provisions up 3.3 mn Euro, still at a low level

(€ m) 2005 2006

Ø risk positions 2.962

186

20.3

58.0

Ø equity allocated

2.972

186

25.5RoE


9

15

7109

1313

9


Q1 Q2 Q3 Q4

2005

Q1 Q2

2006

Q3 Q4

February 2007

Financial Markets

(€ m) 2005 2006


-134.2

280.0

622.1

115.9

93.0

413.2

-43.7

360.9

456.9

+



-

-

=

-



Risk provisions/ evaluations -15.2

Net commission income -137.6

=

281.2

296.4



Net interest income down 24% to 361 mn Euro;

Last year´s result boosted by one-time valuation gains on funding raised prior to loss of state guarantees

Net commission income up 3%; newly developed hedging products

Net trading income up 2% to 286 mn Euro

Successfully launched Carrera Capital Finance Ltd (Structured Investment Vehicle (SIV)

(€ m) 2005 2006

Ø risk positions 27.000

1.670

26.9

33.6

Ø equity allocated

28.712

1.793

16.5RoE


86136

95

42

198

10078

18


Q1 Q2 Q3 Q4

2005

Q1 Q2

2006

Q3 Q4

February 2007

Günter FemersHead of Debt-IR and Intl. Funding

[email protected]: +49 431 900 14601Fax:+49 431 900 614601

Catherine PassasDebt Investor Relations

[email protected]: +49 431 900 10820 Fax:+49 431 900 610820

hsh nordbank: setting the focus - hcob-bank.de · 28 february 2007 page 3 overview of business...

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