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Banking business

November 23, 2009

Hamburg's ailing HSH Nordbank has pronounced itself fit and well enough to remove the drip of state aid which has been its lifeline throughout the global economic crisis.

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HSH Nordbank head office in Kiel
HSH Nordbank says the bleakest days are overImage: AP

In an interview with the Handelsblatt newspaper, HSH Nordbank's CEO Dirk Jens Nonnenmacher said his company no longer needed help from the Financial Market Stabilization Fund (SoFFin), established by the German government to help deal with the fallout from the financial downturn.

"The contract with SoFFin will expire at the end of the year," Nonnenmacher said. "And we will not renew it."

SoFFin had agreed to grant the northern German bank 30 billion euros ($44 billion) in state-backed guarantees, of which 17 billion were used.

Nonnenmacher further said that HSH, which specializes in the financing of ship construction, would repay the remaining 13 billion euros.

"Refinancing has become clearly much more stable in recent months. We've been able to drastically reduce our liquidity costs this year," Nonnenmacher said, adding that the market now offered cheaper refinancing alternatives than SoFFin.

The Handelsblatt newspaper reports HSH was expecting to post a loss of one billion euros for this year and 700 million euros for 2010. But the CEO said the bank would bounce back by 2011 with profits in the hundreds of millions.

Under the European microscope

Money and a magnifying glass
Officials in Brussels are investigating the legitimacy of the HSH Nordbank bailoutImage: dpa Zentralbild

Earlier this year the bank received a three billion euro cash injection and 10 billion worth of guarantees from the states of Schleswig-Holstein and Hamburg after reporting a pre-tax loss of 2.8 billion euros for 2008. HSH Nordbank said it wanted to create a bad bank to protect it from further losses on troubled assets.

But last month the European Commission launched an enquiry into the bailout package on the grounds that it might violate EU rules.

Regulators say they are not convinced the type of troubled assets referred to by HSH Nordbank meet with EU guidelines. They are also concerned that the recapitalization plan might have granted the bank an unfair advantage over its rivals.

Schleswig-Holstein and Hamburg have an 85.8 percent stake in HSH Nordbank. The remaining shares are owned by savings banks and trusts advised by US investor JC Flowers.

tkw/AP/AFP/reuters
Editor: Sam Edmonds

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