Investor Presentation - Hamburg Commercial Bank€¦ · Sustained positive development and key...

Investor Presentation

IFRS Group Result as at 30 September 2017

INVESTOR RELATIONS

HAMBURG, 29 NOVEMBER 2017

Business performance overview

29.11.2017 INVESTOR PRESENTATION 2

► Key milestone reached with the receipt of several binding offers for the Overall Bank on 27 October 2017 – solid basis for further negotiations

► Privatisation in context: Settlement of the second loss guarantee, transition from the public-sector to a private deposit guarantee scheme, and organisational and strategic realignment

Sustained positive development and key parameters reached in the privatisation process

Privatisation

Core Bank

► New business in line with the plan and increased by +11% year-on-year to EUR 6.4bn thanks to an expanded client base, with EUR 1.4bn attributable to new clients

► Focus on concluding new business with an appropriate risk/return profile in the Corporate Clients and Real Estate Clients business units

Wind-down portfolio1

► Wind-down portfolio reduced by EUR 7.4bn, significantly ahead of plan, NPE ratio down to 11.7% (NPE of EUR 8.2bn and performing exposure of EUR 5.8bn in the Non-Core Bank as at 30 September 2017)

► Strongly accelerated wind-down is a decisive factor in the privatisation process, supported by improved shipping market environment, the stringent conclusion of restructuring measures and the weak US dollar

Costs ► Administrative expenses down by 13% year-on-year, exceeding the plan target. CIR of 34% in the Group, but

overstated and not representative for the year as a whole

► Burden resulting from annual contributions to bank levy and deposit guarantee fund of EUR -41mn and guarantee fees of EUR -116mn

Capital and liquidity

► Capital and liquidity key performance indicators at a high level

► CET1 ratio at a high level of 19.2% (phase in), pro-forma excl. guarantee of 16.3%2 (phase in), the LCR stands at 200%

► Funding plan for 2017 already fulfilled in October

Bank’s positive business development provides a good basis for the successful continuation of the privatisation process

1 EaD in the Non-Core Bank; 2 Indicative, not taking into account the regulatory relief effect of the federal state guarantee via recognition as a securitisation transaction in the “Supervisory Formular Approach”

HSH Nordbank AG at a glance

3 29.11.2017 INVESTOR PRESENTATION

Other and Consolidation

► Segments not subject to a reporting requirement, strategic functions and Overall Bank positions at Group level

► Equity and liquidity portfolio (mainly liquidity reserve)

► Net income from restructuring and privatisation

► Strategic lending business of the market units and products and services provided by the Treasury & Markets and Transaction Banking divisions

► Main earnings components of the Transaction Banking product division allocated to the market units

► Current basis and organisational structure built thanks to major restructuring to create an efficient Core Bank with successful operations

Core Bank

Corporate Clients

EaD: EUR 14.3bn

Real Estate Clients

EaD: EUR 11.9bn

Shipping

EaD: EUR 6.0bn

Treasury & Markets

EaD: EUR 22.6bn

EaD: EUR 54.8bn Income before tax: EUR 609mn

NPE ratio: 1.5% Coverage ratio: 60%

EaD: EUR 8.4bn Net income b. t.: EUR 68mn

NPE ratio: 0% Coverage ratio: 0%

EaD: EUR 77.1bn

Income before tax: EUR 201mn

NPE ratio: 11.7%

Coverage ratio1: 55%

► Non-Core Bank includes non-strategic and non-performing assets

► Accelerated reduction in NPE to EUR ~3.8bn by the end of 2018

► At the moment, loans from Shipping (43%), Divestments (21%) and Real Estate Clients (19%) dominate the portfolio

► Comprehensive NPE cover thanks to adequate loan loss provisions and collateral values

Non-Core Bank

EaD: EUR 14.0bn Net income b. t.: EUR -476mn

NPE ratio: 59% Coverage ratio: 55%

TxB2

1 Coverage ratio is the ratio of loan loss provisions in the portfolio to NPE; 2 Transaction Banking is not an independent segment

►►► 1. Change in ownership

2. Financial key figures 9M 2017 – Core Bank

3. Financial key figures 9M 2017 – Group

4. Outlook for 2017

5. Appendix

29.11.2017

Agenda

INVESTOR PRESENTATION 4

P. 5

P. 10

P. 24

P. 37

P. 39

Several binding bids – key milestones reached on the path

towards privatisation

Change in ownership


2018

23.01.

Sales announcement

Until 31.03.

Indicative bids

Until 27.02.

Expressions of interest

2017

Federal states of Hamburg and Schleswig-Holstein are managing the sales process

Until 30.06.

Submission of extended indicative bids

As of April

Selection of bidders, access to data room, due diligence

Until 28.02.

Signing of purchase agreement

Until end of

October

Submission of binding bids

November to

February

Bidder selection Contractual negotiations

29.11.

Publication of Group result 9M 2017

“The federal states have reached another key interim milestone in the process associated with the privatisation of HSH Nordbank AG. In response to the sales announcement published on 23 January 2017, numerous market participants had expressed their interest in participating in the privatisation of HSH Nordbank. Based on the indicative offers received in the period leading up to 31 March 2017, the federal states selected several bidders to take part in the next phase of the process. Selected bidders had submitted extended, more detailed indicative offers by 30 June 2017. They received further-reaching information on HSH Nordbank; this included, by way of example, information on business figures and talks with the owners and experts from HSH Nordbank.

On the cut-off date of 27 October 2017, binding offers were made for HSH Nordbank from the group of bidders. Following an initial assessment, these offers provide a good basis for the continuation of the sales process.”

(Statement made by the federal states, Hamburg/Kiel, 29 October 2017)

Until closing

Viability review by European Commission

Regulatory law authorisations, etc.

Forecast

Non-Core Bank: Significantly reduced legacy burdens by

end of 2018 – Shipping NPE of around EUR 3bn expected

Change in ownership


– Simplified illustration –

Forecast

Non-Core Bank in EUR bn, EaD

Forecast

Assets -62% NPE -72%

End of 2018

-9.6

(-45%)

8.2

4.5

3.8

End of 2017

11.8

4.4

7.5

9M 2017

14.0

5.8

8.2

2016

21.4

7.8

13.6

Non-Core Bank | Shipping in EUR bn, EaD

5.8

9.9

0.9

End of 2017

0.6

5.2

1.6

6.0

9M 2017

5.1

2016

8.3

-4.1 (-41%)

3.6

End of 2018

2.8

Assets -64%

NPE -66%

0.9

Performing NPE

NPE Perfoming

~50% Loan loss provisions

► In 2017, reduction of EUR 9.6bn in total to EUR 11.8bn planned, thereof EUR 4.1bn in Shipping

► 90% of the NPE reduction for 2017 of EUR 6.1bn already implemented by 30 September 2017

► The non-strategic but performing part of the portfolio, which accounts for around EUR 4.4bn at the end of 2017, does not necessarily have to be wound down as things stand at the moment, now that the EU restrictions no longer apply

► Plans to reduce the NPE ratio to under 7% by the end of 2018 in a good economic environment thanks to active wind-down of the portfolio

Improvement in portfolio quality / NPE ratio in the Group in %

17.5%

2016

11.7%

9M 2017

< 10%

End of 2017

< 7%

End of 2018

Improved portfolio quality as basis for a successful

privatisation

Change in ownership


Wind-down strategies

► Recovery strategies – Return to performing classification, inter alia by

way of deferrals, debt waivers and increased collateral, as well as structured solutions with change of ownership for asset financing (in particular Shipping; as a result, contribution to necessary market consolidation at the same time)

► Active wind-down of the portfolio – Repayments, early repayments by

clients, realisation of collateral or sales of assets or loans on the market, incl. market portfolio. To date, EUR 2.6bn of the market portfolio has been sold / settled, of which EUR 2.1bn relieving the balance sheet as at 30.09.2017

1 Exchange rate effect resulting from change in EUR/USD assuming an exchange rate of 1.15 at the end of 2017; 2 The parties agreed to maintain secrecy with regard to the purchase price, closing for EUR 500mn after 30 September 2017

Objective: Significantly improved portfolio quality

Marked reduction in NPE / NPE ratio

Reduction in fundamental concentration risks

Reduced USD sensitivity

Measures largely P/L neutral

Further improvement in balance sheet and cost structure

Settlement of the guarantee earlier than planned – drop in

guarantee fees

Basis of the realignment for the planned privatisation

Wind-down strategy 2017/ 2018 in EUR bn, EaD

2017 2018

Strategic wind-down 3.6

Exchange rate1 0.6

Market portfolio 3.0

Strategic wind-down 6.0

Wind-down target 13.2 9.6 3.6

Market portfolio in EUR bn, EaD

Further wind-down

0.6

Sold legacy assets2

2.6

Market portfolio

3.2

Balance sheet relief of approx.

EUR 2.1bn by the end of Sept. 2017

Key management indicators consistent with objective

of strategic realignment

Change in ownership


Profitability

RoE before taxes

Capital1

CET1

Costs2

CIR

> 8%

~ 40 %

Objective for 2022

~ 15%

Credit quality

NPE ratio ~ 2 %

Total assets

in EUR bn ~60

1 Excl. guarantee; 2 Excl. other operating result

Objectives require strategic realignment of

the business model

► Positive business development in 2017 has

made the Bank much more robust

► Aim to free the Bank from further legacy

burdens (NPE)

► Reduced complexity and increased

efficiency thanks to monetisation of the guarantee

and the fact that EU restrictions will no longer apply

► Capital and liquidity as scarce resources – focus

on making business profitable as opposed to achieving purely volume-related growth

► Realignment to achieve the defined profitability

targets > 8%

~ 40%

~ 15%

~ 2%

~60

►►►

1. Change in ownership



4. Outlook for 2017

5. Appendix

29.11.2017

Agenda


P. 5

P. 10

P. 24

P. 37

P. 39

Core Bank results satisfactory

Financial key figures 9M 2017 – Core Bank

Total income / net interest income

in EUR mn

► Total income of the Core Bank up by 11% to EUR 886mn, incl.

realisation of hidden reserves of EUR 356mn (PY: EUR 160mn) through sales of promissory notes to cover the substantial losses resulting from legacy burdens in the Non-Core Bank

29.11.2017

Administrative expenses / CIR1

in EUR mn

Loan loss provisions in the lending business

(after guarantee and hedging effect of the credit derivative) in EUR mn

► Loan loss provisions after guarantee of EUR -7mn and before

guarantee of EUR -14mn in the Core Bank confirm good portfolio quality

► Net income before taxes up significantly year-on-year

► Substantial earnings contribution made by net interest income of EUR 666mn, burdens in the client segments due to temporary liquidity built up during the privatisation process

► RoE also overstated due to other effects

Net income before taxes / RoE before taxes2

in EUR mn

► Administrative expenses further decreased thanks to

implementation of the cost reduction programme as scheduled

► CIR improved due to operating success and reduced administrative

expenses, overstated in total income due to other effects

1 Calculated as the ratio of administrative expenses to total income, plus “other operating result”; 2 Calculated as the ratio of net income before taxes to average reported equity


Total income

Net interest income

24% 22%

-7

4 1

9M 2016 9M 2017

6 6 65 3 7

8 8 67 9 9 +11%

+24%

9M 2017 9M 2016

-2 4 1-2 6 4

-9%

9M 2016 9M 2017

6 095 3 2

+14%

9M 2017 9M 2016

33% 27%

Corporate Clients – Increased earnings

contribution and stable new business


1 EaD as at 31 December 2016; 2 After guarantee effects, foreign exchange result, hedging effect of credit derivative; 3 Represents the ratio of administrative expenses to total income plus

"other operating income”

29.11.2017

► Corporate Clients has increased the earnings contribution to EUR 71mn (PY: EUR 64mn)

► Good market penetration in a competitive environment that remains challenging resulting in new business of EUR 2.4bn, project business expected to pick up again in Q4

► Structured project financing in the rail traffic and data infrastructure sectors, as well as the wind energy segment concluded

► At the same time, stable risk requirements stringently adhered to in order to ensure consistently good portfolio quality

New business

in EUR bn

Overview of key figures

in EUR mn

Development in 2017 & strategic direction

9M 2016 9M 2017

EAD (EUR bn) 14.21

14.3

Total income 177 169

Loan loss provisions in the lending business2

-1 3

Administrative expenses -106 -99

Net income before taxes 64 71

CIR3 (in %) 59 57


New business by focus sector in %

Focus sectors

-3%

9M 2017

2.4

9M 2016

2.5 Energy & Utilities

Food Industry

Logistics & Infrastructure

Industry & Services

Trade

Wealth Management

Healthcare

Structured Finance

M&A


20%

Trade & Food Industry

24%

Energy & Utilities

35%

Healthcare 7%

Industry & Services

14%

Corporate Clients – Very solid portfolio quality


29.11.2017

► Project finance in the focus sector Energy & Utilities dominates the portfolio with EUR 4.5bn (32%)

► Domestic borrowers account for EUR 9.4bn (65%) and international, mainly European, borrowers for EUR 5.0bn (35%) of the financing transactions

► Good diversification across focus sectors

Portfolio by segment and region

in EUR bn, EaD/in %

INVESTOR PRESENTATION

16-18

0.04 0.03

13-15

0.20 0.04

10-12

0.19 0.19

6-9

2.60

0.37

2-5

6.44

0.83

0-1

3.01

0.42

non-guaranteed

guaranteed

Portfolio by rating category

EUR bn, EaD

Investment grade

Non-investment grade Default categories

14%

5% 5%

Segments

6% 2% 2% 2%

Energy & Utilities

Industry & Services

Trade & Food Industry


Healthcare

3%

Regions

14.3

65%

10%

Other

14.3

32%

23%

21%

9%

Germany

France

Belgium/Lux.

United Kingdom

Spain Italy

Other Europe

Other

► Corporate Clients portfolio of EUR 14.3bn EaD in total, of which EUR 10.7bn (74%) in investment grade and EUR 13.7bn (95%) in rating categories 0 to 9

► NPE ratio of 0.4% with an NPE of EUR 63mn

► Total loan loss provisions of EUR 58mn equivalent to a coverage ratio of 93%

12

∑ 10.69 ∑ 3.60 ∑ 0.06

Real Estate Clients – New business expanded

further at a high level


29.11.2017

► Real Estate Clients making a key earnings contribution with net income before taxes of EUR 103mn, reflecting the Bank’s good market positioning

► Despite ongoing intense competition, new business expanded to EUR 3.4bn

► Business in the Western German metropolitan areas and with international institutional investors pleasing, as in the previous quarters

► High market penetration maintained in the core region of Northern Germany

► Loan portfolio impacted slightly by high level of unscheduled principal repayments

+10%

9M 2017

3.4

9M 2016

3.1

New business

in EUR bn


in EUR mn


9M 2016 9M 2017

EaD (EUR bn) 12.51

11.9



-1 1


Net income before taxes 110 103

CIR3 (in %) 24 28


Development of existing and new business

in EUR bn

+16%

9M 2017

3.4

11.9

2016

4.6

12.5

2015

4.5

12.3

2014

4.1

11.6

2013

2.8

10.4

2012

2.6

10.3

2011

1.2

10.3

New business Existing business, EaD

13



Before portfolio reallocation After portfolio reallocation

Real Estate Clients – Good level of diversification

by segment and region


29.11.2017


in EUR bn, EaD/in %


23%

14%

Schleswig-Holstein

3%

Other Western Germany

Berlin

Hamburg

Other East Germany

Dusseldorf / Cologne

4%

Munich

Frankfurt

International

Other financings1

Stuttgart

Regions

11.9

28%

13%

11%

11%

9%

8%

8%

2%

4% 3%

3%

Segments

11.9

29%

27%

Residential

Retail

Office

► Real Estate portfolio of EUR 11.9bn EaD in total, of which EUR 6.5bn (55%) investment grade and EUR 11.8bn (99%) in rating categories 0 to 9

► NPE ratio of 0.3% with a fully guaranteed NPE of EUR 30mn


► EUR 6.0bn (50%) of the portfolio is attributable to financing in German metropolitan areas

► Portfolio shows good diversification in all segments

► Project development accounts for a share of < 20% of the total portfolio

► Continued expansion of transactions eligible for the cover pool


EUR bn, EaD

0.01

6-9

4.87

0.43

2-5

4.28

0.30

0-1

1.58

0.32

16-18

0.00 0.03

13-15

0.02 0.01

10-12

0.03

non-guaranteed

guaranteed

Investment grade


Operator-run properties

Other commercial business

Other financing

1 No regional allocation because no property collateral

14

∑ 6.49 ∑ 5.36 ∑ 0.03

Shipping – Selective new business, portfolio

reduced to current target level


29.11.2017

► Shipping is down on the prior year with net income before taxes of

EUR 7mn, falling net interest income from a lower receivables volume, loan loss provisions of EUR -12mn (with full balance sheet utilisation of the guarantee) and guarantee fees of EUR -13mn

► Given the ongoing challenging market environment on the whole, selective new business with international clients with good credit ratings

► The focus is on further developing and diversifying the portfolio

+118%

9M 2017

0.4

9M 2016

0.2

New business

in EUR bn


in EUR mn


9M 2016 9M 2017

EAD (EUR bn) 7.11

6.0

Total income 102 67


43 -12


Net income before taxes

87 7

CIR3 (in %) 40 48


Development of existing and new business

in EUR bn

-71%

9M 2017

0.4

6.0

2016

0.3

7.1

2015

0.8

8.4

2014

1.5

16.4

2013

0.9

15.3

2012

0.9

18.2

2011

1.2

20.4

New business Existing business, EaD

15



Before portfolio reallocation After portfolio reallocation

Shipping – Portfolio reflects slight market

recovery subject to a time lag


1 Excl. Germany, Scandinavia and Greece

29.11.2017 INVESTOR PRESENTATION

non-guaranteed

guaranteed


EUR bn, EaD

Investment grade



EUR bn, EaD/in %

► EUR 3.9bn (66%) of loans attributable to international and EUR 2.0bn (34%) to domestic shipping clients

► Container vessels account for a significant proportion (EUR 1.9bn, or 32%) of the Core Bank’s Shipping portfolio, but the proportion is significantly lower compared with 2015 (44%)

► The average age of the ships is 7.3 years

► Number of financed ships comes to 678

► Shipping portfolio of EUR 6.0bn EaD in total, of which EUR 0.8bn (14%) in investment grade and EUR 3.3bn (55%) in rating categories 0 to 9

► NPE ratio of 12.5% with an NPE of EUR 748mn, of which EUR 533mn guaranteed


16

∑ 0.82 ∑ 4.41 ∑ 0.75

16%

Germany

Greece

5% 2% 2%

Segments

6.0

32%

29%

19%

4%

16%

18%

20%

34%

6.0

Regions

Middle East/ Africa

5% The Americas

Scandinavia

Central and Eastern Europe

Asia/Pacific1

Western Europe

Container vessels

Bulkers

Tankers

Other ships

Other financing

0.25

13-15

0.53

0.22

16-18

0.75

10-12

0.40 0.52

6-9

1.43

1.06

2-5

0.46

0.19

0-1

0.09 0.08

Shipping – Nearly 90% performing assets



Other financings1

0.3

18% 82%

Other ships

0.9

6% 94%

Tankers

1.2

4%

96%

Bulkers

1.7

31%

69%

Containers

1.9

4%

96%

non-performing performing

1 Incl. working capital finance

17

Portfolio by performing and non-performing exposure in EUR bn, EaD

Shipping

Core Bank

6.0

0.7 (13%)

5.2 (87%)

New Post- Panamax

Super-Post- Panamax

Post- Panamax

Panamax

Sub-Panamax

Handymax

Handy

Feeder / Feedermax

Containers

1.9

21%

23%

28%

11%

8%

6% 2%

1%

Capesize

Panamax

Handymax

Handy

Bulkers

1.7

15%

21%

39%

25%

Chemicals

VLCC

Suezmax

Aframax

Panamax

Handy

Tankers

1.2

11%

24%

19%

15%

5%

26%

Diversification within the three large ship classes in EUR bn, EaD

8.0 / # 199 6.2 / # 191 7.3 / # 176 7.7 / # 112 n.a. 7.3 / # 678

Average age / number of ships


Shipping market – containers: Increasing demand

supports sustainable stabilisation


Trend reversal towards a demand-dominated market becoming more stable

Positive supply-demand trend Increasing market consolidation

Risks remain as to the sustainability of the recovery – on the whole, however, a trend reversal appears

increasingly likely

G6 Ocean

3

2M CKYHE

Alliances1 previously

THE Ocean 2M

Alliances1 today

Source graphic on the left: Clarksons (Q3 2017); 1 This shows a selection of the members of each of the various alliances

Containers – transportation supply/demand growth (%)

0 %

1 %

2 %

3 %

4 %

5 %

6 %

7 %

8 %

9 %

2013 2016 2012 2015 2014 2017E 2018E 2011

Growth in demand Growth in supply


Positive Shipping market development favours

accelerated portfolio wind-down


Portfolio-weighted charter rates & second-hand prices ACTUAL Lowest historical value

Bulkers | Charter rates (in USD/day) and second-hand prices (in USD mn)

Container vessels | Charter rates (in USD/day) and second-hand prices (in USD mn)

Tankers | Charter rates (in USD/day) and second-hand prices (in USD mn)

► Since the beginning of 2017,

significant marked recovery in

charter rates, and in second-hand prices subject to a time lag, has been continuing. Causes:

Increasing demand

Scrapping of shipping capacities

Consolidation of shipping lines and reduction of alliances

► Higher market liquidity and more positive outlook favour

restructuring measures and active portfolio sales

► Up until the privatisation process has been concluded (closing) at the end of 2018, the improved market environment will be exploited in order to reduce Shipping legacy burdens in the Non-Core Bank to EUR 2.8bn (NPE)

7.500

10.000

12.500

15.000

17.500

20.000

12/15 06/16 12/16 06/17 12/17

20

25

30

35

40

45

50

12/15 06/16 12/16 06/17 12/17

15.000

20.000

25.000

30.000

12/15 06/16 12/16 06/17 12/17

4.000

6.000

8.000

10.000

12.000

12/15 06/16 12/16 06/17 12/17

25

30

35

40

45

50

12/15 06/16 12/16 06/17 12/17

12

14

16

18

20

12/15 06/16 12/16 06/17 12/17

Treasury & Markets – Funding above plan, results

characterised by realisation of hidden reserves


29.11.2017

► Treasury & Markets net income before taxes of EUR 428mn

boosted by the realisation of hidden reserves of EUR 356mn as planned (PY: EUR 160mn) resulting from the sale of promissory notes to optimise the cover pool for public-sector Pfandbriefe and compensate for the losses in the Non-Core Bank

► Increase in exposure in the first nine months of 2017 as part of liquidity management

► Funding plan for 2017 already fulfilled in full as at 30.09. 2017

► Deposit business with institutional clients at a high level

► Liquidity ratios well above regulatory requirements: LCR 200%, NSFR 115% and LiqV of 1.83


in EUR mn


9M 2016 9M 2017

EAD (EUR bn) 18.01

22.6



0 1


Net income before taxes

271 428

CIR3 (in %) 22 13


► Development, sales and distribution of products for risk and investment management

► Support for savings banks, municipal clients and financial institutions

► Capital markets financing: arrangement of promissory notes for Corporate Clients, municipalities and federal states

► Service provider for all business units

► Central operational management of liquidity and market price risks of the Bank's positions

► Refinancing of the Bank

► Implementation of measures to strengthen capital

Treasury & Markets

1EaD as at 31 December 2016;; 2 After guarantee effects, foreign exchange result, hedging effect of credit derivative; 3 Represents the ratio of administrative expenses to total income plus "other operating income”

Funding

► Regular issuer of Pfandbrief benchmark bonds

► Strengthening of primary USD long-term funding using the ABF platform

Core Bank increases new business in a challenging

environment by 11% to EUR 6.4bn



New business

in EUR bn

+11%

9M 2017

6.4

9M 2016

5.8

Breakdown of new business1

in EUR bn

Shipping

0.4 0.2

Real Estate Clients

3.4

3.1

Corporate Clients

2.4 2.5

9M 2017

9M 2016

1 New business 9M 2017, plus EUR 0.24bn Treasury & Markets; 2 Cumulative on-balance sheet new business since 2011 and currently still in the Core Bank portfolio

New business / NPE since 20112

Treasury & Markets

0.6

Shipping 1.6

Real Estate Clients

9.1

Corporate Clients 8.7

Total 20.1

0.0

94.1

0.0

25.0

119.1

NPE

in EUR mn

0.6%

NPE ratio in new business

0.3%

0.0%

5.7%

► New business of EUR 20.1bn concluded since 20112

► NPE ratio in new business 0.6%

► Shipping main driver with an NPE ratio of 5.7% in new business

0.0%

► The focus is on generating new business with an appropriate risk/return profile in a market environment that remains challenging

► New business has shown encouraging development, at EUR 6.4bn, and is in line with expectations

New business2

in EUR bn

Thereof almost EUR 1.4bn with new clients

Core Bank with good NPE ratio of 1.5% thanks to

solid portfolio quality


29.11.2017

► Core Bank portfolio of EUR 54.8bn EaD1 in total, of which EUR 40.2bn (73%) in investment grade and EUR 51.1bn (93%) in rating categories 0 to 9

► NPE volume of EUR 842mn corresponds to an NPE ratio of 1.5%

► Shipping dominates NPE with a share of EUR 748mn/89% and corresponds to an NPE ratio of 12.5%

► Coverage ratio of 60% in the Core Bank at high level

Core Bank portfolios by rating category1

EUR bn, EaD


0.6

13-15

0.6

6-9

0.7

9.1

1.9

2-5

13.6

1.3

0-1

23.0

2.2

16-18

0.3 0.8

10-12

0.7

non-guaranteed guaranteed

Investment grade


2 1 55 3 3

NPE Core Bank

Shipping 748

Real Estate Clients

30 30

Corporate Clients

63 28

Other 1

NPE by client division

in EUR mn, EaD

non-guaranteed

guaranteed

70% covered by the guarantee

60% coverage ratio

22

842

∑ 40.2 ∑ 13.8 ∑ 0.8

NPL ratio 1.5%

Existing client business

Real Estate Clients

Shipping

37%

Corporate Clients

19%

45%

∑ EUR 32.2bn EaD

1 Incl. EUR 22.6bn EaD Treasury & Markets

►►►




4. Outlook for 2017

5. Appendix

29.11.2017

Agenda


P. 5

P. 10

P. 24

P. 37

P. 39

Group net result before tax satisfactory on the whole

Financial key figures 9M 2017 – Group

in EUR mn, IFRS Core Bank Non-Core Bank

Other and

Consolidation Group

9M 2016 9M 2017 9M 2016 9M 2017 9M 2016 9M 2017 9M 2016 9M 2017

Net interest income 537 666 20 -4 -54 26 503 688

Net commission income 57 58 18 19 -6 -25 69 52

Result from hedging 0 0 0 0 -2 -14 -2 -14

Net trading income 145 111 -38 35 -41 13 66 159

Net income from financial investments1

60 51 36 11 -4 65 92 127

Total income 799 886 36 61 -107 65 728 1,012


41 -7 88 -318 20 3 149 -322

Administrative expenses -264 -241 -181 -148 24 23 -421 -366

Other operating income 3 12 51 39 17 26 71 77

Expenses for bank levy and deposit guarantee fund

-30 -25 -16 -9 -10 -7 -56 -41

Net income before restructuring and

privatisation 549 625 -22 -375 -56 110 471 360

Net income from restructuring and privatisation 0 0 0 0 -118 -43 -118 -43

Expenses for government guarantees3

-17 -16 -153 -101 0 1 -170 -116

Net income before taxes 532 609 -175 -476 -174 68 183 201

Income taxes -20 -25

Net income after taxes 163 176

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 payments

29.11.2017 24 INVESTOR PRESENTATION

Pro-forma, not taking into account the regulatory relief effect

of the guarantee

Core Bank with decisive contribution to positive

Group net result – CET1 ratios at high level


RWA

in EUR bn

► RWA2 cut by 17% since the end of 2016 to EUR 23.8bn thanks to

wind-down measures, reduction in market price risks and a weaker US dollar

29.11.2017

-17%

Other & Consolidation

Non-Core Bank

Core Bank

9M 2017

23.8

1.4 6.1

16.3

2016

28.6

1.5 8.3

18.7

1 Calculated as the ratio of net income before taxes to average reported equity capital; 2 After guarantee


CET1 ratio (phase in)

in %

► Core Tier 1 capital ratios improved, largely due to further

RWA reduction

► Pro-forma capital ratio excl. guarantee introduced in preparation for privatisation at a high level of 16.3%

25

+5.1 pp

9M 2017

19.2

2016

14.1

9M 2017

16.3

Net income and RoE1 before taxes

in EUR mn;

5.0% 5.3%

RoE

2 011 8 3

+10%

9M 2017 9M 2016

► Group generates net income before taxes of EUR 201mn (PY: EUR 183mn) and exceeds expectations, based on total income of

EUR 1,012mn and net interest income of EUR 688mn; Core Bank up considerably year-on-year (EUR 532mn) above plan with net income of EUR 609mn; Non-Core Bank reporting structurally negative net income before taxes of EUR -476mn as expected

6 095 3 2

-4 7 6-1 7 5

6 8

-1 7 4

+14%

9M 2017 9M 2016

Distribution of net income before taxes

in EUR mn Core Bank Non-Core Bank Other & Consolidation

Systematic deleveraging improves balance sheet

structure – comfortable liquidity ratios


29.11.2017

Leverage ratio3

in %

+0.9 pp

9M 2017

7.8

2016

6.9

Bail-in ratio2

in %

► Bail-in ratio of around 10.8% (before senior unsecured) above the

bail-in threshold of 8%

► Maturity of subordinated capital of EUR 0.9bn in Feb. 2017 reduces the bail-in ratio as against 31 December 2016

-0.2 pp

9M 2017

10.8

2016

11.0

10.9

0.1

► Liquidity positions significantly above the minimum regulatory

requirements

► Liquidity ratio pursuant to the German Liquidity Regulation (LiqV) of 1.83 (31 Dec. 2016: 1.92)

LCR / NSFR

in %

2 002 2 9

1 1 51 1 1

+4 pp

-29 pp

2016

► Leverage ratio comes to a very solid 7.8% and takes into account

the increase in regulatory capital


Total assets1

in EUR bn

► Total assets down due to reduction in non-strategic and non-

performing portfolio in the Non-Core Bank, slight increase in the Core Bank due to expansion of cash reserve

2 2

5 14 8

-9%

76

16

Core Bank 84

14 10

9M 2017

Non-Core Bank


2016

Guarantee buffer for the residual

reference portfolio

1 Segment assets; 2 If there are 8% bail-in liabilities in relation to total assets before senior unsecured (bail-in threshold), an application for additional support (up to 5% of total assets) can be submitted to the European resolution fund, but there is no legal entitlement to this (see also SAG/SRM Regulation), see also page 33; 3 Not in-period: regulatory disclosure pursuant to the CRR

LCR NSFR

26

9M 2017

Net interest income from Core Bank’s

operating business above plan


Net interest income

in EUR mn

► Net interest income within the Group of EUR 688mn with operating interest income that is slightly higher than expected based on a

lower average interest-bearing receivables volume of EUR 33.9bn as planned (EUR 37.0bn as at 31 Dec. 2016)

► Net operating interest income of EUR 364mn in the Core Bank from client business slightly down on the previous year (EUR 371mn);

burdens due to temporary high levels of liquidity built up during the privatisation process

► Other effects of EUR 287mn, also due to the planned realisation of hidden reserves from sales of promissory notes. This means that the sales

planned for the year as a whole had already been realized in full by 30 September 2017

► Average interest-bearing receivables volume in the Non-Core Bank has fallen significantly from EUR 7.1bn in the previous year

to EUR 4.2bn, with a resulting drop in net operating interest income to EUR 37mn

Net operating interest income generated by

client business

in EUR mn Non-Core Bank Core Bank

Σ 442

Total Bank


Σ 401

3 6 43 7 1

3 77 2

-2%

9M 2017 9M 2016

2 8 7

4 01

+37%

Other effects

Operating interest income in client business

9M 2017

688

9M 2016

503

Net commission income and net trading income

benefit from operating client business


1 Excl. hedge result; 2 Incl. result from financial investments accounted for under the equity method

Net commission income

in EUR mn

Net income from financial

investments2

in EUR mn

Net trading income1

in EUR mn

5 26 9

9M 2016

-25%

9M 2017

1 2 79 2

+38%

9M 2017 9M 2016

1 5 9

6 6

+141%

9M 2017 9M 2016

► Net commission income of EUR 52mn down on previous year

and driven by the Core Bank, with EUR 58mn

► Drop due to the premium expense for the synthetic securitisation transaction executed in Q4 2016

► Cross-selling result showed positive development and exceeds

the pro rata plan

► Net income from financial investments2 came to EUR

127mn and mainly includes gains realised on disposals (EUR 58mn), effects resulting from the planned realisation of hidden reserves (EUR 51 mn) and increases in value in the credit investment portfolio (EUR 25mn)

► Operating successes in the client business (EUR 26mn), the foreign exchange result (EUR 62mn) and increases in value in the Credit Investment Portfolio (EUR 51mn), as well as valuation effects relating to derivatives (EUR 38mn) had a positive impact on net

trading income

► Opposite effect from valuation of basis swaps (EUR -20mn)

► In line with the EU decision of 20 September 2011, the Bank is involved exclusively in client trading (no proprietary trading)


Loan loss provisions for legacy portfolio items

in the Non-Core Bank remain at a high level



-3 2 2

1 4 9

9M 2017 9M 2016

29

-3 2 2


Non-Core Bank

Core Bank

Loan loss provisions in lending business

Gross compensation incl. foreign exchange result, hedging effect of credit

derivative

+134

Loan loss provisions in lending business

before effects relating to the guarantee

-456 -14

-445

3

Components of loan loss provisions

in EUR mn

Loan loss provisions in the

lending business1

in EUR mn

1 After effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative, i.e. the separate income statement item “hedging effect of credit derivative” of EUR -104mn has been recognised in the loan loss provisions of EUR -322mn

► Loan loss provisions before guarantee effects and foreign exchange result came to EUR -456mn (PY: EUR -966mn), of which EUR -14mn is attributable to the Core Bank and EUR -445mn is attributable to the Non-Core Bank, and of which EUR -514mn is guaranteed and EUR 58mn is non-guaranteed

► Effects of the guarantee due to gross compensation of EUR 134mn, incl. foreign exchange result and hedging effect of the credit derivative. The loan loss provisions recognised once again for legacy burdens, in particular, were already no longer compensated for in full back in the first quarter of 2017 due to the full balance sheet utilisation of the second loss guarantee

► Income statement disclosure after guarantee effects of EUR -322mn (PY: EUR 149mn)

High loan loss provisions for legacy burdens from

shipping and energy loans in the Non-Core Bank


Loan loss provisions1 by business unit

in EUR mn


1 Before effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative

► Loan loss provisions in the lending business of EUR -456mn before foreign exchange effects and compensation, mainly driven by the legacy burdens from ship loans of EUR -329mn and a small number of individual commitments relating to the Corporate Clients division (Energy in Poland, Italy) in the Non-Core Bank from the years before 2009

► Reversals in the Real Estate Clients portfolio of EUR 75mn (thereof EUR 73mn Non-Core Bank, EUR 2mn Core Bank) that are based on loan repayments and improved risk assessments

-4 4 5

Core Bank

Non-Core Bank


-456 -14

3

-2 9 9

-2 1 9

7 3

-3 0

Other1

4

1 3

Corporate Clients

-206

13

Real Estate Clients

75

2

Shipping

-329

Core Bank Non-Core Bank


Administrative expenses markedly reduced by 13%


1 The cost-income ratio represents the ratio of administrative expenses to total income, plus “other operating result”

29.11.2017

Net income from restructuring and privatisation

in EUR mn

Administrative expenses

in EUR mn, CIR1

► Personnel expenses reduced by 11% from EUR -188mn (PY) to

EUR -167mn due to further reduction in headcount

► Operating expenses of EUR -184mn (PY: EUR -183mn),

savings by reducing building and personnel-related operating expenses. Offset by IT project costs, strategic projects and ongoing high costs incurred in implementing regulatory and accounting requirements

► Depreciation/amortisation came to EUR -15mn (PY: EUR -

50mn), with the previous year burdened by unscheduled write-downs of property, plant and equipment at subsidiaries

► CIR1 of 34% (PY: 53%) overstated due to other effects in total

income

-1 6 7-1 8 8

-1 8 4-1 8 3

-421

-50

Depreciation/ amortisation

Operating expenses

Personnel expenses

9M 2017

-366 -15

9M 2016

► Restructuring result burdened by restructuring and

privatisation expenses (inter alia for advisory services, data rooms and audit activities). Considerable provisions put pressure on the result in the previous year

-4 3

-1 1 8

-64%

9M 2017 9M 2016


53% 34%

31

3,388

2009

3,610

2008

4,325

-55%

1,964

2016

2,164

2015

2,384

2014

2,579

2013

2,834

2012

3,123

2011

3,684

2010

Employees

Number of full time employees

9M 2017

NPE ratio down by 6 percentage points in 2017 to 11.7%,

portfolio adequately secured


1 Loan loss provisions before compensation, incl. SLLP and GLLP

► Solid coverage ratio of 55%, 62% in Shipping

► Total coverage > 100% including collateral

► NPE reduced from EUR 14.6bn (31 December 2016) to EUR 9.1bn (EUR 77.1bn total EaD)

► NPE ratio reduced from 17.5% (31 December 2016) to 11.7%

► NPE ratio in Shipping of 49% in the Group, 86% in the Non-Core Bank and 13% in the Core Bank

► NPE ratio is 1.5% for the Core Bank


Non-Core Bank

8.2

5.1

1.6

1.0

0.3

Core Bank

0.8

0.7 0.1

Shipping Real Estate Corporate clients Other

NPE by asset class in EUR bn

1.5% 59%

NPE ratio

∑ EUR 9.1bn

55% Coverage ratio

Collateral (including Basel II cash flows)

Risk coverage in EUR bn

Shipping

Real Estate

Corporate Clients

Other

Risk coverage

9.8

5.0

4.8

Total Bank NPE

9.1

5.9

(65%)

1.6

(18%)

1.1

(12%)

0.5

(5%)

60% 55%

Coverage ratio

Risk coverage before senior unsecured IFRS, in EUR bn, EaD

Loans and advances to customers

Loans and advances to credit institutions, liqui buffer etc.

Bilanzsumme

76.5

42.7

33.8

21.9

+141%

Loan loss provisions/

55% coverage ratio

Collateral values (incl. Basel II cash flow)

Liable capital

European resolution fund1

Risk coverage

5.0

4.8

8.3

3.8

NPE

9.1

Liable Capital

Subordinated capital

Silent participations

Reported equity capital2

8.3

1.1

2.1

5.1

Other bail-in eligible liabilities (incl. senior unsecured)

1 If there are 8% bail-in liabilities in relation to total assets before senior unsecured (bail-in threshold), an application for additional support (up to 5% of total assets) can be submitted to the European resolution fund, but there is no legal entitlement to this (see also SAG/SRM Regulation); 2 Reported equity capital adjusted to reflect “Other Comprehensive Income” items (OCI); 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

► Bail-in ratio of around 10.8% based on reported equity2, silent participations and subordinated capital

► The bail-in ratio is expected to be > 8% in the future, too

► The calculation of the bail-in ratio is based on the BRRD definition of a threshold (8%) for a drawdown from the resolution fund


Bail-in ratio 10.8%

10.8% bail-in ratio and extensive risk coverage thanks to

loan loss provisions, collateral and liable capital Financial key figures 9M 2017 – Group

Liable capital IFRS, in EUR bn

Pro-forma excluding the

guarantee2

► Capital ratios characterised by considerable RWA reduction

that is above plan (EUR -4.8bn as against end of 2016) and the

active management of foreign exchange risks and a US dollar that

is weaker than expected

► Part of the regulatory burden for the federal state guarantee

is reflected as a deduction in regulatory equity capital. The

capital deduction item amounts to approx. EUR 0.2bn as at

30 September 2017 (31 December 2016, approx. EUR 0.6bn)

► SREP requirements in 2017: Regulatory early warning

threshold (P2G) of 10.5% (phase in), consisting of an SREP

requirement of 8.9% (P2R) and early warning buffer of 1.6%

CET1 ratio at high level even excluding

guarantee, at 16.3%


29.11.2017

CET1 ratios

in %


9M 2017

18.8

19.2

2016

13.4 14.1

2015

11.6 12.3

2014

11.3

12.6

2013

11.8

13.1

Capital ratios In-period1, in %

3 8 4 0 3 7 2 9 2 4

RWA after

guarantee

76

2016

84

2015

97

2014

110

2013

109

RWA, total assets, CET1 capital in EUR bn

CET1 ratio (fully loaded)

CET1 ratio (phase in)

SREP requirement

2017

10.5

8.9

1.6

CET1 ratio phase in 9M 2017

16.3


18.9

CET1 ratio fully loaded

9M 2017

18.8


19.2

31.6

24.8

20.6 18.7 19.7

Total ratio

4.6

Total assets

CET1 capital 4.0 4.6 4.0 3.8

2 9

9M 2017

Pro forma RWA before

guarantee

1 In-period: ceteris paribus calculation taking full account of the balance sheet amounts as at the reporting date. Not in-period: regulatory disclosure pursuant to the CRR, see Financial Information as at 30 September 2017; 2 Pro-forma, not taking into account the regulatory relief effect of the guarantee (recognition as a securitisation transaction)

In-period1

Not in-period, acc. to CRR1

Solid key financials



Group net result before taxes of EUR 201mn (PY: EUR 183mn).

Core Bank pre-tax income of EUR 609mn satisfactory (PY: EUR 532mn).

New business of EUR 6.4bn (PY: EUR 5.8bn) shows ongoing positive development

NPE ratio of 1.5% for Core Bank and 0.6% for new business1

CET1 ratios at a high level: Phase in 19.2%, fully loaded 18.8% and without guarantee 16.3%2 (phase in)

Solid leverage ratio3 of 7.8%

Liquidity ratios: LCR 200%, NSFR 115%; Funding plan for 2017 already fulfilled in October

1 Cumulative on-balance sheet new business since 2011 and still currently in the portfolio; 2 Indicative, not taking into account the regulatory relief effect of the guarantee; 3 Not in-period, regulatory disclosure pursuant to the CRR

Ongoing positive business development in the run-up to the change in ownership

►►►




4. Outlook for 2017

5. Appendix

29.11.2017

Agenda


P. 5

P. 10

P. 24

P. 37

P. 39

2017 expected to bring positive Group result before

taxes at prior-year level

Outlook for 2017

The outlook and the assumption of the Bank as a going concern for accounting and measurement purposes are based on assumptions set out in the Financial Information as at 30 September 2017 and the Interim Report as at 30 June 2017

29.11.2017

► The next few months will be influenced to a considerable degree by the ongoing privatisation process. The Bank is well prepared and can

benefit from a macroeconomic environment that is favourable overall as it embarks on this decisive phase of privatisation. As things stand at the moment, the Bank expects a purchase agreement on the sale of HSH Nordbank as a whole to be concluded by 28 February 2018. The federal state owners and the Bank believe that the binding bids provide a solid basis for negotiation and show that the potential new owners are looking at the Bank and its potential from what is clearly a forward-looking perspective

► Challenges regarding the future development of HSH Nordbank mainly result from:

a more adverse development of the privatisation process, even though this is becoming less likely

potential setbacks relating to the recovery in container vessels and bulkers and a further deterioration in the tanker segment

the low interest rate level and environment of intense competition

volatility in the financial and currency markets (particularly US dollar)

changes in the assessments by the rating agencies

constantly rising requirements imposed by the European Banking Authority

► In connection with the privatisation process, there are other risks, in addition to the general challenges associated with this sort of process, in particular risks relating to the viability review to be performed by the European Commission, the transition from the public-sector to a private deposit guarantee scheme, parliamentary involvement and the ownership control procedure implemented by the supervisory authorities. In this extremely complex privatisation process, the Bank will continue to do its utmost to support its owners, who are responsible for the sales process. The Bank’s aim is to bring a change in ownership that makes sense from a financial perspective to a successful conclusion

► For 2017 as a whole, the Bank is confirming all of the forecasts for the relevant key management indicators set out in the interim report as

at 30 June 2017 based on the planned results that have already been achieved by 30 September 2017. As far as results at Group level are concerned, the Bank still expects – subject to any conclusions from the privatisation process not known today – to achieve a positive net

income before taxes at prior-year level. The environment will remain challenging


►►►




4. Outlook for 2017

5. Appendix

29.11.2017

Agenda


P. 5

P. 10

P. 24

P. 37

P. 39

Forecast

Non-Core Bank portfolio already reduced by 35% in 2017 –

negative impact due to loan loss provisions and guarantee

fees

Financial key figures 9M 2017 – Non-Core Bank

29.11.2017

Net income before taxes:

in EUR mn

Portfolio by asset class in %

Asset reduction and NPE ratio

EUR bn, EaD


Portfolio by currency in %

► As expected, net income before taxes of EUR -476mn

structurally negative (PY: EUR -175mn) due to substantial loan loss provisions and guarantee fees that are no longer offset in full by the guarantee

► Loan loss provisions after guarantee and hedging effect of the credit derivative of EUR -318mn (PY: EUR 88mn).

► Active measures contributing to targeted reduction in legacy burdens

► NPE ratio in the Non-Core Bank is very high for structural reasons

► Coverage ratio of 55% reflects solid risk coverage

► Coverage ratio of 62% in Shipping

► Portfolio largely (51%) denominated in USD

► Shipping loans account for a large part of the USD exposure

► Shipping dominates the portfolio at 43%/EUR 6.0bn (Average age: 8.6; number of ships: 467)

► Divestments account for the second-largest share with 21% or EUR 2.9bn

-4 7 6

-1 7 5

9M 2017 9M 2016

-35%

(-7.4)

-32%

(-10.3)

2017

11.8

9M 2017

14.0

2016

21.4

2015

31.7

Aviation 3

Corporate Clients

15

Real Estate Clients

19

Divestments 21

Shipping

43 51

EUR 33

USD

GBP

9

Other

7

58.8% 63.6%

Reference portfolio covered by the guarantee

reduced to EUR 19.2bn

Exposure breakdown/guarantee

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 bn, EaD

Distribution of exposure at default (EaD) within the Group

in %/in EUR bn, EaD

Other & Consolidation1

8.2 0.1

Aviation

0.1 0.3

Divestments

0.2 2.7

11.5 3.0

Corporate Clients

12.9 3.5

Total Bank

77.1

57.9

19.2

8.2 3.8

Shipping

1.4

21.2

Treasury & Markets

Real Estate Clients

Non-guaranteed Guaranteed

24.9% 21.4% 20.9% 68.4% 6.3% 65.9% 1.4% 92.6%

Other & Consolidation1

8.4

Aviation

0.4

Divestments

2.9

Treasury & Markets

22.6

Shipping

6.0 6.0

Real Estate Clients

2.6 11.9

Corporate Clients

2.1 14.3

Total Bank

77.1

8.4

14.0

54.8

100.0% 21.3% 18.8% 15.5% 3.8% 0.5% 10.8% 29.3%

29.11.2017

Non-Core Bank Other & Consolidation Core Bank


16.4

14.5

11.9

22.6

2.9 0.4 8.4

16.4

14.5

11.9 22.6

2.9 0.4 8.4

Core Bank with good risk profile - Non-Core Bank

bundles legacy burdens

Loan loss provisions/guarantee

1 Deviations possible due to rounding, portfolio prior to consolidation incl. loan loss provisions for contingent liabilities/securities in the reference portfolio excl. compensation

29.11.2017

Non-Core Bank

Total loan loss provisions1, in EUR bn

EaD distribution, in EUR bn

Core Bank

Total loan loss provisions1, in EUR bn

EaD distribution, in EUR bn

0.02 0.06 0.00 0.50 0.43

54.8

7.5 (14%)

47.3 (86%)

Total Core Bank

Treasury & Markets

22.6

1.4 (6%)

21.2 (94%)

Shipping

6.0

3.1

(52%)

2.8

(48%)

Real Estate Clients

11.9

1.1

(9%)

10.8

(91%)

Corporate Clients

14.3

1.9

(13%)

12.5

(87%)

Total Non-Core Bank

14.0

11.6 (83%)

2.4 (17%)

Aviation

0.4

0.3

(66%)

0.1

(34%)

Corporates

2.1

1.6

(79%)

0.4

(21%)

Divestments

2.9

2.7

(93%)

0.2

(7%)

Real Estate Clients

2.6

1.9 (74%)

0.7 (26%)

Shipping

6.0

5.0 (85%)

0.9 (15%)

4.51

0.43 0.73 3.18 0.13 0.04

Guaranteed Non-guaranteed

Guaranteed Non-guaranteed


Reference portfolio and guarantee components

Guarantee

Core Bank Non-Core Bank Group

Reference portfolio

(in EUR bn, EaD/percentage distribution) 7.5 / 39% 11.6 / 60% 19.2

NPE in the reference portfolio

(EUR bn) 0.6 6.9 7.5

Loan loss provisions

1

in the reference portfolio

(EUR bn) 0.2 4.0 4.3

RWA after guarantee

(EUR bn/percentage distribution) 0.5 / 13% 3.3 / 87% 3.8

Expenses for government guarantees

(In EUR mn/percentage distribution) -16 / 14% -101 / 87% -116

3


1 Before consolidation, incl. loan loss provisions on contingent liabilities/securities in the reference portfolio excl. compensation; 3 Thereof EUR 1mn in Other & Consolidation

► At EUR 11.6bn, the vast majority (60%) of the reference portfolio of EUR 19.2bn in total that is secured by the guarantee is attributable to the Non-Core Bank. 39% is attributable to the Core Bank

► 83% of the non-performing exposure of EUR 9.1bn is covered by the guarantee

► The portfolio share with the highest risk is in the Non-Core Bank, with RWA of EUR 3.3bn

► The guarantee fees are distributed on the basis of regulatory capital committed, with 87% attributable to the Non-Core Bank and 14% to the Core Bank3

Settled losses

Losses to be settled

Sub-senior tranche equity capital deduction item

Senior Tranche

9M 2017

7.0

2.1

4.1

0.2

Balance sheet and regulatory utilisation of guarantee –

potential for settlement of further losses of EUR 4.1bn

Guarantee

1Regulatory surcharge for foreign exchange risk, residual amount and other; 2 Incl. credit risks under partial guarantee 2 (credit derivative) and excl. losses to be settled; 3 Sub-senior tranche is independent of the consideration of the regulatory surcharge

Guarantee structure

in reference portfolio

in EUR bn

Balance sheet breakdown

in EUR bn

Regulatory breakdown

in EUR bn

3.2

Second loss tranche:

EUR 10bn

federal state guarantee

13.2

Settled losses


Gross compensation, loan loss provisions2

Non-compensated loan loss provisions

Senior Tranche

9M 2017

7.0

2.1

4.1

0.1

2016

5.5

1.6

6.0

0.1

Settled losses


Expected Loss

Unexpected Loss

Regulatory surcharge1

Senior Tranche

9M 2017 2016

5.5

1.6

4.8

1.2 0.1

0.6 0.3

0.8

3.0

2.1

7.0

0.2

43 29.11.2017 INVESTOR PRESENTATION

First loss piece

Free capacity loan loss provisions

► Since Q4 2016, creation of a so-called sub-senior tranche within the framework of the regulatory presentation. The senior tranche is split into two sub-tranches. The sub-senior tranche is assigned a risk weight of 1.250%, is reduced by offsettable loan loss provisions that have not been compensated for and is deducted from the regulatory equity capital (EUR 0.2bn as at 30 September 20173)

► Also since Q4 2016, the full loss settlement of the loan loss provisions that have been booked out, but not yet settled with the guarantor, has been assumed. This proportion is EUR 2.1bn as at 30 September 2017

► For the remaining senior tranche, the risk weight currently amounts to around 25%

Free capacity for further loss settlement

Regulatory surcharge1

Moody`s and Fitch confirm HSH Nordbank ratings

Rating1

1 See also latest publications by the rating agencies on the HSH Nordbank homepage: www.hsh-nordbank.de/de/investorrelations/rating/rating.jsp; 2 Developing (dev.); 3 Includes what are known as complex structured bonds of German banks that are to be given preferential treatment over non-structured bonds in a bail-in under the new German insolvency law as of 2017 (KWG §46f (6) and (7)) 29.11.2017

Moody’s Fitch

Public Pfandbrief Aa2 -

Mortgage Pfandbrief Aa3 -

Ship Pfandbrief Baa1 -

Long term deposits Baa3, dev.2 BBB-

Senior-senior unsecured bank debt3 Baa3, dev.2 BBB-

Senior unsecured, long term Baa3, dev.2 BBB- neg.

Short term liabilities P-3 F3

Subordinated capital B2 B-

Hybrid capital T1 Ca -

Financial Strength (BCA)/Viability Rating (VR) BCA: b3 VR: b


09.06./18.08.2017

• “HSH’s portfolio divestments have resulted in a better matched maturity profile. The €5.0bn NPLs transferred out in June 2016 and ongoing asset sales imply structural benefits”

• “HSH’s higher loss-absorption buffers, as reflected in its improved 18.9% common equity Tier 1 ratio at 30 June, up from 14.1% at year-end 2016, will help it weather further downside risk from the persistently challenging global shipping market.”

• “.. results that showed a credit-positive improvement in capital ratios, reduced nonperforming exposures and higher coverage of its underperforming assets with risk provisions.... The combination of lower asset risk and more capital increases the prospects for HSH’s successful privatisation because it raises the bank’s valuation, increasing the likelihood that an investor would pay a positive consideration.”

• “If its privatisation is successful, HSH will emerge as a smaller, financially stronger bank. It would no longer be burdened with high-risk legacy assets and would have fair prospects of sustainable profits”

07.02./03.07./04.09.2017

• “We believe risk reduction efforts over the last two years and stronger impaired coverage had a positive impact on the risk profile of the overall bank, because of measures undertaken in preparation for the sales process, but the viability of its business model remains uncertain”

• “Lower risk-weighted assets (RWAs) and profit retention strengthened HSH’s fully loaded common equity Tier 1 (CET1) ratio to 14.4% at end-1Q17. We believe the buffer to its regulatory requirements will underpin adequate capitalisation through the privatisation process despite vulnerability to asset deterioration”

• “Management’s strategic objectives have focused on the short term with a view to optimise the bank for its expected privatisation. Consequently, the bank has concentrated on complying with EC restrictions, and on profitability and efficiency metrics, including the initiation of a cost-cutting programme. At the same time, management needed to maintain investor confidence and ensure uninterrupted access to funding markets as the bank remained at risk from a crisis of confidence. We believe management has delivered on these objectives and also managed to generate new business with a volume of EUR8.9bn at end 2016 (8.8 end-2015)”

http://www.hsh-nordbank.de/de/investorrelations/rating/rating.jsp



HSH Nordbank with positive rating for sustainability

Sustainability rating

29.11.2017

1 Source: imug Beratungsgesellschaft für sozial-ökologische Innovationen mbH - sustainability rating of bank bonds in 2016; 96 issuers, 13 promotional and development banks not listed

► Further improvement in the imug sustainability rating for HSH Nordbank bank bonds

► Improvement of one notch in rating for public Pfandbriefe from BBB (positive) to A (very positive). The other ratings are unchanged

► HSH Nordbank is at the upper end of average compared with other banks (see graphic on the left)

Ship Pfandbriefe (5)

Public Pfandbriefe (43)

Mortgage Pfandbriefe (66)

Uncovered Bonds (96)

Rating distribution by asset class1

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%


UNCOVERED BONDS MORTGAGE PFANDBRIEFE PUBLIC PFANDBRIEFE SHIP PFANDBRIEFE

Membership of the protection scheme of the

German Savings Banks Finance Group (SFG)

Change in ownership


STATUS QUO – protection scheme of the German Savings Banks Finance Group

Voluntary

institutional

guarantee

The objective of the guarantee scheme is to protect the member institutions and to avert imminent or existing financial difficulties at these institutions. To achieve this, the protection facility can, for example, contribute new liability funds, provide guarantees or sureties vis-à-vis third parties or even satisfy third-party claims. These measures can be combined with each other. 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).

The guarantee 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 compensation case (see item 2) and allow business relationships with clients to be continued in line with the contractual agreements.

All the securities (not of an equity / regulatory capital nature1) that HSH Nordbank AG has issued will therefore continue to fall under the institutional protection of the guarantee system of the Savings Banks Finance Group (Art. 39 (1) of the statutes).

Statutory deposit

guarantee fund

If the German Federal Financial Supervisory Authority identifies a compensation case pursuant to the Deposit Guarantee Act (e.g. if the voluntary institutional guarantee has not resulted in the continued existence of the credit institution), then the customer is entitled to a reimbursement of his/her deposits from the guarantee scheme up to EUR 100,000. This compensation must be provided within seven working days.

More information can be found at https://www.dsgv.de/en/index.html.

1 In particular pursuant to paragraphs 41, 44 of the Communication from the European Commission 2013/C 216/01 of 30 July 2013 (“Banking Communication”)

46

1

2

Simplified sample presentation

Membership of the German Savings Banks

Finance Group (SFG) protection system

beyond 2018

Change in ownership


LOOKING AHEAD

Change in ownership

outside SFG

Member of protection scheme of SFG for another 2 years1

Protection scheme of the successor institution, e.g. Association of German Banks (BdB)

Sustainable profitability confirmed

Change in ownership

within SFG

Continued membership of he German Savings Banks Finance Group Sustainable profitability

confirmed

No change in ownership: New business suspension

Profitability not confirmed Continued membership of the German Savings Banks Finance Group2

If HSH Nordbank's membership of the DSGV ends at a point in time that is not currently known (but at the earliest on 28 February 2018), then its membership of the protection scheme of the German Savings Banks Finance Group1 shall continue for another two years, i.e. at least until 28 February 2020. During this period, the institutional protection provided by SFG will remain in force for HSH Nordbank

1 In accordance with Section 94(4) of the Framework Statute; 2 Assumption that the requirements for DSGV membership set out in the statutes are still met; 3 Exit from DSGV following change in ownership (“closing”), a shift in the earliest possible date (28 February 2018) could also result in a shift in the continued membership of the SFG protection scheme (28 February 2020) 47

Viability assessment of

business model by EU COM

Protection scheme

28.02.2018 2020+

Sales process Member of protection scheme of SFG

for another two years

Protection scheme of the successor institution

Statutory deposit guarantee fund

Completion of privatisation (change in ownership)

2018+

CONTINUED MEMBERSHIP OF THE SFG PROTECTION SCHEME3

Depending on the type of the change in ownership, the precise point in time cannot be specified at present

Simplified sample presentation

Management Board and shareholder structure of HSH Nordbank


CEO

Stefan Ermisch CRO

Ulrik Lackschewitz

Market Torsten Temp

CFO Oliver Gatzke

Management Board of HSH Nordbank

Shareholder structure of HSH Nordbank

Contacts

29.11.2017

Oliver Gatzke

CFO

Harald Müller

Head of Bank Steering

Tel. no.: +49 (0)40 3333 13495

Fax: +49 (0)40 3333 613495

[email protected]

Ralf Löwe

Treasury & Markets Head of Funding / Debt Investor Relations

Tel. no.: +49 (0)431 900 25421

Fax: +49 (0)431 900 625421

[email protected]

Martin Jonas

Head of Investor Relations

Tel. no.: +49 (0)40 3333 11500

Fax: +49 (0)40 3333 611500

[email protected]

HSH Nordbank AG Gerhart-Hauptmann-Platz 50 D-20095 Hamburg


HSH Nordbank AG Schloßgarten 14 D-24103 Kiel



mailto:[email protected]









Abbreviations

31/08/2017 INVESTOR PRESENTATION 50

ABF Asset-based Funding

AG Aktiengesellschaft [German public limited company]

AöR Anstalt öffentlichen Rechts [German institution under public law]

BRRD Bank Recovery and Resolution Directive

Ca. Circa [German text only]

CEO Chief Executive Officer

CET1 Core Equity Tier 1

CFO Chief Financial Officer

CIR Cost-Income Ratio

CRO Chief Risk Officer

EaD Exposure at Default

EinSiG Einlagensicherungsgesetz [German Deposit Guarantee Act]

EL Expected Loss

EU European Union

EUR Euro

EU COM European Commission

SLLP Specific Loan Loss Provisions

Excl. Excluding

Feb. February

GBP British pound

P&L Profit and Loss

HSH HSH Nordbank AG

imug Institut für Markt-Umwelt-Gesellschaft

IFRS International Financial Reporting Standards

Incl. Including

KWG Kreditwesengesetz [German Banking Act]

LCR Liquidity Coverage Ratio

LiqV Ratio pursuant to the German Liquidity Regulation

Lux. Luxembourg Mn Million Bn Billion

NPE /NPL Non-Performing Exposure / Loan NSFR Net Stable Funding Ratio

OCI Other Comprehensive Income

GLLP General Loan Loss Provisions pp. percentage point(s) P2G Pillar 2 Guidance P2R Pillar 2 Requirements Q1 1st quarter RoE Return on Equity RP Risk Provision

RWA Risk-Weighted Assets

SAG Sanierungs- und Abwicklungsgesetz [German Act on the Recovery and Resolution of Credit Institutions] SFG Sparkassen-Finanzgruppe [Savings Banks Finance Group] SREP Supervisory Review and Evaluation Process UL Unexpected Loss Unsec. Unsecured USD US Dollar PY Previous year e.g. for example Ø age Average age 9M 2016/9M 2017 First 9 months of the 2016/2017 financial year # Number § Paragraph % Percent (figures in percent) ∑ Total <20% Less than 20%

Disclaimer

29.11.2017

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 securities or shares of HSH Nordbank 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. This presentation does 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 or other damage 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 this presentation or information in this presentation 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, efficiency & profitability, risk, capital and liquidity – on a targeted basis. For this purpose the Bank uses a risk-adjusted key indicator and ratio system that ensures that the Total Bank, Core Bank and Non-Core Bank 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 2017 (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 2016 financial year in the “Management system“ subsection in the “Basis of the Group“ section.


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