Investor Presentation - hcob-bank.de...Aug 26, 2016 · A Strong Region: Northern Germany INVESTOR...

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


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


4. Outlook for 2016

5. Appendix

26.08.2016

Agenda


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


Net interest income

Total income

13%

8

Corporate Clients with the biggest

contribution to earnings


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


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


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 %


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


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


in EUR million


H1 2016 H1 2015


Total income 98 105

Net loan loss provisions -1 -3


Net income before taxes 71 75

CIR3 (in %) 27 26


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


26.08.2016

Portfolio by segment and region



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




► 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



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


Investment grade


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


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


in EUR million


H1 2016 H1 2015


Total income 76 144

Net loan loss provisions2

-263 -156


Net income before taxes2

-227 -59

CIR3 (in %) 53 34


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


1 Exposure at default; 2 Excluding Germany, Scandinavia and Greece


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




Investment grade


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


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




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



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



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


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


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


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



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


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


-90

7 9

H1 2016 H1 2015



RU

CB

P&L analysis highlights the Core Bank

profitability

Financial key figures H1 2016 – Core Bank / RU


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


-74

Guarantee premium

-77


+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

►►►


2. Financial key figures H1 2016 – Core Bank/RU


4. Outlook for 2016

5. Appendix

26.08.2016

Agenda


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


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


Core Bank making a decisive contribution to

the clearly positive Group net result before tax


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%


-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


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”


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


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%


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


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


Loan loss provisions remain at a high level due to market

developments in the shipping sector and legacy burdens


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


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


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%)


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


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


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


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


Good risk profile of Core Bank excluding Shipping

restructuring


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


NPE ratio reduced to 16% following transfer

of federal states portfolio


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


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%


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


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


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


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 %


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


►►►




4. Outlook for 2016

5. Appendix

26.08.2016

Agenda


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


►►►




4. Outlook for 2016

5. Appendix

26.08.2016

Agenda


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


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


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



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


► 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


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


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


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%


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


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

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



Membership of the two-step protection scheme of

the Savings Banks Finance Group (SFG)

Change in ownership


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


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.


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

[email protected]

Ralf Löwe

Capital Markets / Head of Funding & Debt Investor Relations

Tel. no.: +49 (0)431 900 11293

Fax:+49 (0)431 900 611293

[email protected]

Martin Jonas

Finance/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]









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