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HSH Nordbank Profit Doubles as Ship Loan Provisions Fall

HSH Nordbank AG more than doubled its first-half profit as the world’s biggest financier of ships cut net provisions for loans by about half.

The lender, which was bailed out by its state owners Hamburg and Schleswig-Holstein in 2009, said first-half net income increased to 300 million euros ($395 million) from 131 million euros a year earlier, according to a statement today. Expenses for net loan-loss provisioning fell to 237 million euros from 463 million euros a year earlier.

HSH Nordbank said it’s “well prepared” for the European Central Bank’s Comprehensive Assessment and the related Asset Quality Review as well as the stress test later this year. The bank’s owners, the German states of Hamburg and Schleswig-Holstein, last year raised a guarantee to 10 billion euros from 7 billion euros to cover potential losses.

HSH Nordbank, like other shipping lenders including Commerzbank AG and Norddeutsche Landesbank Girozentrale, is a focus of the ECB’s review of lenders’ balance sheets. The container shipping industry, which accounts for the biggest share of ship loans among German lenders, has suffered from overcapacity since the global financial crisis triggered a trade slump and the worst decline in charter prices in decades.

The company reiterated that it expects to post a profit before and after tax in the full year, helped by relief in loan-loss provisioning. In 2013, HSH posted a loss of 814 million euros, its biggest since 2008, as it set aside more funds to cover risky loans.

New business rose to 4.5 billion euros in the first half from 2.7 billion euros a year earlier. New business was focused on real estate, energy and infrastructure. Pretax profit more than tripled to 432 million euros while interest income fell about 11 percent, according to the statement.

The company had a capital adequacy ratio of 10.9 percent according to the full implementation of Basel III regulatory rules at the end of the first half.

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