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HSH Nordbank Not in Talks With Owners About More Guarantees

HSH Nordbank AG, the world’s largest shipping lender, is currently not in any talks with its main owners, the German regional states of Hamburg and Schleswig-Holstein, about raising their guarantees for the German lender.

“There are at this moment in time no discussions between the states and the bank about state-supportive measures,” Daniel Stricker, a spokesman for Hamburg’s regional government, said by telephone today. Still, asking its owners to increase their guarantees is one potential measure the German regional lender could take to raise its capital levels, Stricker said.

Reuters reported today that HSH Nordbank is considering asking Hamburg and Schleswig-Holstein to widen their guarantees to 10 billion euros ($13 billion), from 7 billion euros, citing two unidentified people familiar with the situation.

HSH Nordbank’s capital ratios declined in the second quarter after the crisis in the shipping industry and a stronger U.S. dollar brought an increase in the lender’s risk-weighted assets. The Hamburg-based bank is currently evaluating what measures it can take to boost its capital levels and reduce risks without injecting fresh capital, it said in an e-mailed response to questions today.

Capital Provision

The German states of Hamburg and Schleswig-Holstein, which control more than 80 percent of HSH Nordbank, provided the company with 3 billion euros in capital and 10 billion euros in guarantees to cover potential losses during the global financial crisis. HSH Nordbank, which also tapped the German government’s Soffin bank-rescue fund for 17 billion euros in guarantees during the crisis, last year repaid 3 billion euros of the guarantees provided by Hamburg and Schleswig-Holstein.

The bank, which plans to cut more than 1,100 jobs by 2014, has been exiting businesses such as airplane financing and international real estate and closing offices to gain approval for the state aid. HSH, which intends to reduce total assets at its main business to 82 billion euros by 2014, forecasts cutting the size of its shipping assets to 15 billion euros by then, compared with 19 billion euros at the end of last year.

HSH Nordbank’s Tier 1 capital ratio, excluding hybrid instruments, stood at 10 percent at the end of June, down from 10.3 percent at the end of last year while the Tier 1 capital ratio including market risk positions stood at 12.7 percent, compared with 13.8 percent at the end of 2011. It swung to a net loss of 67 million euros in the second quarter, compared with profit of 212 million euros a year earlier, after reporting loan losses of 68 million euros, mainly tied to its shipping unit.

HSH Nordbank on Oct. 17 announced that its Chief Executive Officer Paul Lerbinger will step down at the end of this month after 19 months on the job and be replaced with the company’s Chief Financial Officer Constantin von Oesterreich.

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