The former HSH Nordbank is taking another important step in its long-term restructuring.
(Photo: dpa)
Frankfurt State bailouts, scandals, billions in losses for taxpayers: HSH Nordbank reliably provided bad news for years. But since the Landesbank was privatized in 2018 at the latest, the institute, which is now called Hamburg Commercial Bank (HCOB), has been going uphill. The bank is now seeing rising profits and has thicker capital buffers than most of its competitors.
According to information from the Handelsblatt, HCOB will reach another milestone in its renovation next Monday. The private banking association BdB will approve the inclusion of HCOB in the private deposit insurance at a board meeting in Brussels, said several people familiar with the subject. The HCOB fulfills the specified criteria. The HCOB and the BdB did not comment on this.
HSH was the first Landesbank ever to be privatized and is now majority owned by financial investors Cerberus and JC Flowers. A major point of contention during the sale was HSH’s membership in the public deposit insurance scheme.
In autumn 2018, the German Savings Banks and Giro Association (DSGV) and the BdB finally agreed on an interim solution. The HCOB should therefore remain in the public deposit insurance until the end of 2021 and then switch to the private banks, provided that the institute meets certain requirements – including capitalization, portfolio quality and profitability.
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The HCOB therefore describes 2021 as the last and decisive year of its transformation. Membership in the BdB deposit insurance is important because it also provides extensive insurance for corporate customers’ deposits. This is important to many companies, CEO Ermisch made clear in an interview with Handelsblatt last May.
Concentration on profitable niches in corporate banking
Ermisch has been leading the institute, which had speculated on ship financing in particular during the financial crisis, since 2016 and has rehabilitated the financial institution with a hard hand. The number of full-time positions has roughly halved since 2015. In an interview with Handelsblatt in the spring, Ermisch announced that the number of employees should drop to 750 to 800 by the end of the year. The balance sheet total is to fall to around 30 billion euros by then and then remain at this level for the time being.
Among other things, HCOB has shut down its involvement in medium-sized business. In addition to project financing, the bank focuses on profitable niches in corporate banking. This includes international payment transactions. In addition, the institute is active in the small-volume leasing and factoring business and intends to gradually expand this area. In addition, the bank continues to operate real estate and ship financing.
At the end of the first half of the year, HCOB reported a return on equity of 29 percent. The profit rose from January to June 2021 to 194 million euros after four million in the same period of the previous year. This corresponds to a return on invested capital of 19.8 percent. Ermisch raised the forecast for 2021 again by 115 million euros and now expects a net profit of more than 250 million euros.
In an interview with the Handelsblatt, the CEO emphasized that the high equity ratio “is good because of the planned transition to the BdB’s deposit guarantee system”. But it is also clear that the bank “should have a lower capital ratio in the medium term”. The capital requirements of the financial regulator are twelve percent.
Once the switch to private deposit insurance has finally been successful, Ermisch intends to focus increasingly on “strategic options” from 2022 onwards. “We are open to smaller acquisitions and also ready to participate in transformational deals if our shareholders so wish,” he said in May.
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