Roadshow Presentation - Investor Relations May 2019 - Hamburg Commercial Bank
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Roadshow Presentation Investor Relations May 2019
Agenda 1. Closing – Privatisation 2. Transformation process 3. Financial key figures 2018 4. Funding 5. Appendix Roadshow Presentation 2 May 2019
HCOB on track and well positioned to reach its targets
Objectives of EU-COM approved business model for 2022 already partially
reached - among the strongest in an German and EU comparison
Customer-focused and value-driven bank with clear profitability and RoE targets
for a sustainable growth
Management Board – continuity and proven track record with additional
expertise by an international sophisticated management team
Moody’s and S&P acknowledge improved financial profile of HCOB, underlined
by recent rating upgrade from Moody’s
New shareholders – strong expertise and high level of commitment with strategic
investment focus
Funding plan 2018 achieved, among others with successful placement of two covered bond benchmarks
Start with very solid financial profile:
Strong CET1 ratio of 18.5%
Comfortable liquidity ratios: LCR of 225%, NSFR of 121%
Healthy portfolio with an NPE ratio of ~2%
Proven track-record in cost reduction, measures in plan to achieve CIR target ofRatings position based on Hamburg Commercial Bank –
strengthened financial profile Rating Overview
Moody‘s1 S&P1
Upgrades HSH Issuer rating to Baa2, Short-term rating to P-2 (28.11.2018) Issuer Ratings
"Moody’s considers HSH’s standalone credit profile to have significantly Counterparty Rating Baa2, stable BBB+, stable
improved as a result of a balance sheet clean-up that accompanied the
ownership change as expressed by the upgrade of its BCA to ba2 from b3. Deposit Rating Baa2, stable –
The rating agency considers the bank to now be significantly de-risked and
simplified, with asset quality metrics developing more in line with its peers
Issuer Credit Rating (long-term) Baa2, stable BBB, stable
and improved cost structures. In particular, the carve-out of non-performing
assets has, in conjunction with the sustainably improved capitalisation of
the bank, resulted in an improved overall solvency profile." Short-term Debt P-2, stable A-2, stable
Stand-alone Rating (financial strength) ba2, stable bbb- stable
Instrument Ratings (secured issuances)
Public Sector Covered Bonds Aa2, stable –
New Rating established by S&P following the closing (06.12.2018) Mortgage Covered Bonds Aa2, stable –
“Following the successful privatisation, HSH Nordbank can now execute its Ship Covered Bonds A3, stable –
multiyear transformation to a more sustainable and efficient mid-size corporate
lender, supported by a clean balance sheet and large liquidity buffer. HSH Instrument Ratings (unsec. issuances)
Nordbank's sizable buffer of subordinated debt would likely help to protect
senior unsecured creditors if the bank failed and was subject to a bail-in “Preferred” Senior Unsecured Debt Baa2, stable –
resolution action.
The stable outlook reflects our view that the privatisation and ensuing
“Non-Preferred” Senior Unsecured Debt Baa3, stable –
transformation enables HSH Nordbank's management to build on its solid
capitalization and current good asset quality, and that results will
materialise only over the coming two to three years.“ Subordinated Debt (Tier 2) Ba3, stable –
1 See also latest publications by the rating agencies on the Hamburg Commercial Bank’s website: https://www.hcob-bank.de/en/investoren/rating/rating/
Roadshow Presentation
4 May 2019New shareholders with strong expertise, proven track record
and reliable commitment
Ownership structure
Several funds initiated by One fund advised by One fund initiated by Centaurus BAWAG P.S.K.
Cerberus Capital Management, L.P. J.C. Flowers & GoldenTree Asset Capital LP
Co. LLC Management LP Bank für Arbeit und
Wirtschaft und
Österreichische
Postsparkasse
Aktiengesellschaft
Promontoria Holding Promontoria Holding Promontoria Holding JCF IV Neptun GoldenTree Asset
221 B.V. 231 B.V. 233 B.V. Holdings Management Chi Centauri LLC
9.89% 13.88% 18.73% S.à r.l. Lux S.à r.l.
42.5% 35.0% 12.5% 7.5% 2.5%
Shareholders with excellent expertise in the European banking sector
Strong expertise
• Sophisticated in corporate and retail banking (e.g. BAWAG, NIBC) with proven track record in the transformation of banks and
introducing best practice
Prudent risk appetite
• Sound risk profiles of bank investments underlining adequate and moderate risk appetite
Strong commitment
• No dividend payments expected over planning horizon
• No change in shareholder structure for at least three years
• Equity commitment
• Significant investments in IT infrastructure
Roadshow Presentation
5 May 2019Agenda 1. Closing – Privatisation 2. Transformation process 3. Financial key figures 2018 4. Funding 5. Appendix Roadshow Presentation 6 May 2019
Target for transformation: A sustainably profitable bank
2018 Objectives 2022
Capital … already above target, incl.
18.5% ≥16%
CET1 ratio Basel 4 impacts
Asset quality … target almost achieved after
2.0% 140% … exceeds forecast noticeably
LCR
Rating … first rating improvement achieved
Baa2/BBB Baa1/BBB+ following a much improved financial
Moody’s/S&P
profile
1 Excluding one-off effects resulting primarily from the revaluation of the hybrid capital instruments, reported CIR: 27.2% and RoE 2.2%
Roadshow Presentation
7 May 2019HCOB’s strong KPIs predominantly on target level
Capitalisation – CET1 ratio Liquidity – LCR Asset quality – NPE ratio
in % in % in %
HCOB HCOB HCOB
4.0
18.5 18.5 18.5
≥16.0 15.5 3.0
14.5 14.5 241 225 2.8
12.9 11.8
179 168 2.0 140 155 149 1.7
1.4
0.9
0.6
Peer Peer Peer Peer Peer 2018 2022 GER EU Peer Peer Peer Peer Peer 20181 2022 GER EU Peer Peer Peer Peer Peer 20181 2022 GER EU
1 2 3 4 5 Target 1 2 3 4 5 Target 1 2 3 4 5 Target
Capitalisation – Leverage Ratio Costs – CIR Profitability – RoE
in % in % in %
HCOB HCOB 12.2 HCOB
10.8
7.1 7.4 80 85 81
6.8
>6.0 70 >8.0
5.3 63 7.1 7.2
4.8 4.7 5.1
3.5 44 43 44Reduction of administrative expenses, continuous efficiency
improvements to create capacity for further investments
Administrative expenses Operating expenses – key areas for cost reductions
in EUR mn
IT SAP platform, IT optimisation, infrastructure simplification
-25%
Advisory Lower advisory costs following successful privatisation
402
Facilities Reduced number of buildings in Kiel and Hamburg
300
204
35 additional capacity
Legacy Reduction of SPV-related expenses
-34%
operating
134
expenses
Personnel expenses – Measures to reach FTE target
198
-34% personnel
131
expenses
2018 Objective 2022
Situation Dynamic and
2018 Objective along former setup international
2022 -786 FTE / -46% (EUR -67mn / -34%)
of the bank best in class team
Administrative expenses to be reduced by
• Optimisation of IT application development
approx. EUR 100mn / ~25%, eliminating • Termination Wealth Management, opportunistic Global
existing complexity and increasing 1,716 Trade Finance
~930
operational efficiency • Reduce complexity and right-sizing support functions
• Decrease Facility Management services due to reduced
Additional capacity of EUR 35mn for size of bank and fewer buildings
running personnel and operating costs after • Centralisation of activities to head office in Hamburg
implementation of the transformation
Roadshow Presentation
9 May 2019Optimisation of Broad funding mix reduces
liabilities concentration
• Reduced wholesale deposits lead to lower Liability structure1 – Approximated balance sheet volume
concentration risk in EUR bn
Wholesale deposits Pfandbriefe
• Established retail deposits strategy diversifies
Retail deposits ABF
funding base
Senior Unsecured Repos
• Management of liability reserves towards a more
Development banks Equity / subordinated capital and others2
balanced level
• Reduction in funding costs following the 70
significantly improved financial profile and in
accordance with the progress of the
25 56
transformation process 51
• Even before privatisation, refinancing costs 15 Total
0 13
13
have been lowered since autumn 2017 Deposits3
3
15
• Rating upgrades post-closing strengthened
11 10
the funding position 4
4 4
• Prospect of convergence of funding levels 9
8 9
with peers 2 1
1
0 0 1
14 14 13
2017 2018 Objectives 2022
Cash
6.6 5.3 0.7
reserve
1 Rounding differences possible; 2 Mainly trading liabilities, provisions and negative market value of derivatives as well as other product categories; reduction mainly based on lower trading liabilities; 3 Composition depends on
interest rate environment
Roadshow Presentation
10 May 2019Asset profitability will Business will be supplemented by
further improve selected international activities
Expansion in segments Business Clients Excerpt from asset structure1 – By client division
(incl. Project Finance) and Real Estate EaD, in EUR bn
Business Clients Shipping
• New business will balance out the maturity
Real Estate Treasury & Markets 2
profile of the existing portfolio and result in a
stable balance sheet with an attractive return 54
profile 50
• Efforts to step-up international activities; 14
~46
numerous clients operate in foreign countries:
14
1. Project Finance: expansion outside
Europe ~15
2. Real Estate: Austria, Benelux, France
and UK 12
14
Risk-return profile in new business 6
Focus on asset quality and profitability rather ~18
5
than market share based on strong existing
relationships
23 ~4
Risk-conscious business expansion 18
Risk profile very comfortable, slight RWA ~9
increase driven by changes in the balance sheet
structure 2017 2018 Objectives 2022
1 Rounding differences possible; 2 Before reorganisation during the transformation process
Roadshow Presentation
11 May 2019Healthy portfolio structure with NPE ratio of ~2% already
achieved by the end of 2018
Client-Portfolio Total Portfolio by rating category1 Total NPE by client division2
in EUR bn, EaD in EUR bn, EaD in EUR mn, EaD
NPE ratio
~2%
∑ EUR 50.2bn EaD ∑ 41.3 ∑ 14.4 ∑ 0.9
Incl. EUR 17.7bn EaD Corporate
Treasury & Markets 195
Clients
32.5 27.1
Real
26
5.2
18% Estate
Shipping
(16%)
412 Shipping
13.8 14.2
Real Estate 38%
(42%) 10.6
249 Other3
Corporate 13.5 1.8 2.0 882 Total NPE
0.9
Clients (42%)
44% 0-1 2-5 6-9 10-12 13-15 16-18
2018 Investment Non-investment grade Default 58% coverage ratio
grade categories
• Total Portfolio of EUR 56.6bn EaD, of which EUR 41.3bn (73%) in investment grade and EUR 52.0bn (92%) in rating categories 0 to 9
• NPE volume of EUR 882mn corresponds to an NPE ratio of around 2%, including adjustments after the reporting date
• NPE Coverage ratio AC4 of 58% at a solid level
1 Incl.
EUR 17.7bn EaD Treasury & Markets; 2 Rounding differences possible; 3 Incl. Non-Core Bank; 4 Calculation of the coverage ratio has changed since the introduction of IFRS 9 and is therefore defined as the ratio of specific loan
loss provisions on defaulted loans measured at amortised cost (AC) and the exposure at default (EaD) of these defaulted loans (NPE). For comparison purposes, the value as at 31 December 2017 has been adjusted pro forma
Roadshow Presentation
12 May 2019Agenda 1. Closing – Privatisation 2. Transformation process 3. Financial key figures 2018 4. Funding 5. Appendix Roadshow Presentation 13 May 2019
Overall satisfactory 2018 result
Total income1 Loan loss provisions Net income before Total assets
in EUR mn in EUR mn taxes in EUR mn in EUR bn
1,547 1,586 97 70
55
-367
-1,276 -453
2017 2018 2017 2018 2017 2018 2017 2018
CET1 ratio NPE ratio Gross new business
in % in % EUR 8.4bn (PY: EUR 8.6bn); in % / in EUR bn, incl. syndication
18.5
15.4 Shipping
12%
10.4
(1.0)
Real
33% 55%
Corporate Estate
~2.0 (2.8) (4.6)
Clients
2017 2018 2017 2018
1 Including one-off effects resulting primarily from the revaluation of the hybrid capital instruments
Roadshow Presentation
14 May 2019Revenues benefit from operating performance and
one-off effects
EUR mn NCI NII Net interest income (NII) +81%
• Operating interest income above expectations
1,627 • Positive valuation effects (fair value measurement of the
35 portfolio transaction, hedging of the liquidity position)
• Net result from hybrid capital: EUR 994mn (previous year:
945 EUR 304mn)
65
1,592 • Interest expenses for liquidity reserve and funding structure
• High funding costs for the transaction portfolio
880
Net commission income (NCI) -46%
2017 2018 • Lower commission income
• In the previous year, significant income from restructuring
non-performing legacy loans
EUR mn Loans and advances to customers
-16%
39,174
32,791
2017 2018
Roadshow Presentation
15 May 2019Administrative expenses reduced as planned
EUR mn CIR (%) OPEX Consistent cost-reduction show results
-481
• Further cost-reduction programme are already being
implemented to achieve a CIR of 40%
-402
• Operating expenses amounted to EUR -186mn (previous
year: EUR -215mn)
51
• Depreciation of property and equipment and amortisation
of intangible assets came to EUR -18mn (previous year:
EUR -36mn)
27
2017 2018
Implementation of measures for reduction of personnel
Full-time equivalents (FTE) in the Group expenses
• Ongoing planned reduction of employees is reflected in
the corresponding reduction in personnel expenses from
EUR -230mn to EUR -198mn
• Respective cost measures have been totally reflected in
-11% net income from restructuring and privatisation with an
1,926
(2017)
1,716 -44% amount of EUR -366mn in 2018
(2018) 930
(2022)
Roadshow Presentation
16 May 2019Uncertain economic environment dominates
loan loss provisions
Loan loss provisions1 Loan loss provisions 20181 by client division
in EUR mn Risk costs / average interest-bearing assets in EUR mn
Risk costs Core Bank Non-Core Bank Other and Consolidation
3.8% 16 7
-76
-1,276
1.2% -55 -54
-53
-367
-205
2017 2018 Shipping Real Estate Corporate Clients Other
Geopolitical risks put pressure on loan loss provisions
• Recognition of specific loan loss provisions in connection with the restructuring of an exposure in the Shipping division
• Recognition of general loan loss provisions due to mounting geopolitical and economic uncertainties (Brexit, trade conflict, economic
development in Europe and in the sectors relevant to the Bank)
• Previous year: Significantly higher allocations for legacy commitments, especially in the Non-Core Shipping portfolio
1 Incl. effects from compensation / hedging credit derivative of second loss guarantee.
Roadshow Presentation
17 May 2019CET1 ratio at a very good level
• CET1 ratio rose significantly to 18.5 % (previous CET1 capital (EUR bn) and capital ratios (%)
year: 15.4%2) in-period1 Overall capital ratio Tier 1 capital ratio CET1 capital ratio
• Main reason: Reduction in RWA, which is
predominantly attributable to the decline in market
risks and business volume
25.8%
• Tier 1 capital ratio and total capital ratio declined 23.4%
compared with 31 December 2017: as part of the 19.7% 18.5%2
privatisation process, the capital structure is being 15.4% 18.5%
optimised. Within this context, hybrid instruments
were terminated; as a result, regulatory
recognition of hybrid instruments as AT1 / T2 4.0 4.1
ceases
• The termination of hybrid instruments results in a
reassessment of the cash flows associated with
the hybrid instruments; the resulting positive
valuation effect lead stand-alone to a significant
strengthening of the CET1 capital
2017 2018
• SREP requirement: Pillar 2 Requirement “P2R”
of 10.6%, Pillar 2 Guidance “P2G” (incl. early
warning buffer) for the CET1 ratio in 2019 of RWA (EUR bn)
11.6% in-period1
26.2 22.1
1 In-period:
ceteris paribus calculation taking full account of the balance sheet amounts as at the reporting date; 2 Pro forma ratios shown as at 31 December 2017 not taking into account the regulatory relief effect of the federal state
guarantee, to enable a comparison with the key capital figures as at 31 December 2018
Roadshow Presentation
18 May 2019Outlook 2019 – IFRS net income before taxes expected to be
slightly positive in 2019
• In 2019, the Bank will focus on improving its operating performance. The measures
forming part of the transformation programme will be systematically pursued in order
to achieve this. In light of the existing and increasing uncertainties and challenges
in the banking industry, the Bank needs to implement its restructuring measures in
a swift and stringent manner. This will ensure the cost-effective and sustainable
further development of the corporate structure and, at the same time, the agreed
seamless transition to the protection scheme of private banks.
• On the basis of the generally satisfactory performance of the IFRS Group result in the 2018 financial year, the
Bank is confident, from today's perspective, that it will be able to achieve the targets set for 2019 as a whole. The
2019 financial year will be characterised by the implementation of the operating cost-income measures and, in
particular, by the planned reduction in personnel. The individual measures implemented, such as organisational
changes and extensive adjustments relating to HR, will be continuously reviewed as part of the measures
controlling process and adjusted as and when required to ensure the successful implementation of the
transformation programme.
• Taking into account the restructuring provisions set up as at the reporting date, the Bank expects to see slightly
positive IFRS net income before taxes in 2019. The net income forecast is subject to any unforeseeable effects
resulting from the implementation of the restructuring process.
The outlook and the assumption of the Bank as a going concern for accounting and measurement purposes are based on assumptions set out in the Annual Report as at 31 December 2018
Roadshow Presentation
19 May 2019Agenda 1. Closing – Privatisation 2. Transformation process 3. Financial key figures 2018 4. Funding 5. Appendix Roadshow Presentation 20 May 2019
Maturity profile of mid to long term liabilities – Reduced balance
sheet leads to lower funding needs
Maturity profile in EUR mn 2018 2017
in EUR mn As at 31.12.2018 Total of which Total of which
>1 year >1 year
Liabilities to banks
Senior Preferred 23,212 2,873 31,897 5,884
Liabilities to customers
Senior Non-Preferred 6,555 4,441 9,030 6,657
Securitised liabilities
Total 29,767 7,314 40,927 12,541
14,000 13,391
13,000
12,000
11,000
10,000 6,278
8,538 8,837
9,000
1 7,686
8,000 2,265
418
7,000 6,409
6,000 726
5,000 4,783
8,095
4,000 6,653 3,840
6,202
3,000
2,000
1,000 2,330 1,843
0 442 615 370
Payable on demand Up to 3 months 3 months to 1 year 1 year to 5 years More than 5 years
Roadshow Presentation
21 May 2019Funding strategy – diversification of funding structure by
reducing significant reliance on wholesale funding
Approximated liability structure by instruments • Corporate deposits will be optimised
in EUR bn / in %
• Bank is replacing wholesale deposit with
70
sustainable retail funding. Retail client
franchise will be expanded in order to
create a balanced and sustainable
36% 55 funding mix
51
• Due to the current very comfortable
25% 14%
0% CET1 ratio and subordinated liabilities,
6%
12% MREL-requirements are significantly
22% exceeded
20% 20%
• Requirements of rating agencies (LGF)
13% will be especially managed by issuance
14% 18%
of T2 and senior non-preferred
9% 9% 10%
2% 1% 1% 2%
0% 4%
17% 22% 22%
2017 2018 Target 2022
Wholesale deposits Senior Unsec. AbF Hybrids
Retail deposits Covered bonds Subordinated Equity & other1
1 Mainly trading liabilities, provisions and negative market value of derivatives as well as other product categories
Roadshow Presentation
22 May 2019Funding mix envisaged for 2019 – Broad range of asset classes
Total long term funding split 2019
in EUR bn
Development
bank loans
ABF
• Well diversified funding, majority being issued via
Senior Senior Preferred
Preferred
• Starting in 2019, HCOB will be active capital
Approx. markets participant with a broad range of funding-
Mortgage
Pfandbriefe
∑ 4.5 instruments
• Target: Development of a broad diversified
European investor base
Capital
Senior
Non-Preferred
Roadshow Presentation
23 May 2019HCOB loss absorption capital with sizeable buffer to Senior
Unsecured Preferred
Equity
EUR 4,437mn
Order of bail-in sequence
Hybrid instruments
Buffer to potential EUR 687mn
Senior Unsecured losses:
• EUR 10,632mn
• 19 % of total liabilities1
• 48 % of RWA3 Subordinated liabilities2 25 % of total liabilities1
EUR 1,067mn 61 % of RWA3
Senior Unsecured – non-preferred2
EUR 4,441mn
Senior Unsecured – preferred2
EUR 2,873mn
Business model with conservative risk standards
average LTV: 65.6% real estate and 67.4% shipping (31.12.2018)
All data IFRS as at 31.12.2018; 1 Total liabilities of EUR 55,121mn; 2 Maturity of > 1 year; RWA of EUR 22,1bn
Roadshow Presentation
24 May 2019A conservatively managed balance sheet
CET 1 well above regulatory
Tier 1 capital ratio 18.5%
requirement of 10.6%
Strong value, extremely above
Leverage Ratio 7.4%
regulatory minimum of 3.0%
Clear above NSFR
Net stable funding ratio 121%
requirement
Significantly above LCR
Liquidity coverage ratio 225%
requirement of 100%
Conservative market risk
Average Value-at-Risk 2018 EUR 0.2bn
management
All data IFRS as at 31.12.2018; 1 Total liabilities of EUR 55,121mn; 2 Maturity of > 1 year; RWA of EUR 22,1bn
Roadshow Presentation
25 May 2019Agenda 1. Closing – Privatisation 2. Transformation process 3. Financial key figures 2018 4. Funding 5. Appendix Roadshow Presentation 26 May 2019
Balance sheet 2018
Balance sheet
2017 2018
Change in Total assets down in the course of the year
(in EUR mn, IFRS) %
• Above-average liquidity reserves built up during
Cash reserve 6,625 5,362 -19
the privatisation period gradually reduced through
Loans and advances to banks 3,838 3,167 -17 active liquidity management
Loans and advances to customers 39,174 32,791 -16
• Lower loans and advances to customers due to
Loan loss provisions 687 -831 >100 closing of the portfolio transaction (Bank relieved
Credit derivative under the second loss
1,014 0 -100 of large portions of non-performing legacy loans,
guarantee premature termination of the second loss
Trading assets 3,641 3,094 -15 guarantee)
Financial investments 13,647 10,100 -26 • Decrease in securitised liabilities due to
Non-current assets held for sale and disposal
139 65 -53 termination of hybrid instruments as at 31
groups December 2020 and the resulting reassessment of
Other assets 1,617 1,373 -15 cash flows as at 31 December 2018
Total assets 70,382 55,121 -22
Liabilities to banks 8,271 5,470 -34
Liabilities to customers 36,205 28,093 -22
Securitised liabilities 12,444 9,458 -24
Trading liabilities 3,875 2,812 -27
Liabilities relating to disposal groups 47 0 -100
Subordinated capital 2,252 1,614 -28
Equity 4,373 4,437 1
Other liabilities 2,915 3,237 11
Total equity and liabilities 70,382 55,121 -22
Roadshow Presentation
27 May 2019Overall satisfactory result 2018
Other and
in EUR mn, IFRS Core Bank Non-Core Bank Consolidation Group
2017 2018 2017 2018 2017 2018 2017 2018
Net interest income 564 517 23 172 293 903 880 1,592
Net commission income 77 67 20 1 -32 -33 65 35
Result from hedging 0 0 0 0 -18 -9 -18 -9
Net trading income 154 81 84 -184 16 -33 254 -136
1
Net income from financial investments 350 72 -48 0 64 32 366 104
Total income 1,145 737 79 -11 323 860 1,547 1,586
Loan loss provisions in the lending
2 13 -298 -1,295 7 6 -76 -1,276 -367
business
Administrative expenses -292 -288 -190 -117 1 3 -481 -402
Other operating income 8 11 -10 -12 23 -106 21 -107
Expenses for bank levy and deposit
-30 -27 -7 -2 -12 -60 -49 -89
guarantee fund
Net income before restructuring and
844 135 -1,423 -135 341 621 -238 621
privatisation
Net income from restructuring and
0 0 0 0 -66 -366 -66 -366
privatisation
Expenses for government guarantees -22 -41 -127 -118 0 1 -149 -158
Net income before taxes 822 94 -1,550 -253 275 256 -453 97
Income tax expense -75 -20
Net income after taxes -528 77
1 Incl. result from the financial investments accounted for under the equity method; 2 After effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative.
Roadshow Presentation
28 May 2019Real Estate – Leading provider of real estate finance with good
market penetration and outstanding expertise
Major provider of commercial real estate finance in German metropolitan regions with a high market penetration
Established, long-standing business relationships with German and international professional real estate investors, as well as
project and property developers
Real Estate
Broadening of client base by attracting new target clients
Strong range of services including individual financing solutions for existing properties, portfolios, project developments and
refurbishments
Outstanding asset expertise in front and back office with high level of reliability towards investors, efficient and swift credit
approval process
Diversified portfolio that is profitable in the long run and offers a very good risk-return profile
Strategic focus Objective
2018
2022
Intensive efforts to exploit the potential associated with supporting
international investors seeking to enter the German market EAD (EUR bn) 13.8 ~17.6
International outbound business, proximity to international clients will
facilitate rapid implementation of new business, in particular Austria, Total income 189 ~280
(EUR mn)
Benelux, France and UK, thus further diversification of the portfolio
Net income before 67 ~150
Tailor-made solutions in project financing and risk as well as liquidity
taxes (EUR mn)
management
RoE @ 10 ~13
Strong underwriting and syndication capabilities
14% RWA (%)1
CIR (%) 30 ~32
1 RoE‘s on BU levels, which do not include impact of privatisation shown in segment „Other and Consolidation“.
Roadshow Presentation
29 May 2019Real Estate – Good level of diversification by type of use and region
Portfolio by segment and region Portfolio by rating category
in EUR bn, EaD/ in % in EUR bn, EaD
13.8
Other 4.2% 13.8
Real Estate 2.0%
Other Other financing1
2.0% 8.2% ∑ 7.9 ∑ 5.9 ∑ 0.0
financing 2.9%
Abroad
Other 8.1% 1.4% 2.9%
commercial 6.9% Stuttgart
Operator-run 5.5
properties 7.4% Schleswig-Holstein 5.3
22.4%
8.7% Frankfurt
Residential
8.9% Munich
Retail 11.4% Dusseldorf/Cologne
29.4%
Hamburg 2.3
14.0% Rest of Eastern Germany
Berlin 0.5
0.1 0.0
Office 31.2% 28.5% Rest of Western Germany
0-1 2-5 6-9 10-12 13-15 16-18
Investment Non-investment grade Default
Type of use Regions grade categories
• EUR 9.0bn (65%) of the portfolio attributable to financing in western • Portfolio of EUR 13.8bn EaD in total, of which EUR 7.9bn (57%)
German metropolitan regions – successful strategy of regional presence investment grade and EUR 13.1bn (95%) in rating categories 0 to 9
• Portfolio shows good diversification in all segments • NPE ratio of 0.2% with a NPE of EUR 26mn and a coverage ratio of 26%
• Continued expansion of transactions eligible for the cover pool
1 No regional allocation because no property collateral
Roadshow Presentation
30 May 2019Corporate Clients – Industry expertise and client-specific solutions
for larger medium-sized companies
Established financing partner in the commercial centre of Hamburg and the northern German region
Growth segment of Industry & Services with individual solutions and locations, close to clients throughout
Germany
Food Industry Industry & Services
Focus sectors include trade, textiles and food industry
Recognised industry expertise and strong market position in the healthcare sector
Competitive differentiation thanks to integrated corporate finance with consultancy in the areas of structured
finance, leveraged buyout, mergers & acquisitions
Trade M&A
In view of the high pressure on margins and tough credit standards, the momentum was deliberately slowed
down, particularly in business with medium-sized corporate customers and LBOs
Healthcare Structured Finance
Strategic focus
Stepping up medium-sized corporate business with the aim of establishing long-term and profitable client relationships on the basis
of industry, product and structuring expertise
Strengthening the profile of the integrated corporate finance bank
Focus of the cross-sell rate by strengthening sales strategies and closer integration of product and customer departments
Margin pressure might lead to further lower balance sheet commitments if RoE targets might not be matched; reallocation of equity
to higher yielding activities
Roadshow Presentation
31 May 2019Corporate Clients including Project Finance – Good market
position as basis for further business expansion
High market penetration in the areas of renewable energy projects (one of the top financiers
in Europe), as well as in Infrastructure & Logistics
Very strong position in our core markets along the value chain
Energy & Infrastructure
High level of advisory expertise, comprehensive project and structuring expertise Utilities & Logistics
Broad range of high-performance solutions:
• Structured financing at project and corporate level
• Risk hedging and guarantee business
• Payment transactions and cash management
Corporate clients incl. Project Finance
• Transaction advisory services, e.g. M&A
Objective
2018
2022
Strategic focus
Energy & Utilities – Focus at project and sponsor level on manufacturers, EAD (EUR bn) 13.5 ~15.2
project developers, EPC and investors. Further expansion of very good thereof
- corporates 6.8 ~7.6
positioning in established markets, in particular in Scandinavia, Ireland
- energy & infrastructure 6.7 ~7.6
and the Netherlands, as well as implementation of first projects outside
Europe and APAC region Total income 222 ~260
(EUR mn)
Infrastructure & Logistics – Focus on clients and projects in transport,
energy and telecommunications infrastructure (niches and new segments), Net income before taxes 34 ~120
expand excellent footprint in broadband, priority areas such as rail asset (EUR mn)
financing (locomotives and freight wagons) RoE @ 3 ~9
14% RWA (%)1
CIR (%) 53 ~41
1 RoE‘s on BU levels, which do not include impact of privatisation shown in segment „Other and Consolidation“.
Roadshow Presentation
32 May 2019Business Clients including Project Finance – Well diversified in
terms of sectors and solid portfolio quality
Portfolio by segment and region Portfolio by rating category
EaD in EUR bn / in % EaD in EUR bn
13.5 13.5
Other 8.1% 7.4% Other
0.5% ∑ 9.7 ∑ 3.7 ∑ 0.2
Healthcare 4.0% 2.0% Spain
3.2%
Infrastructure & 3.3%
12.3% Italy
Logistics 10.4% 6.7
UK
Trade & 11.0%
17.6% Belgium/Luxembourg
Food
France
Rest of Europe
Industry & 24.3% 3.1
3.0
Services
62.2% Germany
Energy & 0.3 0.3 0.2
33.7%
Utilities
0-1 2-5 6-9 10-12 13–15 16-18
Investment Non-investment grade Default
Segments Regions grade categories
• Industry & Services dominates the portfolio at EUR 3.3bn (24%), • Corporate Clients portfolio of EUR 13.5bn EaD in total, of which EUR
followed by project financing of Energy & Utilities at EUR 3.0bn (22%) 9.7bn (72%) in investment grade and EUR 12.8bn (95%) in rating
categories 0 to 9
• Domestic borrowers account for EUR 8.4bn (62%) and international,
mainly European, borrowers for EUR 5.1bn (38%) • NPE ratio of 1.4% with an NPE of EUR 195mn and a coverage ratio of
79%
• Good diversification across focus sectors
Roadshow Presentation
33 May 2019Shipping – High-level industry expertise – Portfolio will be developed
further on a selective basis
Good market penetration in target markets and segments with long-standing client relationships
Global expertise with considerable financing and structuring competence
Excellent client access in major shipping markets: Hamburg, Athens and Singapore
Shipping
Individual solutions: Risk Management, Global Cash Management and Advisory, as well as Underwriting
Portfolio based on a relatively young fleet with prudent financing structure
Strategic focus Objective
2018
2022
Selected new business in a recovering market with target clients
EAD (EUR bn) 5.2 ~4.3
Focus on medium-sized and larger shipping companies with increasing
importance of corporate clients in general
Total income 108 ~80
Diversified portfolio of containers, bulkers and tankers with selective (EUR mn)
involvement in special segments
Net income before -1562 ~15
Exploit additional business potential resulting from market exit of taxes (EUR mn)
competitors (market with high barriers to entry)
RoE @ -32 ~4
14% RWA (%)1
CIR (%) 32 ~47
1RoE‘s on BU levels, which do not include impact of privatisation shown in segment „Other and Consolidation“; 2 Significant burden from loan loss provisions of € -205 million (formation of specific loan loss provisions, most of which
are related to restructuring measures for a significant loan exposure; in addition, formation of general loan loss provisions and thus provisions for economic uncertainties as well as for the emission targets for ships applicable from
2020).
Roadshow Presentation
34 May 2019Shipping – Portfolio reflects slight recovery trends in the market
subject to a time lag
Portfolio by segment and region Portfolio by rating category
EaD in EUR bn / in % EaD in EUR bn
5.2 5.2
Other 1.5%
financing1 4.9% 2.1% Middle East ∑ 0,7 ∑ 4.1 ∑ 0.4
4.3%
4.9% / Africa
Other ships 13.6%
Americas
13.7%
Tankers 16.0% Scandinavia
Middle &
17.6% Eastern Europe
Asia / Pacific
Bulkers 30.0% 2.1
18.0% Western Europe2
Greece
1.0 1.0
0.6
0.4
Containers 35.5% 37.9% Germany 0.1
0-1 2-5 6-9 10-12 13-15 16-18
Investment Non-investment grade Default
Segments Regions grade categories
• EUR 3.2bn (62%) of loans attributable to international and EUR 2.0bn • Shipping portfolio of EUR 5.2bn EaD in total, of which EUR 0.7bn (13%)
(38%) to domestic shipping clients in investment grade and EUR 2.8bn (54%) in rating categories 0 to 9
• Bulkers account for a significant proportion of the Core Bank's shipping • NPE ratio of 7.9%3 with an NPE of EUR 412mn and a coverage ratio of
portfolio, namely EUR 1.6bn (30%) 58%
• Average age of ships: 8 years, number of financed ships comes to 594
1 Incl. working capital financing; 2 Excl. Germany, Scandinavia and Greece; 3 Considering events after the reporting date the adjusted NPE Ratio is approximately 15%.
Roadshow Presentation
35 May 2019Treasury & Markets – Support clients of all market segments with
expertise and long-standing experience in capital markets
Comprehensive capital market know-how for designing dedicated solutions tailored to our clients’ requirements
Underwriting, syndicating and arranging of such loans and capital-market finance as promissory notes and bearer bonds
Corporate advisory with respect to market price risks (risk measurement, assessment and management) and managing
and hedging market price risks Capital Markets &
Products
Long-standing and established business relationships with institutional clients, domestic and foreign banks as well as local
authorities and federal states
Holistic support of national and international cash management and proactive investment management for term deposits,
promissory notes and bonds as well as individual investment plans
Offering the latest generation of services (e.g. access to trading platforms) and (further) development of products
Strategic focus 2018
Objective
2022
Syndication activities (“originate to distribute”) will support integrated
corporate finance bank EAD (EUR bn) 17.7 ~9.2
Expansion of retail deposits via online platform and risk-conscious expansion
of trading book activities Total income 218 ~180
(EUR mn)
Digital transformation and development of state-of-the-art products and
services Net income before 149 ~120
taxes (EUR mn)
Strengthening and expanding the international investor network to support
funding, syndication and related investment portfolios RoE @ 31 ~28
14% RWA (%)1
CIR (%) 34 ~29
1 RoE‘s on BU levels, which do not include impact of privatisation shown in segment „Other and Consolidation“.
Roadshow Presentation
36 May 2019Successfully maintained its market access as frequent
Pfandbrief issuer
Maturities – Mortgage Pfandbrief Benchmarks Pfandbrief Benchmark Issuances since 2016
in EUR mn
1.350
1.000 Issue Type Size Maturity Spread
850 date (years) (vs. 6M
500 EURIBOR)
500 500 500
500 500 2016 Public EUR 500mn 5 + 18 bp
2019 2020 2021 2022 2023 + 23 bp
2016 Mortgage EUR 850mn 7
Maturities – Public Pfandbrief Benchmarks 2017 Public EUR 500mn 3 + 10 bp
in EUR mn
500 500 2018 Mortgage EUR 500mn 5 + 18 bp
2018 Mortgage EUR 500mn 3.5 + 14 bp
2020 2021
Throughout the privatisation process the bank has continuously issued Pfandbrief Benchmark transactions and maintained its
access to the international capital markets. In 2018, the bank raised around EUR 3.4bn long-term funding
On average around 30%-40% of the Pfandbriefe were placed with international investors
Substantial oversubscription of the orderbook for both Pfandbriefe issued in 2018 underpin a well established Pfandbrief
investor base, which allows an immediate focus on improved funding costs moving forward
Roadshow Presentation
37 May 2019Hamburg Commercial Bank with solid spread development
compared to the market as a wohle (Pfandbrief issuance)
25
20
15
10
5
-
(5)
(10)
(15)
Jul. 18 Aug. 18 Sep. 18 Okt. 18 Nov. 18 Dez. 18 Jan. 19 Feb. 19 Mrz. 19 Apr. 19
HCOB 07/2020 HCOB 11/2020 HCOB 02/2021
HCOB 10/2021 HCOB 04/2022 HCOB 06/2022
HCOB 04/2023 HCOB 07/2023 iBoxx German Covered Bonds
Roadshow Presentation
38 May 2019Mortgage Pfandbriefe
Country allocation Type of use Total volume of cover pool
in mn EUR in mn EUR in %
Residential purposes:
Ʃ: 904,5 mn EUR (19%) Commercial purposes:
141 Ʃ: 3.910,9 mn EUR (81%) 1,7% < 300 TEUR
Germany
9 0,4% > 300 TEUR
United Kingdom
1.367 1.415 28,2% < 1 mn EUR
Sweden
> 1 mn EUR
900 796 < 10 mn EUR
69,7% > 10 mn EUR
305
4.665 5 3 26
single (and multiple office retail industrial other under buliding
two) familiy familiy commercial construction land
houses dwellings
Cover pool (nominal) Duration Mortgage Pfandbriefe Pfandbrief benchmarks
in mn EUR in mn EUR in mn EUR
Pfandbriefe outstanding Cover pool volume
4.815 698 up to 6 months 193 Jul 2019 500
341
115 > 6 m up to 12 m 300
12.4% Nov. 2020 500
102 > 12 m up to 18 m 215
4.586 Oct 2021 500
503 > 18 m up to 2 yrs 491
643 > 2 yrs up to 3 yrs 538 Apr 2022 500
571
1.090 > 3 yrs up to 4 yrs 588 Jun 2022 500
Ordinary Further Total Over- 1.425 > 4 yrs up to 5 yrs 843
cover pool cover assets Pfandbriefe collateralisation Apr 2023 850
outstanding 11 > 5 yrs up to 10 yrs 1.963
0 > 10 yrs 25 Jul 2023 500
Source: Hamburg Commercial Bank AG, External Report according to §28 Pfandbrief Act, www.hcob-bank.com; As at 31.03.2019
Roadshow Presentation
39 May 2019Public Sector Pfandbriefe
Country allocation Breakdown by types borrower and region Total volume of cover pool
in mn EUR in mn EUR in %
direct
Germany
1.628 guaranteed
44 3,7% < 10 mn EUR
259 8 Belgium > 10 mn EUR
24
94 < 100 mn EUR
Italy
35
Poland
43,0% > 100 mn EUR
Switzerland 53,3%
483
Austria 344
2.720 304
EU Institutions 167 141
56 62
Sovereign Regional Local municipalities Other borrowers
municipalities
Cover pool (nominal) Duration Public Sector Pfandbriefe Pfandbrief benchmarks
in Mio. EUR in mn EUR in mn EUR
Pfandbrief outstanding Cover pool volume
269 up to 6 months 90
3.184
0 74 > 6 m up to 12 m 229
Jul 2020 500
654 > 12 m up to 18 m 112
7,4%
500 > 18 m up to 2 yrs 225 Feb 2021 500
2.964
152 > 2 yrs up to 3 yrs 340
276 > 3 yrs up to 4 yrs 363
220
30 > 4 yrs up to 5 yrs 123
Ordinary Further Total Over-
624 > 5 yrs up to 10 yrs 719
cover pool cover assets Pfandbriefe collateralisation
outstanding 386 > 10 yrs 983
Source: Hamburg Commercial Bank AG, External Report according to §28 Pfandbrief Act, www.hcob-bank.com; As at 31.03.2019
Roadshow Presentation
40 May 2019Ship Pfandbriefe
Country allocation Currencies Total volume of cover pool
in mn EUR in mn EUR in %
115 Germany Marshall- 8 JPY
60 < 500 TEUR
4 Inseln
118 19 USD 13,2% > 500 TEUR
592 Bahamas Panama 0,0% < 5 mn EUR
257 Greece Sweden > 5 mn EUR
Hong Kong Singapore
108 44 Liberia Cyprus
97
84 Malta Others 86,7%
410 1.943
Cover pool (nominal) Duration Ship Pfandbriefe
in mn EUR in mn EUR
Pfandbriefe outstanding Cover pool volume
1.936
0 128
1.808
10 up to 6 months 332
20 > 6 m up to 12 m 183
0 > 12 m up to 18 m 232
10 > 18 m up to 2 yrs 224
60 > 2 yrs up to 3 yrs 290
25 > 3 yrs up to 4 yrs 420
3 > 4 yrs up to 5 yrs 175
Ordinary Further Total Over-
cover pool cover assets Pfandbriefe collateralisation 0 > 5 yrs up to 10 yrs 81
outstanding
0 > 10 yrs
Source: Hamburg Commercial Bank AG, External Report according to §28 Pfandbrief Act, www.hcob-bank.com; As at 31.03.2019
Roadshow Presentation
41 May 2019Contacts
Ian Banwell Hamburg Commercial Bank AG
COO Gerhart-Hauptmann-Platz 50
D-20095 Hamburg
Oliver Gatzke Hamburg Commercial Bank AG
CFO Gerhart-Hauptmann-Platz 50
D-20095 Hamburg
Ralf Löwe Tel. no.: +49 (0) 431 900 25421 Hamburg Commercial Bank AG
Treasury & Markets investor-relations@hcob-bank.com Gerhart-Hauptmann-Platz 50
Head of Funding/ D-20095 Hamburg
Investor Relations
Martin Jonas Tel. no.: +49 (0) 40 3333 11500 Hamburg Commercial Bank AG
Head of Investor Relations investor-relations@hcob-bank.com Gerhart-Hauptmann-Platz 50
D-20095 Hamburg
Roadshow Presentation
42 May 2019Abbreviations
ABF Asset-based Funding EU COM European Commission
AG Aktiengesellschaft [German public limited FTE Full time equivalent
company] HGB Handelsgesetzbuch [German Commercial
AöR Anstalt öffentlichen Rechts [German Code]
institution under public law] imug Institut für Markt-Umwelt-Gesellschaft
APAC Asia Pacific [Institute for Market-Environment Society]
Bawag / BAWAG P.S.K. Bank für Arbeit und Wirtschaft und IFRS International Financial Reporting Standards
Österreichische Postsparkasse KG Kommanditgesellschaft [Limited partnership]
Aktiengesellschaft KPI Key performance indicator
BCA Baseline credit assessment LBO Leveraged Buyout
BdB Bundesverband deutscher Banken LCR Liquidity Coverage Ratio
[Association of German Banks] LLC Limited Liability Company
BRRD Bank Recovery and Resolution Directive L.P. / LP Limited Partnership
BU Business Unit M&A Mergers & Acquisitions
B.V. Besloten vennootschap met beperkte NCI Net commission income
aansprakelijkheid [Dutch limited liability NIBC NIBC Bank N.V.
company] NII Net Interest Income
CCO Chief Customer Officer NordLB Norddeutsche Landesbank
CEO Chief Executive Officer NPE /NPL Non-Performing Exposure / Loan
CET1 Core Equity Tier 1 NSFR Net Stable Funding Ratio
CFO Chief Financial Officer OPEX Operational Expenditure
CIR Cost-Income Ratio P&L Profit and Loss
CRO Chief Risk Officer RoE Return on Equity
CSR Corporate Social Responsibility RWA Risk-Weighted Assets
DSGV Deutscher Sparkassen- und Giroverband S.à.r.l. Société à responsabilité limitée [French
[German Savings Bank Association] limited liability company]
EaD Exposure at Default SFG Sparkassen-Finanzgruppe [German Savings
EdB Entschädigungseinrichtung deutscher Banken Banks Finance Group]
[Compensation Scheme of German Banks] SPV Special purpose vehicle
EPC Engineer, Procure, Construct S&P Standard & Poor’s
Unsec. Unsecured
Roadshow Presentation
43 May 2019Disclaimer The market and other information contained in this presentation is for general informational purposes only. This presentation is not intended to replace either your own market research or any other information or advice, in particular of a legal, tax or financial nature. This presentation does not contain all material information needed to make important financial decisions, in particular investment decisions, and may differ from information and estimates from other sources/market participants. The presentation is neither an offer nor a solicitation to buy or sell securities or other forms of investment of Hamburg Commercial Bank AG or other companies, nor does it constitute any advice or recommendation to that effect. In particular, it is not a prospectus. Investment decisions relating to securities or other forms of investment of Hamburg Commercial Bank AG or other companies should not be based on this presentation. Hamburg Commercial Bank AG points out that the market information presented herein is only intended for professional, financially experienced investors who are able to assess the risks and opportunities of the market(s) discussed and obtain comprehensive information from a number of different sources. The statements and information contained in this presentation are based on information that Hamburg Commercial Bank AG has researched or obtained from generally accessible sources. While Hamburg Commercial Bank AG generally regards the sources used as reliable, it cannot assess such reliability with absolute certainty. Hamburg Commercial Bank AG did not perform any checks of its own on the factual accuracy of the individual pieces of information from these sources. Furthermore, this presentation contains estimates and forecasts based on numerous assumptions and subjective assessments made by Hamburg Commercial Bank AG, as well as outside sources, and only represents non-binding views regarding markets and products at the time the estimate/forecast was prepared. Forward-looking statements are subject to risks and uncertainties that are impossible to influence; a number of factors (e.g. market fluctuations, unexpected market developments in Germany, the EU or the US, etc.) may result in a forward-looking statement proving to be unfounded at a later date. Hamburg Commercial Bank AG does not enter into any obligation to update the information contained in this presentation. Hamburg Commercial Bank AG and its employees and executive bodies provide no guarantee, despite exercising due care, that the information and forecasts provided are complete, up- to-date or accurate. Neither Hamburg Commercial Bank AG nor its executive bodies or employees can be held liable for any direct or indirect losses or other damage that may arise from the use of this presentation, excerpts from this presentation or its contents, or for loss or damage that otherwise arises in connection with this presentation. In general, this document may only be distributed in accordance with the statutory provisions that apply in the relevant countries, and individuals in possession of this document should familiarise themselves with the applicable local provisions. Hamburg Commercial Bank AG points out that the presentation is intended for the recipient and that the distribution of this presentation or information contained herein to third parties is prohibited. In particular, this presentation may not be used for advertising purposes. Losses incurred by Hamburg Commercial Bank AG as the result of the unauthorised distribution of this presentation or any of its contents to third parties are to be fully compensated for by the distributor. Such person must hold Hamburg Commercial Bank AG harmless from any third-party claims resulting from the unauthorised distribution of this presentation and from all legal defence costs incurred in connection with such claims. This applies, in particular, to the distribution of this presentation or information contained therein to persons located in the US. Management system and defined management indicators of the IFRS Group The Bank’s integrated management system is aimed at the management of key value drivers on a targeted basis. The Bank (which was operating under the name HSH Nordbank AG up until February 4, 2019) uses a risk-adjusted key indicator and ratio system for this purpose that ensures that the Overall Bank, Core Bank and Non-Core Bank are managed in a uniform and effective manner. The Hamburg Commercial Bank Group is managed mainly on the basis of figures for the Group prepared in accordance with the International Financial Reporting Standards (IFRS) and/or the relevant prudential rules. Within the management reporting framework, the Bank focuses on the most important management indicators for the individual value drivers of the IFRS Group. On the one hand, the focus is on how these key indicators changed compared to the previous year and, on the other, on how they are expected to change in the future. The Group management report for the 2018 financial year will contain further information on the management system and defined management parameters of the Hamburg Commercial Bank Group, the Core Bank and the Non-Core Bank, as well as disclosures. Roadshow Presentation 44 May 2019
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