investor presentation - hcob-bank.de...aug 26, 2016 · a strong region: northern germany investor...
TRANSCRIPT
Investor Presentation
IFRS Group Result H1 2016
INVESTOR RELATIONS
HAMBURG 26 AUGUST 2016
A Strong Region: Northern Germany
26.08.2016 INVESTOR PRESENTATION
Almost 1/5 of Germany’s economic output is generated in the northern German federal states. ➔ Wind energy pioneers: 50% of all of Germany’s wind power plants are located in the north and almost all major
manufacturers and utility companies. ➔ Number 1 of the “Big 7” real estate locations: With a transaction volume of EUR 2.1bn1 as at first half
2016, Hamburg is the most attractive metropolis in Germany. ➔ Tradition of trade and connections to the hinterland: Competitive advantage for logistics
companies, major hub for wholesalers and foreign trade sector. Global trade recently grown by 3.5%2. ➔ Healthcare as a strong economic pillar: Numerous municipal and private hospitals and long-term care
facilities in the north. ➔ Solutions for the future: More than 500 companies from the Life Science sector (biotech, pharmaceuticals
and medical technology) have their research centres in Schleswig-Holstein and Hamburg. ➔ Facebook, Google, Twitter: Hamburg is an attractive location for fast-growing Internet companies and
innovative start-ups. ➔ Hamburg as a maritime hub: Around 370 shipping companies are based in the north, with a good 1/3 of them
in Hamburg. ➔ Aviation as an economic engine: 300 companies - from medium-sized enterprises to global corporations.
One in three aviation industry employees in Germany works in the Hamburg metropolitan region. ➔
Hamburg Schleswig-Holstein
Lower Saxony Mecklenburg-Western Pomerania
Bremen
2
1 Source: JLL trade volume in commercial real estate; 2 Source: WTO, growth from 2014 to 2015
►►► 1. Change in ownership
2. Financial key figures H1 2016 – Core Bank/RU
3. Financial key figures H1 2016 – Group
4. Outlook for 2016
5. Appendix
26.08.2016
Agenda
INVESTOR PRESENTATION 3
Key milestones reached on schedule
Change in ownership
26.08.2016
Change in
Ownership
2018
1 Non-performing exposure; 2 Exposure at default; 3 HSH portfoliomanagement AöR; 4 HSH Beteiligungs Management GmbH; 5 Deadline can be extended, with the Commission’s approval, by six months if the technical implementation of the model is delayed due to circumstances over which the federal states have no direct influence
INVESTOR PRESENTATION
Final EU decision
Sales
procedure
Federal states portfolio transaction
► NPE1 legacy portfolio items reduced, initially EUR 5.0bn (EaD2) transferred to the federal states (HSH PM AöR3) as scheduled on 30
June 2016
► Relief of P&L due to reduced guarantee fees, since 1 January 2016, OpCo has been paying 2.2% on the undrawn part of the guarantee
► Sale of a portfolio of EUR 3.2bn in non-performing loans on the market, with half being sold by the end of 2016 and half by mid-2017
► In June 2016, preparations for the sales procedure were initiated on both the personnel and organisational side and the HoldCo4
was established by the federal states
► Portfolio reallocation in Q3 2016 to make a clear distinction between the Core Bank and the Non-Core Bank
► Change in ownership:
Selection of bidders and signing of an agreement for sale by 28 February 20185
Profitability assessment and approval by the European Commission required for successful conclusion
2016 / 2017
4
Market portfolio transaction
Transfer of the federal states portfolio improves
balance sheet structure and strengthen capital ratio
Change in ownership
26.08.2016 INVESTOR PRESENTATION
2.0
Requirements from EU state aid
8.2
6.2
As at 31.12.2015
8.2
initially
5.0
up to
3.2
Market portfolio Federal state portfolio EU decision
in EUR billion
Portfolio transfer as at 30 June 2016
in EUR billion
Purchase price
Settled losses under the guarantee
2.6
2.4
Federal state portfolio
5.0
Major improvements achieved:
NPE reduced by EUR 5.0bn, NPE ratio down from 19% to 16% as at 30 June 2016
USD portion of the balance sheet reduced, USD refinancing rate1 of 74%, less reliance on EUR/USD exchange rate dev.
Liquidity position improved, USD sensitivity reduced from EUR -186mn to EUR -108mn per euro cent
CET1 ratio strengthened primarily by implementation of the EU decisions, CET1 phase-in increased from 12.3% to 13.5%
Balance sheet adjusted for NPEs and premium
burdens already in financial statements for H1 2016
Significant P&L relief through transfer of material premium obligations to HoldCo
5
1 Genuine / true USD refinancing rate of the Core Bank
Implementation of market transaction to achieve
full relief effect of EU decision
Target level 2018PLUS provides a solid outlook for
a new owner
Change in ownership
Foundations of structural changes
Conclusion of EU state aid proceedings &
transfer of federal states portfolio
Sales process
2017 2015 2016
Competitiveness of Core Bank in
focus:
Capital
Liquidity
Efficiency
Target achievement via:
Growth of income from new business
Cost programme 2018PLUS
Further structural optimisation, reallocation of portfolios in Q3 2016
Measures to strengthen CET1
Core Bank
Overall Bank
Non-Core Bank
CET1 ratio phase-in > 12.o
NPE1 ratio
in % ~10.0
Leverage ratio in % ~7.0
Total income potential in EUR million 800 to 900 30 to 50
Return on equity before taxes, in % negative > 10.0
-150 to -200 200 to 300 Net income potential before
taxes in EUR million
~45 CIR in %
26.08.2016 6 INVESTOR PRESENTATION
1 Non-performing exposure
- Indicative illustration -
►►►
1. Change in ownership
2. Financial key figures H1 2016 – Core Bank / RU
3. Financial key figures H1 2016 – Group
4. Outlook for 2016
5. Appendix
26.08.2016
Agenda
INVESTOR PRESENTATION 7
Operating business is the main factor behind the
positive net income before taxes of the Core Bank
Financial key figures H1 2016 – Core Bank
Total income / net interest income
in EUR million
► Total income of the Core Bank increased by 31% to EUR 555mn
(PY: EUR 424mn)
► Net interest income1 with 81% the main contribution to the
result
26.08.2016
555424 44837 7
+31%
+19%
H1 2016 H1 2015
CIR2
in %
3544
-9 pp
H1 2016 H1 2015
Net loan loss provisionsdging effect)
in EUR million
► Net loan loss provisions with a positive effect in P&L, negative
impact of the Shipping restructuring portfolio in the Core Bank, positive impact of the compensation from the guarantee
56
34
H1 2016 H1 2015
+65%
► Net income before taxes of EUR 261mn up considerably compared to the previous year due to net operating interest income in line with projections, other effects within net interest income and positive loan loss provisions
► Shipping restructuring is still a burden
Net income before taxes / RoE3
in EUR million RoE
► CIR2 currently better than target level due to positive development
in total income and successful implementation of the cost reduction programme
1 Net interest income with other effects from the sale of promissory notes and securities; 2 The cost-income ratio represents the ratio of administrative expenses to total income, plus “other operating result”; 3 Return on equity is calculated as the ratio of net income before taxes to average reported equity
21%
261143
H1 2015
+83%
H1 2016
INVESTOR PRESENTATION
Net interest income
Total income
13%
8
Corporate Clients with the biggest
contribution to earnings
Financial key figures H1 2016 – Core Bank
1 Exposure at default; 2 Cost-income ratio represents the ratio of administrative expenses to total income, plus “other operating result”
26.08.2016
► Corporates Clients makes an above plan contribution to the
result with EUR 74mn; reduction due to less reversal of provisions and burdens from net trading income (CVA)
► New business (+8%) above level of previous year, still very positive in the focus sectors Energy & Utilities and Logistics & Infrastructure, in particular
► New business subject to stringent risk/return requirements, subdued loan demand in a very competitive environment due to market factors
► Focused expansion of franchise value to implement new business plan
+8%
H1 2016
1.4
H1 2015
1.3
New business
in EUR billion
New business:
Energy & Utilities
in EUR billion
Overview of key figures
in EUR million
Development in H1 2016 & strategic direction
Energy & Utilities
Food industry
Logistics & Infra-
structure
Healthcare sector
Industry & Services
Trade
H1 2016 H1 2015
EaD1 (in EUR billion) 14.6 15.4
Total income 116 162
Net loan loss provisions 31 60
Administrative expenses -76 -77
Net income before taxes 74 149
CIR2 (in%) 64 46
INVESTOR PRESENTATION
New business: Logistics & Infrastructure
in EUR billion
0.9
+17%
H1 2016
0.5
2015
1.1
2014
1.2
2013
1.0
2012
0.3
2012
0.5
0.4
+27%
H1 2016 2015
0.7
2014
0.8
2013
9
Wealth
Management
Corporate Clients with good
portfolio quality
Financial key figures H1 2016 – Core Bank
26.08.2016
► Project finance in the focus sector Energy & Utilities dominates the portfolio with EUR 4.8bn (33%)
► EUR 9.2bn (63%) of financing apply to domestic borrowers and EUR 5.4bn (37%) to international, mainly European, borrowers
Portfolio by segment and region
in EUR billion, EaD1/ in %
INVESTOR PRESENTATION
16-18
0.2
0.9
13-15
0.2 0.1
10-12
0.3 0.1
6-9
2.3
0.6
2-5
6.0
1.1
0-1
2.4
0.5
non-guaranteed guaranteed
Portfolio by rating category
in EUR billion, EaD1
Investment grade
Non-investment grade Default categories
Logictics & Infrastructure
Energy & Utilities
20%
21%
6%
15%
5%
Industry & Services
Region
14.6
9%
3%
63%
Segment
Healthcare
Trade & Food Industry
6%
1% Other
4%
10%
4%
14.6
33%
Germany
France
Belgium/Luxembourg
UK Spain
Italy
Rest of Europe
Other
► Corporates portfolio of EUR 14.6bn EaD in total, thereof EUR 9.6bn (66%) investment grade and EUR 12.9bn (88%) in rating categories 0 to 9
► NPE ratio of 8% with an NPE of EUR 1.1bn, thereof EUR 0.9bn guaranteed
► Loan loss provisions of EUR 0.3bn correspond to a coverage ratio of 27%
► Guarantee covers EUR 3.2bn (22%) of the portfolio
10
Energy & Utilities
Food industry
Logistics & Infra-
structure
Healthcare sector
Industry & Services
Trade Wealth
Management
1 Exposure at default
Real Estate Clients' new business in line with
projections and good, stable earnings contribution
Financial key figures H1 2016 – Core Bank
1 Receivables volume; 2 Exposure at default; 3 Cost-income ratio represents the ratio of administrative expenses to total income, plus “other operating result”
26.08.2016
► Real Estate Clients achieved net income before taxes of
EUR 71mn, almost on previous years level (EUR 75mn)
► Selective new business of EUR 1.9bn in a maturing market, after exceptional positive new business in the first half 2015; promising pipeline for H2 2016
► New customers and international institutional investors have contributed to the success story this year, too
► New business particularly in the western German metropolitan regions and the core northern German region
H1 2015
2.9 -34%
H1 2016
1.9
New business
in EUR billion
Overview of key figures
in EUR million
Development in H1 2016 & strategic direction
H1 2016 H1 2015
EaD2 (in EUR billion) 13.0 13.0
Total income 98 105
Net loan loss provisions -1 -3
Administrative expenses -26 -28
Net income before taxes 71 75
CIR3 (in %) 27 26
INVESTOR PRESENTATION
Development of existing and new business
in EUR billion
1.9
2015
4.5
12.3
2014
4.1
+26%
13.0
+275%
H1 2016
11.6
2013
2.8
10.4
2012
2.6
10.3
2011
1.2
10.3
New business Existing business1, EaD
11
Real Estate portfolio with very good quality, broad
diversification by region and segment
Financial key figures H1 2016 – Core Bank
26.08.2016
Portfolio by segment and region
in EUR billion, EaD1/ in %
INVESTOR PRESENTATION
Other West Germany
Hamburg
Berlin
Other East Germany
Munich
Frankfurt
Dusseldorf / Cologne
International
Other financings2
13%
8%
9%
13%
Region
5% 5%
3%
25%
13.0
4% 4%
8%
26%
26%
Schleswig-Holstein
32%
13.0
Segment
Stuttgart
8%
7%
2%
Residential
Retail
Office
► Real Estate portfolio of EUR 13.0bn EaD in total, thereof EUR 7.2bn (55%) investment grade and EUR 12.8bn (98%) in rating categories 0 to 9
► NPE ratio of 1% with an NPE of EUR 0.2bn, thereof EUR 0.1bn guaranteed
► Loan loss provisions of EUR 0.04bn correspond to a coverage ratio of 27%
► Guarantee covers EUR 2.3bn (18%) of the portfolio
► EUR 6.7bn (52%) of the portfolio is attributable to financing in German metropolitan areas
► Portfolio shows good diversification in terms of segments
► Project development accounts for a minor share of 15% of the total portfolio
► Continued development of transactions eligible for the cover pool
Portfolio by rating category
in EUR billion, EaD1
0.0 0.0
6-9
4.8
0.7
2-5
4.6
0.7
0-1
1.2
0.6
16-18
0.0 0.1
13-15
0.0 0.0
10-12
non-guaranteed guaranteed
Investment grade
Non-investment grade Default categories
Operator-run properties
Other commercial
Other financing
1 Exposure at default; 2 No regional allocation, as no property collateral
12
Shipping burdened by high loan loss provisions
due to legacies in the restructuring portfolio
Financial key figures H1 2016 – Core Bank
1 Exposure at default; 2 Before compensation, loan loss provisions alomst completely covered by the guarantee; 3 Cost-income ratio represents the ratio of administrative expenses to total
income, plus “other operating result”
26.08.2016
► Shipping with negative net income before taxes (before compensation) of EUR -227mn (PY: EUR -59mn) characterised by ongoing need for significant restructuring, decreasing total income and high loan loss provisions; excl. restructuring net income before taxes of EUR -13mn
► Wind-down measures in the restructuring portfolio are also having an impact
► Low level of new business, as expected, given the challenging market environment
► The focus is on further developing and diversifying the portfolio with domestic and international deals of good credit ratings
-67%
H1 2016
0.2
H1 2015
0.6
New business
in EUR billion
Overview of key figures
in EUR million
Development in H1 2016 & strategic direction
H1 2016 H1 2015
EaD1 (in EUR billion) 12.9 17.1
Total income 76 144
Net loan loss provisions2
-263 -156
Administrative expenses -41 -49
Net income before taxes2
-227 -59
CIR3 (in %) 53 34
INVESTOR PRESENTATION
Development of existing and new business
in EUR billion
0.9
18.2
-37%
H1 2016
0.2
12.9
2015
0.8
15.9
2014
1.5
16.4
2013
0.9
15.3
2012 2011
1.2
20.4
New business Existing business1, EaD
13
EUR -13 million excl. restructuring
Shipping – High proportion of restructuring
characterising the portfolio
Financial key figures H1 2016 – Core Bank
1 Exposure at default; 2 Excluding Germany, Scandinavia and Greece
26.08.2016 INVESTOR PRESENTATION
16-18
0.5
3.4
13-15
1.2
1.6
10-12
0.5
0.9
6-9
1.4 1.6
2-5
0.8 0.8
0-1
0.0 0.0
non-guaranteed guaranteed
Portfolio by rating category
in EUR billion, EaD1
Investment grade
Non-investment grade Default categories
Western Europe2
Asia / Pacific
Greece
Central and Eastern Europe
Scandinavia
The America
Middle East / Africa
Region
12.9
37%
18%
17%
15%
5%
Germany
2% 2%
Segment
12.9
4%
22%
17%
12%
7%
42%
Portfolio by region and segment
in EUR billion, EaD1/ in %
Container
Bulker
Tanker
Other ships
Other financings
► EUR 8.1bn (63%) of loans attributable to international, and EUR 4.8bn (37%) to domestic Shipping clients
► Container account for a significant proportion of the Core Bank Shipping portfolio, namely EUR 5.4bn (42%)
► The average age of the ships is 6.9 years
► Number of financed ships comes to 1,064
► Shipping portfolio of EUR 12.9bn EaD in total, thereof EUR 1.7bn (13%) investment grade and EUR 4.8bn (37%) in rating categories 0 to 9
► NPE ratio of 30% with an NPE of EUR 3.9bn, thereof EUR 3.4bn guaranteed
► Loan loss provisions of EUR 2.2bn correspond to a coverage ratio of 54%
► Guarantee covers EUR 8.4bn (65%) of the portfolio
14
Portfolio covered by the guarantee in EUR billion, EaD1
Shipping – Guarantee covers considerable portion of
NPE and also includes EUR 5.0bn performing exposure
Financial key figures H1 2016 – Core Bank
26.08.2016 INVESTOR PRESENTATION
Other financings2
0.9
0.4
(48%)
0.5
(52%)
Other ships
2.2
0.7
(32%)
1.5
(68%)
Tanker
1.6
0.2
(14%)
1.4
(86%)
Bulker
2.8
0.7
(24%)
2.1
(76%)
Container
5.4
1.9
(35%)
3.6
(65%)
non-performing
performing
1 Exposure at default; 2 Incl. working capital finance
15
Target for Q3 2016: Portfolio reallocation to make a clear distinction between the Core Bank and the Non-Core Bank and to highlight the
Core Bank’s risk and return profile
Guaranteed Exposure Shipping
8.4
Performing Exposure
5.0
Non Performing Exposure
3.4
Portfolio by performing and non-performing exposure in EUR billion, EaD1
Shipping
Core Bank
12.9
3.9 (30%)
9.0 (70%)
thereof EUR 3.4bn secured by the guarantee (88%)
Forecast
Development of the shipping market
remains difficult
Financial key figures H1 2016 – Core Bank
26.08.2016 INVESTOR PRESENTATION
One-year time charter rates for container vessels, bulk carriers, tankers (in EUR thou.)1 90
60
40
80
70
50
30
20
10
0
2020 2018 2010 2012 2014 2016 2008 2006 2004
► Forecast: Charter rates stagnating at a low level, recovery postponed – in addition, further drop in 2nd hand prices for
container vessels in particular
► Weak market development because the slight growth in global trade is more than offset by the ongoing excess supply in almost all ship categories
► The excess supply is, in turn, due to sustained fleet growth and insufficient consolidation in the shipping industry
► As far as oil tankers are concerned, the return to higher oil prices and the drop in demand for storage capacity are proving to be a challenge
1 Sources: Historical data – Clarkson; forecast: MSI & Marsoft; as at: 30.06.2016
No relief in sight for the Shipping portfolio, sustained high loan loss provisions expected, with a
negative impact on capital resources
16
New business characterised by competitive and
low interest rate environment
Financial key figures H1 2016 – Core Bank
26.08.2016
Distribution of exposure at
default from client business in %
► New business declined, namely by 29%, year-on-year to EUR 3.5bn (from EUR 4.9bn), the highly competitive market environment and sustained low interest rates are having a negative impact
► New business is subject to stringent internal risk/return requirements
► New business development expected to lag behind targets in 2016; increase of new business expected for the second half 2016
► Payout ratio stable at 57%
Real Estate Clients
32
Shipping
32
Corporate Clients
36
New business
in EUR billion
-29%
H1 2016
3.5
H1 2015
4.9
Breakdown of new business1
in EUR billion
INVESTOR PRESENTATION
1 H1 2015 new business plus EUR 0.1bn for Savings Banks & Institutional Clients
Breakdown of new business H1 2016: ∑ EUR 3.5bn
Shipping
0.2
0.6
Real Estate Clients
1.9
2.9
Corporate Clients
1.4 1.3
H1 2016
H1 2015
17
Core Bank with solid portfolio quality, risks largely
covered by guarantee
Financial key figures H1 2016 – Core Bank
26.08.2016
► Core Bank portfolio totalling EUR 65.3bn EaD, thereof EUR 42.5bn (65%) investment grade and EUR 54.5bn (84%) in rating categories 0 to 9; rating categories 16-18 mainly relate to the Shipping restructuring portfolio
► NPE volume of EUR 5.3bn corresponds to an NPE ratio of 8%, excluding Shipping restructuring the NPE ratio of the Core Bank comes to 3%
► EUR 18.5bn new business since3 2011, thereof currently EUR 187.4mn NPE4 corresponds to a new business NPE ratio of 1.0%
► Solid coverage ratio of 60% due to loan loss provisions of EUR 3.2bn
Core Bank portfolios by rating category
in EUR billion, EaD1
INVESTOR PRESENTATION
16-18
0.7
4.5
13-15
2.0 1.7
10-12
0.8 1.0
6-9
9.1
3.0
2-5
14.7
2.6
0-1
23.1
2.1
non-guaranteed
guaranteed
Investment grade
Non-investment grade Default categories
NPE Core Bank
Shipping 3.9 3.4 0.5
Real Estate Clients
0.2
Energy & Infrastr.
0.9 0.8 0.1
Corporate Clients
0.2 0.1
0.1
NPE2 by client division
in EUR billion, receivables volume
non-guaranteed
guaranteed
86% covered by the guarantee
5.3
1 Exposure at default; 2 Non-performing exposure; 3 Cumulative on-balance sheet new business since 2011 that is still in the portfolio; 4 Rating classes 16-18
NPE ratio of 3%
excl. Shipping restructuring and before portfolio reallocation
18
Implementation of portfolio reallocation (incl. Shipping restructuring) in Q3 2016 improves portfolio quality
Further reduction in legacy assets putting
pressure on the RU’s net income before taxes
Financial key figures H1 2016 – RU
26.08.2016
► The wind-down strategy of the RU was continued successfully, total portfolio was reduced by EUR 10.8bn EaD (-33%) to EUR 21.5bn (incl. share of EUR 2.7bn (54%) from the transfer of the federal states portfolio of EUR 5.0bn in total)
► Active winding-down measures focusing on USD high-risk legacy burdens are supporting the wind-down process based on scheduled and early principal repayments; wind-down measures partly exceeded the loss-minimising winding down provided for in the guarantee agreement and resulted in a burden on income
► Net income before taxes of EUR -90mn in the RU has been burdened by high guarantee fees and the accelerated portfolio wind-down
Aviation
7 Corporates
9
Shipping 21
Real Estate
24
Divestments
39
Net income before taxes
in EUR million
Breakdown by asset class in %
-33%
H1 2016
21.5
H1 2015
32.3
Reduction of assets in the RU
in EUR billion, EaD1
-90
7 9
H1 2016 H1 2015
INVESTOR PRESENTATION 19
1 Exposure at default
RU
CB
P&L analysis highlights the Core Bank
profitability
Financial key figures H1 2016 – Core Bank / RU
26.08.2016 INVESTOR PRESENTATION
Interest margin 1.2%
CIR1 35%
CIR1 n.a.
Interest margin 0.3%
Bank levy
-47
Net income
before taxes
261
Net operating interest income
Other operating result / restuct.
result
+51
Administrative expenses
-203
Guarantee premium
-49
Loan loss provisions3
+56
Total
income
555
Other income components
+107
Net interest
income
448
264
184
RoE2 21%
RoE2 n.a.
in EUR million
in EUR million
1 Cost-income ratio represents the ratio of administrative expenses to total income, plus “other operating result”; 2 Return on equity (RoE) is calculated as the ratio of net income before taxes to average reported equity; 3 Incl. hedging effect of the guarantee
Net income
before taxes
Net operating interest income
-90
Bank levy
-16
Other operating result / restuct.
result
-4
Administrative expenses
-74
Guarantee premium
-77
Loan loss provisions3
+95
Total
income
-14
Other income components
+60
Net interest
income
-74
25
-99
► Operating net interest income in relation to receivables volume of EUR 43.3bn gives Core Bank a solid interest margin of 1.2%
► By contrast, with a loan volume of EUR 16.2bn, the RU only has an interest margin of 0.3% which reflects the very high proportion of non-interest-bearing loans; negative net interest income resulting, among other things, from early swap termination in connection with securities sales, which was offset by positive effects in net income from financial investments
► Core Bank demonstrates the adequate profitability of the business model and portfolios (including Shipping restructuring) in the CIR of 35% and in the RoE of 21%; the RU is an obvious burden at Group level
20
►►►
1. Change in ownership
2. Financial key figures H1 2016 – Core Bank/RU
3. Financial key figures H1 2016 – Group
4. Outlook for 2016
5. Appendix
26.08.2016
Agenda
INVESTOR PRESENTATION 21
Group net result before taxes above plan despite
drop in total income
Financial key figures H1 2016 – Group
26.08.2016
in EUR million, IFRS Core Bank RU Group
H1 2015 H1 2016 H1 2015 H1 2016 H1 2015 H1 2016
Net interest income 377 448 71 -74 448 374
Net commission income 54 41 8 9 62 50
Result from hedging 8 2 - - 8 2
Net trading income -26 66 97 -26 71 40
Net income from financial investments1
11 -2 45 77 56 75
Total income 424 555 221 -14 645 541
Loan loss provisions2
34 56 93 95 127 151
Administrative expenses -198 -203 -104 -74 -302 -277
Other net operating income 21 25 32 18 53 43
Expense for European bank levy -44 -47 - -16 -54 -63
Net income before restructuring 237 386 232 9 469 395
Result from restructuring -9 -76 -3 -22 -12 -98
Expenses for government guarantees3
-85 -49 -150 -77 -235 -126
Net income before taxes 143 261 79 -90 222 171
Income taxes - - - - -75 -11
Net income after taxes - - - - 147 160
1 Incl. result from the financial investments accounted for under the equity method; 2 Net loan loss provisions after effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative; 3 Base premium and subsequent payment
INVESTOR PRESENTATION 22
Core Bank making a decisive contribution to
the clearly positive Group net result before tax
Financial key figures H1 2016 – Group
Net income before taxes / RoE
in EUR mn; RoE1
Group net result before taxes of EUR 171mn (PY: EUR 222mn) due to:
► Total income of EUR 541mn (PY: EUR 645mn) with net interest income of EUR 374mn (PY: EUR 448mn) making the main contribution
► Administrative expenses further reduced by 8% to EUR -277 million (PY: EUR -302mn), CIR of 47% (PY: 43%)
► Net loan loss provisions of EUR 151mn (PY: EUR 127mn) after guarantee, foreign exchange result and hedging effect of credit derivative
► Base premium of EUR -126mn (PY: EUR -235mn), bank levy and deposit guarantee fund EUR -63mn2 are having a negative impact (PY: EUR -54mn)
► Other operating result of EUR 43mn (PY: EUR 53mn) and restructuring expenses of EUR -98mn (PY: EUR -12mn)
26.08.2016
Net loan loss provisions (after guarantee, foreign
exchange result and hedging effect of credit derivative3)
in EUR million
Net loan loss provisions before the effects of the guarantee and
foreign exchange result of EUR -520mn (PY: EUR -199mn), thereof EUR -226mn (43%) to the Core Bank and EUR -294mn (57%) to the RU
► Effects of the guarantee due to gross compensation of EUR 671mn (incl. foreign exchange result and hedging effect of credit derivative)
► Income statement disclosure after effects relating to the guarantee, foreign exchange result and the hedging effect of the credit derivative of EUR 151mn (PY: EUR 127mn)
1 Return on equity (RoE) is calculated as the ratio of net income before taxes to average reported equity; 2 Thereof EUR -47mn for the European bank levy and EUR -16mn for the deposit guarantee fund; 3 Income statement position hedging effect from credit derivative of EUR -408mn has been recognised in the net loan loss provisions of EUR 151mn
9% 7%
INVESTOR PRESENTATION
-90
7 9
261
143
CB RU
222 171
H1 2015 H1 2016
151127
+19%
H1 2016 H1 2015
23
Focused new business in the Core Bank, Q2 profit and
portfolio transfer improve CET1 ratio
Financial key figures H1 2016 – Group
RWA1
in EUR billion
4743
+4 pp
H1 2016 H1 2015
► RWA reduced to EUR 34.5bn due to reduction in legacy assets
26.08.2016
New business
in EUR billion -29%
H1 2016
3.5
H1 2015
4.9
► Satisfactory new business of EUR 3.5bn (PY: EUR 4.9bn)
following stringent risk requirements and stable interest margins
► Payout ratio stable at 57%
CIR2
in %
-8%
RU
CB
H1 2016
34.5
5.4 29.1
2015
37.4
7.3 30.1
► CIR of 47% up slightly year-on-year as the drop in total income was
more pronounced than the drop in administrative expenses
► Implementation of the cost reduction programme is going well
1 Risk-weighted assets; 2 Cost-income ratio represents the ratio of administrative expenses to total income, plus “other operating result”
INVESTOR PRESENTATION
Overall ratio / CET1 ratio (phase-in)
in %
► Overall ratio of 22.2%
► Core Tier 1 capital ratio: 13.5% phase-in and 12.8% fully-
loaded are well above the SREP requirements
H1 2016
+ 1.2 pp
+1.6 pp
13.5
22.2
2015
12.3
20.6
24
Systematic deleveraging and portfolio transfer
improve balance sheet structure
Financial key figures H1 2016 – Group
26.08.2016
Leverage ratio
in %
+0.5 pp
H1 2016
6.8
2015
6.3
Bail-in ratio2
in %
► Bail-in ratio of around 10.1% (excl. guarantee and senior
unsecured) well above the bail-in threshold of 8%
+0.4 pp
H1 2016
11.6
10.1
1.5
2015
11.2
9.2
2.0
► Liquidity position improved by the transfer of the federal states portfolio: LCR 140% and NSFR 95%
► Liquidity ratio pursuant to the German Liquidity Regulation (LiqV) of 1.84 (31 Dec. 2015: 1.89)
► Refinancing slightly above plan in H1
LCR / NSFR
in %
140112 9495
+28 pp
2015
► Leverage ratio improved again to 6.8%
INVESTOR PRESENTATION
Total assets1
in EUR billion
► Total assets down due, in particular, to the transfer of the
federal states portfolio and the ongoing winding-down of the RU portfolio
27
687 0
-6%
RU
CB
H1 2016
91
23
H1 2015
97
Guarantee buffer for the remaining
reference portfolio
1 Segment assets; 2 Pro-forma
NSFR LCR
H1 2016 Q1 2016
25
Net interest income from the Core Bank’s operating
business above plan
Financial key figures H1 2016 – Group / Income statement
Net interest income
in EUR million
► Net interest income in the Group of EUR 374mn is above plan, incl. other effects totaling EUR 85mn resulting among others from the
sale of promissory notes as well as hedge-accounting
► Net operating interest income of EUR 264bn from client business in the Core Bank -17% slightly down as expected compared to
previous year, however above pro-rata plan
► Interest-bearing volume of loans and advances in the RU has fallen significantly from EUR 11bn in the previous year to EUR 5bn (-
55%)
Net operating interest income generated by
client business
in EUR million
85
289
448
Other effects
H1 2015
-17%
374
H1 2016
264
317
2563
-17%
H1 2016 H1 2015
RU CB
381 289
Total Bank
26.08.2016 INVESTOR PRESENTATION 26
Net commission income primarily from
the Core Bank
Financial key figures H1 2016 – Group / Income statement
1 Excluding hedge result
Net commission income
in EUR million
Net income from financial
investments
in EUR million
Net trading income1
in EUR million
5062
-19%
H1 2016 H1 2015
7 556
+34%
H1 2016 H1 2015
40
7 1-44%
H1 2016 H1 2015
► Net commission income primarly from the Core Bank with a
contribution of EUR 41mn/82% (PY: EUR 54mn).
► Due to less cross-selling of derivatives and loan commission from new business that was below plan, the net commission income is down on the previous year
► Net income from financial investments benefiting from
securities sales and write-ups on HETA, while write-downs of equity holdings in non-affiliated companies had a negative impact
► Net trading income with a positive impact from the operating
client business, assets measured at fair value and the valuation result from EUR/USD basis swaps
► Opposite negative impact largely comes from valuation effects relating to derivatives due to the drop in long-term interest rates and the marked widening of CDS spreads
26.08.2016 INVESTOR PRESENTATION 27
Loan loss provisions remain at a high level due to market
developments in the shipping sector and legacy burdens
Financial key figures H1 2016 – Group / Income statement
Components of net loan loss provisions
in EUR million Net loan loss provisions
1 in EUR million
1 5 1
1 2 7
+19%
H1 2016 H1 2015
► Net loan loss provisions before the effects of the guarantee and the foreign exchange result of EUR -520mn (PY: EUR - 199mn), of which
EUR -226mn (43%) is attributable to the Core Bank and EUR -294mn (57%) is attributable to the RU, and of which EUR -481mn (93%) is attributable to the guaranteed and EUR -39mn (8%) to the non-guaranteed portfolio
► Effects of the guarantee due to gross compensation of EUR 671mn (incl. foreign exchange result and hedging effect from credit derivatives)
► Income statement disclosure after guarantee effects of EUR 151mn (PY: EUR 127mn)
1 5 1
KB
RU
-226
Income statement disclosure of loan loss provisions
+671
Net loan loss provisions
before effects from guarantee
-520
Gross compensation, incl. foreign exchange result and hedging effect from credit derivatives
-294
26.08.2016 INVESTOR PRESENTATION 28
1 After effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative, i.e. income statement item: hedging effect from credit derivative of EUR -408mn has been recognised in the net loan loss provisions of EUR 151mn
Loan loss provisions characterised by ongoing high
allocations in the Shipping portfolio
Financial key figures H1 2016 – Group / Income statement
Net loan loss provisions1 by business units
in EUR million
► Loan loss provisions of EUR -520mn before foreign exchange effects and compensation; mainly driven by the legacy burdens from ship loans in the RU and Core Bank's restructuring portfolio of EUR -625mn
► Core Bank and RU benefit from reversals of loan loss provisions with regard to Real Estate Clients in the amount of EUR 39mn, Corporate Clients in the amount of EUR 44mn and Others in the amount of EUR 22mn (GLLP)
Other
22 7
(32%) 15
(68%)
Corporate Clients
44
31
(70%)
13
(30%)
Real Estate Clients
39
-1
(-3%)
40
(103%)
Shipping
-625
-263
(42%)
-362
(58%)
Core Bank RU
Restructuring of Core Bank shipping loans
26.08.2016
Core Bank
RU
-520
Total
Bank
-226
(43%)
-294
(57%)
INVESTOR PRESENTATION 29
1 Before effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative
Marked reduction in administrative expenses despite
substantial regulatory requirements
Financial key figures H1 2016 – Group / Income statement
1 Cost-income ratio represents the ratio of administrative expenses to total income, plus “other operating result”
26.08.2016
Result from restructuring
in EUR million
Administrative expenses
in EUR million; CIR1 ► Administrative expenses of EUR -277mn reduced
considerably as a result of the cost reduction programme (PY: EUR -302mn).
► Personnel expenses cut from EUR -141mn (PY) to EUR
-129mn (-9%) due to further reduction in headcount (-8%)
► Operating expenses down by -6% from EUR -140mn (PY) to
EUR -132mn, savings achieved through reduction in building occupancy expenses but opposite high regulatory and accounting-related expenses
► Depreciation/amortisation fell to EUR -16mn (PY: EUR -
21mn), also due to lower depreciation/amortisation in the IT field and lower write-downs on equity holdings
► CIR1 of 47% (PY: 43%)
-1 2 9-1 4 1
-1 3 2-1 4 0
-8%
Depreciation/ amortisation
Operating expenses
Personnel expenses
H1 2016
-277
-16
H1 2015
-302
-21
► Restructuring expenses increased significantly in the course
of the expansion of the ongoing cost reduction programme and the planned personnel measures
-9 8
-1 2
+717%
H1 2016 H1 2015
INVESTOR PRESENTATION
43% 47%
30
Guarantee covers the main risks: 72% of the Shipping
and 36% of the Real Estate Client exposures
Financial key figures H1 2016 – Group / Risk
1 Incl. liquidity reserve; 2 Percentage risk coverage provided by the guarantee in relation to total EaD of the respective division
Risk coverage by the guarantee2
in % / in EUR billion, econ. EaD
Distribution of exposure at default (EaD) within the Group
in % / in EUR billion, econ. EaD
Corporate Center/Other1
13.6
13.4 0.3
Divestments
8.4
2.3 6.1
Capital Markets
11.1
10.4 0.7
Aviation
1.4
0.3 1.2
Corporate Clients
16.7
11.8 4.9
Real Estate Clients
18.2
11.6 6.6
Shipping
17.4
4.8 12.5
Total
Bank
86.8
54.5
32.2
non-guaranteed
guaranteed
37.2% 72.2% 36.2% 29.4% 80.1% 72.9% 2.0% 6.0%
Corporate Center/Other1
13.6
13.6
Divestments
8.4
8.4
Capital Markets
11.1
11.1
Aviation
1.4 1.4
Corporate Clients
16.7
2.0 14.6
Real Estate Clients
18.2
5.2 13.0
Shipping
17.4
4.4 12.9
Total
Bank
86.8
21.5
65.3
100.0% 20.0% 20.9% 19.2% 1.7% 9.7% 15.7% 12.8%
26.08.2016
RU
Core Bank
INVESTOR PRESENTATION 31
Good risk profile of Core Bank excluding Shipping
restructuring
Financial key figures H1 2016 – Group / Risk
1 Without consolidation; 2 For details on net loan loss provisions, see also pages 28 and 29, deviations possible due to rounding; 3 Other: EUR 0.01bn
26.08.2016
RU1
Total loan loss provision2, in EUR billion
EaD distribution, in EUR billion
Core Bank1
Total loan loss provision2, in EUR billion
EaD distribution, in EUR billion
0.04 0.01 2.23 0.51 3.05 0.26
Total
Core Bank
65.3
14.9 (23%)
50.4 (77%)
Corporate Center
13.6
0.3 (2%)
13.4 (98%)
Capital Markets/ Savings Banks
11.1
0.7 (6%)
10.4 (94%)
Corporate Clients
14.6
3.2
(22%)
11.4
(78%)
Real Estate Clients
13.0
2.3
(18%)
10.7
(82%)
Shipping
12.9
8.4
(65%)
4.5
(35%)
Total
RU
21.5
17.4 (81%)
4.1 (19%)
Divestments
8.4
6.1 (73%)
2.3 (27%)
Aviation
1.4
1.2
(80%)
Corporates
2.0
1.7 (83%)
0.3 (17%)
Real Estate Clients
5.2
4.3 (83%)
0.9 (17%)
Shipping
4.4
4.1 (93%)
0.3 (7%)
0.3
(20%)
3.173
0.93 0.10 1.64 0.01 0.48
guaranteed non-guaranteed
guaranteed non-guaranteed
INVESTOR PRESENTATION 32
NPE ratio reduced to 16% following transfer
of federal states portfolio
Financial key figures H1 2016 – Group / Risk
1 Cumulative on-balance sheet new business since 2011 that is still in the portfolio
NPL-NPE reconciliation and development in EUR billion
► Risks in Shipping totalling EUR 6.8bn (49%) and Real Estate of EUR 3.8bn (28%) in total dominate
► NPE ratio in the Core Bank of 8% (EaD of EUR 65.3bn) and in the RU of 40% (EaD of EUR 21.5bn)
► NPE ratio in Shipping within the Group 39%
► Total EaD of EUR 86.8bn includes a non-performing exposure of EUR 13.8bn, corresponding to an NPE ratio within the Group of 16%
► NPL legacy burdens covered by guarantee of 88%, drop is due to the transaction involving the federal states portfolio
26.08.2016 INVESTOR PRESENTATION
NPE H1 2016
13.8
13.6
0.2
Reduction/ Increase
0.4
Portfolio transfer
5.0
NPE 2015
18.4
Transition
2.1
NPL 2015
16.3
RU
8.6
2.9
3.6
0.1 0.7
1.3
Core Bank
5.2
3.9
0.2 0.9
0.2 0.0
Shipping
Real Estate
Energy & Infrastr.
Corporate Clients
Other
NPE by asset class in EUR billion
8% 40%
NPE ratio
16%
1%
19%
NPE - legacies NPE - new business
NPE ratio Total Bank
NPE ratio in new business1
∑ EUR 13.8bn
33
Target 2018: Reduction in the NPE ratio of ~10%
NPE covered by collateral and risk provisions, NPE ratio in
new business of 1.0%
Financial key figures H1 2016 – Group / Risk
1 Loan loss provisions before compensation; 2 Cumulative on-balance sheet new business since 2011 that is still in the portfolio, EaD; 3 Default categories 16 to 18
► New business of EUR 18.5bn since 20112
► NPE ratio in new business 1.0%
► Shipping main driver with an NPE ratio of 6.8% in new business
► Coverage ratio of 48% provided by loan loss provisions
► Total coverage of 99% including collateral
1.0%
NPL ratio in new business
26.08.2016
LLP (SLLP and GLLP)1 48% coverage ratio
INVESTOR PRESENTATION
Risk coverage in EUR billion
Corporate Clients
Other
Risk coverage
13.7
6.6
7.1
NPE Total Bank
13.8
6.8
3.8
1.0
0.9
1.3
Shipping
Real Estate
Energy & Infrastr.
New business and NPE since 20112
Collateral (incl. Basel II cash flows)
Real Estate Clients
2.5 Shipping
8.8
Corporate Clients
7.2
Total
169.3
18.1
0.0
187.4
0.3%
0.0%
6.8%
New business in EUR billion
NPE3
in EUR million
34
18.5
Burdens associated with guarantee premiums and
complexity reduced considerably
Financial key figures H1 2016 – Group / Guarantee
1 Excluding one-off payment of EUR 0.5bn made in 2011 imposed by the European Commission, which was subsequently received back by the Bank in the form of a capital increase
26.08.2016
Cumulative base premium1
in EUR billion
► Guarantee premiums have fallen considerably due to the transfer of key components to the HoldCo, meaning that these contribute to
significant relief within the income statement
► Complexity reduced considerably with further relief provided within the framework of the increasing drawdown of the guarantee as a
result of the portfolio transfer and sale, because since 1 January 2016, the OpCo has only been paying 2.2% on the part of the guarantee which has not been drawn
► The base premium has fallen by -46% to EUR -126mn (PY: EUR 235mn)
► Since 2009, cumulative guarantee premium of EUR 2.8bn recognised through profit or loss
H1 2016
2.8
2015
2.7
INVESTOR PRESENTATION 35
164
7 18 442381
126
47 3406
305
522416
284314
H1 2016 2015 2014
903
2013
858
2012
1.002
2011
478
2010 2009
Development of guarantee expenses over time
in EUR million Base premium Additional premium
Reversal of premium liabilities
P&L relief
Portfolio transfer and positive result strengthen
capital ratios
Financial key figures H1 2016 – Group / Capital
► CET1 ratio “phase-in” characterised by positive half-year results and RWA reduction due to the federal states transaction
► Regulatory early warning threshold of 10.0% - SREP requirement 9.75%, plus early warning buffer of 0.25%
26.08.2016
CET1 ratios
in %
SREP, incl. early warning buffer
INVESTOR PRESENTATION 36
10.0%
12.8
CET1-Quote
fully loaded
H1 2016
Basel III transitional
arrangements
-0.7
CET1-Quote
phase in
H1 2016
13.5
Basel III transitional
arrangements
-0.1
Retained earnings
+0.5
RWA-relief
+0.8
CET1-Quote
phase in
2015
12.3
HSH Nordbank participated in the ECB stress test, the results will not be published; the results of the following SREP
process are expected to be released in H2 2016
Capital ratios improved by the transfer of the federal
states portfolio and further reduction in legacy assets
Financial key figures H1 2016 – Group / Capital
2008 2009 2010 2011 2012 2013
16.9
23.8
9.9
19.1
10.3
21.3
10.7
22.7
7.1
16.1
8.3
CET1 capital ratio Basel III (phase-in), incl. buffer from additional premium
Overall ratio
H1 2016
13.5
22.2
2015
12.3
20.6
2014
12.6
18.7
2013
13.1
19.7
Basel 2.5 Basel III
in EUR billion
1127 1
41 46 6136
2013
109
2012
131
2011
136
2010
151
2009
174
2008
208 RWA
Total assets
-56% Total assets
-69% RWA
26.08.2016
Development of capital ratios and RWA in relation to total assets in %
INVESTOR PRESENTATION
38 40 37 35
H1 2016
91
2015
97
2014
110
2013
109
37
Solid bail-in ratio of 10.1%, excluding guarantee and
senior unsecured liabilities
Financial key figures H1 2016 – Group / Bail-in
1 Incl. buffer of ~1.5 pp from the remaining guarantee volume as an equity substitute; 2 EUR 8.6bn of the EUR 10bn guarantee amount already used in the income statement as compensation/hedging effect derivative second loss guarantee, securing the EaD in the reference portfolio of around EUR 32bn; NB: This presentation includes assessments and forecasts based on numerous assumptions and subjective valuations both of HSH Nordbank AG and other sources and only represents a non-binding view
Comments
► Bail-in ratio of around 10.1% based
on reported equity, silent participations and subordinated capital (excluding guarantee)
► Guarantee ranks before regulatory capital in the event of losses from the reference portfolio
► The EaD in the reference portfolio covered by the guarantee accounts for approximately 37% of total EaD (EUR 86.8bn)
► In arithmetical terms, the guarantee has a buffer impact of approx. EUR 1.4bn/around 1.5 percentage points
► Overall, this results in an imputed bail-in ratio of up to about 11.6% after taking the guarantee into account2
► The bail-in ratio is expected to be significantly > 8% in the future
► The calculation of the bail-in ratio (excl. guarantee) is based on the BRRD definition of a threshold (8%) for a drawdown on the single resolution fund
Guarantee buffer for the remaining reference portfolio2
Reported equity capital
Silent participations
Subordinated capital
Other liabilities egligible for bail-in (senior unsec.)
Bail-in
liabilities
1.4
5.0
2.0
2.1
Total assets
90.8
Bail-in
ratios
∑ 10.5
Security effect
before senior
unsecured
∑ 54.4
Loans and advances to
customers
~ 11.6% incl. guarantee
8% bail-in threshold
~10.1% before guarantee
26.08.2016
Bail-in ratios
IFRS, in EUR billion
INVESTOR PRESENTATION 38
►►►
1. Change in ownership
2. Financial key figures H1 2016 – Core Bank / RU
3. Financial key figures H1 2016 – Group
4. Outlook for 2016
5. Appendix
26.08.2016
Agenda
INVESTOR PRESENTATION 39
Positive, but significantly reduced net
income before taxes expected for 2016
Outlook for 2016
1 If the final structural measures to be taken within the framework of the formal decision cannot be implemented either at all, in full or within the required time frame, this would pose a significant risk to the further implementation of the business model and, as a result, to the outlook for the Bank (see also Annual Report as at 30 June 2016)
26.08.2016
► Further strengthening the basis for a sustainable alignment of the Bank in the long run and creating a
business model for HSH Nordbank which is capable, most importantly, of winning over clients, employees and investors alike and enabling a successful change in ownership:
Successfully forging ahead with and implementing outstanding structural measures together with the federal
state owners
Further expand client business based on the strong market base and the operating progress that has already been made, and exploit increased business opportunities in the corporate business in a focused manner to
implement new business plan
Systematically implement further strategic and operational optimisation measures to secure the
Bank’s competitive standing in a challenging environment, CIR target: < 50%
The aim is to swiftly reduce remaining legacy burdens that are still covered by the federal state guarantee, the
priority being to reduce legacy burdens denominated in USD
Take measures to strengthen capital in order to achieve a capital ratio of > 12% (phase-in) in the long run
► Major challenges and uncertainties:
Sustained very difficult market situation in the shipping industry, including assessment of the long-term trend in loan loss provisions, also in the case of possible greater risk reductions
Low interest rate environment
Highly competitive environment
Volatility in the financial and currency markets, particularly US dollar
Continued implementation of the formal decision of the European Commission
Changes in the assessments by the rating agencies
Further development in requirements imposed by European banking regulation
► For 2016,1 the Bank expects to see significantly reduced positive net income before taxes at the Group level compared to
the previous year due to the material non-recurring items resulting from the reversal of guarantee premiums recognised in the 2015 Group financial statements on the basis of the informal agreement. Environment remains challenging
Outlook
INVESTOR PRESENTATION 40
►►►
1. Change in ownership
2. Financial key figures H1 2016 – Core Bank / RU
3. Financial key figures H1 2016 – Group
4. Outlook for 2016
5. Appendix
26.08.2016
Agenda
INVESTOR PRESENTATION 41
Funding above plan in H1 2016, with a considerable
reduction in the funding requirements for 2016
Refinancing
26.08.2016
► Match funding above plan in the first half of 2016 with a considerable reduction in the funding requirements for 2016 as a whole compared to
the previous year
► Stable funding access to savings bank sector – proportion of retail funding down considerably due to the low interest rate
environment
► Regular issuer of benchmark Pfandbriefe – in February and April, successful placement of two EUR 500bn benchmark issues (public
Pfandbrief with a maturity of 5 years and mortgage Pfandbrief with a maturity of 7 years), both of which attracted considerable demand, also from abroad. In July, the mortgage Pfandbrief was also successfully increased by EUR 350mn
► Strengthening of the original USD long-term funding by way of the ongoing use of the ABF platform via loan-based assets.
In January, execution of a transaction based on infrastructure loans in the amount of USD 200mn. Another USD transaction is planned for the 2nd half of the year
H1 2016
3.4
1.7
1.0
0.7
H1 2015
4.6
1.9
1.3
1.4
> 7 years
21%
4-6 years
28%
1-3 years
51%
H1 2016
3.4
0.2
3.1
H1 2015
4.6
0.8
3.7
Retail
Institutional
Long-term funding
in EUR billion
Funding structure
in EUR billion
Senior unsecured and
Pfandbrief sales
By maturity (excluding asset-based funding)
Senior Unsecured
Asset Based Funding
Pfandbriefe
INVESTOR PRESENTATION 42
HSH Nordbank
December 2015
HSH Nordbank
February
2015
Benchmark issues in 2015 and 2016 support
diversified funding
Refinancing
26.08.2016 43
EUR 500,000,000
3 years Ship
Pfandbrief
USD 415,000,000
2 years ENTRANCE
Asset Based Funding
HSH Nordbank
November 2015
EUR 500,000,000
5 years Mortgage Pfandbrief
HSH Nordbank
February
2015
USD 361,000,000
3 ¼ years CASTELLUM
Asset Based Funding
HSH Nordbank
February 2016
EUR 500,000,000
5 years Public
Pfandbrief
HSH Nordbank
June 2015
EUR 500,000,000
7 years Mortgage Pfandbrief
HSH Nordbank
April
2016
EUR 850,000,000
7 years Mortgage
Pfandbrief1
INVESTOR PRESENTATION
1 Incl. increase of EUR 350mn in July 2016
HSH Nordbank
January 2016
USD 200,000,000
2 years NORTHERN DIABOLO
Asset Based Funding
43
Guarantee of the federal states of Hamburg and
Schleswig-Holstein reduces RWA and strengthens
capital position
Guarantee
26.08.2016
► "HSH Finanzfonds AöR", which was established by the federal states of Hamburg and Schleswig-
Holstein, covers the legacy burdens (as at: 31 March 2009) of HSH Nordbank via a guarantee
facility (second loss guarantee) of EUR 10bn
► First losses of up to EUR 3.2bn are to be borne by HSH Nordbank (already fully written down)
► The guarantee was structured as a financial guarantee in accordance with the IFRS rules
► The reference portfolio has been drastically reduced since March 2009 by about EUR 151bn (82%) from EUR 183bn to a current outstanding EaD
1 of EUR 32.2bn
► The Core Bank and RU account for 46% and 54% of the current EaD1 in the reference portfolio, respectively
► The Shipping segment accounts for an EaD1 of EUR 12.5bn and the Real Estate segment accounts for an EaD1 of EUR 6.6bn
► Guarantee reduces RWA and accordingly strengthens the capital position
► Guarantee buffer resulting from the difference between the imputed risk weight and the regulatory minimum of 20%, currently EUR 0.7bn (as at: 30.06.2016)
3 24 16 17 89 71 1 2
1 3 91 8 3
2020 2017 2016
-82% (-151)
~17
2014 2019
55
2013 2018
~30
2012 2015 2011 2010 2009 03/2009 H1 2016
Forecast Actual in EUR billion
Guarantee facility
Performance of the reference portfolio
Effect of the guarantee
1 Exposure at default
INVESTOR PRESENTATION 44
Senior Tranche
H1 2016
4.8
2.5
First-time utilisation of second loss guarantee through
settlement of federal states portfolio in Q2 2016
Guarantee
1 Equivalent to potential for increase in risk of expected and unexpected losses without change in RWA and CET1 ratio; potential represents the difference between the imputed risk weight and regulatory minimum capital backing of 20%; 2 Includes regulatory surcharge for foreign exchange risk, residual amount and other; 3 Foreign exchange result of approx. EUR -0.2mn; 4 Incl. credit risks under partial guarantee 2 (credit derivative)
26.08.2016
Guarantee structure
in reference portfolio
in EUR billion
Balance sheet breakdown
in EUR billion
Regulatory breakdown
in EUR billion
3.2
EUR 10bn
Second loss guarantee (SLP)
13.2
Gross compensation, loan loss provisions 4
Senior Tranche
H1 2016
4.8
7.0
1.4
2015
1.6
1.6
8.1
1.9 Free capacity of loan loss provisions
Settled losses
Unexpected Loss
Settled losses
Expected Loss
Regulatory surcharge2
Free capacity EL+UL1
Senior Tranche
H1 2016
4.8
5.3
1.7
0.7
0.7
2015
1.6
6.9
2.0
1.0
1.7
Expected drawdown 2016 – 2025 totalling EUR 7.5bn
5.9
EUR - 1.1bn, including foreign exchange result3
Settled losses
INVESTOR PRESENTATION 45
► Reduction in guarantee buffer (free capacity EL+UL) due to the settled losses in connection with the transfer of the federal state portfolio and
risk deterioration in the portfolio in H1 2016
Overview of the income statement
Key financial figures over time
1 Incl. result from the financial investments accounted for under the equity method 2 Net loan loss provisions after effects relating to the guarantee, hedging effect of credit derivative 3 Incl. deposit guarantee fund 4 Base premium and subsequent payment 26.08.2016
in EUR million, IFRS
6M
2016
12M
2015
6M
2015
12M
2014
6M
2014
12M
2013
6M
2013
12M
2012
6M
2012
12M
2011
6M
2011
12M
2010
Net interest income 374 1,032 448 586 231 929 480 1,520 453 1,350 635 1,502
Net commission income 50 114 62 130 73 104 52 119 44 120 61 218
Result from hedging 2 12 8 -40 -12 9 10 6 9 4 -10 8
Net trading income 40 84 71 61 112 193 114 -238 -210 -173 1 -156
Net income from financial investments1
75 54 56 171 242 261 153 39 142 23 62 219
Total income 541 1,296 645 908 646 1,496 809 1,446 438 1,324 749 1,791
Loan loss provisions2
151 304 127 577 337 -833 -192 -656 -111 389 317 -317
Administrative expenses -277 -634 -302 -724 -338 -755 -382 -821 -385 -837 -382 -867
Other net operating income 43 38 53 123 54 44 53 191 253 36 13 -6
Expense for European bank levy3
-63 -50 -54 -1 - - - - - - - -
Net income before restructuring 395 954 469 883 699 -48 288 160 195 912 697 601
Result from restructuring -98 -31 -12 -84 -8 -56 -8 -43 -19 -235 2 -9
Expenses for government guarantees4
-126 -473 -235 -521 -259 -414 -143 -302 -157 -883 -211 -519
Net income before taxes 171 450 222 278 432 -518 137 -185 19 -206 488 73
Income taxes -11 -352 -75 -118 -131 -251 -7 61 35 -59 -150 31
Net income after taxes 160 98 147 160 301 -769 130 -124 54 -265 338 104
INVESTOR PRESENTATION 46
Overview of selected financial key figures
Key financial figures over time
1 Acc. to Basel 2.5, as of 2014 Basel III (phase-in) 2 Loan loss provisions before compensation and foreign exchange result as of 12M 2013 3 Segment assets
26.08.2016 INVESTOR PRESENTATION
6M 2016
12M 2015
6M
2015
12M 2014
6M
2014
12M 2013
6M
2013
12M
2012
6M
2012
12M
2011
6M
2011
12M
2010
Core Tier 1 capital ratio (%)
1
Buffer from additional premium
Core capital ratio (%)
13.5 -
17.3
12.3 -
16.4
10.0 2.4
13.8
10.0 2.6
14.4
10.0 2.8
14.6
11.7 n.a
15.3
12.0 n.a. 15.9
9.9 n.a. 12.3
10.0 n.a. 12.7
10.3 n.a. 13.8
13.0 n.a.
18.8
10.7 n.a. 15.2
Loan loss provisions
2
(EUR mn)
Core Bank
RU
-520 -226 -294
-3,020 -1,901 -1,119
-199 -124
-75
-486 -461
-25
-195 -128
-67
-1,713 -692
-1,021
-224 -108 -116
-656 -312 -344
-111 -95 -16
389 -35 424
317 53
264
-317 93
-410
Shipping portfolio (EUR bn)
3
Core Bank
RU
14 11 3
18 13 5
21 15 6
20 14 6
20 14 6
21 14
7
25 16 9
26 17 9
29 19 10
29 19 10
n.a. n.a. n.a.
30 21 9
Core Bank new business (EUR bn)
Corporate Clients Corporates & Wealth Mgmt. Real Estate Clients Energy & Infrastructure Shipping Capital Markets
3.5 1.4
- 1.9
- 0.2
-
8.8 3.2
- 4.6
- 0.8 0.2
4.9 -
0.8 2.9 0.5 0.7 0.0
9.5 -
2.3 4.1 1.6 1.5
0.0
4.5 -
0.9 2.3 0.6 0.7 0.0
7.6 -
2.9 2.8 0.9 0.9 0.1
2.7 -
1.3 0.6 0.4 0.3 0.1
6.8 -
2.1 2.6 1.2 0.9 0.0
2.9 -
0.9 1.0 0.5 0.5 0.0
4.7 -
1.7 1.2 0.6 1.2 0.0
n.a. -
n.a. n.a. n.a. n.a. n.a.
3.5 -
1.0 0.5 0.6 1.3 0.1
Total assets (EUR bn) 91 97 108 110 113 109 121 131 138 136 132 151
Net income before taxes (EUR mn)
Core Bank
RU
171 261 -90
450 397
53
222 157 65
278 -120 398
432 185 247
-518 -123 -395
137 131
6
-185 509
-694
19 -30 49
-206 -115 -91
488 278 210
73 330 -257
Employees (FTE) 2,290 2,384 2,469 2,579 2,676 2,835 2,938 3,123 3,436 3,684 3,313 3,388
47
HSH Nordbank with positive rating for sustainability
Sustainability rating
26.08.2016
1 Source: imug Beratungsgesellschaft für sozial-ökologische Innovationen mbH - sustainability rating of bank bonds in 2015; 102 financial institutions, 14 development banks not listed
► Improvement in the sustainability ratings of HSH Nordbank bank bonds (rating of ship Pfandbriefe lifted from negative to neutral CC)
► Rating for mortgage Pfandbriefe increased three levels from neutral C to positive B, the other ratings have been maintained
► HSH Nordbank is at the upper end of average compared with other banks (see graphic on the left)
Ship Pfandbriefe (5)
Public Pfandbriefe (42)
Mortgage Pfandbriefe (73)
Uncovered Bonds (102)
Rating distribution by asset class1
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
INVESTOR PRESENTATION 48
UNCOVERED BONDS MORTGAGE PFANDBRIEFE PUBLIC PFANDBRIEFE SHIP PFANDBRIEFE
New shareholder structure established in June 2016
Shareholder structure and rating
1 Incl. Hamburger Gesellschaft für Vermögens- und Beteiligungsmanagement mbH (HGV) 2 See also latest publications by the rating agencies on the HSH Nordbank homepage: www.hsh-nordbank.de/de/investorrelations/rating/rating.jsp 3 Developing (dev.) 26.08.2016
Moody’s Fitch
Public Pfandbrief Aa2 -
Mortgage Pfandbrief Aa3 -
Ship Pfandbrief Baa1 -
Unsecured liabilities, long-term - non-guaranteed Baa3, dev.3 BBB- neg.
Unsecured liabilities, long-term - guaranteed Aa1 stable AAA stable
Unsecured liabilities, short-term P-3 F3
Subordinated capital B2 B-
Hybrid capital T1 Ca -
Financial Strength (BCA) / Viability Rating b3 b)
Shareholder structure
Rating2
INVESTOR PRESENTATION
HSH Nordbank AG (OpCo)
5.1 % HSH Beteiligungs Management GmbH (HoldCo)
94.9%
5.85% 11.91%1
State of Schleswig-Holstein
10.56% 71.68%
HSH Finanzfonds AöR Joint institution of the
federal states Savings Banks
Association Schleswig-Holstein
Nine trusts initiated by J.C. Flowers & Co
LLC
JCF
Free and Hanseatic City of Hamburg
49
Membership of the two-step protection scheme of
the Savings Banks Finance Group (SFG)
Change in ownership
26.08.2016 INVESTOR PRESENTATION
STATUS QUO – Two-level protection scheme of the German Savings Banks Finance Group
1. Level – Voluntary
institutional
protection
The objective of the protection scheme is to protect the member institutions and to avert imminent or existing financial difficulties at these institutions. To achieve this, the protection scheme can, for example, contribute new liability funds, provide guarantees or sureties vis-à-vis third parties or even satisfy third-party claims. This is designed to rectify the problems faced by the institution in question and prevent the liquidation of the institution pursuant to the German Act on the Recovery and Resolution of Credit Institutions (SAG)1. These measures can also be combined with each other until the financial difficulties of the institution concerned are resolved.
The protection scheme has set up a risk monitoring system with corresponding organisational structures for preventative purposes. This system helps imminent financial difficulties to be identified early on/to prevent such difficulties from arising in the first place, and allows suitable counter-measures to be taken.
The aim is to prevent a case where support is needed under the protection scheme and to allow the business relationship with the customer to be continued on a permanent basis and without restrictions. All instruments issued by HSH Nordbank AG (excluding those with the character of equity capital/own funds) are covered by the institutional protection of the protection scheme of the German Savings Bank Finance Group (Section 39(1) Framework Statute).
2. Level – Statutory
deposit protection
Tier 2, depositor protection under EinStG, only applies where the voluntary institutional protection system has not resulted in the continued existence of the credit institution and such institution is unable to repay deposits due for reasons directly related to its financial position. Under the statutory deposit guarantee the customer has a claim against the guarantee scheme for the repayment of his deposits up to EUR 100,000.
You can find more information on this under www.dsgv.de/sicherungssystem.
1 German Act on the Recovery and Resolution of Credit Institutions (Sanierungs- und Abwicklungsgesetz)
50
Simplified sample presentation
Membership of a protection scheme beyond 2018
Change in ownership
26.08.2016 INVESTOR PRESENTATION
LOOKING AHEAD
Simplified sample presentation
Protection scheme
Viability assessment of
business model by EU-KOM
Change in ownership
outside SFG
Member of protection scheme of SFG for another two years1
Protection scheme of the buyer, e.g. Association of German Banks (Bundesverband deutscher Banken)
2.
Profitability confirmed
Change in ownership
within SFG
1.
Remain member in the Savings Banks Finance Group Profitability confirmed
Discontinuation of new
business
3.
Profitability not confirmed Remain member in the Savings Banks Finance Group
TIME SCHEDULE
► HSH Nordbank AG will remain a member of the Savings Banks Finance Group until at least 28 February 2018.
► Should HSH Nordbank's membership of the Savings Bank Finance Group end at a date not currently foreseen, its membership of the protection scheme of the Savings Bank Finance Group would continue to apply for another two years in accordance with Section 94(4) of the Framework Statutes, i.e. expected until at least 2020.
HSH Nordbank Sales phase Remain in the protection scheme
…
30.06.2016 28.02.2018 28.02.2020
1 Depends on the completion of the change in ownership
► Options 1 and 2 include the assessment of the sustainable stability of the new institution by the European Commission
51
Disclaimer
26.08.2016
The market information contained in this presentation is for general informational purposes only. It is not intended to replace own market research or other legal, tax or financial information or advice.
The presentation is not an invitation to buy or to sell and may not be used for advertising purposes.
HSH Nordbank AG points out that the market information presented herein is only intended for financially experienced investors who are able to assess the risks and opportunities of the market / markets discussed and obtain comprehensive information from a number of different sources.
The statements and data contained in this presentation are based on either information thoroughly researched by HSH Nordbank AG or on generally accessible sources that it regards as reliable but which cannot be verified: Although HSH Nordbank AG regards the sources used as reliable, it cannot assess such reliability with absolute certainty. Individual items of information could only be reviewed with regard to their plausibility; however, their factual accuracy was not checked. Furthermore, this presentation contains estimates and forecasts based on numerous assumptions and subjective assessments made by HSH Nordbank AG as well as outside sources and only represents non-binding views of markets and products at the time of publication. HSH Nordbank AG and its employees and organisational bodies accept no responsibility for the completeness, up-to-datedness and accuracy of the information and forecasts provided despite careful checking.
This document may only be distributed in accordance with the legal regulations applicable in the relevant countries and persons in possession of this document should acquaint themselves with the applicable local regulations.
These documents do not contain all material information needed to make important financial decisions and may differ from information and estimates from other sources / market participants. Neither HSH Nordbank AG nor its organisational bodies and employees can be held liable for losses that may arise from the use of this presentation, its contents or otherwise arise in connection with this presentation.
HSH Nordbank AG points out that the distribution of these materials to third parties is prohibited. Losses incurred by HSH Nordbank AG as the result of the unauthorised distribution of this presentation or any of its contents to third parties are to be compensated for by the distributor. Such person has to hold HSH Nordbank AG harmless from all claims arising from the unauthorised distribution of this presentation or any of its contents to third parties and all legal costs incurred in connection with such claims. This particularly applies to a distribution of this presentation or information contained therein to persons located in the USA.
Management system and defined management indicators of the IFRS Group
The Bank’s integrated management system is aimed at the management of key value drivers – income, expense, capital, liquidity and risk – on a targeted basis. For this purpose the Bank uses a risk-adjusted key indicator and ratio system that ensures that the Overall Bank, Core Bank and Restructuring Unit are managed in a uniform and effective manner. The HSH Nordbank Group is managed mainly on the basis of figures for the Group prepared in accordance with the International Financial Reporting Standards (IFRS).
Within the framework of management reporting the Bank focuses on the most important management indicators for the individual value drivers of the IFRS Group. The focus is, on the one hand, on the trend of these indicators during the year to date compared to the same period in the previous year and, on the other hand, on their expected change during the rest of 2016 (forecast, opportunities and risk report section). Further information on the management system and defined management indicators of the HSH Nordbank Group can be found in the HSH Nordbank’s Group Management Report for the 2015 financial year in the “Management system“ subsection in the “Basis of the Group“ section.
INVESTOR PRESENTATION 52
Contacts
26.08.2016
Oliver Gatzke
CFO
Harald Müller
Head of Bank Steering
Tel. no.: +49 (0)40 3333 13495
Fax:+49 (0)40 3333 613495
Ralf Löwe
Capital Markets / Head of Funding & Debt Investor Relations
Tel. no.: +49 (0)431 900 11293
Fax:+49 (0)431 900 611293
Martin Jonas
Finance/Investor Relations
Tel. no.: +49 (0)40 3333 11500
Fax:+49 (0)40 3333 611500
HSH Nordbank AG Gerhart-Hauptmann-Platz 50 D-20095 Hamburg
HSH Nordbank AG Gerhart-Hauptmann-Platz 50 D-20095 Hamburg
HSH Nordbank AG Schloßgarten 14 D-24103 Kiel
HSH Nordbank AG Gerhart-Hauptmann-Platz 50 D-20095 Hamburg
INVESTOR PRESENTATION 53