Interim Report as of 30 September 2011 HSH Nordbank AG Gerhart-Hauptmann-Platz 50 20095 Hamburg Phone +49 40 3333–0 Fax +40 40 3333–34001 Martensdamm 6 24103 Kiel Phone +49 431 900–01 Fax +49 431 900–34002 [email protected] www.hsh-nordbank.com HSH NORDBANK GROUP AT A GLANCE IMPRINT Income Statement Published by Forward-Looking Statements (¤ m) 1.1.– 30.9.2011 1.1.– 30.9.2010 HSH Nordbank AG This interim report includes certain forward-looking state- Net income before restructuring 839 157 Gerhart-Hauptmann-Platz 50 ments. These statements are based on our beliefs and Net income before taxes 46 -245 20095 Hamburg assumptions, as well as on conclusions drawn from infor- Group net loss -224 -190 Phone: +49 40-3333-0 mation currently available to us and on sources which Fax: +49 40-3333-34001 we consider to be reliable. Forward-looking statements Internet: www.hsh-nordbank.com include all statements that are not historical facts, in- Balance sheet cluding statements concerning possible or assumed future (¤ bn) 30.9.2011 31.12.2010 Martensdamm 6 growth opportunities and future economic developments. Equity 4.8 5.1 24103 Kiel Total assets 137.6 150.9 Phone: 0431-900-01 Such forward-looking statements are based on a number of Business volume 147.6 163.7 Fax: 0431-900-34002 assumptions concerning future events and are subject to uncertainties, risks, and other factors, many of which are Investor Relations beyond our control. Therefore actual events may differ Capital ratios 1) (%) 30.9.2011 31.12.2010 Phone: +49 40-3333-14601 considerably from those forecast in the forward-looking Fax: +49 40-3333-614601 statements. In view of this, you are advised never to rely Tier 1 capital ratio 17.9 15.4 [email protected] to an inappropriate degree on forward-looking statements. Tier 1 capital ratio excl. hybrid fi nancial instruments 13.0 10.7 We cannot accept any lia bility for the accuracy or com- Regulatory capital ratio 26.8 22.4 Imprint pleteness of these statements or for the actual realisation of Realisation forecasts made in this report. Furthermore, we are not Employees 30.9.2011 31.12.2010 Heisters & Partner obliged to update the for ward-looking statements follow- Büro für Kommunikationsdesign, Mainz ing publication of this information. In addition, infor- Total 3,770 3,852 mation contained in this report does not represent any Germany 3,252 3,251 Printed by kind of offer for the acquisition or sale of any type of Abroad 518 601 HSH Print + Logistics GmbH, Hamburg securities of HSH Nordbank AG. Full-time positions 3,292 3,388 Germany 2,820 2,824 Abroad 472 564 This interim report is available for download at www.hsh-nordbank.com Unguaranteed Guaranteed Public-sector Mortgage Ship This is an English translation of the original German 2) Long-term ratings liabilities liabilities Pfandbriefe Pfandbriefe Pfandbriefe version of the interim report. Moody’s Baa2 Aa1 Aaa Aaa A2 Fitch A - AAA – – – 1) including market risk positions 2) Obligations covered by “Gewährträgerhaftung” (guarantee obligation) interimmanagementreport 1| HSH NordbaNk aG – iNterim report ContentS Letter from the Chairman of the management Board 2 QUARTERLY finanCiaL report 4 Interim management report of the hSh nordBank groUp 4 Underlying conditions and business overview 4 Business developments 8 Earnings situation 9 Net assets and financial position 12 Segment reporting 15 outlook 27 risk report 31 Interim finanCiaL StatementS of the hSh nordBank groUp 40 Statement of comprehensive income 40 Statement of financial position 44 Statement of changes in equity 46 Condensed cash flow statement 48 explanatory notes 49 General information 49 Notes on the income statement 58 Notes on the statement of financial position 66 Segment reporting 78 Notes on financial instruments 81 Other disclosures 92 REVIEW OPINION 103 ReSponSiBiLitY Statement by the management Board 104 Q32011 2 dear LadieS aNd GeNtLemeN, The state aid proceedings conducted by the European Commission regarding HSH Nordbank, which had lasted for more than two years, were finally concluded in Septem- ber 2011. The Bank has thereby secured legal and planning certainty for a sustainable and successful future. The EU Commission has linked a series of conditions and com- mitments to the conclusion of the proceedings, under which the capital measures provided by Hamburg and Schleswig-Holstein in 2009 are to be counterbalanced from a competition law point of view. The Bank has therefore undertaken to place limits on total assets until 2014 and to wind down other businesses. Our corporate response to the requirements imposed by the EU Commission is our new business model. In the third quarter we launched a comprehensive transformation programme to implement this new model. In the centre of the new strategy is the reorganisation of the HSH Nordbank into a focussed bank with a strong sales force and the structure of a medium-sized “Bank for entrepreneurs”. From its regional base we will focus HSH Nordbank on its role as the preferred banking partner for enterprises and business owners. However, the implementation of the EU decision and our strategy requires painful cuts. We are reducing operating and personnel costs as part of the continuous reduction in total assets and the realisation of improvements in efficiency. At the same time a reduction in Group headcount by about a third is unavoidable in order to achieve this. The manner in which this is to be effected is currently being determined in close coordination with the works council. HSH Nordbank was able to continue to improve its operating net income situation over the course of the year. Despite the portfolio downsizing, an increasingly gloomy environment as well as a one-off payment of € 500 million made to the federal states of Hamburg and Schleswig-Holstein that was recognised as an expense and fulfils a con- dition imposed by the EU Commission on the Bank, net income before taxes for the nine months ending 30 September 2011 increased to € 46 million compared to a loss of € − 245 million for the comparable period in the previous year. Without taking the one-off payment into account the results of the Bank have improved significantly. This is reflected in the increase in net income before restructuring to € 839 million com- pared to € 157 million in the previous year. The decrease in loan loss provisions attributable to the progress made in reducing risk as well as the effect of the state guarantee made a significant contribution to these LetterfromtheChairmanofthe ManagementBoard 3 good results. A Group net loss after taxes of € − 224 million was recorded for the first three quarters. We are also assuming a Group net loss for the whole of 2011 due to the exceptional charges relating to the one-off payment as well as the costs to be incurred in the reorganisation of the Bank. Thanks to the continued reduction of risk positions it was possible to strengthen the cap- ital of HSH Nordbank even further over the year. The Tier 1 capital ratio as at 30 Sep- tember 2011, including market risk positions, reached 17.9 % thus reflecting a solid capital adequacy of the Bank compared to the banking industry as a whole. The business development in the current year clearly shows that the reduction in risk and focussing on core businesses are paying off. We will continue to implement our strategy programme in a consistent manner over the coming months. We are strength- ening the foundations for the sustained successful development of business in our future areas of operation through a series of structural measures, not least the internal reorganisation of product and customer responsibility that has already been set in motion. Dr. Paul Friedrich Lerbinger Chairman of the Management Board of HSH Nordbank Q32011 4 QUARTERLy FiNaNciaL report interimmanagement Reportofthe HSH NordBank Group as of30SeptemBer2011 UNderLying coNditions aNd busiNess overview Underlying conditions increased tension in the financial markets Trends on the financial markets over the year were increas- Global economy is cooling off ingly affected by the European national debt crisis. Con- Largely due to the Western industrial nations, the world cerns about trends in Greece, which are increasingly spill- economy has weakened over the course of the year. Dy- ing over to other eurozone states, but also about the namic domestic demand continued to ensure quite high world economy, led to greater uncertainty among investors growth rates primarily in the emerging markets in Asia, in the summer, who moved their assets into “safe ha- whereas the US economy lost significant steam in com- vens” as a consequence. This drove down yields on German parison with last year, expanding only slowly. Consumer government bonds and treasuries to historic lows in Sep- demand is depressed due to the tense labour situation, tember. In contrast, the risk premiums for government the reduction of private debt, and rapidly rising prices. The bonds issued by some highly indebted peripheral states prolonged depression in the real estate market had an continued to rise. Bonds issued by Italy and Spain and – additional damping effect. The political debate over the in view of fear for the stability of the banks and the rat- consolidation of public budgets also continued, leading ing of France – French government bonds came under to uncertainty among companies and consumers regarding increasing pressure. future trends in government expenses and taxes. The agreement of the European governments in July to After a strong start to the year in the eurozone, special provide a second rescue package for Greece as well as to effects and other influences led to economic stagnation in grant additional powers to the European Financial Sta- the Spring of 2011.