IFRS consolidated group 9M interim results HSH NORDBANK AG HAMBURG 6 DECEMBER
Agenda 1. Key financial data 9M -. 2. Appendix 6 December 2
Key financials at a glance 9M - 9M - 2011 % Net interest and commission income 1,183 1,214-2.5 Loan loss provisions -458 365 >100 Net income before restructuring 299 794-62 Net income after taxes -25-269 91 30 Sep 31 Dec 2011 % Total assets (EUR bn) 136 136 0 Tier-1 capital ratio 1 (in %) 11.8 13,8-2.0PP Employees (FTE) 3,274 3,684-11 1 incl. market risk positions; taking into account the interim results 6 December 3
New business well above previous year client business in core bank Corporate and Private clients new business EUR bn Real estate clients 0.6 1.3 1.1 1.6 New business at 4.6 bn EUR almost doubled over year ago (2.4) Net interest margins on new business considerably above legacy portfolio Cross selling increased over course of the year Energy & Infrastructure Shipping 0.4 0.3 0.8 0.9 Impact on earnings will accrue over time Improved risk parameters; lower concentration risks, better rated borrowers 9M 9M 2011 6 December 4
New business : attractive transactions across multiple business lines Oiltanking Finance B.V. / M&B AG DIC Gewerbeimmobilien Portfolio Solar Park Briest Nordex SE 245.000.000 91.687.400 115.943.000 500.000.000 Hamburg Schuldscheindarlehen Joint Lead Arranger Hamburg Portfoliofinanzierung Arranger Hamburg /Brandenburg Project Finance Joint MLA Hamburg Syndicated Multicurrency LG & Credit Facility HGV Deutsche Wohnen AG Wohnportfolio Windportfolio Hurrikan PSA Gruppe Averhoff Park 550.000.000 134.110.000 32.000.000 43.860.000 Hamburg Schuldscheindarlehen Joint Lead Arranger Kiel/Lübeck Portfoliofinanzierung Arranger Portfoliofinanzierung (Turbinen aus norddt. Fertigung) Arranger Hamburg Bauträgermaßnahme Lead Arranger 6 December 5
New business : attractive transactions across multiple business lines SHRU Holding GmbH & Co. KG FRANKONIA Eurobau AG Andreasquartier Vivantes 50.000.000 Rostock Medium-Term Senior loan Joint Lead Arranger 131.000.000 Düsseldorf Projektentwicklung Arranger 40.000.000 Kiel /Berlin Structured Finance Mandated Lead Arranger Komponistengärten Biesterfeld Allianz Tower City Nord 21.000.000 Berlin Sole Lender 45.000.000 Hamburg Schuldscheindarlehen Sole Arranger 63.000.000 Hamburg Bestandsfinanzierung Arranger 6 December 6
Net interest income slightly below previous year due to extraordinary effects net interest income net commission income 1,121 1,108 93 75 9M 2011 9M 9M 2011 9M Focus on core business lead to lower loans volume Prevailing low interest rate environment reduces net result from own investments Net interest income last year benefitted from distributions from equity holdings Positive valuation effects from hybrid instruments supports net interest income Commission income from abandoned business missing this year (e.g. private banking Luxembourg) 6 December 7
Valuation losses impacting net trading result net trading income 9M 2011 9M 5 years Euro-Dollar Basisswap-Spread Basispoints Spread tightening leads to valuation losses -319-339 Net trading income largely driven by valuation losses from EUR/USD-basis swaps (-358 m ); massive spread tightening in 9M- to -30 bp from -66 (year-end 2011) Negative impact also from DFV valuation of own liabilities (-136 m ) Positive valuation gains from credit investment portfolio (+63 m ) Genuine trading result well positive (+92 m ), e.g. cross selling margins from client flows 6 December 8
Financial investments distinctly positive net income from financial investments exposure to selected euro zone sovereigns 145 175 IFRS bookvalue 09.30. 12.31.2011 Portugal 251 267 Ireland 0 0 Italy 611 557 9M 2011 9M Greece 21 51 Spain 175 180 Total 1,058 1,055 Profit from the sale of non-strategic equity holdings Positive valuation effects from credit investment portfolio Valuation gains and profit from the sale of bonds But additions to portfolio impairments due to sovereign debt crisis 6 December 9
Riskshield lowers loan loss provisions no actual payments from guarantors loan loss provisions accumulated risk provisions 10,200-872 -458* Second loss guarantee 7,000 4,607 414 2,393 Gross insurance effect of the guarantee loan loss provisions guarantee effect net loan loss provisions First loss piece 3,200 2,951 249 Remaining buffer under the first loss piece: approx. 3 bn EUR Actual losses accrued since April 2009: -249 m EUR In line with a highly conservative risk policy -872 m EUR risk provisions built ytd 9M - Net of reserves for future payment of additional and base premia, and temporary waiver as required by the EU the hedging effect of the guarantee totals 414 m EUR Net result from LLP in the P&L statement is -458 m EUR Only if and when the total of realised losses exceed the 3.2 bn EUR first loss piece threshold a claim will be filed under the guarantee *i.e. 4 LLP on portfolio not covered by the guarantee, and 454 additional premium (for details also see appendix) 6 December 10
Costs for public sector guarantees down SoFFin guarantees fully redeemed public sector guarantees outstanding EUR bn 7 7 6 cost of guarantees 796* 742 231 0 54 213 18 SoFFin-gtee. Second loss gtee. 9M 2011 9M 09.30.2011 Second loss guarantee 09.30. SoFFin -guarantee Since the beginning of the restructuring over 2.0 bn EUR have been paid for public sector guarantees (of which more than 1.8 bn EUR were paid to Hamburg and Schleswig-Holstein) Last outstanding SoFFin-guaranteed bond fully redeemed on 23 July, * Including 500 mm extraordinary payment to the guarantors; reinjected as fresh capital in February 6 December 11
Stable funding sources long-term funding capital markets EUR bn 1.0 1.0 1.6 pfandbrief senior unsecured and pfandbrief by maturity 7 yr 13% 1-3 yr 26% 4.7 3.6 4.5 senior unsecured 4-6 yr 61% 2011 9M plan Stable access to savings bank group; to retail clients throughout Germany, in particular Issuing plan exceeded by 30 Sep on pro-rata basis 74% of fresh long term funding in maturities over 4 years Successful issuance of two mortgage pfandbriefs of 500 m each and with maturities of 4 and 5 years respectively in first half of 6 December 12
Costs have been going down operating expenses* personnel expenses administrative expenses* 571 558 526 295 283 272 276 275 254 9M 2011 9M 9M adjusted** 9M 2011 9M 9M adjusted** 9M 2011 9M 9M adjusted** Cost cutting measures are progressing well Excluding newly consolidated group companies, administrative expenses came down 45 m EUR Depreciation on real estate held by newly consolidated group companies dampened further reduction of administrative costs * incl. depreciation on tangible and intagible assets 35 (18) ** excluding 44 in 2011 newly consolidated group companies 6 December 13
Personnel reduction continued employees in Germany (FTE) employees total group (FTE) 3,244 2,921 2,515 3,684 3,274 2011 9M 9M adjusted* 2,854 employees abroad (FTE) 440 353 339 2011 9M 9M adjusted* 2011 9M 9M adjusted* * excluding 44 in 2011 newly consolidated group companies 6 December 14
Group income statement Jan Sep Jan Sep 2011* Net interest income 1,108 1,121-1 Net commission income 75 93-19 Result from hedging 10 7 43 Net trading income -339-319 -6 Net income from financial investments 175 145 21 Net income from at-equity investments -7-56 88 Total income 1,022 991 3 Loan loss provisions -458 365 >100 Administrative expenses -558-571 -2 Other operating result 293 9 >100 Net income before restructuring 299 794-62 Result from restructuring -29 3 >-100 Expenses for government guarantees -231-796 -71 Net income before taxes 39 1 >100 Income tax % -64-270 -76 Group net result -25-269 91 EUR bn 09.30. 12.31.2011 Total assets 136 136 0 * After adjustments 6 December 15
Weakening economic environment puts pressure on capital ratios total assets EUR bn tier-1 capital ratio in % 13.8 136 136 10.3 11.8 9.4 12.31.2011 09.30. 12.31.2011 09.30. with hybrid tier-1instruments* without hybrid tier-1 instruments (Common Equity Ratio) Effects from weakening economic environment in general and shipping crisis in particular could not be fully mitigated by: Re-injection of 500 m EUR fresh capital in Q1- (extraordinary payment to guarantors in 2011) Gain from buy-back of subordinated capital which strengthened core equity tier-1 capital Wind down of non strategic portfolios * incl. market risk positions, and taking into account financial statements and quarterly results respectively 6 December 16
Outlook Economic environment Weakening economic growth worldwide: in part recession (eurozone), in part less dynamic growth (USA, Asia, China in particular) Continuing austerity measures and increasing unemployment dampen consumption and capital investments in eurozone Lower trade volumes between Europe and Asia Economic trends in Germany visibly better than in rest of Europe Shipping markets No rapid improvement expected in shipping markets: trough of the cycle to be reached not before 12 18 months Lasting pressure on ship prices, freight rates, and time charter rates High oil prices and weak euro add to market difficulties Slow recovery of the shipping industry not expected to begin before end of 2013 Financial markets and banking industry Euro government debt crisis may continue and lead to further EUR/ USD volatility Continuously high volatility on international capital markets Low interest rate environment and quantitative easing expected to last for a while Regulatory environment impacted from uncertainty 6 December 17
Focus Proactive management of balance sheet total and risk-weighted assets Examine further measures to strengthen core capital ratio Intensive portfolio management of loan business, in particular as to the restructuring of shipping and real estate loans Further diversification of our funding basis Continued expansion of new business in a risk conscious manner 6 December 18
Agenda 1. Key financial Data 9M. 2. Appendix 6 December 19
Calculation of base fee and additional fee based on model assumptions for demonstration purpose only Loan loss reserves Realized losses EUR bn 7,5 7,0 6,5 4,5 4,0 3,5 3,0 2,5 2,0 1,5 1,0 0,5 0,0 maximum calculation period for add. fee is 10 years only (until end of 2019) 6,0 Virtual utilization of gtee. is basis 5,5 for ex-post calculation of add. fee 5,0 FLP 3,2 0,00 0,10 0,20 0,30 1,00 1,50 1,80 2,00 2,30 2009 2010 2011 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2,80 3,35 3,60 3,80 Planned utilization of gtee is basis for ex-ante calculation of add. fee 3,93 4,06 4,20 4,50 LLP (past / plan) realized losses 6 December 20
Calculation of guarantee costs (IFRS) Base fee; Additional fee Additional fee (ex-post): 3.85% p.a. on 2.4bn loan loss reserves exceeding the 3.2bn First Loss Piece for 3.5 years (April 2009 Sep ) = 328m Additional fee (ex-ante): 3.85% p.a. on planned loss claims; present valued back to reporting date= 306m Base fee (ex-ante): 4% p.a. on cumulative amount of claims; present valued back to reporting date= 167m Waiver; Debtor warrant Guarantors waive their claim on the above ex-ante and ex-post fees = 328 + 306= 634m against the issue of a debtor warrants NPV of the expected cash flows from debtor warrants= 451m 634-451=183m positive effect on income, recognised in LLP and included in the compensation item 6 December 21
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Contact Günter Femers Head of Investor Relations Tel: +49 (0)40 3333 14601 Fax:+49 (0)40 3333 614601 guenter.femers@hsh-nordbank.com AG Gerhart-Hauptmann-Platz 50 20095 Hamburg 6 December 23