HSH Nordbank’s Shipping Loan Loss Provisions at USD 1 Bn

As the shipping market remained in very difficult conditions, the German-based provider of shipping finance HSH Nordbank reported a “substantial” loan loss provisioning on ship loans in the first nine months of 2016.

Namely, the bank said the loan loss provisioning of EUR -979 million (USD 1.03 billion) before the guarantee had to be applied during the period, of which 98 percent is related to the non-core-bank.

In the first nine months of the year HSH Nordbank continued to reduce its legacy assets while setting aside substantially higher provisions for its shipping loans. At the same time, the bank earned EUR 163 million, up from EUR 24 million a year earlier, and improved its capital ratios.

The bank is pushing ahead with the upcoming change of ownership, it is putting on a good performance in the Core Bank supported above all by the real estate and corporate clients businesses and is continuing its systematic cost-cutting course.

According to HSH Nordbank’s CEO Stefan Ermisch, the bank is still expecting a profit for the year as a whole “despite the unabatedly difficult situation on the shipping markets and is preparing for the impending change of ownership.”

As no improvement is currently in sight in shipping, despite the crisis having lasted several years already, Ermisch said that the bank intends “to cut more problem loans from our legacy business by the end of the year.”

The transfer of non-performing loans to the federal states of Hamburg and Schleswig-Holstein in the amount of EUR 5 billion (as of 31 December 2015) is a key element of the agreements between the federal states and the EU Commission, and it constitutes an important prerequisite for the impending change of ownership.

Additionally and in line with the EU decision, the bank may dispose of a further EUR 3.2 billion worth of loans on the market and charge the resulting losses directly to the guarantee.

The disposal is to be completed by the middle of 2017, with a substantial proportion to be sold in the fourth quarter of 2016.