Hamburg Opens Bank Offering Loans at 1% Interest

Hamburg, Germany’s second-biggest city, formed a business development bank to lend to small- and medium-sized companies, expanding the operations of an existing lender focused on subsidizing real estate.

The Hamburgische Investitions- & Foerderbank, or IFB, will team up with lenders such as Deutsche Bank AG, Commerzbank AG and M.M. Warburg & Co KGaA to offer loans of as much as 500,000 euros ($661,400) at annual rates as low as 1 percent, Chief Executive Officer Ralf Sommer said today.

“Our cheap rate offers coincide with new Basel III capital adequacy rules, shortage of equity at banks and difficulties among small- and medium-sized companies to obtain loans,” Sommer said at a news conference in Hamburg.

Hamburg founded its first business development bank, Hamburgische Wohnungsbaukreditanstalt, in 1953. The new lender bundles the existing bank, which focused on the housing industry, with several of the city’s grant and debt guarantee programs, making it a key partner for small businesses active in energy, housing and research and development, Sommer said.

“Hamburg isn’t a low-cost business location, so all areas of the local economy from rose cultivators to suppliers of Airbus AG can only sustain their position if they are innovative and that’s where we offer support,” Frank Horch, Hamburg’s head of economic affairs, said at the same conference.

The bank has capital of 800 million euros, of which 708 million euros will be dedicated to supporting the housing industry, 40 million euros to the broader economy and 52 million euros to innovation projects such as laser technology and renewable energy, said Sommer. It plans to increase the number of employees to about 235 from 200, he said.

Hamburg, together with the state of Schleswig-Holstein, also has an 85.4 percent stake in HSH Nordbank AG, the world’s largest shipping lender.

HSH, which focuses on lending to small- and medium-sized firms, is suffering from bad loans made to shipping clients amid a glut of vessels and low freight rates that are crippling operators. Hamburg and Schleswig-Holstein have stepped in with a guarantee of 10 billion euros, which has won preliminary EU approval.

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