STEFAN ERMISCH IN CONVERSATION
TARGETS REACHED. KEEP GOING.
HSH Nordbank closed out 2016 with a Group profit of €121 million. How do you rate the year?
Stefan Ermisch: 2016 was a good year for the Bank. This is not only due to the fact that we can be pleased with our result as a whole. More importantly, perhaps, we have managed to make the Bank as a whole more effective and more competitive.
What does this mean specifically?
Stefan Ermisch: The work of a bank now needs to be efficient, fast, neat and low-cost. This is something we have been working on for years; it’s an ongoing process. Those who don’t stay with it get ruled out. The competition in our industry is very tough. Hence permanent improvement and change are fundamental requirements for success. At the same time, we have shown that our Core Bank is able to hold up excellently in a heavily contested market, not only in our northern German home region but also beyond. This is an important message that is reflected in the results: in 2016, our Core Bank generated earnings before taxes of €639 million. This good result was possible only because our colleagues worked with a great deal of commitment. All in all, we laid the foundations for long-term success in 2016.
How did new business go?
Stefan Ermisch: All told, we concluded new business with a volume of €8.9 billion and are thus on a par with last year’s strong figure – but this time with a smaller team. The existing volume in the Core Bank remained largely constant in 2016: the Corporate Clients business area generated 14.2, Real Estate Clients 12.5 and Shipping 7 billion euros.
What impact did the emphasis on focal industries have on new business?
Stefan Ermisch: A consistently positive one. In many areas, we continued to expand or consolidate our position in the market. In the real estate segment, we generated new business worth €4.6 billion and thus slightly exceeded the the previous year’s strong figure. Here we are among the top 3 in Germany. In our Corporate Clients business area, we increased new business by 20 per cent to €3.8 billion. In renewable energies, we are among the top 5 in Europe; our new business in this area in 2016 was well in excess of €1 billion.
May 2016 saw the EU’s final decision in the state aid proceedings. A change in ownership is planned by the end of February 2018. What does this mean for the Bank?
Stefan Ermisch: We see this major change as an opportunity. The banking sector is undergoing fundamental change. The industry has to deal not only with strict regulatory requirements, but also with the strain resulting from the setting of low interest rates. At the same time, traditional business models need to be transposed to the digital world. New owners will understand the opportunities that this setting offers and make bold use of them. On top of this with HSH, they will be able to take possession of a bank well established in the market with an excellent organisational structure. But just so we can get this right: the sale scheduled for 2018 is being managed by the federal states of Hamburg and Schleswig-Holstein. But of course, we as the Bank will support them to the best of our ability.
Is the Bank to be sold as a whole?
Stefan Ermisch: That is the aim. But syndicates may also be formed.
Who might be interested in HSH Nordbank?
Stefan Ermisch: At present, investors have the opportunity to acquire a well-established commercial bank in a region and country with a strong economy. This Bank provides future and growth prospects. Of course, investors will take a very close look because it is not every day that such an offer comes up. For us, it is important not to let up in our day-to-day operations – quite the opposite. We must continue to honour our service promise to the market and to our clients on an everyday basis. And that is what we will do. Our colleagues have always demonstrated their ability to not only keep on top of business in turbulent times, but also to rise to peak form. We stand for the ability to handle new challenges successfully time and time again.
The Core Bank is profitable, but the new owners also have to contend with the Non-Core Bank..
Stefan Ermisch: That’s true. Even though we have made genuinely good progress when it comes to reducing our legacy assets, past mistakes made pre-2009 continue to weigh very heavily, particularly so because the shipping sector has been in the throes of a historical crisis ever since. Furthermore, the guarantee dating from 2009 defines very narrow limits for economic scope for action. Both these factors weigh on us. The entire shipping sector is severely shaken. This is hitting us very hard – like all banks exposed to shipping. Put simply, the Non-Core Bank pools the past mistakes in the form of non-performing loans that to date have been wound down insufficiently, due also to the guarantee. This is not ideal; nevertheless, all parties involved have a duty to find a good solution to these problems in the course of privatisation. We know this, the owners know this, the EU Commission knows this, as does the European Central Bank.
Are there any parties interested in non-performing loans?
Stefan Ermisch: Yes, they are investors who have specialised in the liquidation of critical portfolios. They take on risks and hope for promising returns. Given the fact that the shipping market has hit absolute rock bottom, this may be a good time to enter it. But these investors have certain prices in mind. Here, it will be important to find an economically feasible path for all involved. Everyone will have to push themselves to their limit to achieve a good result. I am confident that this will be possible.