HSH Nordbank AG 2003 Annual Report SET FOR A STRONG

Transcription

SET FOR A STRONG FUTURE
HSH Nordbank AG 2003 Annual Report
Multiple-Year Overview, HSH Nordbank Group*
Operating profit before risk (€ millions)
2003
2002
2001
2000
1999
1,162.1
1,110.7
936.0
683.1
572.9
Operating profit after risk (€ millions)
582.7
621.7
480.3
446.5
336.0
Net income (€ millions)
261.9
239.1
204.4
110.2
111.5
38.7
37.7
37.6
41.9
43.1
31.12.1999
Cost-income ratio (%)
31.12.2003
1.1.2003
31.12.2001
31.12.2000
Total assets (€ millions)
171,660
181,173
178,554
162,430
146,093
Business volume (€ millions)
204,926
211,105
200,677
184,797
162,701
Lending volume (€ millions)
205,016
211,254
201,771
185,535
163,685
4,511
4,724
4,355
3,855
3,647
Employees
* Pro forma data for previous years.
Ratings
long-term
short-term
stand-alone
Moody’s
Aa1
P-1
C (financial strength)
Standard & Poor’s
AA-
A-1+
not assigned by S&P
at this time
Fitch Ratings
AAA
F1+
C (individual)
Stable
Outlook negative
Under review for a possible downgrade
Set for a strong future
HSH Nordbank AG
Annual Report 2003
Set for a strong future
Our claim holds true in a double sense. The merger has created a
Bank that is, more than ever before, a strong partner standing
beside its customers worldwide – acting rapidly, individually and
with expert competence. And by amalgamating and bundling our
forces we have – as a strong bank of the north – created a powerful platform for still further enhancing the success of our market
activities. Our goal is clear: capital market readiness by 2006.
The conditions are favorable:
– as regional bank of the north we are – along with the Savings
Banks – market leaders in the Hamburg/Schleswig-Holstein
region;
– as a specialized financing provider we are excellently positioned
in promising market segments, both nationally and internationally;
– in the international capital markets we are a powerful and innovative partner.
For these reasons we have designed our Annual Report 2003 to
express the new era for HSH Nordbank. We show its promise in pictures of people setting out for new personal and emotional frontiers. People who, like HSH Nordbank, have prepared themselves
with dedication for the challenges ahead. Like them, we are in peak
condition. That is evident from the straightforward figures, facts
and data of 2003 – the year we are presenting to you in this report.
Contents
Annual Review
6
Managing Board
6
Foreword by the Chairman of the Board of
Managing Directors
Financial Report
10
Board of Managing Directors, HSH Nordbank
12
Report of the Supervisory Board
16
Group Overview
16
Corporate Governance
20
Merger and Integration
26
Strategy
32
Employees
36
Cultural Projects/Corporate Citizenship
40
Group Segments
40
Shipping Clients
46
Real Estate Clients
56
Corporate Clients
62
Special Corporate and Institutional Clients
72
Private Clients
78
Financial Markets
88
Strategic Participations/Transaction Services
100
102
Management Report
102
Management Report and Group Management Report
132
Annual Accounts
132
Annual Accounts and Group Annual Accounts
184
Additional Information
184
Glossary
188
Addresses
Managing Board
6
7
Ladies and Gentlemen,
2003 marks the beginning of a new era for HSH Nordbank. The Bank came into being on
June 2, 2003, born of the merger between Hamburgische Landesbank and Landesbank
Schleswig-Holstein. With approximately 4,500 employees in the Group worldwide, and total
assets of EUR 180 billion, this first cross-state merger in Germany’s Landesbank history has
created a new and powerful player in the German banking market.
The merger was a decisive strategic step toward securing our long-term capital market
readiness and strengthening our competitive position worldwide and, as such, a prompt
and logical response to the upcoming abolition of state guarantees in 2005. The circumstances of the merger were particularly favorable. Not only had both banks been collaborating closely and successfully since 1997, but both benefited from complementary strategies
as well as the physical proximity of their locations. Landesbank Schleswig-Holstein had a
strong presence throughout the Baltic Sea region, and Hamburgische Landesbank in Asia.
As a result of the merger we are looking to achieve a medium-term synergy bonus of some
EUR 150 million per annum.
The logic of the merger, and the new bank that it created, aroused a great deal of interest
in the media and rating agencies, as well as among investors and customers. We must
now demonstrate that HSH Nordbank can fulfill those high expectations and be seen as a
positive example among the Landesbanks. To this task all our energies are committed. For
example, the speed with which we have launched our new overall bank strategy aimed at
“Capital market readiness 2006” demonstrates the high level of integration we have already
achieved. The new strategy connects seamlessly with our two predecessor banks, and consistently develops and extends traditional strengths. The operational program putting this
strategy into effect was launched before the end of 2003, and is currently in progress in the
Bank’s individual divisions. This progress is being monitored and steered in a bank-wide
controlling process.
Managing Board
8
HSH Nordbank has positioned itself as a powerful regional bank of the north and at the
same time as an international provider of specialized financing. We aim to focus our
thinking, actions and communication with growing intensity on the requirements of our
customers and of the capital markets. As a result, our solutions will increasingly reflect
our special expertise in customer relations as well as industry and product know-how.
Our overall strategic goal is clear: on the one hand a significant growth in profitability,
and on the other a clear and sustained improvement in our capital resources and their
structure. We are determined to raise return on equity above the 15 % mark, and the core
capital ratio to more than 7%. Sound cost management will enable us to make the investments we need for earnings growth.
However great the challenges of the past year, we have at all times maintained our concentration on current business operations. We have successfully responded to market demands
and achieved gratifying results in a difficult economic environment. With somewhat lower
total assets of EUR 171.7 billion in comparison with the previous year’s EUR 181.2 billion,
we were able to increase net income by 9.5 % to EUR 261.9 million, and to significantly
strengthen our reserves as a result. Risk provisions and evaluations rose once again in
2003, but it must be noted that the previous year’s figure had benefited significantly from
extraordinary income. Discounting this effect, risk provisions fell discernibly, mainly
because they could be considerably reduced on the securities portfolio. We are confident
that we can further curtail risk provisions during the current year without relaxing our
traditionally strict risk management standards.
The gradual improvement in the economic forecast for 2004, as well as the ongoing recovery
on the financial markets, give grounds for all-round optimism for the current year. Our
agenda for 2004 is therefore clear:
• We aim to complete the integration of our two houses and to realize all the costs and
earnings benefits connected with this.
• We will further optimize return on equity and focus more intensively on qualitative
rather than quantitative growth. We aim to increase earnings by sales of non-capitalbinding products and by pricing loans to reflect actual risks more accurately.
• In addition, we will consistently develop our strengths on the lending side, concentrating
increasingly on profitable new business. With this in view, we aim to focus specifically
on sectors where we can obtain attractive prices because of our dominant market position
or strong regional presence.
9
• We intend to continue with our active engagement in new lending business. However, we
will relinquish the policy we have so far followed, of always holding loans on our books
until maturity. Instead, we will sell certain tranches of loans before maturity, in order to
free up our equity capital. This can be effected, for example, by securitization of individual loan portfolios.
• We will also systematically develop our cooperation with the local Savings Banks. In the
first quarter of 2004 HSH Nordbank and the Savings Banks Association for SchleswigHolstein entered into an agreement of association regulating the details of our future
collaboration. Bilateral operational agreements with each individual Savings Bank in
Schleswig-Holstein will follow. This opens a new chapter in our longstanding cooperation
with the Savings Banks and underpins our role as a powerful partner in this sector.
As you see, Ladies and Gentlemen, we are pursuing with consistent pragmatism the course
we have set, defining our goals, developing our strategy and taking the steps required to
realize it. We are optimistic about our way ahead. In the words we have taken as leitmotif
for our first annual report, HSH Nordbank AG looks and feels “Set for a strong future”.
That we have come so far in our first year, and established so strong a position for the future,
is due in large measure to our clients and employees. I would like to thank them, in the
name of the entire Board of Managing Directors, for the confidence they have placed in us,
and for their commitment and support. I invite all our clients and employees to continue
with us on our constructive path into a successful future.
Hamburg/Kiel, May 2004
Alexander Stuhlmann
Chairman of the Board of Managing Directors
HSH Nordbank
Managing Board
10
11
The Board of Managing Directors
HSH Nordbank
Alexander Stuhlmann
Hans Berger
Peter Rieck
Franz S. Waas, Ph.D.
Hartmut Strauß
Born 1948. Member of the Board
Born 1950. Appointed Deputy
Born 1952. Appointed Deputy
Born 1960. Appointed to the
Born 1949. Appointed to the
Born 1952. Appointed to the Board
of Managing Directors since 1996.
Chairman of the Board of Man-
Chairman of the Board of Man-
Board of Managing Directors of
Board of Managing Directors of
of Managing Directors of Landes-
Appointed Chairman of the Board
aging Directors of Landesbank
aging Directors of Hamburgische
Landesbank Schleswig-Holstein
Hamburgische Landesbank 2000.
bank Schleswig-Holstein 2003.
of Managing Directors of Hambur-
Schleswig-Holstein 1996 and
Landesbank 1998. Member of
2001. Member of the Board
Member of the Board of Man-
Member of the Board of Man-
gische Landesbank 1998. Chairman
Chairman 2003. Deputy Chairman
the Board of Managing Directors,
of Managing Directors, HSH
aging Directors, HSH Nordbank,
aging Directors, HSH Nordbank,
of the Board of Managing Direc-
of the Board of Managing Direc-
HSH Nordbank, since June 2,
Nordbank, since June 2, 2003.
since June 2, 2003. Responsible
since June 2, 2003. Responsible
tors, HSH Nordbank, since June 2,
tors, HSH Nordbank, since June 2,
2003. Responsible for Participa-
Responsible for Asset Liability
for Controlling/Finance, Credit
for Financial Institutions/Global
2003. Responsible for Communica-
2003. Responsible for IT/Organiza-
tions/Research, Real Estate
Management, Capital Markets,
Risk Management, Services,
Trade Finance, as well as Corpo-
tions/Investor Relations, Human
tion, Internal Audit, Shipping,
Customers, Lease Finance, and
as well as Portfolio Management
Taxes, and Transaction Services.
rates and Structured Finance.
Resources, Private and Business
and Savings Banks/Public Sector
Transportation.
and Investments.
Clients, the Legal, as well as Board
Customers.
Advisory Services.
Ulrich W. Ellerbeck
Report of the
Supervisory Board
12
Report of the Supervisory Board
Foundation of HSH Nordbank AG.
The shareholders of Hamburgische Landesbank – Girozentrale – and Landesbank Schleswig-Holstein Girozentrale resolved on September 9, 2002 to merge the two banks. In
taxation and accounting terms the amalgamation would be effective retroactively as from
January 1, 2003. The new bank was to be a stock corporation. The act of merger and the
change in legal status were accomplished with entry of HSH Nordbank AG in the Commercial Registers of Hamburg and Kiel on June 2, 2003. Therefore the report of the Supervisory
Board covers the activities of the predecessor houses from January 1 – June 1, 2003 and
those of HSH Nordbank from June 2 – December 31, 2003, as well as the activities connected with the foundation of HSH Nordbank itself. The reports of the Supervisory Board
of Hamburgische Landesbank and of the Administrative Board of Landesbank SchleswigHolstein on their activities from January 1 – June 1, 2003 can be found below.
HSH Nordbank AG was founded on April 16, 2003 by the shareholders of its predecessor
banking houses. In accordance with article 30, paragraph 1, and article 31, paragraph 1 of
the German Stock Corporation Act, the founders named ten members to constitute a Supervisory Board representing their interests. The members of the Founding Supervisory Board
were as follows:
Heide Simonis
Dr. Ralf Stegner
Dr. Wolfgang Peiner
Gunnar Uldall
Jürgen Sengera
Dr. Manfred Puffer
Olaf Cord Dielewicz
Dr. Hans Lukas
Dr. Rainer Klemmt-Nissen
Alexander Otto
On April 17, 2003 the Founding Supervisory Board elected from among its members
Minister-President Heide Simonis as Chairwoman, and Senator Dr. Wolfgang Peiner as
Deputy Chairman of the Supervisory Board, and appointed the members of the Board of
Managing Directors of HSH Nordbank AG. On 24/25 May 2003 the Supervisory Board
examined and signed the Foundation Audit Report.
The membership of the Supervisory Board is governed by the German Codetermination
Act, with the effect that the Board has to have parity of representation. Status proceedings
were opened in accordance with article 31, paragraph 3, and articles 97-99 of the German
Stock Corporation Act, and on August 14, 2003 ten employee representatives were formally
appointed by ruling of the District Courts of Hamburg and Kiel. The persons appointed
were:
Astrid Balduin
Olaf Behm
Margitta Dauck
Dr. Elisabeth Keßeböhmer
Michael Schmalz
Hans-Joachim Schwandt
Bernd Steingraeber
Berthold Bose
Peter Deutschland
Annette Falkenberg
13
At its meeting of August 18, 2003 the Supervisory Board approved the Chairwoman and
elected Astrid Balduin from the group of employee representatives as a new Deputy Chairwoman of the Supervisory Board.
At the same meeting the Supervisory Board appointed the committees as determined by
the procedural rules. The Executive Committee is mainly concerned with Managing Board
business. The Mediation Committee deals on an ad hoc basis with matters falling under
article 31, paragraph 3 of the German Codetermination Act. The Audit Committee supports
the Supervisory Board in matters of accounting and internal auditing, and examines the
annual financial statements. The Risk Committee supervises the overall risk situation of
the Bank regarding counterparty, market price and operational risks.
Key activities.
The Supervisory Board of HSH Nordbank has fulfilled the tasks incumbent on it by law,
statutes, procedural rules and Corporate Governance Code. The Board of Managing Directors has provided the Supervisory Board with regular, comprehensive and timely information and submitted to it all issues requiring its decision or knowledge. The Supervisory
Board has ensured that it was regularly informed about the Bank’s business development,
fundamental questions of corporate planning, the risk situation and important individual
occurrences.
In order to establish the operational competency of the Bank from the moment of the
merger, the Supervisory Board had already – in a written resolution signed at the end of
May 2003 – approved the key regulations governing the Bank’s activities, the procedural
rules for the Board of Managing Directors and Supervisory Board, as well as the Corporate
Governance Code. In June 2003 the sale of LBS Schleswig-Holstein AG – previously spun off
from Landesbank Schleswig-Holstein – was approved, also in a written resolution. In the
Board’s two ordinary meetings the bylaws were again discussed and their main points
confirmed. In addition, the Supervisory Board was on each occasion informed by the Board
of Managing Directors about the current situation of the Bank’s business development.
Further questions resolved at the meetings were the appointment of a Personnel Director,
the acquisition of a mortgage bank and the opening of another foreign branch. In its final
session the Supervisory Board focused on the Bank’s strategic orientation and planning for
the next three years. Other matters on the agenda included the support collective of the
Savings Banks Finance Group, as well as a report on IT migration related to the merger.
The Supervisory Board was supported by the work of the Risk Committee. In its three
meetings this committee dealt with the matters falling within its purview as determined
by law, statutes, procedural rules and administrative regulations. It also scrutinized the
Bank’s private equity activities. The committee discussed the Bank’s risk report in detail.
The report provides a comprehensive overview of the Bank’s risk situation, with specific
reference to credit, liquidity and market risks.
Report of the
Supervisory Board
14
Examination and adoption of the Annual Accounts and Group Annual Accounts for 2003.
The annual accounts and management report for 2003, as well as the Group annual accounts
and Group management report, were examined by the auditors, BDO Deutsche Warentreuhand
Aktiengesellschaft Wirtschaftsprüfungsgesellschaft, and approved without reservation. At its
preparatory meeting on May 3, 2004 the Audit Committee, composed of members of the Supervisory Board, scrutinized the annual accounts and management reports and discussed the auditor’s reports in detail. The auditor was present at this meeting and answered the committee’s
questions at length. At its annual accounts meeting on May 12, 2004 the Supervisory Board considered the annual accounts as well as the report of the Audit Committee. The Supervisory Board
approved the audit results and confirmed that no reservations need be made. At its meeting
on May 12, 2004 the Supervisory Board approved and adopted the annual accounts and Group
annual accounts and management reports as presented by the Board of Managing Directors.
Personal notes.
In addition to the appointment of the ten shareholders’ representatives, and the Courts’ appointment of the ten employee representatives, there were other changes in the membership of the
Supervisory Board. With effect from the end of the extraordinary general meeting of the Board
on August 6, 2003, Jürgen Sengera, Dr. Manfred Puffer and Dr. Rainer Klemmt-Nissen retired from
the Supervisory Board. In their place, the meeting elected Dr. Johannes Ringel, Hans-Peter Krämer
and Prof. Dr. Hans-Heinrich Driftmann. Dr. Johannes Ringel resigned from the Board with effect
from December 31, 2003. Margitta Dauck left the Bank – and therefore also the Supervisory
Board – with effect from the same date. As successors, the District Courts of Hamburg and Kiel
appointed Dr. Thomas Fischer and Jutta Langmack. The Supervisory Board would like to take
this opportunity to thank all former members mentioned above for their successful and highly
esteemed commitment.
Hans-Peter Becker, a member of the Board of Managing Directors of Hamburgische Landesbank
from 1980-1993, died on April 19, 2004. A highly respected lending business specialist, he put
his profound knowledge, breadth of experience and excellent customer contacts to the service
of the Bank, to whose continuing success he contributed substantially. He also played a key role
in establishing and developing our international branches and offices.
The Supervisory Board would like to thank the Board of Managing Directors and all Bank employees for their intense commitment, in particular with regard to the preparation and execution of
the merger of our two predecessor houses. Not only was the amalgamation successfully completed, but at the same time a good result for the year was posted – an achievement for which management and employees deserve high recognition as well as gratitude.
The Supervisory Board
Heide Simonis
Chairwoman of the Supervisory Board HSH Nordbank
15
Activities of the Supervisory Board of Hamburgische Landesbank and of the
Administrative Board of Landesbank Schleswig-Holstein from January 1 – June 1, 2003.
From January 1 – June 1, 2003 activities were subject to supervision and control by the
Supervisory Board/Administrative Board of the two predecessor organizations. In fiscal
year 2003 only one ordinary meeting of the Supervisory Board of Hamburgische Landesbank
was held, on April 2, 2003. At this meeting the Managing Board informed the Supervisory
Board about the Bank’s business situation and the progress of the merger. The Supervisory
Board gave its consent to various matters of investment holdings. The meeting concentrated
on examining the annual accounts of Hamburgische Landesbank for 2002, including the
Group annual accounts. At its preparatory meeting on March 21, 2003 the Audit Committee
discussed the annual accounts and auditor’s reports in detail, in the presence of the auditor.
The Credit Committee, composed of members of the Supervisory Board, met five times during the period under review to discuss specific lending commitments.
The Administrative Board of Landesbank Schleswig-Holstein met twice in the period under
review, on March 7 and May 5, 2003. The Administrative Board was informed at these meetings about the Bank’s business situation and the progress of the merger. The Managing
Board also informed the Administrative Board about internal audit activities in 2002. As
well as various matters of investment holdings, to which the Administrative Board gave its
consent, the second meeting concentrated on discussion of the annual accounts of Landesbank Schleswig-Holstein for 2002, including the Group annual accounts. At its preparatory
meeting on May 5, 2003 the Audit Committee discussed the annual accounts and auditor’s
reports. The Credit Committee met three times during the period under review to discuss
lending commitments requiring its approval. The Advisory Committee also met twice in
order to be informed about the Bank’s business situation, especially the progress of the
merger.
In the period under review there were some changes in the composition of the Administrative Board of Landesbank Schleswig-Holstein. Waltraut Fuhrmann and former Minister
Claus Möller retired from the Board. Their places were taken by Helmut Gründel and Minister Dr. Ralf Stegner. With the merger of the two predecessor banking houses, Ulf Gänger
and Dieter Pfisterer retired from the Managing Boards of Hamburgische Landesbank and
Landesbank Schleswig-Holstein respectively. The supervisory bodies of both Banks appreciated Mr. Gänger and Mr. Pfisterer as highly competent specialists in the lending business,
whose personal qualities and experience contributed substantially to the success of both
Banks. We would like to take the opportunity here to thank them once again for their commitment.
Kiel, May 2004
Hamburg, May 2004
For the Administrative Board of the former
For the Supervisory Board of the former
Landesbank Schleswig-Holstein Girozentrale
Hamburgische Landesbank
Girozentrale
– Girozentrale –
Heide Simonis
Dr. Wolfgang Peiner
Chairwoman
Chairman
Group Overview
16
Corporate Governance
The concept of corporate governance describes the principles
of responsible leadership and management of a company.
HSH Nordbank is emphatically committed to these principles in
the interests of sustained economic operation. For many years
they have been an essential part of the Bank’s philosophy.
17
A tradition of transparency.
at the time of its foundation. This Code is a
constituent element of the procedural
In February 2002 the Government Commis-
rules for the Board of Managing Directors
sion on Corporate Governance published
and Supervisory Board. It is written into
the German Corporate Governance Code,
the bylaws of the Bank and published in its
containing the most important guidelines
Internet pages (www.hsh-nordbank.com/
for the management and supervision of
InvestorRelations).
German listed companies. Conceived as a
supplement to existing company law, the
Corporate Governance Code lays down
Voluntary commitment – going further.
standards for good, responsible corporate
management. Its principal goal is to en-
HSH Nordbank’s Corporate Governance
hance the attractiveness of Germany as a
Code reflects the core legal framework regu-
business location for national and inter-
lating the management and supervision
national investors.
of stock corporations, as well as nationally
and internationally accepted standards of
Corporate management directed toward
good, responsible corporate management
sustained and responsible growth of
to which the Supervisory Board and Board
enterprise value is a central concern of
of Managing Directors of HSH Nordbank
HSH Nordbank. For this reason the Bank
subscribe. Both text and content of the
expressly subscribes to the goals of the
Bank’s own Code correspond closely to the
German Corporate Governance Code. Our
German Corporate Governance Code pub-
two predecessor banking houses, Ham-
lished by the Government Commission.
burgische Landesbank and Landesbank
Schleswig-Holstein, followed these same
The German Corporate Governance Code
management principles, even though they
has two parts: the first part depicts the law
did not possess a corporate governance
as applicable to company management;
code of their own.
the second part consists of suggestions and
recommendations, which are generally
As an internationally operating organiza-
expressed in the words “should” or “ought”.
tion, HSH Nordbank views it as a priority
This latter part contains procedural recom-
that the corporate governance system to
mendations for the management and super-
which it has voluntarily committed itself
vision of German companies listed on the
should be understood and appreciated by
stock exchange. These recommendations –
shareholders, customers, employees and
and all the more so the suggestions – are
the general public alike – both nationally
not regarded by the German Code as man-
and internationally. In order to reinforce
datory, but as allowing deviation from the
long-term confidence, the Bank committed
suggested norms.
itself to its own Corporate Governance Code
Group Overview
18
The HSH Nordbank Code exceeds the terms
The principal rules of the HSH Nordbank
of the German Corporate Governance Code
Code govern the following areas:
as it ignores the distinction between legal
prescription and recommendation or sug-
• shareholder rights;
gestion. HSH Nordbank views the nonmandatory elements of the German Code
• annual shareholders’ meeting;
as equally binding on it as a company. Both
the Board of Managing Directors and the
• cooperation between the Board of
Supervisory Board of HSH Nordbank see
Managing Directors and the Supervisory
the consistency of their own Code as under-
Board;
lining the unique value of the Bank’s corporate management principles. Moreover,
• rights and duties of the Board of
it encourages a higher level of identifica-
Managing Directors, with specific refe-
tion between the addressees of the Code
rence to tasks and competencies, struc-
and its content. As its prescriptions are not
ture and remuneration, conflicts of
formulated as options, one does not even
interest;
think of acting otherwise.
• rights and duties of the Supervisory Board
with specific reference to tasks and comKey aspects of the Bank’s Corporate
petencies, tasks and competencies of the
Governance Code.
Chairperson of the Supervisory Board,
formation of committees, structure and
To facilitate comparison with the German
remuneration, conflicts of interest, effi-
Code, and to enhance transparency, the
ciency checks;
detailed structure of the German Code was
taken over. In compiling the Bank’s own
• transparency;
Code, each regulation of the German Code
was scrutinized for its specific relevance to
the Bank. The main points of divergence
• preparation and publication of financial
statements and audit of annual accounts.
from the German Corporate Governance
Code are summarized at the end of the
Compliance with the stipulations of HSH
HSH Nordbank Code.
Nordbank’s Corporate Governance Code is
continuously monitored. The Bank has
complied in full with the prescriptions of
its Code since the date of its foundation,
and continues to do so. At its meeting on
March 29, 2004 the Supervisory Board determined that, in the period under review,
it had fulfilled the tasks incumbent on it
19
by law, statutes and Corporate Governance
confirm its activities as efficient in accor-
Code. The Supervisory Board determined
dance with article 5.6 of the Bank’s Cor-
further that it had been informed by the
porate Governance Code.
Board of Managing Directors in a regular,
comprehensive and timely manner about
HSH Nordbank AG understands corporate
the Bank’s business development, funda-
governance as an ongoing process invol-
mental questions of corporate planning,
ving every member of the organization. The
the risk situation and important individual
Bank’s own Corporate Governance Code can
occurrences. The Supervisory Board and its
be adapted at any time in response to new
committees were informed of all issues
circumstances, especially if there should be
requiring their decision or knowledge. The
developments in company law or changes
Supervisory Board was therefore able to
in the German Code.
Heide Simonis
Alexander Stuhlmann
Chairwoman of the Supervisory Board
Chairman of the Board
HSH Nordbank
of Managing Directors
HSH Nordbank
Group Overview
20
Merger and integration. HSH Nordbank –
first mover in the German Landesbank sector
With the agreement of July 17, 2001 between the German Government and the EU Commission on the abolition of the so-called
Anstaltslast (maintenance obligation) and Gewährträgerhaftung
(guarantee obligation), a new phase dawned in the history of the
German Landesbanks. Responding promptly to the loss of state
guarantees due in summer 2005, and to the intensification of
competition in the banking industry, the owners of Hamburgische
Landesbank and Landesbank Schleswig-Holstein created HSH Nordbank. This was the first interstate merger in the German Landesbank sector. The merger is an important step in the realization of
HSH Nordbank’s business strategy, including the long-term securing
of capital market readiness, and the strengthening of the Bank’s
position in international competition.
21
Hamburgische Landesbank and Landes-
Managing Boards, as well as their depart-
bank Schleswig-Holstein – two ideal
ments and projects, in the run-up to the
partners.
merger decision. From that point on, the
office assumed responsibility for manage-
The merger of the two Landesbanks was in
ment of the merger process.
several respects an ideal match. Both in
geographical focus and business strategy
Whilst the preparatory phase, from March
they perfectly complemented each other.
through September 2002, was largely occu-
And, since 1997, Landesbank Schleswig-
pied with feasibility studies and questions
Holstein’s 49.5 % stake in Hamburgische
of evaluation, the period immediately follo-
Landesbank had proved a sound basis for
wing the merger decision saw the imple-
successful practical cooperation. With
mentation of a number of important steps.
similar corporate cultures and well-estab-
With 36 integration projects and over 100
lished knowledge of each other’s structures
sub-projects in operation, the merger of
and processes, as well as close physical
the two institutes was driven purposefully
proximity, the two partners spoke the
forward and the structure of the new Bank
same language – a fact that has conside-
set up.
rably simplified the integration process.
In the immediate aftermath of the owners’
decision, taken on September 9, 2002, to
Full speed ahead for the merger.
merge the two banks, several major tasks
were accomplished. Key positions were
In March 2002 the Managing Boards of
filled, and organizational structures as
well as business policies were defined. By
bank Schleswig-Holstein were asked by the
the end of 2002 the Board of Managing
banks’ owners to examine the possibility
Directors and the first management level
of merging their two houses. This involved
positions had already been filled, the orga-
questions of evaluation and the subsequent
nizational divisions had been allocated bet-
distribution of shares in the merged bank
ween Hamburg and Kiel, the Bank’s orga-
between the owners. The Bank’s organi-
nizational principles had been determined,
zational divisions also had to be allocated
the decision had been taken to employ
between the two headquarters in Hamburg
RaRoC (Risk-adjusted Return on Capital) as
and Kiel. On the basis of a shareholders’
the Bank’s economic management prin-
resolution of July 5, 2002, the two banks
ciple, the Bank’s strategic image had been
set up a joint office based in Hamburg and
defined, and the future IT system decided.
Kiel. Commencing work on August 1, 2002,
With the signing of the State Treaty on
this office served as a coordination center
February 4, 2003 between the Free and
for both
Hanseatic City of Hamburg and the State
of Schleswig-Holstein, the merger gained
decisive political impetus.
Group Overview
22
Legal incorporation.
Entry in the Commercial Register after
only nine months.
An important step toward capital market
readiness was the decision to change the
Once these steps were accomplished, there
Bank’s legal status into an Aktiengesell-
were no further obstacles – after a prepara-
schaft (stock corporation), sending a posi-
tory period lasting less than nine months –
tive signal to capital and labor markets
to the birthday bells ringing for HSH Nord-
alike. Long term, the step is an indispensa-
bank AG. So with entries completed in the
ble prerequisite for stock market flotation.
Handelsregister (Commercial Registers) of
Although still a non-listed corporation,
Hamburg and Kiel, the Bank already opened
HSH Nordbank has decided to follow the
its doors for business on June 2, 2003. For
German Corporate Governance Code, there-
accounting and tax purposes, incorporation
by conveying another valuable message to
took effect retroactively as of January 1,
the capital markets.
2003. The shareholders of the new Bank
are the City of Hamburg (35.38 %) and the
In response to the Brussels decision, the
State of Schleswig-Holstein (19.55 %), along
strategic orientation of HSH Nordbank
with the Savings Banks Association for
required a clear separation between public
Schleswig-Holstein (18.21 %) and WestLB
sector development and commercial busi-
(26.86 %). The shares held by Landesbank
ness. Therefore, with effect from June 1,
Baden-Württemberg (LBBW) were taken over
2003, Investitionsbank Schleswig-Holstein
by the Bank’s public sector owners before
(IB) – which ran the public sector develop-
completion of the merger. These owners
ment side as a legally dependent but
have contractually committed themselves
administratively autonomous division of
to maintaining a majority shareholding
Landesbank Schleswig-Holstein – was spun
(50.1 %) in HSH Nordbank AG at least until
off from the parent bank. And on May 23,
the end of 2013.
2003 Hamburgische Landesbank transferred its 82 % stake in Hamburgische
Wohnungsbaukreditanstalt (WK) – which
Letters of comfort also binding on
conducts the public sector business for the
HSH Nordbank.
City of Hamburg – to the City of Hamburg.
HSH Nordbank AG was also obliged by
With the entry of HSH Nordbank AG in the
law to shed its savings and loan business.
Commercial Registers, the entire invento-
Therefore with effect from June 1, 2003,
ries of Landesbank Schleswig-Holstein and
Landes-Bausparkasse (Home Loan and
Hamburgische Landesbank, including all
Savings Bank – LBS) was spun off from
assets, liabilities and employment relation-
Landesbank Schleswig-Holstein and acqui-
ships, were transferred to the new Bank as
red by the Savings Banks Association for
legal successor. This includes letters of
Schleswig-Holstein. Hamburgische Landes-
comfort issued by the predecessor banks in
bank had already disposed of its holdings
favor of their subsidiary companies before
in the home loan and savings business as
the merger.
from January 1, 1997.
23
Brussels Agreement covers
IT migration.
HSH Nordbank.
After intensive analysis and evaluation, it
The transitional arrangements enacted by
was decided in December 2002 to take over
the Brussels Agreement of July 17, 2001
the IT platform used by Landesbank Schles-
on the abolition of the Anstaltslast and Ge-
wig-Holstein as the principal solution for
währträgerhaftung are also applicable to
HSH Nordbank. Whilst specific functions
HSH Nordbank. The states of Hamburg and
of the Hamburgische Landesbank system
Schleswig-Holstein determined in the State
have been maintained, Hamburgische
Treaty that their obligations toward HSH
Landesbank’s business databases have been
Nordbank apply to exactly the same extent
migrated onto the new system, which has
as they did toward the predecessor banks
clear advantages in terms of modularity,
client compatibility, multicurrency com-
bank Schleswig-Holstein.
patibility and multilingualism. Temporary
problems arising in the course of IT migration have been identified and analyzed –
Annual synergies of EUR 150 million
and to a great extent already solved. Inter-
expected.
nal bank operations were at no time materially impaired.
By the third year following the amalgamation, HSH Nordbank expects to benefit
from synergies amounting to approxima-
Integration of business cultures – an
tely EUR 150 million per annum. Some two
essential step to success.
thirds of the savings will be in costs, arising principally from consolidation of IT
The success of a merger depends to a great
and staff functions, as well as from a
extent on the ability to integrate business
lowering of expenses in connection with
cultures and achieve full and rapid identi-
preparations for IAS and Basle II. We aim
fication with the new company. For this
to achieve earnings synergies by improved
reason, cultural integration is a high prio-
utilization of customer potential (cross-
rity for HSH Nordbank. The Cultural Inte-
selling), and by HSH Nordbank increasingly
gration project was primarily concerned
assuming lead or co-lead functions in
with analyzing the business cultures in
financing projects – reflecting the Bank’s
Hamburg and Kiel, pinpointing similarities
enhanced profile in international markets
and differences and determining where
and state-of-the-art know-how in key mar-
action was required. Specific measures were
ket segments.
then taken – for example, in the shape of
information sessions and events focused
on cultural integration. The longstanding
cooperation between the two banking
houses and their familiarity with each
other’s structures and methods, as well as
their relatively close physical proximity,
considerably eased the integration process –
although this has not yet been entirely
Group Overview
24
perfected. An important supportive feature
The strategy process – concentration on
of the merger operation was the Bank’s
core competencies.
effective internal communications. Swift
and comprehensive information about
The merger united two powerful partners
each step of the process was seen as a key
firmly rooted in the Hamburg and Schles-
to enhancing employee motivation and
wig-Holstein areas of northern Germany.
commitment.
The ability to remain competitive after the
abolition of Anstaltslast and Gewährträger-
haftung will be a decisive factor for the
HSH Nordbank Hypo AG .
future growth of HSH Nordbank. With this
in mind, the Bank undertook an intensive
The decision to establish HSH Nordbank as
review of business strategy immediately
a stock corporation entailed loss of the
after the merger. HSH Nordbank sees itself
right to issue covered mortgage bonds as a
as both a strong regional player in northern
refinancing instrument – though a special
Europe and an international expert in spe-
federal German regulation enabled existing
cialized financing. Aiming to improve and
mortgage bonds to be continued. In order
extend its customer relations and signifi-
to regain the authorization to issue mort-
cantly increase sales of non-capital-binding
gage bonds, HSH Nordbank acquired a
bank products, the Bank will pursue an
mortgage bank in September 2003. HSH
active capital management policy based on
Nordbank Hypo AG – equipped with a letter
portfolio transactions.
of comfort from HSH Nordbank – can continue to secure favorable conditions for
its real estate and medium-sized business
customers, as well as mun-cipalities and
public authorities, and at the same time
offer refinancing products to both public
and private sector Savings Banks.
25
Group Overview
26
A clear goal, a clear strategy –
“Capital Market Readiness 2006”
The German banking industry is undergoing profound change,
the result of a shift in underlying conditions, changes in the legal
framework, and intensive competition. To keep pace with these
developments and continue to operate successfully in today’s
markets means adapting to these changes. With the completion
of the first interstate merger in the Landesbanks sector, we have
created an excellent platform not only for keeping up with the
leaders, but for taking our place among them. Our new overall
bank strategy, and the business model we have built on it, reflect
this ambition. They are milestones on our way to a successful
future.
27
Our strategic basis – a strong position in
Our strategic goal has a name –
core markets.
“Capital Market Readiness 2006”.
In all its core markets HSH Nordbank enjoys
The new overall bank strategy aims to pro-
an excellent competitive position. In the
vide HSH Nordbank with capital market
Hamburg and Schleswig-Holstein economic
readiness, independent of state guarantees,
region we are market leader in the cor-
by 2006. Against this background we have
porate clients segment, not merely on
consistently developed the strategic orien-
account of our lending strengths but also
tation of our predecessor banks. Above all
because we act in many cases as house
in northern Germany and northern Europe
bank to the medium-sized business sector
we will continue to play the role of core
in northern Germany. Hardly any other
regional bank, enjoying a close relation-
Landesbank is so deeply rooted in its home
ship with our customers. At the same time
region. In specialized financing we also
we will serve the foreign trade require-
take a leading position – as one of the three
ments of our domestic customers. And
top addresses for commercial real estate
HSH Nordbank will also be active as a pro-
finance in Germany, one of the largest
vider of specialized finance in those inter-
Beyond home base – we are represented at major financial centers worldwide
Shanghai
Oslo
Stockholm
Helsinki
Tallinn
Hong Kong
Riga
Copenhagen
Lübeck
Amsterdam
Warsaw
Hamburg Berlin
London
Luxembourg
Guernsey
Kiel
Hanoi
New York
Singapore
German refinancers for manufacturer-
national segments in which we possess
independent leasing companies, a major
special product, market or client expertise.
international transport financing house,
and world leader in ship financing. In these
To broaden our investor base on both the
segments we also act as house bank for
national and international capital markets,
many clients. Our new overall bank strate-
HSH Nordbank is consistently expanding
gy, launched in 2003, takes its inspiration
its position as an innovative partner, secu-
from this excellent starting position.
ring its funding with a continuous issuing
program, but also offering and dealing
in complex products such as structured finance and asset backed securities. With
Group Overview
28
this enhanced profile we will continue to
in earnings through sales of non-capital-
be competitive and successful in future,
binding products, as well as by risk-oriented
and generate sustained growth in the
pricing in our traditional lending business,
Bank’s enterprise value. Our goal is clear:
and by a more active management policy
we aim to boost profitability and signifi-
in our equity and risk positions.
cantly improve both our capitalization and
its structure.
2. Profile to be sharpened by intense
focus.
The road to success – consistent
Despite the limit set on risk-weighted
development of overall bank strategy
assets, we aim to develop new lending
and business model.
business very actively, by intense utilization of the advantages we have built up
Our strong market position and longstan-
over decades of contact and trust with our
ding customer relationships in our role as
existing customers. We will, however, con-
principal banker – founded on the tradi-
centrate our activities in segments where
tion of HSH Nordbank and its predecessors
our strong market or regional presence can
as relationship-bankers – create a platform
give us a leading position, with the possi-
on which our overall bank strategy and
bility of attractive profit margins. Commit-
business model will be developed in a five-
ments outside these areas will be entered
point plan:
into very selectively on the basis of assured
high profitability. This strategy will signifi-
1. Qualitative growth.
cantly sharpen our profile, positioning us
as a powerful regional bank of the north
In its core activities, HSH Nordbank reached
and an international provider of speciali-
a critical size with the merger. For this
zed financing. We will systematically use
reason we will in future – unlike our pre-
our lending strengths to further extend
decessor houses – focus not on quantitative
our leading position via intensive expan-
growth but on profitability and capitaliza-
sion of new business.
tion, aiming for a position that is also
internationally attractive. Without extending our risk position, we intend to further
expand our lending business. Our aim is
for clearly focused growth, without keeping all our loans on the books until maturity. We will achieve the necessary increase
29
3. Active asset management to generate
4. Franchise value to be boosted by multi-
growth and diversify risks.
product approach.
As we intend to actively pursue the deve-
HSH Nordbank’s traditional strength as
lopment of new lending business, we will
an outstanding loan specialist constitutes
relinquish our former policy of keeping all
an excellent platform for systematic devel-
our loans on the books until maturity. In-
opment of our customer relationships.
stead, we will sell tranches of loans before
Currently we too often maintain a single-
maturity, thus freeing equity capital tied
product relationship with our clients.
up in lending. This can be effected by syn-
Our future goal is to develop an all-round
dication of claims at the time when a loan
approach that more frequently makes us
is arranged, or by portfolio management
first address for all our customers’ finan-
transactions on the secondary market (for
cial requirements. Within a multi-product
example, securitization) during the credit
context we will offer a significantly higher
period. The precondition for such transac-
number of non-capital-binding products
tions is a portfolio of outstanding quality –
and services, with the overall goal of doub-
like ours.
ling commission income by 2006.
By securitizing tranches of loan from the
In order to achieve the transition from a
ship financing, real estate and corporate
loans-intensive business model to one orien-
segments, which enjoy high ratings, we aim
ted on selling significantly more products
to support the creation of a liquid secon-
and services with high commissions earn-
dary market for these asset classes. Our
ings, we will in future focus more closely
goal is to regularly place complete sub-port-
on the specific business requirements of
folios on the international capital markets
our customers, and thereby also deepen
via securitization transactions, thereby
the already good relationships we enjoy
enabling investors to benefit from HSH
with them. We aim to generate further
Nordbank’s special expertise in its attrac-
commissions earnings by more frequently
tive core activities.
assuming lead or co-lead functions. This
will involve our product divisions in deve-
In our portfolio management transactions
loping high-performance non-capital-bind-
we will also exercise vigilance, taking
ing products, and providing support for
prompt action to counter the formation of
customer advisory and sales units.
risk concentrations. In addition, to enhance
risk diversification and optimize earnings,
This approach enhances customer-value
we will systematically invest in credit and
and at the same time creates tangible value
market price risks.
added for the Bank. A deep and far-reaching
customer relationship, based not only on
lending, will prevent bank services from
drifting off to the competition – and do so
without burdening the Bank’s capital.
Group Overview
30
5. Cooperation with the Savings Banks to
Our claim – to be a top player in the
be intensified.
north European banking market.
Our position as a strong regional bank of
The onward development of our business
the north is further reinforced by our
model, as outlined above, has laid the
intensive cooperation with the local Savings
foundation for HSH Nordbank’s positio-
Banks network. This constitutes a second
ning as one of northern Europe’s leading
pillar of our business activities. We are
commercial banks – and one that, after
particularly closely linked to the Schleswig-
mid 2005, will no longer enjoy state gua-
Holstein Savings Banks – for which we
rantees. Thanks to the deep relationships
serve as central bank – through an agree-
with our customers that we have developed
ment of association, as well as by concrete
over the years, and to our strong market
bilateral sales agreements. We also tradi-
position, we do not need to expand into
tionally serve the Savings Banks on a supra-
new high-risk business segments. Instead,
regional basis as second or third under-
we can concentrate on generating new
writing partner.
business in fields where our expertise is
proven and our customer know-how out-
Our activities are focused on areas in
standing. This is an excellent springboard –
which – in line with our business model –
not only in itself, but also in relation to
we possess acknowledged expertise. These
the competition.
include refinancing, advisory services for
risk and portfolio management, and the
In the wake of the Managing Board’s deci-
trading of risk on the secondary market.
sions establishing an overall bank strategy,
Examples are a mortgage bond secured on
the period since autumn 2003 has seen
real-estate, developed for Savings Banks and
the implementation of this strategy in HSH
successfully placed for a Schleswig-Holstein
Nordbank’s various organizational divi-
Savings Bank – an historic first in Germany
sions. Progress is monitored and ensured
– as well as rating advisory services provi-
through a bank-wide controlling pro-cess.
ded for various Savings Banks. In addition
The strategy is put into effect decentrally,
to this, we put our proven expertise in
and the process is complemented with a
developing innovative capital market pro-
program of action addressing key success
ducts – for example, our successful struc-
factors for the development of our business
tured retail products – at the service of
model.
Savings Bank customers as well.
We are confident that the systematic implementation of this model will, by 2006,
achieve a return on equity of more than
15 % before taxes, as well as sustained
growth in our capital resources, with a core
capital ratio of over 7 %. This will ensure
adequate and attractive funding on the
international capital markets.
31
Group Overview
32
Employees – high level of commitment
following a successful merger
The merger of Hamburgische Landesbank and Landesbank
Schleswig-Holstein into HSH Nordbank AG, and the integration
process that followed, continue to make high demands on
our human resources management and on our employees.
For this reason personnel issues had clear priority from the beginning of the process. Tackling them swiftly has been crucial
to the rapid and frictionless integration of the two banks.
33
Integration process well on the way.
Responsible HR management – measures
swiftly taken to integrate employees.
Experience of company mergers and restructuring processes shows that the inte-
The integration process was implemented
gration of different business cultures is a
via various practical measures supporting
decisive factor in creating a new corporate
cooperation, developed by HR initially as
identity, and in laying the foundations of a
projects and later as established policy.
stable and viable business model. In the
Among these were large interactive events
run-up to the merger, HSH Nordbank al-
in which all employees had the opportu-
ready identified this as a key issue and,
nity to participate, as well as optional con-
after a thorough cultural analysis, intro-
flict-solving and coaching sessions. A key
duced the necessary operational measures.
element was the team-building sessions
We consistently based these on the aware-
provided in response to the requirements
ness of a shared north German mentality.
of many of the Bank’s organizational units.
That the integration process has already
These covered topics from the development
achieved so much is due above all to the
and implementation of strategy to setting
willingness of our employees to actively
up information and communication struc-
shape our common future. The Board of
tures. The sessions are being continued in
Managing Directors would like to take the
the current year, with the focus on the
opportunity here to thank all our employ-
Bank’s new strategy to meet the demands
ees for the trust they have put in us, and
of the capital market, as well as measures
the commitment they have continuously
required for developing a unified leader-
demonstrated.
ship concept.
Group Overview
34
Development of employee profile.
tation of the Bank’s new strategy, we
supported and implemented these changes
As at December 31, 2003 the HSH Nord-
with various complementary and compen-
bank Group employed 4,511 people – some
satory measures, and as a result were largely
4 % less than were employed in the prede-
able – from the inception of HSH Nord-
cessor organizations at the end of the pre-
bank – to provide the resources necessary
vious year. The reduction in the regular
for the Bank to staff its national and inter-
workforce was achieved with minimal
national locations.
turnover by a widespread stop in recruitment and the promotion of special early
We aim in the current year to recruit
retirement offers.
experts for specialist positions – in some
cases from narrowly defined professional
The merger and consequent new strategic
segments. In line with this requirement we
orientation of certain divisions of the Bank
are positioning ourselves both nationally
brought with it the need for many employ-
and internationally as an attractive
ees to adapt to a new job profile or work-
employer.
place. Within the context of the implemen-
Employee profile
31.12.2003
Total number of employees (Group)
of whom: female
4,511
2,127
Regular employees
4,314
of whom:
Bank
3,207
Branches
418
HSH Nordbank International S.A.
126
HSH Nordbank (Guernsey) Ltd.
14
PLUS BANK AG
335
Casinos
194
HSH Nordbank Hypo AG
Trainees
Temporary employees/Interns
Employees on maternity and parental leave
Retired employees and surviving dependants/employees in early retirement
20
148
49
186
1,566
Part-time employees in %
15.78
Average age (years)
38.43
New appointments (excluding branches and subsidiaries)
100
35
Incentives increase attractiveness as an
Company support for playgroup and
employer.
after-school places.
HSH Nordbank sees employee relations
A central feature of HSH Nordbank’s HR
based on fairness and high motivation as
policy is the harmonization of family and
an essential pillar of its corporate culture.
workplace. We are continuing the coope-
For this reason we are on the point of
rative project “Company Kids”, providing
introducing a remuneration system, deve-
flexible facilities for children up to the age
loped from that of our predecessor organiz-
of twelve. This was started by our prede-
ations, for employees on both individually
cessor, Hamburgische Landesbank, in tan-
and collectively agreed salary scales. The
dem with the organization Familienservice
system will provide motivation for success
(Family Service). Places are free for HSH
by means of variable bonus payments and
Nordbank employees, and were used inten-
other attractive incentives. We will conduct
sively in 2003. We plan to extend this pro-
performance reviews with each employee
vision to our Kiel location, where employ-
in which we agree upon individual targets
ees currently (as in the past) can use a
and discuss perspectives for professional
contingent of places reserved in Arbeiter-
and personal development as well as remu-
wohlfahrt (Workers’ Welfare) children’s
neration. The instruments we use for em-
facilities.
ployee advancement include management
and professional qualification measures,
a mentoring program concentrating especially on equal opportunities for highpotential female staff, and systematic personnel development programs. Some of the
HR concepts and systems inherited from
our predecessor banks have not yet been
fully integrated, but we are confident in
our ability to reach new solutions, in cooperation with the employees’ council, in the
course of the current year.
Group Overview
36
Our involvement in the arts, culture, sports
and the environment
Firmly rooted in the region of Hamburg and Schleswig-Holstein,
HSH Nordbank upholds the longstanding tradition of cultural and
social commitment shown by its predecessors before the merger.
We see ourselves not only as an attractive regional employer, but as
an enterprise with widespread cultural and social responsibilities.
37
Widely committed to culture and the arts.
Principal sponsor of the SchleswigHolstein Music Festival.
HSH Nordbank supports contemporary art
and culture in Schleswig-Holstein via an
Along with its partners in the Savings
Arts Foundation established by Landesbank
Banks Finance Group, HSH Nordbank is a
Schleswig-Holstein in 1992. The Foundation
principal patron of the Schleswig-Holstein
appoints an expert curator for a period of
Music Festival – one of Europe’s biggest
one to two years, with the task of creating
and best known music events. In 2003 the
and implementing an arts program. Last
Bank sponsored the Festival’s concert pre-
year, for example, the Bank sponsored the
ludes for the first time, and we also pro-
“NORD-KUNST: Schleswig-Holstein in the
mote the Festival’s ideals by supporting
20th Century” exhibition that toured the
talented young musicians. In 2003 we
region, paying homage to the whole spec-
awarded a prize for woodwind soloists.
trum of art from the north. For the cur-
Reflecting our image as a partner and
rent year the well-known solo clarinetist
sponsor of culture and the arts, as well as
Sabine Meyer has been engaged as Founda-
science and sports, HSH Nordbank suppor-
tion Curator.
ted a number of other cultural and social
events in the past year, ranging from individual exhibitions to the HSH Nordbank
Longstanding partnership with the
Cup, a sailing regatta attracting internatio-
Hamburg and Kiel Kunsthalle museums.
nal competitors. And, as a committed corporate citizen, the Bank supports selected
With HSH Nordbank’s sponsorship of the
social projects.
new “Kunst in Hamburg. Heute” (“Art in
Hamburg. Today”) section of the Hamburg
Kunsthalle, a fresh element has entered
Boats, sea and Kiel Week – side by side
the longstanding collaboration between
with the world’s biggest sailing event.
the Bank and the museum. Focused on
completing the collection of works by
Kiel Week is one of the world’s biggest and
Hamburg artists, the project demonstrates
most prestigious sports events. Every year
HSH Nordbank’s significant contribution
its top level competitions and wide accom-
to maintaining the City’s artistic heritage.
panying program of cultural events draw
We also have a well-established partnership
large numbers of visitors from all over the
with the Kunsthalle in Kiel, where we have
world. As a partner for sports and culture,
been principal sponsor of an annual ex-
HSH Nordbank will sponsor Kiel Week for
hibition each year from 2003 to 2005. In
the next three years, making a major con-
2003 this enabled the Kiel museum to stage
tribution to the attractiveness and dyna-
its “SEE History” exhibition, presenting its
mism of the entire north German region.
own collection – including works by Emil
Nolde and Max Liebermann – in a new
context.
Group Overview
38
Principal sponsor of the HSH Nordbank
Committed to climate protection.
Run – around Hamburg’s Hafencity.
Environmental care is important to HSH
Newly renamed “HSH Nordbank Run”, the
Nordbank. Our goal is to reduce CO2
former “Hafencity Run” is a 4.5 km race
emissions as far as possible. We have not
through Hamburg’s “Hafencity” docklands
only consistently lowered our own energy
complex sponsored by HSH Nordbank. In
consumption, but also support other envi-
cooperation with the “Hamburger Abend-
ronmental projects in Schleswig-Holstein,
blatt” newspaper, part of the proceeds of
including reforestation and the reinstating
this race are devoted to social projects. The
of large wetland areas, making a significant
“Children Help Children” initiative, for ex-
and sustained contribution to compensa-
ample, provides support for underprivil-
ting carbon dioxide emissions around our
eged children and their families, organi-
Kiel location. In addition, HSH Nordbank is
zing regular and reliable care and contact
a member of the “Hamburg Partnership for
services as well as financial help.
the Environment”, an initiative started in
2003 by the City State with local industry
and commerce to support sustained ecolo-
Backing for the “Employment Initiative”.
gical modernization and use of resources.
We see membership of this group as mean-
Like its pre-merger predecessors, HSH Nord-
ingfully complementing our commitment
bank supports innovative educational and
to environmental management.
training schemes geared to strengthening
the regional economy. In the “Employment
Initiative – Schleswig-Holstein Regional
Network”, HSH Nordbank and Provinzial
Nord Insurance Group have established a
joint project aiming to integrate young
people into work. In 2003 the “Schools and
the Economy” prize was awarded to regional schools for the second successive year.
39
THE FUTURE IS A NEW GOAL
Shipping Clients
With a business volume of more than EUR 20.8 billion,
HSH Nordbank is the world’s largest ship financing
house. Our Shipping division offers, alongside classical
and structured ship financing, the entire range of
financing and hedging instruments optimally tailored
to the requirements of internationally operating
shipping companies.
43
Number-one ship financing provider,
HSH Nordbank’s own innovative rating
with comprehensive know-how and
system takes account of quantitative and
customized solutions.
qualitative factors in making loans.
Our core region of northern Germany has
In cooperation with other banks, we have
a long tradition of shipbuilding, maritime
developed a rating system for mortgage-
trade and travel and ship financing. For
based ship financing that has set a new
this reason the Shipping division ranks high
benchmark. It enables risk to be assessed
among HSH Nordbank’s core activities. The
and calculated as objectively and verifiably
Bank has a particularly long tradition of
as possible. As well as the purely quanti-
financing activities in Germany, Scandinavia
tative measurement of a transaction’s cash
and Greece, but customers from other
flow, a number of qualitative factors such
European countries, the USA and Asia also
as management, support by parent compa-
comprise a large section of our balanced
nies and the technical condition of the ship
and diversified lending portfolio covering
are taken into account – and here the long
numerous market segments. We provide
experience of HSH Nordbank and its pre-
our clients with investment services for all
decessors, as well as our good customer
regular types of merchant ship, with a focus
relationships, plays an essential role. In this
on new vessels in the three principal mar-
way we are able to offer our business part-
kets: container ships, tankers and bulk
ners even better advice and provide finan-
carriers. In addition we offer our depth of
cing precisely tailored to their individual
experience and know-how to provide tailor-
requirements.
made financing for cruise ships, ferries
and many special ship types. In the secondhand market we help our customers to find
flexible short-term solutions appropriate
to these specific market requirements.
Group Segments
44
2003 – significant market recovery.
bulker segments – even hit record levels.
A powerful driver behind this development
The three main ship financing markets –
was China, whose importance as a producer
container ships, tankers and bulk carriers –
of manufactured goods, within the frame-
developed in an unexpectedly positive way
work of the increasing internationalization
in 2003. Charter rates rose throughout the
of the division of labor, is constantly grow-
year, and – especially in the container and
ing. China’s raw materials requirement for
steel and energy production is increasing
accordingly – a phenomenon from which
Portfolio by Country/Region
in %
all market segments continue to draw high
5.3 0.9
6.9
profits. In the container vessel market we
saw a boom in orders, especially from
6.4
German shipping companies, for so-called
6.9
54.8
super-post-Panamax ships with a capacity
of over 7.5 million TEU, to cover the basic
10
transportation requirements of worldwide
8.8
scheduled services. Reflecting its position as
Germany 54.8
Scandinavia/Baltic States 8.8
Greece 10
North America 6.9
Far East 6.4
Rest of Europe 6.9
Turkey/Eastern Europe 5.3
Various 0.9
national market leader, HSH Nordbank has
gained very substantially from the demand
for financing generated by this upturn.
Dynamic growth in shipping division.
Portfolio by Ship Type
Especially on the domestic front, the strong
in %
2.2
2.5
6.6
demand by German shipping companies in
2003 for financing for new jumbo container
8.9
34.1
ships had a positive impact. Foreign trade
also flourished. Our new business amounted
8.9
to EUR 9 billion, and at year-end 2003 our
total business volume for ship financing
stood at EUR 20.8 billion. This included
18
18.8
Container ships 34.1
Oil tankers 18.8
Bulk carriers 18
Chemical and product tankers 8.9
Passenger ships/ferries 8.9
Cruise ships 2.5
Gas tankers 2.2
Other 6.6
open commitments amounting to EUR 3.1
billion.
45
After the merger we continued to extend
and deepen our traditionally good relationships with our customers – for example, by
offering individually tailored capital market
products. We also provided innovative financing structures – such as leasing offers –
to meet changing customer requirements.
Our increasing role as arranger has enabled
us to strengthen our market position still
further, and thanks to commission income
from cross-selling activities, our overall earnings developed positively in 2003, despite
the weakness of the US dollar.
Optimally equipped for the future.
The introduction of our rating system for
ship financing provision has already enabled
us to fulfill the new equity capital stipulations of Basle II. As a result, we see ourselves
well positioned for future activities in the
ship financing segment, and expect our business to continue its dynamic development.
The positive market climate and current
global upswing will also have a positive
impact on ship financing and offer good
opportunities for lending. At the same time,
we will intensify our market presence, using
our many contacts in the banking world to
further raise the level of our syndication
activities.
THE FUTURE NEEDS PLANNING
Real Estate Clients
Successful completion of ambitious real estate projects presupposes the perfect interplay of know-how,
concept and capital. As an expert financial services
provider, HSH Nordbank is continuously and systematically developing its comprehensive product spectrum, ranging from classical financing to real estate
investment banking. In addition, HSH Nordbank has
for several years been investing in shareholdings that
directly support the goals of its Real Estate Clients
business. The goal of this strategy is to extend and
enhance customer loyalty and generate additional
earnings.
49
Purposeful expansion of our strong
In order to continue firmly on our success-
domestic position and selective growth in
ful course, we further developed our fun-
attractive international markets.
damental strategy in the real estate sector
after the merger in 2003, adjusting it to
Commercial real estate clients form one of
reflect the Bank’s enhanced market position
HSH Nordbank’s core business areas, and
and new orientation toward the capital
one that creates – as it did with our two
markets. Apart from broadening our pro-
predecessor houses – a strong foundation
duct range in response to customer require-
for the Bank’s continuing growth. We run
ments, we aim to focus more strongly on
our real estate business from numerous
the growing requirement of our business
locations – apart from Hamburg, Kiel and
partners for syndicated and securitized
Berlin, we are represented in London, New
loans. Our goal is to consistently extend
York, Copenhagen, Stockholm, Warsaw and
our position in the national market, and at
Amsterdam.
the same time achieve substantial growth
in selected international markets.
On the domestic market our real estate
financing activities are concentrated on
A further important goal for HSH Nordbank
commercial and residential properties,
is the rapid integration of HSH Nordbank
with regional focuses on Hamburg, Berlin,
Hypo AG into the Group, acquired through
northern Germany and the major popula-
the purchase of an existing mortgage bank.
tion centers of western Germany. Already
The main task of this new 100 % subsidiary
today we are the leading provider of real
is the refinancing of HSH Nordbank’s long-
estate financing in northern Germany.
term real estate lending business. Tranches
Parallel to this, our activities abroad conti-
of first mortgage are transferred to HSH
nue to grow in importance, with properties
Nordbank Hypo via loans acquired and
in prime locations in major American and
processed by HSH Nordbank, where they
European cities. In addition, we are further
are refinanced with secured mortgage
expanding our Real Estate Clients division
bonds. The necessary procedures were set
to reflect our claim to provide “all-round
up in 2003, and the first refinancing acti-
real estate service” in this segment. In addi-
vities have already been completed. This
tion to classical financing, we offer our
aspect of the Bank’s activities continues the
customers attractive innovative products
longstanding and successful tradition of its
from the real estate investment banking
two predecessor houses in mortgage bond
spectrum. HSH Nordbank’s real estate client
issues.
portfolio totaled more than EUR 21 billion
in 2003, with international activities accounting for some EUR 5.5 billion. Total
Fiscal 2003 – encouraging development in
business volume as at December 31, 2003
difficult market environment.
amounted to some EUR 27.8 billion.
Real estate business is subject to cyclical
trends. This is reflected in the uneven development of our major business segments
during the past year. Nevertheless the whole
Group Segments
50
picture gives grounds for considerable satis-
customer groups both nationally and inter-
faction. Our success is built on a balanced
nationally, among them investors in both
product portfolio, adapted and optimized
commercial and residential property, real
in response to changing environmental
estate corporations, project developers and
conditions. In the domestic residential market, for instance – in contrast to commercial properties – we see a medium-term
Portfolio by Property Type
in %
recovery taking place, with demand and
24
30
rentals both picking up. On the other hand,
in our principal international markets, the
USA and UK, we expect a growing demand
2
over the same period.
44
Balanced portfolio structure ensures longterm business success.
Residential (domestic) 30
Commercial (domestic) 44
Residential (international) 2
Commercial (international) 24
Apart from increasing internationalization,
the balanced diversification of our portfolio
residential property companies. Our port-
ensures maximum independence from the
folio continues to be concentrated in the
cyclical fluctuations of the real estate sector.
domestic market, which accounts for 74 %
For this reason, we started at an early date
of our activities. New business, however,
to extend our product range as widely as
will further increase the contribution of
possible. Today we serve a large number of
the international segment. At 68 %, the
dominant focus of our financing activities,
both nationally and internationally, is on
Portfolio by Customer Segment
in %
6
commercial projects – for example, office
12
accommodation and shopping malls.
26
20
New business – increasing importance of
international segment.
8
28
After a sluggish beginning in difficult market conditions, we were able to conclude
Residential property companies (domestic) 12
Residential property investors (domestic) 20
Commercial property investors (domestic) 28
Real estate corporations (domestic) 8
International investors 26
Other investors (domestic) 6
new business amounting to some EUR 4.7
billion without easing our careful lending
policies. Some 62 % of our domestic new
business, with a total volume of EUR 1.3
billion, was concentrated in our home
51
region of northern Germany and in the
Berlin metropolitan area. Remaining do-
New Business by Country/Region
(International)
in %
3
mestic new business in 2003 continued to
4 2
8
be focused on the major German metro-
34
politan areas. With some EUR 2.6 billion –
amounting to 26 % of our total portfolio –
international new business added its own
11
5
considerable impulse. Some 34 % of our
international new business was concentra33
ted in the USA, where – in cooperation
with powerful partners – we invested above
all in the so-called 24 hour cities like New
York and Washington. Our international
European new business focused on the UK –
principally on the Greater London area.
USA 34
UK 33
Netherlands 5
Poland 11
Rest of Europe 8
France 3
Spain 4
Canada 2
financing structures, focusing on selected
Prospects for 2004.
core markets. Within this framework we
will consistently pursue our established
With the overall economy recovering very
course, developing from a pure lending
slowly, we see little opportunity for growth
institution into a more complex real estate
in the domestic real estate financing mar-
investment banking house.
New Business by Customer Segment
in %
Segment backed by participations –
5
8
completing our product range and
strengthening our market position.
20
Parallel to our real estate financing activi-
55
ties, HSH Nordbank has for some years invested in participations that actively support
12
Residential property companies (domestic) 5
Residential property investors (domestic) 8
Commercial property investors (domestic) 20
Real estate corporations (domestic) 12
International investors (total) 55
the business operations of our Real Estate
Clients division. The goal of this strategy is
to extend and enhance customer loyalty
and achieve additional earnings. Our holdings are confined to medium to long-term
investments, with assets currently spread
ket. Therefore, to operate effectively in this
across four areas – project development,
still volatile environment, we aim to concen-
issuing business connected with real estate
trate on top quality, high margin business.
investment funds, participations (including
On the international front we will continue
real estate equity funds) and services.
to maintain our conservative
Group Segments
52
Project development.
Issuing business – real estate investment
funds.
HSH N Immobilien Holding GmbH is the
company responsible within the Group for
Since January 1, 2002 our real estate invest-
all real estate projects in which the Bank
ment fund activities have been concentrated
has an equity stake. In the year under review
under the umbrella of HGA AG (formerly
the company was able to further expand its
HGA Hamburgische Grundbesitz Beteili-
activities, and is currently participating in
gungs AG), an HSH Nordbank subsidiary.
seven projects with a total volume of EUR
For this purpose, our entire stake in HGA
990 million. The largest single project – in
Capital Grundbesitz und Anlage GmbH,
which HSH N Immobilien Holding joined
HGA Management Investor und Anlage
forces with the ALLIANZ Group – is the
GmbH (formerly "Katharinen" Verwaltungs-
EUROPA-Passage, a shopping mall and office
gesellschaft mbH) and LB Immo Invest
space development under construction by
GmbH (formerly HGA Investment GmbH)
Projektgesellschaft Alida Grundstücksgesell-
was transferred to our HGA holding in the
schaft mbH & Co. KG in a prime location in
course of fiscal year 2002.
central Hamburg. Completion and opening
are scheduled for the end of 2006. Parallel
Fiscal 2003 saw an overall growth in fund
to its equity business, HSH N Immobilien
volume from HGA Capital closed-end
Holding has significantly expanded its ser-
public funds. During the past year, three
vice activities in the project development
new funds were set up with real estate
and management areas, via its subsidiary
properties in Frankfurt, Vienna and Pecs
HSH N Immobilien Development GmbH.
(Hungary). The HGA New Office Campus-
The company’s direct involvement in this
Kronberg Fund set up in April 2002 was
area creates not only qualitative improve-
fully placed (with partial recourse to the
ments – enhanced technical know-how –
placement guarantor), as was the HGA
but also earns additional income without
Mitteleuropa I Fund with a shopping mall
incurring higher risks or absorbing capital.
in Pecs (Hungary). In addition, the HGA
USA III Fund is at an advanced stage of
placement in New York. With these funds
HGA Management controls a fund and
property volume of some EUR 1.1 billion.
Jointly with ECE – a project developer and
manager of shopping malls – HGA Capital
is currently developing its specialized fund
activities in central Europe, based on the
construction of state-of-the-art shopping
facilities in Hungary, the Czech Republic
and Poland.
53
In 2003 the capital investment company LB
HSH Nordbank’s key equity investment acti-
Immo Invest set up two open-end real estate
vities during the past fiscal year included
funds for institutional investors, leaving
the acquisition of the remaining 50.1 %
highly respected competitors behind in
shares in LEG Schleswig Holstein Landesent-
growth-rate terms. Additional capital com-
wicklungsgesellschaft GmbH. The complete
mitments have already been made, enabling
privatization of LEG brought the operating
the purchase of further properties on a
companies – as well as the core real estate
considerable scale. As from April 1, 2003,
activities of B&L Immobilien AG – under
two partners from the Landesbank sector –
the LEG umbrella. In the wake of the
Helaba, and REAL I. S. AG Gesellschaft für
amalgamation, LEG changed its name to
Immobilien Asset Management, a subsidiary
DGAG Deutsche Grundvermögen GmbH
of BayernLB – joined LB Immo Invest, in
(DGAG). The new company is owned by B&L
order to broaden the property purchasing
Immobilien AG (62 %) and HSH Nordbank
base and boost product sales in Germany.
AG (38 %). DGAG develops, buys, sells, manages and administers real estate properties.
In the shopping facilities segment the
Participations – including real estate
company’s portfolio comprises retail outlet
equity funds.
rentals totaling some 143,000 sq. m. and
commercial property of some 297,000 sq.
Our activities in this segment comprise
m. throughout Germany. As well as its own
property companies and equity funds.
residential holding of more than 19,400
GEHAG GmbH manages some 20,000 resi-
rental units, the company manages some
dential units in Berlin. The company’s core
3,300 rental units for third parties. DGAG
activities include traditional management,
is looking to achieve incorporation in the
development of the core portfolio, and
near future. The company plans to enhance
individual property sales. GEHAG improved
and extend its position in the German
its business processes in 2003 and pushed
property market during 2004, especially in
ahead with the optimization of its property
its core shopping facilities and residential
portfolio. During the year under review, the
business segments.
company restructured its borrowing and
placed a significant tranche of funding with
Since the end of 2002 HSH Nordbank (before
a bank syndicate led by HSH Nordbank AG.
that date Hamburgische Landesbank) has
The company fulfilled its economic plan
invested in various international equity
for 2003, and will concentrate in the cur-
funds, among them US and Canadian funds.
rent fiscal year on tapping optimization
The Bank’s total commitment amounted to
potentials.
some EUR 70 million (equivalent value), of
which some EUR 4 million had been called
as at December 31, 2003. The funds are
invested mainly in real estate financing and
project developments for office and commercial accommodation.
Group Segments
54
Regional focuses are the USA, Canada and
Property services.
major west European cities. The investments
aim not only to grow attractive earnings,
Our core activity in this segment consists of
but also to enhance networking with inter-
comprehensive consulting services for our
national investor groups, and thereby gene-
clients on all real estate business matters.
rate additional follow-up income.
We aim to extend this service during the
current year.
Goal-oriented real estate portfolio management requires not only the acquisition of
new investments and the development of
Planned establishment of a real estate
existing ones, but also continuous alertness
holding entity to bundle activities.
to appropriate exit openings. Thus, at the
end of 2003 the sale of our stake in West-
HSH Nordbank intends in the course of
Invest Gesellschaft für Immobilienfonds
2004 to reorganize those of its real-estate
and Westdeutsche ImmobilienHolding
related activities that take place outside the
brought attractive returns – WestInvest
Bank, bundling them in a single holding
issues and manages open-end (as well as
company, HSH N Real Estate, which will
one closed-end) property funds. Similarly,
also house the funds business, equity/
at the beginning of the year under review
opportunity investments, real estate project
HSH N Composits GmbH (a 100 % subsidiary
development and property services. As well
of HSH Nordbank) held 32.8 % of the capital
as unifying and optimizing our market
in HVG Heimbau GmbH (HVG) – itself a
impact, this reorganization will create
holding company owning 76.6 % of the
earnings synergies and facilitate clear and
capital in the real estate enterprise BIG
effective management. Relations with the
Heimbau AG. These investments were sold
Bank will be maintained via our Real Estate
in 2003 to Deutsche Annington Erste
Clients division.
Wohnungsbeteiligungs- und Verwaltungs
GmbH & Co. KG. Finally, negotiations are
currently at an advanced stage to sell the
Bank’s interest in W. Jacobsen AG to an
institutional investor. W. Jacobsen AG is a
listed real estate company with property in
northern Germany.
55
THE FUTURE DEMANDS COMMITMENT
Corporate Clients
The Corporate Clients segment comprises not only the
worldwide corporates business run from the Bank's
head offices in Hamburg and Kiel, but also the corporates activities of the Copenhagen Branch (Nordic Corporates) in the Baltic Sea region. In our core region
of Hamburg and Schleswig-Holstein, HSH Nordbank
enjoys a predominant market position in this business
segment. We also maintain a comprehensive network
of branches and representative offices in Scandinavia
and the Baltic Rim countries, substantiating our claim
to be a powerful bank of the north. We aim to reinforce and extend this position in future. Good foundations have been laid in the course of the merger,
with the bundling of competencies and the expansion
of the product portfolio, as well as with our growing
international orientation and our solid expertise in
both our own and our customers' business activities.
59
Corporates and Structured
Finance
Taking account of tax and corporate structures, as well as rating aspects, we have
developed our structured finance capability
Leading-edge position further
with a clear focus on quality, in order to
strengthened.
meet the rising demands of our customers,
who increasingly see the optimization of
Corporates and Structured Finance concen-
their own financing as an important stra-
trates on the top end of the medium-sized
tegic task. Our wide experience and high
company segment, above all in northern
level of expertise in arranging finance for
Germany. In our home region of Hamburg
infrastructure and wind-energy projects, for
and Schleswig-Holstein we are the leading
example, as well as for acquisition financing
bank in this segment – a position reinforced
makes us a sought-after partner at both
by the merger of Hamburgische Landesbank
national and international levels.
and Landesbank Schleswig-Holstein into
HSH Nordbank. Our goal is to develop this
strong market position dynamically and
Selective business expansion.
systematically, with clear customer orientation and sound and reliable strategies. Our
Despite the weak economic environment
clear priority here is on long-term customer
throughout the year, Corporate Clients
satisfaction. We want our customers to look
business developed well in 2003. Focusing
to us as their company bank – a close and
more closely on earnings and risks, we
trusted partner for all their banking require-
achieved a business volume of EUR 16 bil-
ments. We see structured finance solutions,
lion, including structured finance activi-
which play a key role in this context, as one
ties. A rise in costs, due principally to the
of our central growth areas.
merger process, was more than offset by
very satisfactory earnings from deposits, as
Our success is built on intelligent product
well as services and commission business.
development. We offer financing, interest
Overall results were significantly up on the
rate and currency management solutions
previous year.
precisely tailored to our corporate clients’
requirements. We have special expertise in
foreign trade, logistics, port administration,
Customer relationships and market
manufacturing business, health and social
position strengthened by targeted
services. Our Corporate Finance, Leasing,
participations.
Export and Trade Finance, Asset Management and e-Banking units add further sup-
In addition to comprehensive service pro-
port, ensuring that our products effectively
vision, HSH Nordbank has for some years
meet customer requirements.
invested in shareholdings as an aspect of its
Corporate Clients activities. The goal of this
strategy is to extend and intensify the bankclient relationship as well as to boost earnings. As a matter of principle, investments
are made only on a medium to long-term
basis.
Group Segments
60
Through the holding company Timene
reflected in ongoing good results. The all-
Beteiligungsgesellschaft mbH & Co. KG,
round picture in 2004, with the one-off
HSH Nordbank owns approximately 10 % of
burdens of the merger process behind us,
the shares in Norddeutsche Affinerie AG.
enables us to face the future optimistically.
The results of Norddeutsche Affinerie AG
for fiscal 2002/2003 were affected by the
generally weak economy, as well as rising
Nordic Corporates
costs and competitive distortions on international raw materials markets. However,
Powerfully present in the Baltic Sea
despite the difficult economic and market
region.
situation, overall results were encouraging.
As a leading regional bank in northern
So far as sales of segment-oriented holdings
Europe, HSH Nordbank maintains a comp-
are concerned, we successfully sold our 75 %
rehensive network throughout Scandinavia
share in Miles Handelsgesellschaft Inter-
and the Baltic Rim countries. Alongside
national mbH in December 2003 via our
our Main Branch in Copenhagen, we have
Lamatos subsidiary. Miles is active in the
Branch Offices in Stockholm and Helsinki,
preparation of fashions collections and sub-
and Representative Offices in Oslo, Riga,
sequent make-to-order production in Asia,
Tallinn and Warsaw. In our prime target
as well as in a wide variety of textile sales.
segments, HSH Nordbank already ranks
among the top German banks operating
As a result of the realization of collateral
throughout the Baltic Sea region. This gives
provided for loans to Sirius Beteiligungs-
us a clear competitive edge that we aim
gesellschaft mbH, Hamburg, HSH Nordbank
to utilize for our customers’ and our own
received 12,948,800 individual shares (offset
benefit. With this strong regional presence
against claims) in IVG Immobilien AG, Bonn
we are in a position to offer our customers
as at February 23, 2004. This amounts to an
innovative financial services on the spot –
11.16% holding in the company.
complemented with tailor-made, high-performance products from the entire HSH
Nordbank Group.
Clear customer orientation as basis for
continuing positive development.
Nordic Corporates continues its success
We expect business to liven up during the
story.
current year, not only because of the overall
improvement forecast for the economic en-
Nordic Corporates, which covers the cor-
vironment, but also and above all because
porate clients activities of the Bank in the
of our clear commitment to the medium-
Baltic Sea region, reported a business vol-
sized business sector. Our strong customer
ume of EUR 7.2 billion as at year-end 2003.
focus has already met with very positive
The market was characterized throughout
response in our target group, and this is
61
High-performance network around the Baltic
Helsinki
Oslo
Tallinn
Stockholm
Riga
Copenhagen
Hamburg
Kiel
Lübeck
Warsaw
Berlin
the year by intense competition. Despite
ing team specifically tasked with acquiring
this, we were able to confirm the upward
funds from corporate clients as well as
trend of previous years' results. During the
institutional investors. With a strengthened
past financial year we firmly established
treasury team dedicated to medium-sized
our structured finance services at the Stock-
corporate clients, the increased demand for
holm Branch, enabling us to provide our
interest-hedging instruments, stemming
customers with an even higher level of sup-
from currently low interest rates, can be
port. Our focus here is acquisition finance/
met. We view this segment as providing
leveraged finance, export and project finance
considerable potential for further growth,
and asset backed structures. Nordic Corpo-
which we intend to systematically utilize.
rates now has 30 professionals dedicated to
these three business areas.
Solution-oriented customer focus.
Stronger focus on medium-sized
In today’s markets, integrated financing
customers.
solutions are the key to success. For this
reason cooperation between our Financial
The traditional focus of HSH Nordbank’s
Markets, Commercial Banking and Struc-
wide range of products and services in the
tured Finance services has been further
Baltic Sea area has been large companies,
intensified, enabling us to meet the grow-
institutional investors and real estate custo-
ing demands and increasingly complex
mers. During the past financial year we
requirements of our customers. Nordic
consistently widened this focus, and are
Corporates will to an increasing extent
now in high demand as a business partner
work in step with our Corporate Finance
providing new products and services for
units in Denmark, Sweden, Finland and
many of the region’s medium-sized enter-
Germany, as well as with other divisions of
prises. The past year also saw a significant
the Bank, in order to deliver optimal solu-
development in our refinancing and trea-
tions to our customers.
sury activities, with a newly extended fund-
THE FUTURE MEANS NEW DEPARTURES
Special Corporate and
Institutional Clients
As a national as well as international provider of
specialized financing, HSH Nordbank’s activities
within this segment are concentrated in its divisions
of Transportation, Lease Finance, Financial Institutions/Global Trade Finance, and – for the north
German home region – Savings Banks/Public Sector
Customers. Our longstanding experience and expertise in our own and our customers’ business, combined with a product range designed for specialized
applications, creates the best basis for optimal customer solutions in all relevant fields.
65
Transport Finance
and rail networks, air traffic systems providers and logistics companies. Our diversi-
High performance transport finance
fied spectrum covers the entire value added
provider with comprehensive product
chain of transportation and logistics. Our
portfolio.
strategic goal is to consistently develop our
HSH Nordbank offers its customers in the
Portfolio by Region
international transportation and logistics
in %
34.0
industries a wide range of attractive advisory, financial and other services for air and
and infrastructure. From our Kiel, London
1.2
1.4
1.4
2.8
and New York branches we serve our busi-
8.8
rail transportation, as well as for logistics
ness partners worldwide with a continuously expanding, innovative product portfolio.
50.4
Europe 34.0
North America 50.4
Asia 8.8
Middle East 2.8
Africa 1.4
Pacific Rim 1.4
South America 1.2
Portfolio by Market Segment
in %
8.3
14.9
existing strengths as a finance house with
specialist expertise in products, markets
and customer relations, providing our
customers with a wide range of financial
76.8
Aviation 76.8
Rail 14.9
Logistics/Infrastructure 8.3
products and services. To achieve this, we
are able to call on the know-how of the
entire HSH Nordbank Group, tailoring
solutions – for example, interest and
Our Aviation subdivision is concentrated on
currency-based products – to the precise
airlines and leasing companies, as well as
requirements of our business partners, and
airplane and aero-engine manufacturers
thereby also cementing deep customer
and their supply industries. In our Rail and
loyalties.
Logistics/Infrastructure subdivisions we
are a specialized and competent financial
partner serving rail companies, railcar and
New, return-oriented business flourishing
rolling stock manufacturers and local pub-
despite difficult environment.
lic transport providers, as well as airport
Subject to divergent underlying conditions,
our core markets – air transportation, rail
and logistics – developed in very different
ways. In the first half of 2003 the aviation
market was hit by the Iraq crisis and the
outbreak of SARS. However the
Group Segments
66
second half – especially the fourth quarter –
Against this background, the development
already brought signs of recovery, and the
of transport financing activities in 2003
industry as a whole is now experiencing a
was encouraging. By intensifying existing
discernible upswing. Nevertheless, recent
customer relationships, and selectively
tendencies toward consolidation look set to
expanding our customer base, we were able
continue, with the market in future looking
to achieve a profit-driven new business
to be characterized by certain dominant
volume of some EUR 1 billion. The opening
alliances. The logistics market also maintai-
of our New York branch in the last quarter
ned its trend toward consolidation. Public
of 2002 brought us closer to our American
sector budgetary restrictions led to a further
customers, and had a very positive impact
privatization of services and the growth of
on our performance in the important US
Public Private Partnerships. The liberaliza-
transport finance market. Due to higher
tion of European rail transport markets is
margins, earnings achieved significantly
also an ongoing story. Since spring 2003,
higher levels overall than in the previous
rail freight has been open to free compe-
year. Business volume stood at some EUR
tition throughout the EU, and there has
5.5 billion as at December 31, 2003. The
also been a further opening of local public
moderate growth in lending is due to a
transport provision to tenders from the
selective business policy as well as exchange
private sector.
rate developments. An adequate level of
risk provision was created.
Despite numerous challenges, HSH Nordbank enjoys an excellent market position in
almost all core business areas. In the avia-
Positive outlook for fiscal 2004.
tion finance segment, for instance, a considerable number of national players have
In line with our strategic focus, the Trans-
withdrawn, and their places have to some
port Finance unit is concentrated – along
extent been taken by British and French
with most of its activities – on the USA and
banks as well as by capital market financ-
Europe. This enables us to minimize overall
ing. Other finance providers have turned –
country risks. In new business we continue
for reasons of diversification – to rail trans-
to pay close attention to the value of colla-
portation. HSH Nordbank will make use of
teral, as well as to the marketability of the
this situation, tapping further potential in
means of transportation we are financing.
cooperations based on already established
As a transport financing house we will pro-
market positions. In the logistics industry
ceed with heightened determination along
we see further growth potential above all in
the track we have taken. We expect this to
connection with medium-sized companies –
bring positive growth to both our lending
a market segment showing a significant
portfolio and earnings in 2004, despite the
requirement for financial provision.
many challenges facing us in a still difficult
economic environment.
67
Lease Finance
advances to special purpose banks. Domestic
clients accounted for the major part of the
Excellent position in lease refinancing.
portfolio (some 85 %). The remaining approximately 15 % consisted of lending in
In the Lease Finance segment HSH Nordbank
the framework of cross-border leasing
has bundled the longstanding experience
transactions, with US leases taking the
of its two predecessor banks in refinancing
major share. We regularly monitor the
leasing companies. Leasing has firmly
borrower’s credit standing – which deter-
established itself on the German market as
mines the quality of the loan – with a
a financing instrument, and has become an
newly developed rating system.
important limb of HSH Nordbank’s business
activities. Our clients are leasing companies
In new lending business concluded in 2003
operating both in Germany and inter-
we purposely focused more closely on risks
nationally, for whom we provide tailored
and earnings aspects rather than high vol-
refinancing products. In this segment we
ume growth. With a total volume of some
see ourselves as one of the leading players
EUR 2 billion we were not in a position to
in Germany.
match the extremely high level of new
business reached in 2002, which – boosted
by some individual big-ticket deals – ex-
Lending portfolio steady.
ceeded EUR 3 billion overall. Nevertheless,
the significantly higher earnings quality
Due mainly to the strong euro, the total
of the new business we generated gives
business volume in the lease financing
grounds for satisfaction – the more so since
segment at year-end 2003, amounting to
the weak economic environment in 2003,
some EUR 9.1 billion, was only slightly up
as well as continuing uncertainty about
on the previous year’s level. The lending
relevant taxation policies, affected the entire leasing sector.
Portfolio by Market Segment
in %
AGV GmbH – the specialist for complex
25
40
and innovative leasing products.
The AGV Group, in which HSH Nordbank
holds a 90% share, plays a central role in the
domestic leasing market for both movable
35
Real estate and large movable property financing 40
Other movable property financing 35
Loans and advances to special purpose banks 25
property and real estate. AGV concentrates
on structuring complex leasing transactions
and offering innovative solutions for large
movable property (big-ticket leasing). In 2003
the AGV Group maintained its successful
portfolio was distributed as follows: some
40 % loans on real estate and large movable
property, 35 % loans on other movable property, and approximately 25 % loans and
business growth, boosting its new business
Group Segments
68
volume from EUR 866 million to EUR 1.1
this, we shall offer our leasing products to
billion. Close strategic cooperation between
all HSH Nordbank customers and business
HSH Nordbank and Deutsche Leasing AG in
partners. AGV and its subsidiary HSH N
Bad Homburg ensures that the company is
Nordic Finance will play a key role in these
well equipped for the future.
activities. Jointly with these companies our
product experts will provide our corporate
AGV aims to further expand its internatio-
clients and partners in the Savings Banks
nal business by tapping cross-selling poten-
network with complex and innovative
tials with HSH Nordbank’s market units.
leasing offers geared to generating additio-
Since the end of 2003 AGV has owned HSH N
nal new business.
Nordic Finance AB, Stockholm, as a subsidiary well-established on the Scandinavian
market and suitably complementing our
own activities. In addition, along with
Savings Banks and Public
Sector Clients
Deutsche Leasing AG, AGV operates the joint
venture ImMobilien-Vermietungsgesellschaft
In association with the local Savings
mbH (DIMO), which cooperates with the
Banks network – market leaders in
Savings Banks network in real estate leasing.
northern Germany.
With new business amounting to some EUR
200 million, DIMO ended 2003 on the same
Cooperation with the network of local
level as the previous year, and could also
Savings Banks is an important pillar of
report further progress in its interface with
HSH Nordbank’s activities. Our cooperation
the Savings Banks network.
covers not only the traditional segments of
Savings Bank refinancing, investment business and customer activities – especially
Leasing business continues to grow in
securities business – but also syndicated
importance.
commercial and municipal lending, and
foreign commercial business. A more
Against the background of Basle II, as well
recent focus is on innovative financial and
as new accounting regulations, leasing has
consultative services.
become an increasingly attractive alternative to the classical lending business. As an
integral component in the financing mix,
leasing enables companies to improve their
balance sheet ratios – especially their equity
capital position. As a result, we expect the
business potential of our main customer
groups to grow, and – building on our
excellent market position – plan to further
expand new business in 2004. As well as
69
A new chapter in our cooperation begins.
In order to open up alternatives to classical
funding loans, HSH Nordbank – in coopera-
In the first quarter of 2004 HSH Nordbank
tion with the Schleswig-Holstein Savings
and the Savings Banks Association for
Banks network and the Savings Banks Asso-
Schleswig-Holstein entered into an agree-
ciation for Schleswig-Holstein – has set up
ment of association that heralded a new
an electronic register of cover funds as a
era in their cooperation. The foundations
prerequisite for issuing mortgage bonds
had been laid last year by the Schleswig-
secured on real-estate. The register enables
Holstein Savings Banks, the Savings Banks
the Savings Banks to make independent use
Association for Schleswig-Holstein and HSH
of opportunities for issuing mortgage bonds
Nordbank. The agreement governs intensive
or registered mortgage bonds. In November
cooperation in marketing and sales activi-
2003, under the lead of HSH Nordbank, the
ties, in the provision of products and ser-
Kreissparkasse Südholstein issued a Savings
vices for the Savings Banks’ own – as well
Bank mortgage bond secured on real estate
as their customers’ – business activities, and
– an historic first in Germany. After this
in risk, liquidity and portfolio management.
pilot issue, other issues – including registe-
The agreement aims to bundle the new
red mortgage bonds – have been planned
association’s forces to achieve enhanced
for first half-year 2004.
market penetration and synergies, and it
serves as a basis for individual bilateral
HSH Nordbank traditionally provides refi-
sales agreements governing detailed coope-
nancing and liquidity funds for the Savings
ration with every bank in the Schleswig-
Banks, as well as a broad spectrum of invest-
Holstein Savings Banks network.
ment opportunities, ranging from time
deposits to asset management. The Savings
Banks cooperate with us in customer-focused
Innovative products for the associated
activities, using our comprehensive, high
partners.
performance product and consultation
offers – above all in the securities business,
In order to meet the increasing demand by
syndicated commercial and municipal
the Savings Banks for innovative financial
lending and international business. We are
products and consultative services, HSH
also continuously expanding the back-office
Nordbank has developed a sales platform
services we can make available for sharing
for capital market products specifically for
with the Savings Banks network.
the Savings Banks network. Together with
the concentration of our syndicated loans
business with the Savings Banks in an
autonomous central unit, this step has
improved the quality of our consultative
services and enhanced our joint market
impact.
Group Segments
70
business.
Financial Institutions/Global
Trade Finance
As a state and municipal bank, we support
New division with special product range
the states and municipalities in all matters
for banking and insurance industries.
New horizons in the public sector lending
of financing, and we also provide public sector loans. The focus here is on project and
For Financial Institutions, 2003 was above
special financing, as well as advice on pri-
all a year of successful strategic develop-
vatizations. In contrast to these activities,
ment, in which we tailored our product
the classical municipal loan is increasingly
range exactly to the requirements of our
losing importance. Within the framework of
target customers from the banking and
our new post-merger strategy, our aim is to
insurance industries. Together with Global
position the Bank as a comprehensive provi-
Trade Finance – newly formed in the course
der not only of products, but also of finan-
of the merger process – Financial Institu-
cing and consultation services to the muni-
tions constitutes a single unit with a power-
cipalities and their closely related compa-
ful presence in the international markets,
nies, and to concentrate customer loyalty
especially in Europe and Asia. Our business
still further via one-stop service provision.
volume as at December 31, 2003 amounted
to EUR 32.9 billion.
Declining loan portfolio – rising service
Our product spectrum covers the arrange-
and commission income.
ment of syndicated loans, sales of innovative and traditional capital market solu-
Due to the moderate level of loan demands
tions, transaction services and the procure-
on the part of the Savings Banks and public
ment of "plain vanilla" as well as structured
sector clients, as well as the changed fund-
funding. We see considerable opportunities
ing conditions of HSH Nordbank after the
for growth, especially in our core segment
abolition of the mortgage bond privilege,
of global trade financing. In the next few
business volume declined in the year under
years we aim to develop the Bank's position
review to EUR 24.1 billion. At the same
as a specialist commodity financing house.
time the realignment of activities toward
Enhanced integration of current activities
service and commission products proved
and the completion of the network play a
highly successful. Income from services,
key role in achieving this goal.
especially from capital market products –
for example, the sale of structured bonds –
developed very satisfactorily. Against the
background of HSH Nordbank’s new strategy, the role of Savings Bank/Public Sector
Clients has been newly defined as the central management and service unit for the
value-based coordination of all activities
targeted on this segment.
71
Good business in individual product
segments.
The Syndicated Loans product segment had
a very good year. In northern and central
Europe in particular, but also in Asia, we
are among the first addresses as arranger
and book-runner, and we were able to
further consolidate our position in this
market. The excellent customer relations
established in this way serve as an optimal
platform for sales of our wide range of
capital market products. Our new Global
Trade Finance unit focuses principally on
our commercial customers and their
merchandise.
Course set for a successful future.
In the wake of the merger and the restructuring of the Financial Institutions/Global
Trade Finance division we have set the
compass for a successful future. We aim to
intensify existing customer relations and
give top priority to our clients' individual
requirements. Without neglecting our core
competency as arranger of syndicated loan
facilities, we will continue to expand our
product portfolio with structured capital
market products and attractive portfolio
management offers. Against the background
of ongoing expansion in world trade, and
the excellent growth opportunities this
provides, our Global Trade Finance unit will
focus with increasing intensity on worldwide flows of capital and goods. In addition, the network established through the
merger will activate synergies to stimulate
our growth still further.
THE FUTURE CALLS FOR COURAGE
Private Clients
Within this segment, HSH Nordbank’s Private and
Business Clients division focuses on services for high
net worth private customers. This target group is
complemented by self-employed individuals as well as
other business clients and foundations. The strategic
focus on the upper private customer segment is central
to our successful business model as a high-performance service partner. The concentration of various
subdivisions and competencies in the course of the
merger has enabled us to bundle our know-how and
enhance our competitiveness in this segment.
75
Personalized customer service and a
Steady development in all segments.
diversified product portfolio assure
sustained success.
Private and Business Clients’ results for
fiscal 2003 were encouraging. Attractive
Our customers’ wealth is made up of many
new lending business with our target
different elements, and for this reason our
group, especially in real estate financing,
service concept is integrated to cover every
enabled us to maintain the business vol-
aspect of asset and finance management.
ume – with careful evaluation of risks –
Our attention is focused on the individual
at last year’s levels, totaling some EUR 3.5
customer, with whom we aim to establish a
billion. Some 75 % of the portfolio consists
relationship of personal trust built on regu-
of real estate financing, 15 % comprises
lar and continuous contact over many years.
asset investment financing and 10 % fixed
rate loans. Private clients account for 95 %
Private and Business Clients offers a highly
of our lending, with 5 % going to business
competitive and comprehensive range of
products and services tailored to customer
Lending Portfolio by Financing Type
requirements, both from our own provision
in %
10
and from the best available on the market,
irrespective of the provider. We lay parti-
15
cular emphasis on asset structure analysis
and planning, consultation and asset management, as well as financing, shareholding
investments and advisory services to foun-
75
dations.
Real estate financing 75
Asset investment financing 15
Fixed rate loans 10
Group Segments
76
clients. The demand for private real estate
Good prospects for 2004.
financing remains very lively in our target
group, and business clients’ financing
Services for high net worth private clients
requirements also stayed at a high level in
is one of the fastest growing segments in
our target region.
the banking market. Inheritance, company
sales and the establishment of foundations
Liabilities also climbed slightly to some
are among the long term factors suppor-
EUR 2 billion as a result of the expansion
ting this development. With our focus on
of our activities with our customer target
high net worth private clients we aim to
groups. The merger has enabled us to com-
achieve significant growth in our segment.
bine many different products in a unified
We expect to see new business livening up
portfolio and offer our customers a broad
in 2004, and relations with established
range of investment alternatives. Securities
customers intensifying in line with our
commissions business, comprising shares,
multi-product approach. The focus here lies
bonds and investment funds, retained
not only on lending, but also and above all
virtually the previous year’s volume, with
on the service and customer investment
sales of shareholding and structured pro-
business. In this way we contribute to the
ducts doing particularly well. Earnings
overall results of HSH Nordbank without
from services also remained at the previous
absorbing large amounts of capital, and in
year’s level, with declining income from
a way that supports the diversification of
asset investment financing compensated by
risks across the entire portfolio.
income from new products developed specifically for our customer target group.
77
THE FUTURE COMES FROM CURIOSITY
Financial Markets
In order to create an effective and unified impact
both on the market and on our customers, we have
bundled all our financial market activities in a single
segment, Financial Markets, comprising the Capital
Markets division, Asset Liability Management as well
as Portfolio Management and Investments. These
units are responsible for arranging balanced refinancing facilities and for trading activities, advisory
services and the sale of capital market products, as
well as for efficient liquidity management across the
entire Bank. As a result of their successful implementation of individual strategies developed within the
context of the merger, all these units made a significant contribution in fiscal 2003 to assuring the longterm capital market readiness of HSH Nordbank.
81
Capital Markets
with a highly liquid resource. The first fiveyear issue was accompanied by a big road-
Bank-wide funding strategy optimized.
show in Europe, presenting the Bank’s
strategy to existing and potential investors.
Capital Markets had a successful year in
The successful placement of three bench-
2003. In particular, bond market activities
mark bonds with a total volume of EUR 3.5
developed in a thoroughly gratifying way.
billion in 2003 provided investors with
The past fiscal year was dominated both by
liquid securities covering the whole matu-
the merger and by the future abolition of
rity range. Alongside these benchmark
state guarantees. Already before the merger,
issues, structured private placements – with-
Capital Markets had, in collaboration with
in the framework of the EMTN program, as
Asset Liability Management, developed a
well as domestic issues – were used with
sustainable funding strategy for the Bank as
great success to optimize funding. Regular
a whole. Central to this was the ongoing
issues of foreign currency bonds completed
expansion of the Bank’s investor base, both
Capital Markets’ range of activities.
internationally and across the various
segments, as well as a broadening of the
HSH Nordbank has more than ten years’
product range. The targeted funding
experience in structured product issues,
volume for fiscal 2003 was successfully
and has become one of the largest and most
raised on the capital markets. As the propor-
successful players in this field worldwide –
tion of long-term refinancing rose beyond
a development repeatedly confirmed by the
expectations, money market funding could
leading place taken by the Bank in relevant
be reduced accordingly.
league tables. In 2003 HSH Nordbank was
among the five biggest issuers of structured
Funding is secured with a broad spectrum
equity products worldwide, and in struc-
of products. Euro Medium Term Note pro-
tured interest rate products the Bank held
gram (EMTN) issues are used for medium to
ninth place worldwide. Among German
long-term funding on national and inter-
issuers the Bank was number two in both
national capital markets. The practice of
categories.
launching benchmark issues, successfully
pursued by our predecessor houses, has
also been continued, extending the Bank’s
investor base and providing our customers
Group Segments
82
Apart from issuing standardized structured
Successful expansion of trading and sales.
products, the Bank has also established
an excellent reputation in recent years for
The expansion of trading and sales activi-
customized – to some extent highly com-
ties in the Capital Markets division takes
plex – product solutions for its customers,
strict account of customer requirements for
providing access to a large number of new
market risk protection. In all risk classes
investors. Sales of structured products have
solutions are sought for capital market
grown continuously over the years, and are
products, and emphasis is laid on tailoring
becoming increasingly important for fund-
risk management solutions to individual
ing. They currently account for approxi-
customer requirements. Coordination of
mately 14 % of long-term funding, and the
this customer business is the responsibility
figure continues to rise.
of the sales platform Capital Markets. In
the year under review, business volumes
In the wake of the extension of the Com-
and earnings surged by some 100 %. The
mercial Paper programs at our foreign
growth in product use that underlay this
branches in Luxembourg (Multi Currency
expansion indicates on the one hand a
ECP), as well as in London and New York
significant intensification of our customer
(USCP), these programs now constitute a
relations, on the other hand it makes high
fixed item in our short-term refinancing,
demands on both operational processes
with total volumes in each case of US $10
and risk management systems. A concrete
billion. Due to the excellent liquidity posi-
example is the successful boosting of
tion, we had only used EUR 8.6 billion of
structured retail product sales that enabled
these programs as at year-end 2003.
Savings Bank customers to benefit from
attractive chances on the capital markets.
The issue of a Savings Bank mortgage bond
The systematic expansion of our technical
secured on real estate – developed by HSH
asset management programs was similarly
Nordbank and launched by Kreissparkasse
successful.
Südholstein – attracted a great deal of
interest last year. After the creation of the
Market risks from the large number of daily
necessary infrastructure for the public
customer transactions are reported in the
sector Savings Banks in Schleswig-Holstein,
various risk accounts (shares, derivatives,
we were able to realize this pilot project
bonds, interest rate derivatives, borrowers’
with Kreissparkasse Südholstein in collabo-
note loans, money market and repo), and
ration with the Savings Banks Association
collated as own trading after netting and
for Schleswig-Holstein. This provides the
active disposal of risk items. Remaining risk
Savings Banks, as of now, with an instru-
is managed in line with market conditions.
ment securing them competitive funding
on the capital markets after 2005.
83
Consistent application of the principle of
central market-risk books enables higher
Portfolio Management and
Investments
revenues to be generated from customer
cash flows – which are subject to natural
New directions for the future.
market risks – throughout the Bank. As a
result, risk capital requirements fall signif-
In the wake of the merger of the two pre-
icantly and the Bank’s own-account reve-
decessor banks, Portfolio Management was
nue – including interest income – can be
combined with Credit Investments in a
increased.
new strategic alliance. In line with the new
strategy, Portfolio Management and Investments (PMI) has assumed the three core
Promising outlook for current year.
functions within HSH Nordbank of capital
and asset manager, growth enabler and
Our focus for the current fiscal year is on
product manager.
systematic development and continuing
expansion of our strategy. Regular trans-
As capital and asset manager, PMI is res-
actions will establish the presence of HSH
ponsible for procurement and management
Nordbank in the capital markets and en-
of the Bank’s equity capital as well as for
hance the Bank’s profile as an innovative
active portfolio management. This latter
player. Advisory services and the sale of ca-
function involves risk diversification by
pital market products to existing customer
means of investments in credit risks and
groups – especially on the Bank’s lending
market price risks. Strategic recommen-
side – have high priority. We aim in parti-
dations are also given to the Board relating
cular to boost sales of equity-related deri-
to asset allocation, and to achieving the
vative products and structured products in
Bank’s targeted rating. As growth enabler
interest rate and FX trading. Repo business
we systematically free up available equity
continues to play a major role for Capital
capital for lending, providing HSH Nord-
Markets, with the focus on widening our
bank in this way with additional growth
circle of trading partners and expanding our
opportunities. This is effected by placing
product range to cover all ordinary trans-
credit risks on the international capital
action types. Finally, we aim to integrate
markets in securitized form, for example as
our branches step by step more closely into
asset backed securities (ABS). We also sup-
the successful strategy of Capital Markets
port the Bank’s market units in optimizing
and of the whole Bank.
loan price structures and intensifying business relationships. In our function as product manager we offer advisory services,
asset management and structuring products
in order to utilize existing cross-selling
potentials within the framework of HSH
Nordbank’s multi-product approach.
Group Segments
84
Business developing well in all areas.
book-building process enabled us to raise
the volume from an initial EUR 300 million
We pursue an active management policy
to EUR 500 million and thereby achieve an
for HSH Nordbank’s strategic market price
optimally diversified investor spectrum.
risks. With an optimized risk position in
The success of ReSPARC II was clearly seen
the asset classes interest rates, forex and
as a vote of confidence in HSH Nordbank in
equities we were once again able to achieve
relation to its imminent repositioning on
excellent results in the year under review.
the market.
In accordance with our Global Head approach, sub-portfolio managers will in
future be located in additional branches of
New opportunities through innovation
HSH Nordbank – for instance in Luxem-
and integration.
bourg and Copenhagen – with a view to
gaining wider access to international capi-
Close observation of market price changes
tal markets.
has enabled Portfolio Management and
Investments to develop an early warning
In order to diversify credit risks, HSH Nord-
system for credit risks signaling potential
bank’s loans securities portfolio is managed
counterparty default. The system aims to
on a worldwide basis – in particular by de-
provide the Bank with a means of antici-
ploying derivatives like asset backed secu-
pating possible credit defaults or rating
rities (ABS) and single name investments.
downgrades, so that appropriate and timely
We concentrated last year above all on con-
action can be taken to contain the risk. The
tinuously consolidating the portfolio in
system was already installed in 2003 for a
line with the Bank’s high quality standards.
large number of listed borrowers, and will
Management of the Bank’s core portfolio
be extended in the course of the current
also achieved a record result in 2003, con-
year to all relevant HSH Nordbank custom-
tributing to HSH Nordbank’s good net
ers.
interest income.
Another extremely successful operation last
spring was HSH Nordbank’s equity capital
transaction ReSPARC II (Reengineered Silent
Participation Assimilated Regulatory Capital Issue). This equity instrument proved
valuable in presenting a convincing credit
story to the Bank’s international investors.
The positive market response during the
85
The development and establishment of an
Ambitious goals for fiscal 2004.
internal equity market within HSH Nordbank was also a PMI priority during the
Our goal for 2004 is to again make a deci-
year under review. In the course of the year,
sive contribution to HSH Nordbank’s aggre-
equity capital limits were reallocated, with
gate results with our successful business
the result that units actively engaged in
activities. The implementation of the stra-
market activities could generate additional
tegy decided upon for securing the Bank’s
business and achieve higher earnings. At
ongoing capital market readiness also pre-
the beginning of 2004 an internal market
sents a considerable challenge for Portfolio
for collaterals was also set up to facilitate
Management and Investments – but one
active management of collateralizable
that we face with absolute fitness and total
securities. A further task of PMI is to ease
commitment.
the Bank’s equity position by placing risk
bearing balance sheet assets on the capital
market. The systematic development of exit
Asset Liability Management
channels in the Bank’s core segments promotes HSH Nordbank’s ongoing transition
Concentration and expansion of liquidity
from asset financer to asset manager. In
management.
this context, the planned placement of
selected assets, to be effected in 2004, was
Against the background of the coming abo-
actively pursued during the year under
lition of state guarantees, and an upward
review.
trend in funding and liquidity costs, HSH
Nordbank has bundled all liquidity management activities in an ex-panded Asset
Global outlook with strong regional roots.
Liability Management (ALM) division. As the
Bank’s liquidity manager, ALM is respon-
With its twin locations in Kiel and London,
sible for securing and managing liquidity,
as well as its capital market activities,
for strategic funding management, and for
Portfolio Management and Investments has
liquidity brokerage. The goal is to lower
a strong international orientation. But we
liquidity/refinancing costs and still further
never lose sight of our north German regio-
minimize liquidity risks.
nal focus. Above all our rating advisory
service supports the Bank’s Savings Bank
and public sector clients in the implementation of our joint strategy with the associated Savings Banks in Schleswig-Holstein.
The Savings Banks responded eagerly to the
recommendations of HSH Nordbank’s advisory service on capital market activities,
opening the prospect of sustained and successful collaboration within the Savings
Banks Finance Group.
Group Segments
86
In its function as liquidity manager, ALM is
Development of liquidity and funding
responsible for managing of the Bank’s
situation.
liquidity risks, and for earnings obtained
from the transformation of liquidity matu-
Liquidity costs did not rise in 2003 – indeed,
rities. We focus particularly on the security
over a period of four years they have slightly
and cost-efficiency of the measures taken to
fallen. In order to prepare the Bank for
safeguard liquidity. As strategic funding
increasing competition and tougher rating
manager, ALM is responsible for optimal
criteria, a new funding strategy was deci-
management of the Bank’s refinancing acti-
ded at the beginning of 2003, and in the
vities. In order to fine-tune costs and mini-
course of the year many elements of this
mize liquidity risks, funding requirements
strategy were implemented. Extremely
are determined for the lending activities of
successful – especially long-term – funding
the market units, and from these require-
brought a sustained improvement in liqui-
ments appropriate funding parameters are
dity, and consistently favorable funding
inferred and continuously monitored and
costs, along with the Bank’s positive market
adjusted.
profile, reflect HSH Nordbank’s excellent
market position today.
As liquidity broker between HSH Nordbank’s
lending and refinancing units, as well as its
various branches, ALM is responsible for
pricing, limiting and allocating the scarce
resource of liquidity, assuring its efficient
deployment through the Bank as a globally
operating whole. Anticipating not only the
rising demands of the rating agencies but
also possible new regulations of the supervisory authorities, professional liquidity
management is an essential prerequisite for
the Bank’s future competitiveness.
87
THE FUTURE NEEDS TEAMWORK
Strategic Participations/
Transaction Services
Activities that cannot be directly ascribed to other
business segments are included in the segment “Other/
Consolidation” – among them special service units like
Transaction Services, as well as our strategic participations portfolio. We aim in our strategic participations to
enhance our coverage of specific segments and to open
up new ones.
91
HSH Nordbank
International S. A.
The bank established individual value adjustments to cover all discernible risks in
the lending business. The entire securities
Foreign subsidiary on the right road.
portfolio (liquidity and investment) was
valued at lower of cost or market. As in the
The core business segments of HSH Nord-
previous year, the bank again took mea-
bank International S.A. (HSHI) are internatio-
sures to strengthen internal structures and
nal lending, money market and foreign ex-
reserves. General administrative expenses
change activities as well as securities and pri-
fell 4 % as a result of strict cost manage-
vate clients business. Total assets remained
ment. Profit for the year amounted to
stable throughout fiscal 2003 in comparison
EUR 55 million after tax (prior year EUR 50
with the previous year, ending on EUR 7.9
million) – the highest earnings in the hist-
billion (a slight drop of 0.6 %) as at Decem-
ory of HSHI. This enabled the bank not only
ber 31, 2003. The assets/liabilities structure
to service the parent company’s silent par-
also remained virtually unchanged. On the
ticipation but also to pay out a dividend and
assets side, fixed-income securities remained
allocate the remaining profit to reserves.
the most important item, with 42 % of the
total. Liabilities were dominated by liabilities to banks at 86% of the total. In addition,
Building blocks for positive operational
the bank’s obligations from lending and
growth.
guarantor commitments amounted – as in
the previous year – to EUR 0.5 billion.
With its strongly international orientation,
HSHI is in a position to make foreign currency loans in virtually all convertible cur-
Fiscal 2003 – highest profit in the bank’s
rencies. Our lending portfolio remains
history.
excellently balanced, with borrowers from
EU member states accounting for 68 % of
Again in the past fiscal year HSHI experien-
total exposure and, as such, constituting a
ced positive growth. Net interest income
preferred customer segment. Exposure
dropped slightly by 3%, but – at EUR 52.6
within the EU and other western industria-
million – still remained high. At EUR 23.3
lized countries totals 81 %. A considerable
million (prior year EUR 31.4 million), results
portion of this exposure is toward states,
from financial transactions were again
state banks and other banks, or is covered
highly satisfactory. The positive results deri-
by guarantees from these institutions.
ved primarily from price developments in
securities transactions. In comparison with
Interbank money market trading is used for
the previous year’s results it must be noted
liquidity settlement purposes, as well as for
that the year under review was burdened
fine-tuning interest rate risks. In addition
with a one-off effect from the sale of deri-
to the balance sheet items, the bank also
vatives.
uses innovative financial instruments for
this purpose. The resulting claims on banks
rose slightly in comparison with the previous year from EUR 790 million to EUR
800 million.
Group Segments
92
As in previous years, the portfolio of own
The improved capital market environment
securities represents a pool of mostly listed
worldwide has stimulated HSHI’s customers
securities which serve to underpin HSHI’s
into renewed activity, and commission in-
earnings and liquidity. Due to high matu-
come from this segment has risen accord-
rities and only partial replacement with
ingly.
new security purchases, the fixed income
securities portfolio declined by about EUR
200 million to EUR 3.3 billion. The port-
Stake in Nobis Société des Banques Privées
folio consists of securities that can be con-
increased.
verted into cash at short notice and are
mostly funded at matching maturities. As
HSHI holds an 80 % stake in Nobis Société
large amounts will also become due in the
des Banques Privées Luxembourg. Nobis’s
current year, HSHI does not expect the
activities focus on private banking and asset
securities portfolio to maintain the same
management. As in HSHI itself, private
level as in the previous year. Again in 2003
client business was helped on by the posi-
the portfolio generated highly gratifying
tive climate on the stock markets, and the
price gains as well as a substantial contri-
greater readiness of customers to invest.
bution to net interest income.
After completion of the fiscal year, HSHI’s
holding was raised by 10 % to 90 %. In addi-
HSHI continues to refinance its activities
tion, HSHI owns a 51.62 % stake in Inter-
mainly through other banks, and by parti-
national Fund Services and Asset Manage-
cipating in Banque Centrale de Luxem-
ment S. A. (IFSAM). With its broad product
bourg’s open market operations, as well as
and service provision, IFSAM functions as
by deposits from private and corporate
a Competence Center investment fund.
clients. Liabilities to banks totaling EUR 6.8
IFSAM has achieved significant growth in
billion, and liabilities to customers totaling
both deposited securities and transaction
EUR 0.6 billion have scarcely changed from
volumes, and earnings development was
the previous year’s levels.
also gratifying.
HSHI’s Private Banking division targets
international private clients holding medium to large securities portfolios. The
bank provides these customers with an
individual advisory service adapted to continuously changing market conditions.
93
HSH Nordbank (Guernsey)
Limited
PLUS BANK
Specialized in securities transactions.
HSH Nordbank (Guernsey) Limited was established in 1998 by Hamburgische Landes-
PLUS BANK has been operating indepen-
bank, and holds a full banking license. Its
dently on the market since July 2002,
principal function is to complement and
providing its customers with the complete
extend HSH Nordbank’s international acti-
range of securities transaction services.
vities. HSH Nordbank (Guernsey) Limited
During the last fiscal year the bank con-
invests in bank bonds, credit derivatives,
centrated on developing its existing busi-
asset backed securities (ABS) and collate-
ness relationships and attracting new,
ralized debt obligations (CDO). The bank
potentially long-term customers. Against
also performs deposit and lending activi-
the background of modest growth in trans-
ties. The past fiscal year saw this subsidiary
action volumes in 2003, PLUS BANK inten-
generating growth in all core activities and
sified its service provision, designing and
reporting higher profits. Total assets as at
developing numerous products oriented to
December 31, 2003 were up by more than
current and future customer requirements
11% to some EUR 1.5 billion.
and geared to boosting sales as well as
enhancing customer loyalty. Along with the
development of innovative products and
HSH N Finance (Guernsey)
Limited
the improvement of processes, PLUS BANK
also consistently extended the scope and
functions of the EWS PLUS system and
HSH N Finance (Guernsey) Limited was also
brought it technically up to date.
established in 1998. Within the framework
of the Euro Medium Term Note (EMTN) program, the company places issues in accor-
Profiting from the outsourcing trend.
dance with English law on the national and
international capital markets, and is stra-
The core market for securities transactions
tegically integrated into HSH Nordbank
banks was characterized in 2003 by an
Group’s refinancing activities, acquiring
ongoing trend toward outsourcing securi-
funds for deployment across the Group. All
ties processing operations. This was reflec-
market risks are passed on to the parent
ted in the number of contracts issued for
Bank and monitored here. Counterparty
tender, six of which were decided in favor
risks are confined exclusively to HSH Nord-
of PLUS BANK. The resulting projects have
bank. HSH N Finance experienced very
already been – or will shortly be – set up.
positive development during the past fiscal
Despite the widespread reluctance to in-
year, with new business volume of almost
vest, resulting from the overall economic
EUR 2.4 billion, and total of assets more
than EUR 12.5 billion as at 31.12.2003. Within the framework of the EMTN program,
HSH N Finance will continue to play a key
role for the Group in the future.
Group Segments
94
situation, this success rate demonstrates a
high level of acceptance of PLUS BANK’s
service offer. The number of clients re-
New subsidiary plays decisive role in
mained stable over the fiscal year, with two
funding real estate lending.
new customers acquired to replace the two
banking customers who withdrew. The new
In September 2003, HSH Nordbank AG took
customers have already been successfully
over the share capital in HKB Hypotheken-
migrated.
und Kommunalkredit-Bank AG, established
in 1998 and based near Munich in Hallbergmoos. The new subsidiary was transformed
Merger with TxB Transaktionsbank to
into HSH Nordbank Hypo AG and relocated
take place with retroactive effect from
in Hamburg. Its equity capital was raised by
1.1.2004.
an initial injection of EUR 58 million, with
further funds pending, up to a total of EUR
At the beginning of May 2004, HSH Nord-
200 million. With the purchase of HKB
bank, Bayerische Landesbank (BayernLB)
Hypotheken- und Kommunalkredit-Bank,
and Landesbank Hessen-Thüringen (Helaba)
HSH Nordbank is once again in a position
agreed the merger of their securities trans-
to issue covered mortgage bonds. This refi-
actions houses. This step was taken in order
nancing instrument available to our two
to maintain future competitiveness, and
public sector predecessor banking houses
achieve the strategically necessary market
was lost by virtue of the legal incorporation
volume. PLUS BANK and TxB (Dornach) –
that took place within the merger process.
a joint subsidiary of BayernLB and Helaba –
will be retroactively merged with effect
To fund our long-term real estate financing
from January 1, 2004. The headquarters of
activities, tranches of first mortgage loan
the new company will be Dornach (near
acquired and processed by HSH Nordbank
Munich), with offices in Hamburg and
will be transferred to HSH Nordbank Hypo,
Offenbach (near Frankfurt). HSH Nordbank
where they will be refinanced via covered
will own 25.1% of the merged company, the
mortgage bonds. The necessary procedures
remaining shares being held by BayernLB
were set up in 2003, and business opera-
and Helaba.
tions began soon afterwards. In 2004 we
will be in a position to start our issuing
activities, and our goal is to establish HSH
Nordbank Hypo as an innovative operator
in this market. Acquisition of business partners will take place in close consultation
95
with the parent company. A second strate-
volume by 25 %, and virtually doubling
gic model comprises the public sector lend-
pre-tax income, in the second year of its
ing business, which will be pursued to a
activities – the result of seven successfully
limited extent – so far as reasonable margins
completed contracts that firmly established
can be achieved. Finally, we plan a refinanc-
HSH N Corporate Finance in the mid-upper
ing platform for private real estate loans,
echelons of Germany’s M&A consultants.
where we will be working together mainly
Major operations in this context were the
with local Savings Banks and insurance
sale of CG Nordfleisch AG to Best Meat BV,
companies. HSH Nordbank has signed a
advising Damp Holding AG on the acquisi-
letter of comfort for HSH Nordbank Hypo.
tion of Klinikum Stralsund, and the sale of
the Miles Fashion Group to MPC. The company’s strategic focus is on the region’s
Outlook for 2004.
medium-sized companies, especially those
from the four core segments of consumer
HSH Nordbank Hypo’s financial statements
goods, health and social care, utilities and
for the year under review reflect the settle-
real estate. HSH N Corporate Finance is
ment of the activities of the original HKB
looking to sign a further series of major
Hypotheken- und Kommunalkredit-Bank
contracts in these fields during the first
arising from their business plan at the time
quarter of 2004.
of the merger. With total assets of EUR 1.3
billion as at year-end 2003, a loss of EUR 5.6
million was incurred for the fiscal year. This
result was, however, critically affected by
Gudme Raaschou
Bankaktieselskab A/S
restructuring and integration costs. As these
expenses will, for the most part, cease in
Another of HSH Nordbank’s corporate
2004, we expect the current year to record
finance units is Gudme Raaschou Bankak-
a balanced result, and the following years
tieselskab A/S, an investment banking sub-
to show increasing income.
sidiary with headquarters in Copenhagen
and a branch in Stockholm. The bank’s
activities cover the corporate finance, debt
capital markets and equities segments.
HSH N Corporate Finance
Results for 2003 were considerably better
than for the previous year – a consequence
HSH N Corporate Finance GmbH, one of
above all of the repositioning of the com-
HSH Nordbank’s corporate finance units,
pany initiated in 2002, as well as the up-
has made a name for itself as a leading
swing on the international capital markets.
financial consultant in the M&A field in
Gudme Raaschou participated in a number
northern Germany. Despite the difficult
of projects in the year under review, mainly
market environment, HSH N Corporate
Finance succeeded in raising its business
Group Segments
96
in the industrial and energy sectors, among
The flourishing markets in Russia and the
them the sale of the regional energy provider
Baltic States will generate further growth
Energigruppen Jylland to the state-owned
potential. The Russian market in particular
Danish energy company DONG. These trans-
is currently benefiting from a sustained
actions aroused lively interest at the begin-
improvement in stability, and PCA is expec-
ning of the year. Along with HSH N Corpo-
ting lucrative contracts to come from the
rate Finance, Gudme Raaschou also played
food, forestry, oil and gas industries. Overall
a consultative role in the sale of CG Nord-
the company reported moderate improve-
fleisch AG to the Danish company Best
ment in results in fiscal 2003 compared
Meat BV – a merger that created the second
with the previous year.
largest meat producer in Europe.
Integration of corporate finance activities
PCA Corporate Finance Oy
decided.
PCA Corporate Finance Oy, with headquar-
All three corporate finance units of HSH
ters in Helsinki, is another of HSH Nord-
Nordbank will be brought together in 2004.
bank’s corporate finance units. PCA’s core
The integrated unit will employ some 100
activities are in the M&A field, with increa-
highly specialized experts and have a strong
sing focus on international transactions.
presence throughout the Scandinavian/
In cooperation with HSH Nordbank, PCA
Baltic Sea region. This move aims to further
played an advisory role in last year’s acqui-
extend the Bank’s leading role in the
sition of the Finnish real estate enterprise
region, and to provide a springboard into
Polar by the German company IVG GmbH.
other core sectors. Business activities will
The coming year is expected to see a signi-
focus on small to medium-sized companies.
ficant influx of foreign investors onto the
An initial step in this process will be to
Finnish real estate market. The trend will
increase HSH Nordbank’s stake in PCA to
be boosted by the stable economic deve-
100%.
lopment of Finland as an EU member state,
combined with high earnings prospects.
PCA also provided consultation services for
the energy, technology and industrial sectors, as well as advising the Finnish government on specific projects.
97
Private Equity
plan, and continues to show encouraging
growth. Our equity fund holdings remain
Both the former Hamburgische Landesbank
regionally concentrated in Europe, and our
and Landesbank Schleswig-Holstein made
direct investments are mostly in Germany.
equity investments in the past, with the aim
of realizing returns adequate to the risks
incurred. These investments were generally
in the form of private equity fund and, to a
HSH N Kapital and
HSH N Invest
lesser extent, direct participations. LandesBoth HSH N Kapital GmbH and HSH N
bank Schleswig-Holstein used its wholly
1)
owned subsidiaries HSH N Kapital GmbH
2)
Invest GmbH experienced moderate busi-
and HSH N Invest GmbH to handle these
ness turnover in 2003. The main reason for
investments.
this was that the high investment quality
standards imposed by both companies
As part of the merger process, these two
obliged them to reject a large number of
operational units were brought under the
requests for participation. Despite this, the
umbrella of HSH Nordbank and newly orga-
year brought several promising new invest-
nized. Our private equity fund business is
ments in different sectors. Among them
now run by the Participations/Research
was an indirect investment in Envitec Wis-
division. Our direct investments business is
mar GmbH made by HSH N Invest in May
run primarily through the two companies
2003. Envitec is active in the medical and
HSH N Kapital and HSH N Invest, in close
environmental technology fields, and has
consultation with the customer-oriented
already attracted notice in the past with its
Corporates and Structured Finance division,
innovative products. This investment is
and serves as direct back-up for our busi-
developing very positively. HSH N Kapital
ness divisions.
was also able to expand its portfolio with
attractive investments last year, above all in
At year-end 2003, total investments amoun-
its core region of northern Europe, among
ting to EUR 658 million had been commit-
them a 5 % holding in Danske Traelast, Den-
ted, of which EUR 271 million had been
mark’s leading building materials company.
called. The Private Equity Portfolio, which
Danske Traelast operates a large number of
is still at an early stage of development, was
builders’ merchants and DIY stores under
expanded in 2003 in line with our business
various brand names. Another HSH N Kapital investment was in the acquisition of
Beeck Feinkostsalate effected via a holding
in Deutsche See Fischmanufaktur. Both
HSH N Kapital and HSH N Invest are confident in their ability to further expand their
investment activities.
1)
2)
Formerly: Schleswig-Holsteinische Kapital-Beteiligungsgesellschaft mbH (KBG).
Formerly: LB Kiel Unternehmensbeteiligungsgesellschaft mbH (UBG).
Group Segments
98
Transaction Services
with the sale of ships or conditional payments. In addition we provide comprehen-
Position and strategy.
sive individual advisory and consultative
services on all questions of payment pro-
The products and services provided by the
cessing, foreign trade (foreign payments,
Transaction Services division are a key
documentary services) and e-commerce.
element in HSH Nordbank’s sales strategy.
With high-performance competitive and
The market in these fields was highly
innovative products, Transaction Services
competitive throughout 2003, but we were
has positioned itself in the market as a
able to maintain our strong position,
value-based product division, and has devel-
especially in the medium-sized business
oped a sales force providing professional
segment. We retained our high market
back-up for market oriented segment sales,
share and even expanded it in the docu-
especially with regard to the Payment Ser-
mentary transactions segment. With the
vices and Documentary Service subdivi-
technical migration of payment systems
sions. The Transaction Services division has
and documentary settlement processes, the
been reorganized to reflect the Bank’s new
third and fourth quarters saw a further
strategic concept, and its non-capital-bind-
major step of the merger process comple-
ing products make a strong contribution to
ted. The integration of the settlement units
HSH Nordbank’s earnings.
and their systems has led to a bundling of
know-how and a sustained optimization of
processes that will enhance vital synergies
Strong earnings-oriented product
and lower the unit costs of external pro-
division.
viders. Cooperation with these external
service partners guarantees the ongoing
Transaction Services has long and extensive
quality, speed and flexibility of our pay-
experience in payment systems and docu-
ment systems and document-based pro-
mentary transactions. Ongoing simplifica-
cedures.
tion and streamlining of data transmission
and processing allows payment systems to
The merger of Landesbank Schleswig-
be exactly tailored to the requirements and
Holstein and Hamburgische Landesbank to
circumstances of individual organizations.
create HSH Nordbank AG has further
In this way we offer our customers rapid,
strengthened the market position of the
easy and secure settlement of all payment
payment systems and documentary trans-
processes. In the documentary transactions
actions segments in northern Germany, as
segment we provide export/import com-
well as extending their customer base.
mercial letters of credit and collection procedures, as well as guarantees, standby
letters of credit and extensive special services – for instance in connection
99
Management Report
101
102
Management Report
102
Overview – Global Economy
105
Banking Environment
106
HSH Nordbank – Business Development
116
Risk Report
132
Annual Accounts
132
Group Balance Sheet
136
Group Statement of Income
138
HSH Nordbank AG – Balance Sheet
142
HSH Nordbank AG – Statement of Income
144
General Information
146
Accounting and Valuation Principles
150
Consolidated Companies and
Consolidation Principles
151
Notes to the Balance Sheet
161
Notes to the Statement of Income
162
Other Notes
183
Auditor’s Certificate
184
184
Glossary
188
Addresses
Management Report
102
Overview – the Global Economy
Gradual recovery worldwide.
In 2003 the global economy continued to suffer external shocks – the Iraq conflict and the
SARS outbreak in spring, along with ongoing repercussions of September 11, 2001. Whilst
these shocks were cushioned by considerable fiscal and monetary impulses, overall uncertainty about economic prospects remained high. Private investment on the capital markets
as well as corporate reinvestment, proceeded cautiously. However, the strong expansion in
the USA and Asia looks set to put the global economy on a firmer footing in 2004/2005.
USA as growth engine – Asia demonstrates powerful expansion.
Starting last year, the upswing in the US economy is to a great extent the result of decisive
expansionary monetary and fiscal policies. Interest rates hit an historic low when the
Fed lowered key rates again in June and the government implemented a broad package of
tax breaks. Both these measures boosted private consumption, which – together with the
upturn in investment – kick-started the transition to self-sustaining growth in the USA.
Once again last year the Asian economies demonstrated their ability to drive the world
economy, with China expanding strongly on the basis of a sustained wave of investment
and flourishing external trade. Japan continued to benefit from a dynamic regional environment, despite the ongoing structural problems within its economy. Greater political
security on the domestic front, along with the impact of the US recovery, led to the stabilization of major economies of Latin America – Brazil, Argentina and Mexico.
Western Europe lacking dynamism – Eastern Europe robust.
The global economic downturn in 2003 had an uneven impact on European economies.
Whilst the UK achieved a respectable 2.3 % growth in GDP, Euroland only managed 0.4 %.
Against this background of slow economic growth, the ECB maintained its expansionary
monetary policy. Growth in private and public consumption across the Eurozone remained
stable, but investments fell substantially. This scenario is likely to change in 2004, with
investments and exports once again boosting economic expansion, and a 2 % growth in
GDP is expected.
In Scandinavia, 2003 was a year of stagnation for the Danish and Norwegian economies,
but Sweden and Finland achieved growth rates significantly above the Eurozone average.
We expect 2004 to see growth rates of 2 % or more in this region of northern Europe,
thanks in part to expansionary fiscal policies.
103
Eastern European GDP rose significantly again in 2003, with growth hitting 5.5 %. Above
all the Baltic States and Russia pulled strongly ahead, but Poland also left its period of weak
growth behind. In 2004 we expect the region to maintain its vigor. However, EU membership (since May 1, 2004) presents a major challenge to several states in the region – above
all in reducing high budgetary and balance of payments deficits.
End of stagnation in Germany.
In the early months of 2003 the German economy kept its downhill course, but the end
of military operations in Iraq, together with the recovery in the global economy, brought
increasing stability as the year progressed. On balance, GDP fell just short of the 2002 level –
a drop of 0.1 %. The gap between flourishing external trade and sluggish domestic performance remains wide, with private households currently reluctant to spend their real income
growth. This is partly the result of the ongoing discussion about major structural reform.
Whilst 2003 was a year of falling investment, we expect investment to pick up during the
coming quarters, thanks to significantly improved sales prospects. Order books have already
begun to fill, and production figures are rising strongly. The major driving force behind
this recovery is likely to be foreign trade, with Germany benefiting from the stability of the
US economy, and from its close links with the dynamic countries of central and eastern
Europe, as well as China. Our overall forecast for 2004 is growth of 1.5 %.
Hamburg and Schleswig-Holstein – economic situation set to improve in 2004.
The slow pace of economic development also affected Hamburg and Schleswig-Holstein.
After two years of low growth rates – during which Hamburg’s economy performed rather
better than Germany’s as a whole – the City’s GDP dropped by 0.5% in 2003. Service industries, which play a proportionately larger role in Hamburg than in the country generally,
also felt the force of the wind more keenly – in particular those serving the corporate sector. In contrast to this, however, the City of Hamburg, as a major trade and transportation
hub, benefited from the upswing in other regions of the world, with the Port of Hamburg
achieving record results for the year.
Schleswig-Holstein’s economy also performed poorly in 2003, with real GDP falling 0.6 %.
This was mainly the result of a drop in performance in the manufacturing and construction sectors. Service industries performed rather better. The visibly improved business
climate in both federal states around the turn of the year suggests that the bottom of the
curve has now been passed. We expect both Hamburg and Schleswig-Holstein to report
discernible growth again in 2004, with GDPs of 1.75 % and 1.5 % respectively.
Management Report
104
Financial markets – stocks getting under way, yields rising.
After three years marked by widespread losses, international stock exchanges again posted
strong gains in 2003. With the geopolitical situation returning to stability after the end of
the war in Iraq, share prices profited not only from high liquidity levels and the all-round
improvement in the economic environment, with better prospective corporate earnings,
but also from a greater willingness on the part of investors to take risks. The Dow Jones
ended the year up 25 %, the DAX up 37 % and the STOXX50 up 10 %.
Bonds and interest rates were subject to high levels of volatility. Increased optimism in the
economy – and with it the fear of a pending change in US and European key lending rates –
led to temporary increases in returns. However, recurrent uncertainty about the sustainability of growth in the leading economies kept bonds in continuous demand. The development of the US dollar – which fell 20 % against the euro and 11 % against the yen in 2003 –
continues to be a decisive force on international stock and bond markets in 2004. If growth
prospects continue to strengthen, yields may rise further as the year progresses. Share
returns, however, have already been very largely anticipated in price structures, so price
growth potential in this segment is limited.
DAX*
8,000
7,000
6,000
5,000
4,000
3,000
2,000
1.1.01
1.1.02
1.1.03
1.1.04
1.1.02
1.1.03
1.1.04
200 day average
DAX
10y Bunds*
6%
5%
4%
3%
1.1.01
200 day average
Yield on 10 year Bunds
* The charts are not a formal component of the Management Report.
105
The Banking Environment 2003
German banking industry at the crossroads.
In the past year, the situation of the German banks improved. Risk provisions fell below
the levels of the previous year, although – due to the large number of company insolvencies – they still remained relatively high. Thanks in great measure to the recovery on the
stock exchanges, the overall picture was again more encouraging. After hitting an interim
low of 2,188 points in March 2003, the German shares index (DAX) showed significant
improvement during the rest of the year. However, this encouraging development cannot
conceal the fact that German banks continue to face the challenge of improving their income position without losing track of costs. The past year again brought profound changes
to German banking, reflected in the increasing number of mergers. The favorable climate
discernible again in the banking industry appears set to continue throughout the current
year, despite the fact that the financial sector is also suffering from the persistently weak
growth of the German economy, as well as from a spate of business insolvencies.
The Landesbanks (public sector banks of the German states), in addition, are currently
faced not only with the challenge of new regulations – IAS and Basle II – but also with the
abolition (in July 2005) of Anstaltslast (maintenance obligation) and Gewährträgerhaftung
(guarantee obligation) incumbent on their public sector owners. This loss of state guarantees will inevitably impair Landesbank ratings, and consequently the conditions governing
their refinancing operations. The capital markets have to some extent already anticipated
this step, with refinancing costs for the Landesbanks currently running at considerably
higher levels than hitherto. In a highly competitive market, this has significant impact on
earnings. The Landesbanks are working intensively to adjust their business models to the
changed situation, with the aim of improving their profitability and achieving competitive
ratings without the benefit of guarantees from their respective states.
Management Report
106
HSH Nordbank – Business Development 2003
HSH Nordbank reacted quickly to the upcoming abolition of state guarantees. The phasing
out of Anstaltslast (maintenance obligation) and Gewährträgerhaftung (guarantee obligation) has far-reaching implications for the Bank’s business operations, because it entails
a significant rise in the cost of funding. The merger and incorporation of the Bank, completed last year, was an initial response. At the end of 2003 the Bank successfully passed
another milestone when it promulgated its new strategy. The encouraging results of 2003,
achieved under difficult conditions, as well as the results of the predecessor houses posted
in previous years, confirm that HSH Nordbank possesses all the essential prerequisites to
meet coming challenges. Group net income climbed 9.5 % to EUR 261.9 million, and allowed
significant strengthening of reserves. Accordingly, a gross dividend of EUR 56.25 million on
ordinary shares in the amount of EUR 450 million, and a gross dividend of EUR 8.75 million on preference shares in the amount of EUR 50 million, together with an allocation of
EUR 165 million to retained earnings, was recommended to the Annual Shareholders’
Meeting on May 12, 2004.
Merger and formation of HSH Nordbank.
HSH Nordbank AG was established by the merger of Landesbank Schleswig-Holstein Girozentrale, Kiel, and Hamburgische Landesbank – Girozentrale –, Hamburg. After ratification
of a State Treaty between the Free and Hanseatic City of Hamburg (FHH) and the State of
Schleswig-Holstein, the merger became effective with entry of the stock corporation in the
commercial registers of Hamburg and Kiel on June 2, 2003. For accounting and tax purposes incorporation took effect retroactively as of January 1, 2003.
The transitional arrangements defined in the Brussels Agreement of July 17, 2001 on the
abolition of Anstaltslast and Gewährträgerhaftung are also applicable to HSH Nordbank.
The states of Hamburg and Schleswig-Holstein determined in the State Treaty that these
obligations apply in identical terms to HSH Nordbank as they did to the predecessor banks
Hamburgische Landesbank and Landesbank Schleswig-Holstein.
The Bank sees the merger and simultaneous conversion into a stock corporation as an
important step toward ensuring long-term competitiveness and capital market readiness.
The merger joined two strong partners, both of them with deep roots in the Hamburg/
Schleswig-Holstein region, and both complementing each other perfectly in geographical
focus as well as business strategy. By the third year following the merger, HSH Nordbank
expects to benefit from synergies amounting to approximately EUR 150 million per annum
in earnings and expenses. Incorporation was an essential step for a possible stock market
listing.
107
IT migration.
It was decided early in the merger process to take over the IT platform used by Landesbank
Schleswig-Holstein as the principal solution for HSH Nordbank, and to migrate Hamburgische Landesbank’s business databases onto the new system. The integration of the two
systems established some major milestones in the course of 2003. Temporary problems
arising in the course of IT migration were identified and analyzed – and have to a great
extent already been solved. Internal bank operations were at no time materially impaired.
We expect that, after completion of all IT migration operations, unified state-of-the-art
systems will be in place for all divisions by early 2005.
Consolidated companies.
HSH Nordbank’s individual accounts cover the Bank as established with co-headquarters in
Hamburg and Kiel and subsidiaries in Germany and abroad. As at year-end 2003 the Bank
had branches in Lübeck, Berlin, Luxembourg, Copenhagen, Stockholm, Helsinki, London,
New York, Hong Kong and Singapore. On April 1, 2004 a branch was opened in the Cayman
Islands.
Investitionsbank Schleswig-Holstein (IB) and Landes-Bausparkasse (LBS), both of which were
formerly legally dependent but organizationally independent entities within Landesbank
Schleswig-Holstein, were spun off from Landesbank Schleswig-Holstein before the merger.
The Group accounts comprise HSH Nordbank’s individual accounts as well as those of HSH
Nordbank International S. A., Luxembourg1) and its subsidiaries Nobis Société des Banques
Privées S. A., Luxembourg, and International Fund Services & Asset Management S. A., Luxembourg. They further include the accounts of HSH Nordbank (Guernsey) Ltd., Guernsey2),
HSH N Finance (Guernsey) Ltd., Guernsey3), HSH N Composits GmbH, Kiel4), and its subsidiary HSH N Funding I, Grand Cayman5), the Schleswig-Holstein casinos, PLUS BANK AG,
Hamburg, and METONO GmbH, Hamburg. METONO GmbH is a holding company of
HSH Nordbank with a 50 % stake in PLUS BANK AG. HSH Nordbank Hypo AG, Hamburg6),
acquired in September 2003, is consolidated here for the first time. Its acquisition enables
HSH Nordbank to issue mortgage bonds. Hamburgische Wohnungsbaukreditanstalt (WK),
Hamburg, has not been included in consolidation, as it was sold before the merger.
Comparison with previous year.
In order to compare the development of the economic situation of HSH Nordbank AG and
the HSH Nordbank Group, and in line with article 265 paragraph 2 sentence 3, and article
294 paragraph 2 sentence 2, respectively, of the German Commercial Code (HGB), the
1) Formerly:
Landesbank Schleswig-Holstein International S. A., Luxembourg.
Hamburgische Landesbank (Guernsey) Ltd., Guernsey.
3) Formerly: Hamburgische LB Finance (Guernsey) Ltd., Guernsey.
4) Formerly: LB Kiel Nord Capital GmbH, Kiel.
5) Formerly: LB Kiel Funding I, Grand Cayman.
6) Formerly: HKB Hypotheken- und Kommunalkredit-Bank Aktiengesellschaft, Hallbergmoos.
2) Formerly:
Management Report
108
figures and details of the previous year are presented as if the merger had already taken
place as at 1.1.2002. This has entailed calculating separately the assets and results of IB, LBS
and WK.
Financial situation.
In comparison with the opening balance sheet as at 1.1.2003, the Group’s total assets
dropped EUR 9.5 billion (5.3 %) to EUR 171.7 billion. The total assets on the Bank’s individual accounts declined 6.1 % to EUR 166.0 billion (1.1.2003: EUR 176.7 billion). The main
reasons for the decline in total assets of both Group and Bank were on the one hand the
significant depreciation of the US dollar in the course of the year, and on the other the
Bank’s policy of qualitative rather than quantitative business expansion. In order to use
available equity capital more efficiently, and to optimize return on equity, the Bank has
selectively concentrated new business in sectors and regions in which its strong market
position can realize attractive profits.
Group business volume fell 2.9 % to EUR 204.9 billion. Bank business volume fell 2.4 % to
EUR 210.4 billion. Group lending volume was down 3.0% to EUR 205.0 billion. Bank lending
volume was down 3.1% to EUR 210.4 billion.
Lending and derivatives business.
On the assets side of the Group balance sheet, loans and advances to customers are the
biggest item, with approximately 46.1%, amounting to some EUR 79.2 billion (1.1.2003:
EUR 78.9 billion). This represents a slight rise (0.4 %) on the opening figure. Loans to customers abroad comprise some 35.5 % of this item. Claims secured by mortgages rose 4.7%
to EUR 17.7 billion; those secured by ship mortgages declined slightly (-5.2 %) to EUR 11.5
billion – mainly as a result of the depreciation of the US dollar. Low-margin public sector
loans reduced significantly further (-14.1%) to EUR 12.5 billion.
Loans and advances to banks fell 18.5% to EUR 37.3 billion. The securities portfolio declined
3.8 % to EUR 50.9 billion.
On the Bank’s individual accounts, loans and advances to customers also rose slightly (0.4 %)
to EUR 78.2 billion (1.1.2003: EUR 77.9 billion), whilst loans and advances to banks dropped
20.3 % to EUR 37.1 billion. The securities portfolio declined 4,7 % to EUR 46.1 billion.
We again expanded our derivative financial instruments business to meet our customers’
specific financing requirements, but also to minimize risks and make use of market opportunities. Interest-rate derivatives accounted for more than three-quarters of the volume.
The remainder was accounted for by currency-related products. Equity and other price risks
were a comparatively negligible quantity. At Group level the nominal volume of derivatives
as at 31.12.2003 amounted to EUR 349.9 billion (1.1.2003: EUR 279.8 billion), at Bank level
to EUR 343.6 billion (1.1.2003: EUR 273.5 billion). Risk measured in terms of credit risk
109
equivalents amounted to EUR 2.1 billion (1.1.2003: EUR 1.9 billion) in both Group and Bank
as at 31.12.2003. At year-end the nominal volume of credit derivatives stood at EUR 9.5 billion (1.1.2003: EUR 12.0 billion) in the Group, and at the same figure in the Bank (1.1.2003:
EUR 11.8 billion).
Refinancing.
The principal source of funding in the Group is certificated liabilities, at 35.9 % of all
funding and a volume of EUR 61.5 billion (1.1.2003: EUR 66.8 billion). To optimize longterm funding, the Bank is increasingly concentrating on its own issuing activities on the
international capital markets. Securities are issued with medium to long maturities –
among other models on the basis of a EUR 25 billion EMTN program. In the year under
review, benchmark issues totaling EUR 3.5 billion, as well as structured bond placements,
contributed substantially to the optimization of funding activities. For short-term refinancing HSH Nordbank is currently using two commercial paper programs with a volume of
USD 10 billion each. The Bank’s certificated liabilities portfolio (individual accounts) fell
to EUR 49.7 billion (1.1.2003: EUR 57.3 billion). In addition to these activities, the Bank has
also issued mortgage bonds in 2004 – through HSH Nordbank Hypo AG, acquired in September of the previous year.
Liabilities to banks fell steeply – by 14.3 % to EUR 47.6 billion at Group level, and by 10.1%
to EUR 54.9 billion at Bank level. At year-end, liabilities to customers stood at EUR 48.0 billion (Group), an increase of 5.7 %. At Bank level liabilities to customers rose 4.5 %.
Equity capital situation.
The Group’s liable equity capital comprises, as core capital, the on-balance-sheet equity
capital and the fund for general banking risks. As supplementary capital it comprises
subordinated liabilities, profit participation capital, and reserves in line with article 340f
of the German Commercial Code. As at 31.12.2003, liable equity capital amounted to EUR
10.7 billion (1.1.2003: EUR 10.3 billion) in both Group and Bank, representing an increase
of 3.9 % on the previous year.
The details of the Group’s equity capital situation are as follows: share capital stood at
EUR 500 million; silent participations qualifying as core capital stood at EUR 4.6 billion.
These silent participations – for the most part with unlimited maturities and permanently
available – were taken up both by the shareholders and on the capital markets. In the year
under review, silent participations amounting to EUR 500 million were again placed with
international investors. Remaining growth in equity capital mainly comprises subordinated
liabilities and allocations to the fund for general banking risks in line with article 340g of
the German Commercial Code.
Management Report
110
Group balance sheet
€ millions
Cash reserve, debt instruments issued by
public institutions, bills of exchange eligible
for refinancing
Loans and advances to banks
31.12.2003
1.1.2003
Change on
previous year
in € m.
Change on
previous year
in %
360
366
-6
-1.6
37,319
45,772
-8,453
-18.5
Loans and advances to customers
79,207
78,876
331
0.4
Total securities
50,892
52,907
-2,015
-3.8
1,425
1,276
149
11.7
377
340
37
10.9
Other assets
2,080
1,636
444
27.1
Total assets
171,660
181,173
-9,513
-5.3
-14.3
Equity investments in non-affiliated and
affiliated companies
Trust assets
Liabilities to banks
47,570
55,491
-7,921
Liabilities to customers
47,966
45,393
2,573
5.7
Certificated liabilities
61,547
66,836
-5,289
-7.9
Trust liabilities
377
340
37
10.9
Subordinated debt
2,841
3,027
-186
-6.1
Profit participation capital
1,497
1,497
0
0.0
365
252
113
44.8
Equity capital
6,485
5,776
709
12.3
Other liabilities
3,012
2,561
451
17.6
Total liabilities
171,660
181,173
-9,513
-5.3
Lending volume
205,016
211,254
-6,238
-3.0
Business volume
204,926
211,105
-6,179
-2.9
Fund for general banking risks
On balance sheet date, the ratio between own funds qualifying as liable capital, and total
risk-weighted assets plus market price risk positions (solvency ratio), stood at 10.6 %
(1.1.2003: 9.7 %) for the Group, and 10.9 % (1.1.2003: 10.4 %) for the Bank. During the year
under review the principles governing capital adequacy and liquidity were observed at all
times.
Solvency ratio
31.12.2003
1.1.2003
Principle 1 – Bank
10.9 %
10.4 %
Principle 1 – Group
10.6 %
9.7 %
BIS ratio
10.2 %
9.4 %
Bank
6.9 %
6.3 %
Group
6.6 %
6.0 %
BIS ratio
6.3 %
5.6 %
Core capital ratio
Earnings position.
In a banking environment that again proved tough throughout 2003, HSH Nordbank maintained the positive trend established over many years by its predecessor banks. Operating
profit before risk provisions and evaluations at Group level rose 4.6 % by EUR 51.4 million
to EUR 1,162.1 million (prior year EUR 1,110.7 million). The result for the Bank was up 4.3%
by EUR 46.6 million to EUR 1,126.8 million (prior year EUR 1,080.2 million).
111
Results from operations were consistently better than in the previous year. As with the
predecessor banks, the main source of operating income was net interest income, which
increased 2.2 % (EUR 31.6 million) to EUR 1,499.1 million at Group level. Resulting from a
policy of selective expansion and credit pricing that more accurately reflected actual risks,
most of the Bank’s segments achieved higher profits with their new business. This more
than compensated the negative impact of US dollar depreciation and the decline in dividends
from equity holdings. At Bank level, interest income increased 2.0 % (EUR 29.0 million) to
EUR 1,450.0 million.
Net commission income at Group level jumped 13.3 % to EUR 223.3 million, driven by
commissions from international lending activities, as well as higher income from securities
business at the subsidiary PLUS BANK AG, and the HSH Nordbank International, S. A. Group,
Luxembourg. At Bank level the increase in commission income was somewhat lower (5.4 %),
amounting to EUR 181.7 million.
Net income from trading at Group level increased 5.7% to EUR 83.2 million; at Bank level
the increase was 6.0 % to EUR 74.7 million.
At Group level, other operating income surged 121.8 % in the year under review to
EUR 88.7 million. It must be noted in this context that restructuring expenses resulting
from the merger, which amounted to some EUR 84 million in 2002, were reduced to
around EUR 20 million in 2003. This item also benefited from tax refunds from the previous years. At Bank level the increase was 120.3 %, to EUR 87.0 million.
Administrative expenses rose 8.9 % in the Group and 7.0 % in the Bank – rather less than
in the past with the predecessor banks. — The development in personnel expenses reflects
a reduction of 193 in employee numbers to a total of 4,511 (prior year 4,724). To realize
savings derived from the merger, the Bank encourages measures such as early retirement
schemes that promote employee turnover. At the same time there has been ongoing recruitment, with the focus on filling specialist positions. At Bank level, personnel expenses, at
EUR 305.4 million, were only slightly higher than in the previous year (EUR 303.7 million).
At Group level, personnel expenses rose 4.4 % to EUR 347.7 million, due to slight increases
in employee numbers in various Group companies, as well as the first-time consolidation
of HSH Nordbank Hypo AG. — Operating expenses rose 13.3 % in the Group to EUR 384.5
million, and 13.1% in the Bank to EUR 361.2 million. The increase is largely due to goodwill
write-downs at Group level, as well as to a rise in depreciation resulting from higher investment in plant and equipment in recent years. Higher advisory services costs – to some
extent related to the merger and the development of the Bank’s new strategy – also contributed to the increase in this item.
The relation of total administrative expenses to operating income (cost income ratio)
achieved an excellent level both in the Group – 38.7 % (prior year 37.7 %) – and in the Bank:
37.2 % (prior year 36.6 %).
Throughout 2003 we maintained our traditionally strict risk standards. Overall risk provisions and evaluations were up once again – at Group level by 18.5 %, and in the Bank by
17.1%. It must be noted that in the previous year revenue from sales of shareholdings
Management Report
112
lowered reported risk provisions. Disregarding this effect, risk provisions have fallen
considerably in the year under review, due particularly to the large reduction in provisions
on the securities portfolio. As at year-end, these amounted to EUR 43.4 million (prior year
EUR 380.9 million) in the Group, and EUR 59.4 million (prior year EUR 387.1 million) in
the Bank. Loan loss provisions, on the other hand, were again raised in 2003, against the
background of persistent weakness in the economy. At Group level, net allocations to loan
loss reserves amounted to EUR 436.7 million (prior year EUR 365.9 million); at Bank level to
EUR 406.8 million (prior year EUR 362.1 million). Reserves as defined by article 340g of the
German Commercial Code were again substantially increased. With these measures, HSH
Nordbank has adequately covered all ascertainable and future risks.
At Group level, operating profit after risk provisions and evaluations dropped by EUR
39.0 million (-6.3 %) to EUR 582.7 million (prior year EUR 621.7 million). At Bank level this
ratio was down 6.4 % to EUR 551.4 million (prior year EUR 588.9 million).
The contributions of the various segments of the HSH Nordbank Group7) to the operating
result are presented below.8) With reference to the column Other/Consolidation, it must be
observed that – along with consolidation details and reconciliation to Group results – this
segment includes earnings from subsidiaries or shareholdings not related to specific segments, as well as other central income and expense items. For example, personnel and
other operating expenses are reported here if they are not causally linked to any other
segment. Likewise, equity investment revenues are reported here. Central risk provisions
mainly covers general bad debt provisions and allocations to specific bank reserves. On
balance, the segment Other/Consolidation posts a negative operating result that does not
impact other segments.
Notes on individual segments:
Despite the weakness of the US dollar, the Shipping Clients segment experienced brisk
business activity in 2003 and posted an operating result of EUR 230.3 million after risk provisions and evaluations. Return on core capital reached 21.5 %. In difficult circumstances,
the Real Estate Clients segment achieved an operating result after risk of EUR 93.4 million.
Return on capital amounted to 8.9 %. The Corporate Clients segment includes not only the
worldwide corporates business run from the Bank’s Hamburg and Kiel head offices, but
also the corporate client activities of the Copenhagen Branch (Nordic Corporates). Despite
the persistent weakness of the economic environment, business in this segment developed
briskly, thanks to the Bank’s strong market position in sharply focused customer segments.
The operating result stood at EUR 177.0 million after risk provisions and evaluations, with
7) See
Annual Accounts.
line with the option allowed by German Accounting Standard No. 3, previous year’s results are not cited in
segment reporting.
8) In
113
return on core capital of 18.7 %. The Special Corporate and Institutional Clients segment
comprises Financial Institutions/Global Trade Finance, Savings Banks/Public Sector Customers, Lease Finance and Transportation. This segment posted an operating result after risk
provisions of EUR 131.2 million, with return on core capital of 14.5 %. In a highly competitive overall market environment, the Private Clients segment posted an operating result
after risk provisions and evaluations of EUR 31.9 million, with return on core capital
standing at 19.5 %. The Financial Markets segment includes Asset Liability Management
(ALM), Portfolio Management and Investments (PMI) and Capital Markets. The very successful activities of this segment achieved an operating result after risk of EUR 350.6 million
and a return on core capital of 25.8 %9).
Primary segment structure10)
HSH Nordbank
Shipping
Clients
Real Estate
Clients
Corporate
Clients
Special Corporate and
Institutional
Clients
Private
Clients
Shipping
Real Estate
Clients
Corporates
and
Structured
Finance
Financial
Institutions/
Global Trade
Finance
Private and
Business
Clients
Nordic
Corporates
Savings
Banks/Public
Sector
Customers
Portfolio
Management and
Investments
Lease
Finance
Capital
Markets
Financial
Markets
Asset
Liability
Management
Other/
Consolidation
Group
Central
results
Transportation
Return on equity (RoE)11) stood at the same level (11.0 %) as the previous year. The Bank’s
individual account RoE rose slightly from 10.4 % to 10.5 %.
Due mainly to further placements, dividends on silent participations rose by 21 % at both
Group and Bank level to some EUR 317 million.
Taxes on income fell by 96.8 % at Group level to EUR 3.9 million, and at Bank level by
95.9 % to EUR 4.6 million. In the year under review the Bank had to apply the German
Accounting Standard (DRS) No. 10 “Deferred Taxes in Consolidated Financial Statements”
for the first time. In line with this standard, both tax accruals and deferrals were reported
in the annual accounts. The significant excess of deferrals over accruals is reflected in a
reduction of taxes as reported in the Group Statement of Income.
9) The
customer-related segment structure used here entails that net commission income from capital market products
is not reported under Financial Markets.
10) The chart is not a formal component of the Management Report.
11) (Operating result after risk/evaluation + allocation to reserves in line with article 340g of the German Commercial
Code HGB)/(average on-balance-sheet equity – net retained earnings + average reserves in line with article 340g HGB)
Management Report
114
At EUR 261.9 million, Group net income was up EUR 22.8 million (9.5 %) on the previous
year (EUR 239.1 million). At Bank level net income stood at EUR 230.0 million, 7.3 % up on
the previous year.
Group statement of income
€ millions
2003
Pro forma
2002
Change on
previous year
in € m.
Change on
previous year
in %
1,499.1
1,467.5
31.6
2.2
223.3
197.1
26.2
13.3
Operating income
- net interest income
- net commission income
- net income from trading
83.2
78.7
4.5
5.7
- other net operating income
88.7
40.0
48.7
121.8
- personnel expenses
-347.7
-333.1
-14.6
4.4
- operating expenses
-384.5
-339.5
-45.0
13.3
Operating profit before risk
provisions/evaluations
1,162.1
1,110.7
51.4
4.6
Risk provisions/evaluations
-579.4
-489.0
-90.4
18.5
-436.7
-365.9
-70.8
19.3
-43.4
-380.9
337.5
-88.6
-98.8
Administrative expenses
- loan loss provisions
- securities
- shareholdings
4.5
364.8
-360.3
-104.3
-135.4
31.1
-23.0
- changes to special reserve item
0.5
28.7
-28.2
-98.3
- other
0.0
-0.3
0.3
-100.0
582.7
621.7
-39.0
-6.3
0.0
0.0
0.0
0.0
582.7
621.7
-39.0
-6.3
- reserves in line with 340 f/g HGB
Operating profit after risk
provisions/evaluations
Extraordinary income
Net income before taxes
Dividends on silent participations
Taxes on income
Net income
-316.9
-261.9
-55.0
21.0
-3.9
-120.7
116.8
-96.8
261.9
239.1
22.8
9.5
Occurrences after balance sheet date.
In 2003 HSH Nordbank opened negotiations with Bayerische Landesbank (BayernLB) and
Landesbank Hessen-Thüringen (Helaba) on the amalgamation of their securities transactions houses. An outline agreement was drawn up, according to which PLUS BANK and
TxB LB Transaktionsbank GmbH (Dornach) – a joint subsidiary of BayernLB and Helaba –
will be retroactively merged with effect from January 1, 2004. The headquarters of the new
company will be in Dornach (near Munich), with offices in Hamburg and Offenbach (near
Frankfurt). HSH Nordbank will own 25.1% of the merged company, the remaining shares
being held by BayernLB and Helaba. The transaction banking market is currently going
through a phase of strong concentration. The merger is an important measure to safeguard
an adequate market share and retain a competitive position in future.
The Bank also decided at the end of 2003 to outsource major elements of its IT and related
services. Contracts are expected to be exchanged during first half-year 2004. This will
achieve significant cost savings in the medium term.
115
EU “unlawful subsidy” dispute.
In November 2002 the European Commission initiated proceedings against Hamburgische
Landesbank and Landesbank Schleswig-Holstein, as well as other Landesbanks, for receiving unlawful subsidies. Regarding HSH Nordbank’s predecessor houses, the question is
whether an equity contribution in the form of shares in various public development banks
in Hamburg and Schleswig-Holstein constituted unlawful subsidy. As the equity bears adequate interest, we do not expect the proceedings to have a negative impact. Hamburgische
Landesbank and Landesbank Schleswig-Holstein shed the shares in question before the
foundation of HSH Nordbank.
Outlook.
In global terms, 2003 already saw widespread economic recovery taking place, driven by
the USA and Asia, and there are sufficient indicators that in Europe and Germany the
bottom of the curve has also been passed. With its international business operations, HSH
Nordbank is positioned to benefit from the growing dynamism in the world economy –
as it will from an economic upswing in the Hamburg/Schleswig-Holstein region, which is
central to its activities.
With the merger and simultaneous conversion into a stock corporation, HSH Nordbank
created an excellent platform for ensuring its future competitiveness. The Bank’s new
strategy, launched at the end of 2003, is aimed above all at enhancing profitability and
capitalization and optimizing capital structure. Various measures taken in the current year
are directed toward realizing these goals. HSH Nordbank’s strategy is closely linked to that
of its twin predecessor banking houses, developing their longstanding strengths in a
consistent direction. The Bank sees itself, accordingly, as a powerful regional bank of the
north and an international provider of specialized financing. It intends by 2006 to raise
return on equity beyond the 15% mark, and the core capital ratio to over 7 % – whilst at
the same time limiting risk-weighted assets to EUR 100 billion. The necessary growth in
earnings on the basis of a static lending volume is to be achieved through sales of noncapital-binding products and services (multi-product approach), as well as by generating
higher profits in the Bank's traditional lending business. Activities will be concentrated in
segments where the Bank’s strong market position can realize attractive prices, and its
special expertise in specific sectors and regions will be employed to further extend its excellent competitive position as a provider of specialized financing solutions – for example
ship, real estate and transport finance.
HSH Nordbank is confident that the achievements already in place, and the measures
introduced in the context of the new strategy, will bear fruit in the current year, and that
this will take visible effect in the annual accounts for 2004.
Management Report
116
Risk Report 2003
The success of a bank depends critically on a responsible, professional approach to risks.
For this reason, active risk management ranks high in the philosophy of HSH Nordbank.
The Bank understands risk as any unfavorable development that might impair the Bank’s
financial, earnings or liquidity situation. The Bank distinguishes counterparty, market,
liquidity, operational and strategic risks.
Risk management system
The individual elements of risk management comprise a system that ensures the identification, analysis, evaluation, management, continuous monitoring and reporting of risks.
Organization of risk management.
Responsibility for risk management is clearly defined within the Bank. Risk policy – including the methods and procedures to be applied in the quantification, monitoring and management of risks – is decided by the full Managing Board, which accordingly bears overall
responsibility for the Bank’s risk management. With the Chief Risk Officer sitting on the
Managing Board, the functional separation of market from non-market units, as recommended by the Mindestanforderungen an das Betreiben von Handelsgeschäften der Kredit-
institute (MaH – Minimum Standards for Trading Activities of Credit Institutions) and the
Mindestanforderungen an das Kreditgeschäft der Kreditinstitute (MaK – Minimum Standards for Lending Activities of Credit Institutions) is safeguarded at all organizational levels.
Central Risk Controlling develops the methods and instruments used for quantifying,
monitoring and managing risks, thereby ensuring that the risks themselves remain evident and controllable. Operational risk reporting is carried out by an independent entity –
typically by Transaction Services. The Bank’s Internal Audit, which directly reports to the
Board, guarantees independent scrutiny of the appropriateness and effectiveness of our
risk management system. The Bank’s risk profile is frequently reviewed by the Supervisory
Board’s Risk Committee.
Risk management and controlling.
Our risk management and controlling system is continuously refined in line with current
business management and regulatory criteria, and is a constituent element of the Bank’s
overall management system. In this context, it is of elementary importance that management focus on the risk/return profile of business activities at all relevant levels of the
Bank’s structure. The Bank uses a Raroc (Risk-adjusted return on capital) approach for
calculating the value added ratio of all business activities.
117
HSH Nordbank’s business segments are run on the global head principle. This also applies
to risk controlling, where methods and instruments are centrally developed, implemented
and sanctioned, ensuring unified and systematic Bank-wide risk controlling.
For the authorization and execution of its business activities the Bank has established clear
rules defining competencies and detailing reporting obligations. Mandatory formal checks
are imposed before new or adapted products are launched, or business deals signed in new
markets. These require the Managing Board’s consent, which will only be given if the activity
in question can be modeled in accordance with the Bank’s relevant processes and systems.
A risk reporting process in line with MaK was developed and introduced in the Bank in the
course of 2003, keeping both the Managing Board and Risk Committee regularly informed
about the Bank’s risk situation. It will in future also serve to monitor implementation
of credit risk strategy, which will define the risk-bearing parameters of planned lending
activities.
Risk-bearing capability.
Acceptance of risk is subject to the principle of risk-bearing capability. As an economic safeguard against potential loss, the ability of the Bank to carry risks is regularly monitored
with a view to establishing risk parameters. A global limit covering all Bank risks, and
individual limits for specific risk types, are derived from this ratio. These limits are determined by the Managing Board.
Default risks.
Lending is a core activity of HSH Nordbank, and the incurring, management and limitation of default risks is, therefore, a core competency. The organization of the lending business and the methods of risk management and controlling undergo continuous updating
to meet the demands of changing market conditions and new regulations (Basle II, MaK).
Default risks are differentiated into credit, settlement, country and equity risks.
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118
Credit risks.
Credit risks comprise not only classical loan loss risks but also issuer and counterparty risks.
They differ from settlement risks in occurring throughout the entire term of the deal.
Classical credit risk refers to potential loss arising from credit risk mitigation or the default
of business partners in a loan transaction. Issuer risk refers to the risk of deterioration in
the credit rating of an issuer of securities. Counterparty risk refers to potential loss arising
from the default, or deterioration in the credit rating, of business partners, mainly in offbalance-sheet – for example, derivatives – transactions. Counterparty risks only arise here
in business that has positive value for the Bank, where default would entail the need for a
new transaction on less advantageous market terms. Counterparty risks are calculated via
counterparty limits on a mark-to-market basis.
As at year-end 2003, the nominal value of derivatives transactions amounted to EUR 349.9
million (prior year EUR 279.8 million). To cover risks arising from such transactions, the
Bank concluded collateral and netting agreements with a number of major counterparties.
Irrespective of these netting agreements, replacement costs for derivatives transactions
amounted to EUR 2,100 million as at year-end (prior year EUR 1,888 million). Replacement
costs in this context refer to the potential costs of a new transaction required to restore a
position forfeited through default of a business partner.
Settlement risks.
HSH Nordbank distinguishes between risks associated with advance settlement and final
settlement. Advance settlement risks arise in the time-span between notification of an
advance payment and its receipt. The risk limit is calculated in relation to the sum due.
Settlement risks occur when the counterparty does not fulfill its obligations on schedule
and the Bank consequently suffers loss because of market price changes. A risk limit is
calculated in relation to the difference (as impacting HSH Nordbank) between the agreed
settlement price and the actual market value of the underlying transaction.
Country risks.
Country risks are understood as the risk of partial or total default on agreed capital payments – or failure to pay on time – due to restrictions in international payment transactions, or illiquidity, or nonpayment by debtor states or guarantors. These risks are not
related to the creditworthiness of the debtor.
119
The table below provides an overview of the Bank’s foreign exposure, which totaled
EUR 87,657.1 million as at 31.12.2003 (prior year EUR 95,087.9 million). Foreign exposure is
understood as the exposure of foreign lending and trading activities, taking account of
collateral security relevant to transfer risks – for example guarantees or sureties.
Region
Western Europe
– EU countries
– non-EU countries
Central and eastern Europe
– EU accession countries 2004
Africa
North America
Foreign exposure Foreign exposure
in %
in %
2003
2002
65.5
60.2
5.3
67.3
61.2
6.1
3.4
2.0
3.6
2.0
0.4
0.1
17.2
15.6
Central and South America
4.4
4.3
Middle East
0.4
0.5
Asia and the Pacific
8.1
7.4
International organizations
0.3
0.6
Special purpose companies
0.3
0.6
100.0
100.0
Total
Equity risks.
Management of opportunities and risks related to equity investments is based on a clearly
defined, proactive shareholding strategy. Equity risks are risks of loss arising from provision of equity capital to third parties. The Bank’s equity investment controlling is continuously refined as an instrument for managing these risks.
As well as the quantitative evaluation of equity risks, detailed qualitative analyses are
performed before new equity investments are incurred or existing ones changed. Within
the context of due diligence reviews, the financial, legal and management situation of
the company in question is carefully examined. Whilst these measures are appropriate to
ascertaining risks and opportunities prior to the acquisition of an equity holding, existing
investments are subject to ongoing risk assessment and management procedures. An
essential prerequisite for the early detection and management of risks is that appropriate
competencies are established in company statutes and procedural regulations, and that the
Bank is represented on the supervisory boards of key affiliates.
Ongoing assessment of the profitability of equity investments is carried out on the basis of
predefined ratios. In addition, regular reports on the business development of selected
companies, analyzed from the point of view of the Bank as shareholder, enable risk containment to be optimally effected.
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120
Organization of lending business.
A large number of qualitative standards relating to the structure and organization of
lending business, as determined by the MaK, were put in place by HSH Nordbank in the
course of 2003, or will shortly be implemented.
In line with MaK standards, the Bank’s structural organization takes account of the principle of functional separation of market from non-market units. This principle applies –
right up to Managing Board level – both to the lending process itself and to credit controlling, and is of central importance to decisions about loans. The structure and organization
of HSH Nordbank’s credit decision process aims to ensure the lasting basis and quality of a
loan decision, especially from the risk angle. As an independent non-market unit, Credit
Risk Management bundles, coordinates and integrates risk management functions within
the lending process, such as credit decision-making, rating and collateral security assessment, loan recovery controlling, loan settlement and provisioning against risks.
HSH Nordbank has established voting on loan applications by both market and non-market
units, not only as a constituent element, but as an essential prerequisite of the loan decision,
with different competency levels accorded to voting and decision-making.
In this way the decision at the competent management level is preceded by intense and
rigorous analysis at two further levels, each of which is independent of the other. The first
vote takes place in a market unit which, with its customer-oriented approach, looks at
wider global factors in the lending process than sales alone.
If the market and non-market votes disagree, voting competency passes successively to the
next higher level. The consistent integration of Credit Risk Management in the decisionmaking chain ensures that the market-independent vote retains its decisive weight in this
eventuality as well.
In line with MaK’s opening clause, HSH Nordbank has opted to waive the requirement of
a second vote in the non-market area for specific loans not classified as risk relevant. This
applies to credit decisions relating to specific sectors (municipal loans, loans to domestic
banks covered by Gewährträgerhaftung), short-term overdrafts, and particularly loans of an
order that falls below predetermined risk parameters.
Rating plays a key role at various stages of the lending process, as well as impacting the
regulation of competencies. On the basis of the proposal put forward by the market unit,
rating is reviewed and determined by Credit Risk Management, which scrutinizes the
appropriateness and adequacy of the selected rating process, as well as the efficiency with
which it has been applied.
121
Inspection of collateral security is the responsibility of the Surveyors unit in Credit Risk
Management. This unit evaluates real estate offered as security, lays down standards for the
assessment of ships, airplanes, rail transportation and other movables, and scrutinizes the
criteria selected by external assessors, as well as checking their implementation.
Bank-wide risk provision management is also the responsibility of Credit Risk Management –
especially the evaluation of recommendations for forming risk provisions, the determination of provision levels, and the reporting system on the development of risk provisions.
The central Loan Recovery Controlling/Risk Provision Management unit is responsible for
identifying, calculating and processing appropriate provisions for commitments involving
risks.
Finally, identification and monitoring of problem loans and their settlement also falls
within the remit of Credit Risk Management.
Risk limitation in lending business.
Limitation of default risks in HSH Nordbank is currently implemented at various hierarchical levels. The Bank’s risk capital limit is set for the whole Bank, with the limitation of
default risks depending on a confidence level in line with Basle II. Regulatory limitation in
line with Principle 1 is located both at Bank-wide and at Competence Center level, where it
takes place within the context of equity capital allocation.
A further limitation at Bank-wide level takes place in the framework of country risk management. Management of foreign commitments is a two-stage process. On the one hand the
maximum nominal external lending volume of HSH Nordbank is limited, in line with the
Bank’s own risk policy, by means of clustered country-rating categories. On the other hand
business is fine-tuned in individual countries on the basis of risk-adjusted credit amounts.
These amounts are projected onto individual country limits derived from rating-class limits
as well as from the specific economic standing of the country concerned. The limits are set
by the Managing Board, and their utilization is continuously monitored by the Country
Management unit (located in Economic Research).
Borrower/borrower-unit limits are set within the management framework for large-scale
risks, as well as via limitation of classical lending and trading activities.
Management procedures for large-scale risks ensure that the Bank stays within the regulatory limits set for major risks at Bank and Bank Group levels. It enables the Bank to recognize potentially excessive risks at an early stage, and implement measures to prevent them
from arising.
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122
Risk provisions.
HSH Nordbank’s risk management pays the utmost attention to default risks. The Bank’s
cautious business policy is demonstrated by the fact that – despite the difficult economic
environment of the past few years, and a resultant increase in the loss-rate in 2003 to
0.13 % (prior year 0.04 %) – the average rate for the past five years remains low, at 0.09 %
(prior year 0.07 %). Risk provisions in the form of individual value adjustments/allocations
to reserves as at 31.12.2003 stood at EUR 1,581 million (prior year EUR 1,493 million),
representing 0.75 % of the total lending volume (prior year 0.71%). General bad debt provisions amounted to EUR 163 million (prior year EUR 123 million). In addition, the Bank
made further provisions in line with articles 340 f and g of the German Commercial Code.
Basle II.
As a preliminary to Basle II, the Bank is pushing ahead with a number of projects developing credit risk management instruments. For example, within the framework of cooperations with other Landesbanks and with the German Savings Banks and Giro Association
(DSGV), complex rating procedures based on scorecard and simulation models have been
developed, all of which meet Basle II standards. The internal rating procedures developed
by the Bank cover virtually the whole of the loans portfolio that falls within the scope of
Bank-wide strategy, and they are already being used in market segments as well – for instance the ship financing and leasing modules developed cooperatively under the lead of
HSH Nordbank. The entire shipping portfolio has already been rated with this new module.
The rating systems enable the Bank to comply with regulatory and economic parameters
for the identification and analysis of risks, and provide an essential platform for all-round
portfolio management.
In cooperation with the other members of this project, HSH Nordbank also established
RSU Rating Service Unit GmbH & Co. KG, tasked with the maintenance and ongoing development of the rating systems. This step guarantees unified rating procedures that meet
the quality standards of bank regulatory bodies.
To ensure the consistent depiction of different portfolio segments on a single rating scale –
which is a prerequisite for valid comparisons – the Bank uses a master-scale that also allows
mapping with external ratings. The rating classification provided by the modules serves to
evaluate object-related and project-related as well as creditworthiness risks, and as such is
an essential tool in fulfilling the stipulations of Basle II and IAS, as well as for implementing bank-wide management and loans-portfolio limitation parameters.
The year under review also saw the establishment for HSH Nordbank of a foundational
LGD/EAD (Loss Given Default/Exposure At Default) concept. The Bank had pursued the
development of the LGD project in tandem with the other Landesbanks, with the goal of
applying the LGD conceptual framework to key segments of its portfolio. This framework
facilitates mapping of the input data, definitions and computational regulations for LGD
analysis.
123
The Bank has already started gathering the LGD/EAD data that will form the basis for
LGD/EAD assessments in line with Basle II. The internal LGD/EAD assessment is also being
increasingly used for pricing credit risk positions. In the ship-financing segment, an
existing loan loss history covering a period of twenty years serves as a database for the LGD
assessments that have been continuously undertaken since mid 2002. A basis for the LGD
history required by Basle II has also been promptly laid in the other segments covered by
the Landesbank project, by assembling data on cases where individual value adjustment
occurred during the period from 2000 to 2002. These preparatory steps, as well as other
organizational measures, will enable HSH Nordbank to fully meet the criteria of the
“advanced internal rating based approach” determined by Basle II, which will be applied
sequentially in each segment.
HSH Nordbank is also engaged in developing consolidated and logically centralized datastorage systems for analyzing, monitoring and reporting risks. These systems fulfill Basle
II’s stipulations on the provision of data, other information and cross-sectional functions
for the following areas: external (regulatory) reporting, disclosure, internal reporting,
validation/calibration of rating models, validation/calibration of LGD models, supervision
and internal audit, credit risk controlling, market risk controlling and operational risk
controlling. In this context, 2003 also saw the development of key elements of a system
adapted to the specific requirements of HSH Nordbank for calculating equity capital in
line with Basle II regulations.
Liquidity risks
Liquidity risk denotes the risk that current or future payment obligations cannot be fulfilled, or cannot be wholly fulfilled or cannot be fulfilled on the expected terms. It occurs,
therefore, when refinancing can only be effected at a premium, or not at matching maturities, or assets can only be sold at a discount.
Liquidity flow balance sheet.
The relevant assets and liabilities are arranged by life-span in time bands to create a balance
sheet depicting liquidity flow. This indicates the surplus or shortfall of assets in relation to
liabilities for each time band. Limits and internal ratios are imposed on open liquidity
positions across the entire Bank, as revealed in the liquidity flow balance sheet. If these are
overrun, appropriate escalation procedures are triggered. The Bank’s good market position,
both nationally and internationally, as well as its consistent diversification, ensure ability
to pay on a daily basis, as well as access to short-term liquidity. A further instrument underpinning liquidity is the large portfolio of liquid securities in the Bank’s liquidity reserves,
especially those eligible as collateral with the ECB. These security measures ensure that the
Bank is at all times in a position – via repo or Central Bank transactions – to furnish an
adequate volume of liquidity.
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124
Management and monitoring.
Utilization of limits, as well as compliance with the qualitative parameters set by Asset
Liability Management for the liquifiable securities portfolio, is monitored by Risk Controlling as a functionally and organizationally distinct unit. Conception and validation of the
procedures employed is the responsibility of Risk Controlling and Asset Liability Management. The Managing Board is regularly informed about the Bank’s liquidity situation. In
the year under review limits were at no time infringed.
On the basis of the already determined funding requirement, Asset Liability Management
assumes responsibility for structural management of liquidity for the current year and
beyond, whilst FX/MM trading manages its operational implementation. Asset Liability
Management analyzes the future business plans of the market units in the light of their
impact on the Bank’s liquidity position, and manages liquidity and refinancing structures
by submitting appropriate funding details to Capital Markets.
HSH Nordbank’s funding strategy takes account of changes in the business environment,
and focuses on meeting the requirements of national and international investors. The
opening of the New York Branch has provided the Bank with new forms of funding in the
US dollar area, and has enhanced structural diversification of refinancing with regard to
available instruments, countries and currencies, as well as investor groups. In its role as an
internationally recognized issuer, HSH Nordbank increasingly places certificates of deposits,
medium term notes and benchmark bonds, as well as other instruments.
The safeguarding of liquidity on acceptable market conditions has high priority for HSH
Nordbank, and numerous steps were taken in the course of 2003 to further improve
management and monitoring instruments.
As well as ensuring compliance with the external regulatory framework, the ratio of
Liquidity Directive II serves as a further risk-control parameter. This ratio was at no time
infringed.
125
Market risks
Market risks denote losses that can potentially arise for our positions as a result of market
price changes due to changes in interest rates (interest rate risks), exchange rates (foreign
exchange risks), share prices and indexes, fund prices, and prices of precious metals, raw
materials or other tradable goods (other price risks) and their levels of volatility.
Organization of market risk management.
The Managing Board determines the methods and processes by which market risks are
measured, contained and managed, and sets an overall global limit for them. Within this
upper loss-limit, the risks deriving from all activities carrying market risk are contained
via a dynamic system of limits covering loss and risk. Daily market risk reports keep the
Managing Board and trading units continuously informed about risk levels and the actual
utilization of limits.
Market risk management takes place immediately in the trading units Capital Markets
and Portfolio Management and Investments, as well as Asset Liability Management. Selected
strategic positions carrying market risks are the responsibility of the Asset Liability Committee, composed of the CEO, the Chief Trading Officer, the Chief Risk Officer and representatives of the market units.
In accordance with MaH standards, the organizational separation of risk controlling from
risk management is ensured at all levels.
Market risk measurement methods.
The Bank’s system for measuring and managing market risks is based on the value at risk
(VaR) approach, where the market risk of a position is the maximum loss (in EUR) that,
with a given probability, will not be exceeded within a given time-span until the position is
hedged or restored to liquidity.
For the bulk of its portfolio, HSH Nordbank uses the historical simulation method to calculate VaR. The calculation is based on a confidence level of 99 %, a holding period of one day
and an observation history of 250 trading days. Accordingly, VaR is the maximum expected
loss that, with a probability of 99 %, will not be exceeded when a position is held for one
trading day.
In the wake of the migration of the predecessor banks’ IT systems, a common platform
for market risk controlling is being created. Until the process is completed, risk evaluation
for some few portfolios temporarily uses a variance/covariance approach based on risk
parameters. In line with the Basle supervisory standards for banks, the calculation of these
parameters is derived from historical market fluctuations. It is likewise based on a confidence level of 99 %, a holding period of one day and an observation history of 250 trading
Management Report
126
days. For interest rate, foreign exchange and other price risk categories, separate parameters reflecting the different impacting factors are calculated. These are updated on a
quarterly basis, or in line with major market movements.
Daily value at risk in the year under review.
The following chart shows the development of daily value at risk for HSH Nordbank’s
trading and banking book for the period July through December 2003. The VaR calculation
was unified in July and based on a confidence level of 99 % and a holding period of one
day. Market risk lay between EUR 39-78 million. Total VaR for the Bank amounted to
EUR 49 million as at last trading day 2003.
HSH Nordbank: Daily Value at Risk, July through December 2003
in € millions
80
70
60
50
40
30
7/03
8/03
9/03
10/03
11/03
12/03
daily
maximum
minimum
average
Until June 2003, measurement of market risks was calculated on a different basis in each
of the two predecessor banks. In Hamburgische Landesbank (HLB), market risk calculations
were based on a confidence level of 99 % and a holding period of 10 days for trading book
positions and 20 days for banking book positions. Landesbank Schleswig-Holstein’s risk
calculations were based on a confidence level of 95 % and a holding period of one day. Due
to the difference in method, the market risks of the two banks for the period January
through June 2003 cannot be directly compared. For an identical position, VaR was up to
six times higher in Hamburgische Landesbank than in Landesbank Schleswig-Holstein. The
following table shows daily value at risk for all trading and banking book positions, calculated according to the different methods used:
127
in € millions
2003
HSH
Nordbank1)
July – Dec.
2003
HLB2)
Jan. – June
2003
LB Kiel3)
Jan. – June
Average
56.3
83.8
Maximum
77.9
98.1
Minimum
39.4
72.4
1) Confidence
2002
HLB2)
2002
LB Kiel3)
27.1
94.3
24.4
43.3
117.8
31.1
15.6
71.9
19.6
level 99 %, holding period 1 day.
2) Confidence
level 99 %, holding period 10/20 days.
3) Confidence
The following table shows value at risk by risk categories as at year-end (trading and
banking book positions):
in € millions
2003
HSH
Nordbank1)
2002
HLB2)
2002
LB Kiel3)
Interest rate risks
40.8
18.2
19.3
Foreign exchange risks
11.7
9.4
2.7
4.2
50.4
2.6
49.0
78.0
24.6
Other price risks
Total market risks
1) Confidence
2) Confidence
level 99 %, holding period 10/20 days.
3) Confidence
Market risks from derivatives transactions – including volatility risks resulting from options
positions – are contained in the values shown.
Backtesting.
The Bank checks its VaR estimates by means of regular backtesting. Assuming unchanged
positions, the theoretical results for the current day – on the basis of observed market
developments – are compared with the previous day’s VaR estimates based on historical
simulation. A special form of backtesting is applied to the risk parameters based on the
variance/covariance approach. Backtesting results are taken into consideration in the
ongoing development of the Bank’s value at risk methods.
Stress testing.
In line with MaH, and as a complement to daily risk measurements, the Bank performs
regular stress tests to ascertain the impact of extraordinary market shifts on market risks
of all categories. In addition, separate interest-rate stress tests are performed, simulating
the accumulated impact of standard interest rate shifts (“interest rate shocks”) across all
interest-rate risk positions.
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128
Regulatory requirements.
On the basis of the (optional) standard procedures laid down in Principle 1 of the German
Banking Act (KWG), HSH Nordbank determines at monthly intervals the equity capital
requirement for market coverage risk. During the year under review, none of the stipulated
limits was at any time infringed.
Within the context of Basle II project activities, the management functions of interest rate
risks in the banking book were also further extended.
Operational risks
HSH Nordbank defines operational risks (OR) as the “risk of direct or indirect loss caused
by the inappropriateness or failure of internal infrastructure, internal processes or staff or
as a result of external factors”. The definition covers legal risks as well as risk of damage to
reputation.
The identification, evaluation and management of operational risks is of key importance
to HSH Nordbank. We see the management of operational risks as an essential component
of our internal management systems, and one whose significance will continue to grow in
the future. The reasons for this are the dynamic banking environment, the limited possibilities of risk transfer, and the increasing demands of rating agencies and other market
players.
At the same time, our activities focus on meeting regulatory requirements. In the context
of future equity capital coverage for operational risks, we are currently creating a platform
to provide us with the option of selecting an advanced rating approach.
Organization of operational risk management.
HSH Nordbank possesses an independent central unit for the identification, evaluation and
analysis of operational risks. Central Operational Risk Controlling is responsible for the
development and upkeep of the controlling instruments, for nurturing expertise and providing advice on operational risks, as well as for the promotion of an internal operational
risk culture throughout the entire Bank. This unit reports independently to the management of the Bank that bears overall responsibility for these risks. The actual management
of operational risks impacting the whole Bank across the business lines is coordinated by a
central unit.
129
Central Operational Risk Controlling is backed up by a decentralized network of experts.
All business units have OR officers and assistants, who are responsible for the upkeep of
the controlling instruments and function as a link between the central controlling unit
and the decentralized organizational units. The OR officers and assistants are trained by
Central Operational Risk Controlling and ensure that decentralized know-how from the
different divisions of the Bank is represented in the controlling process.
Instruments.
Operational risks can impact all products, processes and organizational units. Therefore a
properly functioning internal operational risk culture plays a key role in utilizing the
know-how of employees for the identification of operational risks. HSH Nordbank continuously promotes its internal risk culture via a number of instruments, among them brochures, articles in the house magazine, management talks and a telephone hotline.
Since January 1, 2004, operational risk events have been recorded in a central database. The
introduction of this Bank-wide database was preceded – at both national and international
levels – by comprehensive training of all decentralized OR experts in the use of the database,
together with an information campaign on OR damage reporting involving all employees.
Data relating to operational risk events is gathered decentrally in the relevant organizational units and passed directly to the central controlling unit. Central Operational Risk Controlling performs data quality assurance, collates collective loss data where necessary, and
writes analyses and reports. Analysis, assessment and classification of operational risk
events at HSH Nordbank exceeds the requirements of supervisory bodies, and enables relevant reporting to the Bank’s senior management.
The introduction of controlling instruments, training of decentralized experts, as well as
Bank-wide promotion of risk culture, take place in the Bank’s overseas Branches and Representative Offices parallel to activities in the German-based units. Communication with
senior management at foreign-based units serves to integrate the specific environmental
conditions governing the activities of these units into the overall management of operational risks.
HSH Nordbank plans to develop a self-assessment tool in the course of 2004, based on the
experience of the predecessor banks with this instrument. It will complete reporting of
operational risks to the relevant management units with submission of data on current
and future developments.
Further instruments planned include risk indicators and scenario analyses. Incorporation
of external data is also being currently developed.
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130
Strategic risks
Strategic risk denotes the danger of financial losses due to long-term decisions that are
erroneous or based on false assumptions. Such decisions can impact individual segments
or the entire banking sector. In order to limit risks of this sort, the Bank’s strategic and
organizational structures are subjected to regular scrutiny – apart from the annual Bankwide planning process. In 2003 a comprehensive review of Bank strategy was undertaken,
in which, among other aspects, the goals and orientation of each segment were systematically examined.
Summary and outlook
In the wake of the merger in 2003, the Bank sets itself the task of creating an integrated
risk management system based on the methods and instruments used in its two predecessor banking houses for measuring, monitoring and managing risks. This process has been
successfully executed. Further Bank-wide projects devoted to the development of new
methods and instruments, and the upgrading of existing ones, ensure that negative impact
from risk is immediately detected – and response triggered – by the Bank’s risk management. The Bank possesses a range of instruments that permits it to incur risks intentionally,
in a controlled and conscious way.
In 2004 we will undertake further measures to optimize our controlling and management
systems. The focus here will be on the ongoing implementation of the requirements of
Basle II and the Minimum Standards for Lending Activities of Credit Institutions (MaK). As
well as meeting regulatory norms, we see considerable economic benefit in the development of the new risk management system. Furthermore, we are well placed to meet all
foreseeable future supervisory requirements.
In line with our strict evaluation criteria, we have set aside adequate provisions for all
ascertainable risks. Risk provisions (individual value adjustments and allocations to reserves) for counterparty risks amounted to EUR 1,458 million (prior year EUR 1,355 million) as
at year end. During the year under review, the Bank’s liquidity ratio (Principle II in accordance with article 11, German Banking Act) at all times exceeded the minimum requirement.
Liable capital as defined by the German Banking Act amounted to EUR 10,656.2 million.
The overall Principle I ratio stood at 10.9 % (ratio of risk-weighted assets, including market
risk positions, to liable capital).
131
Annual Accounts
132
Group Balance Sheet as at December 31, 2003
Assets
(Notes)
in € thousands
1.1.2003
1. Cash reserve
a) cash on hand
b) balances with central banks
11,404
13,864
328,299
342,617
thereof:
339,703
with Deutsche Bundesbank
356,481
289,201
prev. year
270,744
2. Debt instruments issued by public institutions and bills
of exchange eligible for refinancing with central banks
a) treasury bills and discounted treasury notes as well as
similar debt instruments issued by public institutions
3,587
4,488
thereof:
eligible for refinancing with Deutsche Bundesbank
prev. year
791
1,196
b) bills of exchange
16,739
thereof:
prev. year
3. Loans and advances to banks
10,073
16,739
5,585
(7, 8, 19–21, 24, 25)
a) payable on demand
b) other loans and advances
4. Loans and advances to customers
5,585
20,326
4,355,480
6,696,885
32,963,537
39,075,007
(7, 8, 20, 21, 24, 25)
37,319,017
45,771,892
79,207,345
78,875,605
thereof:
secured by mortgages
17,666,713
prev. year
16,866,971
prev. year
14,525,853
public-sector loans
12,474,002
secured by ship mortgages
11,526,689
prev. year
12,153,335
5. Bonds and other fixed-income
securities
(9, 20–22, 24, 25, 30)
a) money market instruments
aa) issued by public-sector issuers
399,421
512,876
thereof:
eligible as collateral for Deutsche Bundesbank
prev. year
399,421
507,769
ab) issued by other issuers
2,484,789
thereof:
1,041,775
2,884,210
prev. year
1,554,651
60,074
–
b) bonds
ba) issued by public-sector issuers
11,370,047
13,724,910
thereof:
prev. year
8,983,413
10,088,075
bb) issued by other issuers
31,656,936
thereof:
prev. year
46,880,741
14,047,717
12,831,931
c) own bonds
2,151,842
nominal amount
2,057,857
prev. year
To be carried forward:
33,155,831
43,026,983
2,026,553
48,063,035
50,461,945
164,949,426
175,475,996
1,987,318
133
(Notes)
Liabilities
in € thousands
1.1.2003
1. Liabilities to banks
(31–34)
b) with agreed maturities or notice periods
7,892,886
3,831,971
39,676,938
51,658,955
47,569,824
2. Liabilities to customers
55,490,926
(32–34)
a) savings deposits
aa) with agreed notice periods of three months
176,611
122,615
ab) with agreed notice periods of more than
three months
4,208
4,929
180,819
127,544
b) other liabilities
ba) payable on demand
bb) with agreed maturities or notice periods
8,046,952
7,777,298
39,737,733
37,488,049
47,784,685
45,265,347
47,965,504
3. Certificated liabilities
(32–34)
a) bonds issued
52,916,366
b) other certificated liabilities
53,538,107
8,630,663
thereof:
money market instruments
13,298,019
61,547,029
66,836,126
377,323
339,835
7,242,265
prev. year
4. Trust liabilities
45,392,891
13,298,019
(35)
thereof:
trust loans
56,212
prev. year
61,397
5. Other liabilities
(36)
1,732,285
1,458,513
6. Deferred income
(37)
398,289
357,237
7. Provisions
(14)
a) provisions for pensions and
similar obligations
(38)
b) tax provisions
c) deferred taxes
d) other provisions
373,226
339,636
169,266
130,354
(16, 59)
49,290
–
(39)
289,727
275,514
881,509
745,504
8. Special reserve items
(40)
–
521
9. Subordinated debt
(41)
2,841,224
3,027,305
(42)
1,496,565
1,496,565
365,000
251,641
165,174,552
175,397,064
10. Profit participation capital
thereof:
maturing in less than two years
57,776
prev. year
11. Fund for general banking risks
(43)
51,129
Annual Accounts
134
Assets
(Notes)
in € thousands
1.1.2003
Carried forward:
164,949,426
175,475,996
(9, 22, 24, 30)
2,828,564
2,445,159
(12, 22, 30, 55)
505,279
523,678
920,199
752,307
377,323
339,835
241,250
256,477
(6, 30)
153,523
154,652
12. Other assets
(27)
1,087,636
888,191
13. Prepaid expenses
(28)
473,667
336,466
(16, 59)
122,946
–
171,659,813
181,172,761
6. Shares and other non-fixedincome securities
7. Equity investments in non-affiliated
companies
thereof:
in banks
50,217
prev. year
52,981
prev. year
1,000
in financial services institutions
1,000
8. Equity investments in affiliated
companies
(12, 22, 30, 55)
thereof:
in banks
57,771
prev. year
9. Trust assets
153,649
(26)
thereof:
trust loans
56,212
prev. year
61,397
10. Intangible fixed assets
11. Tangible fixed assets
14. Deferred taxes
Total assets
135
(Notes)
Liabilities
in € thousands
1.1.2003
Carried forward:
12. Equity capital
a) subscribed capital
165,174,552
(45–47)
(44)
aa) share capital
ab) silent partnership capital
b) capital reserves
c) differences arising from capital consolidation
d) profit
e) minority interests
Total liabilities
1. Contingent liabilities
175,397,064
500,000
500,000
4,557,717
4,106,256
5,057,717
4,606,256
1,164,290
1,164,290
–
1,281
259,383
–
3,871
3,870
6,485,261
5,775,697
171,659,813
181,172,761
14,149,357
13,999,922
12,289,652
9,549,220
(52)
liabilities from guarantees
and indemnity agreements
2. Other commitments
irrevocable loan commitments
Annual Accounts
136
Group Statement of Income for the Period
January 1 to December 31, 2003
in € thousands
20021)
(Notes)
1. Interest income from
a) lending and money market transactions
7,801,389
b) fixed-income securities and book-entry securities
1,585,558
7,844,478
1,998,564
9,386,947
9,843,042
8,016,164
2. Interest expenses
8,580,702
1,370,783
1,262,340
3. Current income from
a) shares and other non-fixed-income securities
89,133
b) equity investments in non-affiliated companies
c) equity investments in affiliated companies
102,254
7,478
30,747
26,608
70,490
123,219
203,491
5,150
1,679
4. Income from profit pooling, profit transfer
and partial profit transfer agreements
309,281
5. Commission income
275,776
85,956
6. Commission expenses
197,092
83,219
78,704
(50)
166,871
178,170
(40)
521
28,700
7. Net income from trading activities
8. Other operating income
78,684
223,325
9. Income from writing back
special reserve items
10. General administrative expenses
a) personnel expenses
aa) wages and salaries
268,258
241,980
ab) compulsory social security contributions
as well as expenses for retirement pensions
and for other employee benefits
79,405
91,082
347,663
333,062
thereof:
for retirement pensions
39,824
prev. year
b) other administrative expenses
52,640
312,201
293,444
659,864
626,506
72,344
46,104
39,270
106,067
11. Depreciation on and value adjustments to
intangible and tangible fixed assets
12. Other operating expenses
(51)
13. Write-downs on and value adjustments
to loans and certain securities as well as
allocations to loan loss provisions
468,109
598,559
14. Income from write-ups on loans and
certain securities and from the release of
loan loss provisions
–
–
468,109
598,559
733,501
572,940
137
in € thousands
20021)
(Notes)
Carried forward:
733,501
572,940
15. Allocations to the fund for general banking risks
113,359
40,000
16. Write-downs on and value adjustments to equity
investments in non-affiliated as well as affiliated
–
companies and securities treated as fixed assets
–
17. Income from write-ups on equity investments
in non-affiliated as well as affiliated companies
5,897
and securities treated as fixed assets
18. Expenses from the assumption of losses
19. Profit on ordinary activities
20. Taxes on income
(59)
128,350
5,897
128,350
4,367
7,522
621,672
653,768
3,925
120,753
21. Other taxes not shown under other
operating expenses (item 12)
38,943
32,052
42,868
152,805
316,949
261,882
261,855
239,081
2,472
–
259,383
239,081
22. Profits transferred under partial profit
transfer agreements
23. Net income
24. Minority interests in net income
25. Profit
1)
Pro forma figures cf. note 5
Annual Accounts
138
Balance Sheet of HSH Nordbank AG as at December 31, 2003
Assets
(Notes)
in € thousands
1.1.2003
1. Cash reserve
a) cash on hand
b) balances with central banks
8,522
11,190
293,322
333,086
thereof:
301,844
with Deutsche Bundesbank
344,276
287,661
prev. year
270,744
2. Debt instruments issued by public institutions and bills
of exchange eligible for refinancing with central banks
a) treasury bills and discounted treasury notes as well as
similar debt instruments issued by public institutions
3,587
4,489
thereof:
prev. year
791
1,196
b) bills of exchange
16,739
thereof:
prev. year
10,073
16,739
5,584
(7, 8, 19–21, 24, 25)
5,584
20,326
4,295,778
6,715,976
32,765,090
39,773,198
(7, 8, 20, 21, 24, 25)
37,060,868
46,489,174
78,154,725
77,871,785
thereof:
secured by mortgages
17,535,247
prev. year
16,813,144
prev. year
14,106,885
public-sector loans
12,084,502
secured by ship mortgages
11,406,872
prev. year
12,030,627
5. Bonds and other fixed-income
securities
(9, 20–22, 24, 25, 30)
aa) issued by public-sector issuers
399,421
512,876
thereof:
prev. year
399,421
507,769
ab) issued by other issuers
2,484,789
thereof:
1,041,775
2,884,210
prev. year
1,554,651
60,074
–
b) bonds
11,007,717
13,374,664
thereof:
prev. year
8,744,208
10,062,360
27,654,643
thereof:
prev. year
42,428,171
13,186,160
12,007,834
c) own bonds
1,757,293
nominal amount
1,731,599
prev. year
29,053,507
38,662,360
1,996,327
43,303,863
45,979,149
158,841,626
170,694,457
1,938,423
139
(Notes)
Liabilities
in € thousands
1.1.2003
(31–34)
7,866,233
3,667,561
47,082,566
57,467,183
54,948,799
61,134,744
(32–34)
a) savings deposits
aa) with agreed notice periods of three months
176,610
122,615
ab) with agreed notice periods of more than
three months
4,209
4,929
180,819
127,544
b) other liabilities
ba) payable on demand
bb) with agreed maturities or notice periods
7,848,658
7,549,576
38,923,373
37,274,271
46,772,031
44,823,847
46,952,850
(32–34)
a) bonds issued
41,109,998
44,046,703
8,630,663
thereof:
money market instruments
13,298,019
49,740,661
57,344,722
377,323
339,835
7,242,265
prev. year
4. Trust liabilities
44,951,391
13,298,019
(35)
thereof:
trust loans
56,212
prev. year
61,397
5. Other liabilities
(36)
1,787,793
1,472,260
6. Deferred income
(37)
367,772
335,237
7. Provisions
(14)
a) provisions for pensions and
similar obligations
367,434
(38)
b) tax provisions
c) other provisions
(39)
335,680
156,213
92,441
250,573
249,533
774,220
677,654
8. Special reserve items
(40)
–
521
9. Subordinated debt
(41)
2,756,376
2,952,683
(42)
1,496,565
1,496,565
365,000
251,641
159,567,359
170,957,253
10. Profit participation capital
thereof:
maturing in less than two years
57,776
prev. year
11. Fund for general banking risks
(43)
51,129
Annual Accounts
140
Assets
(Notes)
in € thousands
1.1.2003
Carried forward:
158,841,626
170,694,457
(9, 22, 24, 30)
2,798,842
2,421,413
(12, 22, 30, 55)
505,279
523,678
1,670,073
1,403,926
377,323
339,835
7,286
10,199
(6, 30)
129,500
128,284
12. Other assets
(27)
1,131,379
872,171
13. Prepaid expenses
(28)
464,851
333,836
(16, 59)
93,206
–
166,019,365
176,727,799
6. Shares and other non-fixedincome securities
7. Equity investments in non-affiliated
companies
thereof:
in banks
50,217
prev. year
52,981
prev. year
1,000
in financial services institutions
1,000
8. Equity investments in affiliated
companies
(12, 22, 30, 55)
thereof:
in banks
778,512
prev. year
9. Trust assets
789,879
(26)
thereof:
trust loans
56,212
prev. year
61,397
10. Intangible fixed assets
11. Tangible fixed assets
14. Deferred taxes
Total assets
141
(Notes)
Liabilities
in € thousands
1.1.2003
Carried forward:
12. Equity capital
a) subscribed capital
159,567,359
(45–47)
(44)
aa) share capital
ab) silent partnership capital
500,000
500,000
4,557,716
4,106,256
b) capital reserves
c) profit
5,057,716
4,606,256
1,164,290
1,164,290
230,000
Total liabilities
1. Contingent liabilities
170,957,253
–
6,452,006
5,770,546
166,019,365
176,727,799
25,118,361
23,014,276
12,118,319
9,395,769
(52)
liabilities from guarantees
and indemnity agreements
2. Other commitments
irrevocable loan commitments
Annual Accounts
142
Statement of Income of HSH Nordbank AG for the Period
January 1 to December 31, 2003
in € thousands
20021)
(Notes)
1. Interest income from
a) lending and money market transactions
7,576,465
b) fixed-income securities and book-entry securities
1,388,046
7,604,895
1,806,001
8,964,511
9,410,896
7,715,134
2. Interest expenses
8,262,374
1,249,377
1,148,522
3. Current income from
a) shares and other non-fixed-income securities
89,049
b) equity investments in non-affiliated companies
c) equity investments in affiliated companies
102,165
7,320
30,748
98,735
137,557
195,104
270,470
5,515
2,052
4. Income from profit pooling, profit transfer
and partial profit transfer agreements
246,482
5. Commission income
239,206
64,725
6. Commission expenses
172,410
74,685
70,503
(50)
131,618
144,861
(40)
521
28,700
7. Net income from trading activities
8. Other operating income
66,796
181,757
9. Income from writing back
special reserve items
10. General administrative expenses
a) personnel expenses
aa) wages and salaries
232,666
216,800
ab) compulsory social security contributions
as well as expenses for retirement pensions
and other employee benefits
72,742
86,934
305,408
303,734
thereof:
for retirement pensions
38,629
prev. year
b) other administrative expenses
52,029
307,609
278,434
613,017
582,168
53,608
41,034
34,689
103,835
11. Depreciation on and value adjustments to
intangible and tangible fixed assets
12. Other operating expenses
(51)
13. Write-downs on and value adjustments to
loans and certain securities as well as
allocations to loan loss provisions
465,219
596,975
14. Income from write-ups on loans and
certain securities and from the release of
loan loss provisions
–
–
465,219
596,975
672,044
513,506
143
20021)
in € thousands
Carried forward:
672,044
513,506
15. Allocations to the fund for general banking risks
113,359
40,000
16. Write-downs on and value adjustments to equity
investments in non-affiliated as well as affiliated
companies and securities treated as fixed assets
–
–
17. Income from write-ups on equity investments
in non-affiliated as well as affiliated companies
and securities treated as fixed assets
6,997
18. Expenses from the assumption of losses
19. Profit on ordinary activities
20. Taxes on income
124,467
6,997
124,467
4,367
7,522
561,315
590,451
4,547
112,752
21. Other taxes not shown under other
operating expenses (item 12)
9,951
1,623
14,498
114,375
316,817
261,710
23. Net income
230,000
214,366
24. Profit
230,000
214,366
22. Profits transferred under partial profit
transfer agreements
1)
Pro forma figures cf. note 5
Annual Accounts
144
Notes to the Annual Accounts and Group Annual
Accounts for 2003
General Information
1 HSH Nordbank AG and its shareholders.
HSH Nordbank AG, with registered offices in Hamburg and Kiel, was established by the
merger of Hamburgische Landesbank – Girozentrale –, Hamburg, and Landesbank
Schleswig-Holstein Girozentrale, Kiel, on June 2, 2003. For accounting and tax purposes,
incorporation took effect retroactively as at January 1, 2003.
The shares in HSH Nordbank AG are distributed as follows: The Free and Hanseatic City of
Hamburg holds 35.38 %, WestLB Beteiligungsholding GmbH1) (Düsseldorf) 26.86 %, the State
of Schleswig-Holstein 19.55 %2) and the Savings Bank and Giro Association for SchleswigHolstein 18.21%. The Free and Hanseatic City of Hamburg and WestLB Beteiligungsholding
GmbH notified us in the fiscal year pursuant to § 20 (1) of the German Stock Corporation
Act (AktG) that they own more than one quarter and 26.86 %, respectively, of the shares in
HSH Nordbank AG.
2 Deposit insurance fund, Gewährträgerhaftung (Guarantee Obligation), Anstaltslast
(Maintenance Obligation), eligibility of liabilities as cover funds.
HSH Nordbank AG is a member of the Landesbanken/Girozentralen support fund, which
falls under the support system of the German Savings Banks Organization. The support
system ensures the ongoing liquidity and solvency of all affiliated institutions.
Irrespective thereof, the owners of HSH Nordbank AG are responsible for the liabilities of
HSH Nordbank AG within the scope of Anstaltslast and Gewährträgerhaftung. The transitional agreement reached by way of the Brussels Agreement of July 17, 2001 on the expiration of these state liability mechanisms also applies to HSH Nordbank AG pursuant to § 2
of the State Treaty of February 4, 2003 between the Free and Hanseatic City of Hamburg
and the State of Schleswig-Holstein concerning the merger of the predecessor institutions.
Hence liabilities entered into up until July 18, 2001 are covered by Gewährträgerhaftung,
regardless of their maturities. Gewährträgerhaftung likewise covers liabilities established
after this date but prior to July 18, 2005 if they do not mature after December 31, 2015.
Anstaltslast will remain in effect until July 18, 2005 in any case.
As previous co-owner of Landesbank Schleswig-Holstein Girozentrale, Landesbank BadenWürttemberg (Stuttgart) is liable within the scope of the Gewährträgerhaftung described
above for the liabilities agreed upon prior to its withdrawal effective May 23, 2003 and
transferred to HSH Nordbank AG by way of the merger.
Uncovered debt instruments issued by HSH Nordbank AG are eligible as cover funds in
terms of the German Mortgage Banking Act to the full extent based on Gewährträgerhaftung. This also applies to all uncovered debt instruments issued by the predecessor
institutions, Hamburgische Landesbank – Girozentrale – and Landesbank SchleswigHolstein Girozentrale.
3 Adherence to the principles of the German Banking Act (KWG).
HSH Nordbank AG adhered to the regulations in force in the Federal Republic of Germany
on regulatory capital and the liquidity of financial institutions in accordance with the
German Banking Act at all times during the fiscal year. The same applies to the regulatory
Group in accordance with § 10a of the German Banking Act.
1)
2)
WestLB Beteiligungsholding GmbH, Düsseldorf, is a wholly owned subsidiary of WestLB AG, Düsseldorf and Münster, which is a wholly owned subsidiary
of NRW.BANK (formerly Landesbank Nordrhein-Westfalen), institution under public law, Düsseldorf and Münster.
Including 2.69% of GVB Gesellschaft zur Verwaltung und Finanzierung von Beteiligungen des Landes Schleswig-Holstein mbH, Lockstedt; a wholly
owned subsidiary of the State of Schleswig-Holstein.
145
4 Applied accounting standards.
We have prepared the annual accounts of HSH Nordbank AG and the Group as at December 31, 2003 in accordance with the provisions of the German Commercial Code (HGB),
the Stock Corporation Act (AktG) and the Ordinance Regarding Accounting for Banks and
Financial Services Institutions (RechKredV). In addition, we have heeded the pertinent
statements of the Institute of Independent Auditors in Germany (IDW) and, in the Group
accounts, the relevant German Accounting Standards (DRS) as well.
5 Notes on the presentation of the merger in the accounts.
For the purpose of enabling a comparison of the economic situation of HSH Nordbank AG
and the HSH Nordbank Group over a specific period of time, we have adjusted the previous
year's figures pursuant to § 265 (2) sentence 3 and § 294 (2) sentence 2, respectively, of the
German Commercial Code to appear as though the merger had already taken place as at
January 1, 2002. To this end, all assets and liabilities as well as all income and expenses of
sold subsidiaries or of detached legally dependent central departments of the predecessor
institutions were taken out of the calculation. In the case of Hamburgische Landesbank –
Girozentrale –, this involved Hamburgische Wohnungsbaukreditanstalt and in the case
of Landesbank Schleswig-Holstein Girozentrale, Investitionsbank Schleswig-Holstein and
Landes-Bausparkasse Schleswig-Holstein. Except for HSH Nordbank Hypo Aktiengesellschaft,
which was only acquired on September 1, 2003, the comparative figures were thus calculated on the basis of the companies consolidated in the Group accounts as at December
31, 2003 (cf. note 17).
All assets and liabilities of the predecessor institutions which existed on the effective date
of the merger (January 1, 2003) were acquired by amalgamation through the formation of
HSH Nordbank AG. For this reason, we have specified the opening balance sheet carrying
amounts of HSH Nordbank AG and the HSH Nordbank Group as at January 1, 2003 as the
basis for comparison of the balance sheet items. We have calculated the comparative figures for the statement of income based on the above-specified group of consolidated companies on a pro forma basis. Certain comparative figures which were not part of the balance
sheet or the statement of income were not included in the accounts, as due to the merger
their calculation would have caused undue cost or effort or they cannot be meaningfully
interpreted from an economic point of view.
Annual Accounts
146
Accounting and Valuation Principles
6 Fixed assets.
Fixed assets are valued at acquisition or production cost. For depreciable assets we calculate
systematic amortization in line with the options provided by tax law, whereby the following periods of useful life are taken as a basis:
Fixed assets group
Useful life in years
Buildings
50
Fixtures in third-party buildings
3–7
Computer equipment
4
Other plant and office equipment
3 – 13
In the case of tangible fixed assets, we carry out unscheduled depreciation to the extent
that a permanent loss in value has occurred. Should the reasons for this no longer be
applicable, write-ups up to a maximum amount of the (amortized) acquisition or production cost are undertaken.
Any acquisition or production cost subsequently incurred is capitalized and depreciated
systematically. Expenditure on the maintenance of fixed assets is recognized as expense on
an accrual basis.
Tangible fixed assets that are regarded as low-value items pursuant to tax regulations are
written off in full in the year of acquisition.
7 Loans and advances.
We state loans and advances to banks and loans and advances to customers (asset items 3
and 4) at the nominal value or cost of acquisition, respectively. Premiums or discounts are
transferred to prepaid expenses or deferred income and written back over the term of the
loan or the shorter fixed-interest period. Pro rata interest is treated on an accrual basis and
reported in the corresponding line item. We heed the strict lower of cost or market principle by strictly applying our risk management principles, which are described in the
following.
8 Value adjustments to loans and allocations to loan loss provisions.
In order to provide for possible loan losses, we make value adjustments in accordance with
the following principles; these adjustments are set off against the corresponding balance
sheet items. Even if no longer mentioned in the following, this occurs in the case of offbalance sheet transactions by setting up provisions. In order to ensure that our risk management covers all identifiable credit and country risks, it is carried out in three steps.
1. Our credit exposures are monitored on an ongoing basis in accordance with strict
guidelines. We make individual value adjustments in the amount of the anticipated loss
for all credit risks identifiable when examined individually. This anticipated loss results
from the amount of the receivable less repayments still expected less the anticipated
liquidation value of the collateral after deduction of liquidation costs.
2. In addition, we set up general bad country debt provisions for exposures relating to
borrowers domiciled in countries rated as non-investment grade countries. The value
adjustment rates are differentiated in accordance with rating grades. For countries in
default, we increase the value adjustment rates appropriate to the particular situation.
In determining the basis for calculation we take individual value adjustments already
made as well as risk-reducing factors (such as valuable collateral outside of the country
of domicile or the short terms of receivables) adequately into account.
147
3. Finally, we make general bad debt provisions for the remaining exposures which are
not accounted for in the first two steps but involve latent risks by applying a risk factor.
The risk factor represents the ratio of actual loan defaults (depletion of individual value
adjustments plus direct write-offs less payments on loans written off) of the past five
years to the risk exposure. The calculation procedure is in accordance with the taxapproved procedure pursuant to the bulletin of October 1, 1994 by the German Federal
Ministry of Finance.
All three types of risk provisioning are reversed to the extent that the credit risk no longer
applies. In this manner, we comply with tax law and Commercial Code provisions to
reverse impairments.
9 Securities.
For measurement purposes, our securities portfolio (asset items 5 and 6) is divided up into
the investment portfolio, the liquidity reserve and the trading portfolio in accordance with
the intended use and pursuant to Commercial Code provisions. The following table shows
the division of the three portfolios as a percentage on the basis of carrying amounts:
in %
Bank
31 Dec. 2003
1 Jan. 2003
Group
31 Dec. 2003
1 Jan. 2003
Investment portfolio
45.3
46.1
43.4
43.4
Liquidity reserve
33.3
41.9
37.2
45.6
Trading portfolio
21.4
12.0
19.4
11.0
Given that securities held in the investment portfolio are intended for long-term investment, we value the greater portion in accordance with the diluted lower of cost or market
principle. The securities in question are accordingly stated at their acquisition cost in
the case of temporary decreases in value. We thus avoid reflecting performance volatility,
which would not be economically justified based on the short-term nature of the value
fluctuations. In the case of permanent — i.e. usually induced by credit standing — value
reductions, we write down the security to the lower stock exchange price, market price or
attributable value. Mainly for the purpose of compensatory measurement of hedged items,
we value the remaining investment portfolio at the strict lower of cost or market principle
(cf. also note 11).
We value the securities held in the liquidity reserve and the trading portfolio in accordance with the strict lower of cost or market principle. We accordingly state the value of
the securities at the lower of acquisition cost or stock exchange price, market price or attributable value, irrespective of the duration of the reduction in value.
The portfolios in the trading portfolio are set up in accordance with our risk management
principles. The securities and derivatives positions in these portfolios are valued at stock
exchange or market prices. In the process, we set off measurement gains up to the amount
of the corresponding losses (compensatory measurement with due regard to the recognition-of-loss principle).
Interest resulting from the entire securities holdings is reported as interest income, whereby
pro rata interest is treated on an accrual basis. The measurement results and price gains
realized are allocated to the financial investment results (items 16 or 17 in the statement of
income) for securities in the investment portfolio, to the credit risk results (items 13 or 14
in the statement of income) for securities in the liquidity reserve, and to the trading results
(item 7 in the statement of income) for securities in the trading portfolio. Dividends and
other payouts are reported under current income from shares and other non-fixed-income
securities.
Annual Accounts
148
10 Derivative financial instruments.
Derivative financial instruments are recognized and measured in accordance with the
accounting principles of commercial law, whereby particular consideration is given to the
principles of realization and recognition-of-loss. We have linked the conclusion of internal
transactions to compliance with uniformly determined conditions. In particular, the terms
must be in line with the market conditions.
Purchased or written options are carried on the balance sheet as other assets or other
liabilities in the amount of the premium paid. If necessary, we set up provisions to heed
the lower of cost or market principle and the recognition-of-loss principle. The option premium only affects net income upon sale or close-out, otherwise upon expiry or exercise.
To the extent that a margin system is applied in the case of innovative financial instruments, the margin payments are capitalized. We meet the lower of cost or market principle
by setting up provisions when appropriate.
If derivative financial instruments are allocated to the trading portfolio in accordance with
their intended use, we report unrealized and realized gains or losses — if applicable within
the scope of portfolio measurement — under net income from trading activities. Derivative
financial instruments allocated to the investment portfolio or liquidity reserve are generally used for hedging purposes (cf. note 11).
11 Hedge accounting.
Aside from the compensatory measurement in the trading portfolio (cf. note 9), we form
accounting groups in accordance with generally accepted principles for securities and
derivatives that are to be regarded as a unit in terms of risks and rewards. If the strict
requirements for this have been fulfilled, we value the corresponding hedged items and
hedging items as offsetting transactions, taking into account the recognition-of-loss principle. If perfect hedging relationships exist with regard to the interest rate risk, we waive
an interest-induced measurement of the corresponding hedged items and hedging items.
The reporting of profits from hedging operations follows the corresponding reporting of
the hedged items.
12 Equity investments in affiliated and non-affiliated companies.
We carry equity investments in affiliated and non-affiliated companies at the cost of
acquisition or at the lower attributable value. Our major investment interests are stated in
No. 55 of the notes. For more information on these investments, the list we have compiled
pursuant to § 285 No. 11 and § 313 (4) of the German Commercial Code may be examined
at the Local Courts of Hamburg and Kiel.
13 Liabilities.
Liabilities are stated at the amount repayable. Premiums and discounts are shown as
deferred income and prepaid expenses, respectively, and are released over the term of
maturity.
14 Provisions.
Provisions for pension obligations have been calculated on the basis of actuarial principles
based on the life tables of Dr. Klaus Heubeck and are accounted for pursuant to German
GAAP.
149
Other provisions are stated in the amount of the expected call on the provisions according
to reasonable commercial assessment, whereby we take positive profit contributions –
such as the anticipated realization value of collateral – adequately into account. We do not
undertake discounting in principle. We exercise the option for setting up provisions for
operating expenses (§ 249 (2) of the German Commercial Code) only for restructuring
expenditure in connection with the merger.
15 Currency translation.
Currency translation occurs pursuant to § 340h of the German Commercial Code as well as
to statement BFA 3/95 of the expert banking committee of the German Institute of Independent Auditors (IDW).
Assets and liabilities in foreign currency are converted at the middle spot rate as at December 31, 2003. Outstanding spot transactions are converted at the spot rate on balance sheet
date, and the outstanding forward transactions at the forward rate on the balance sheet
date. The differences arising from the currency translation of hedged balance sheet items
and the related hedging transactions are netted out and reported under other assets.
The balance sheet items and the outstanding positions in foreign currencies allocated to
current assets are, in principle, classified as “specially hedged” in each currency pursuant
to § 340h (2) sentence 2 of the German Commercial Code and are accordingly valued. To
this end, expenses and income from the currency translation are reported in the statement
of income pursuant to § 340h (2) sentences 1 and 2 of the Commercial Code.
We convert annual accounts that have been prepared in foreign currencies at the corresponding middle rate of the ECB on the balance sheet date.
16 Deferred taxes.
We calculate deferred taxes in the individual accounts in accordance with the provisions
of § 274 of the German Commercial Code. In the process, we net out tax assets against tax
liabilities.
In the Group accounts, we report and measure deferred taxes pursuant to German Accounting Standard No. 10. Thus deferred tax assets and liabilities arise from the different carrying amounts for assets and liabilities in the commercial and tax balance sheets and are
computed accordingly. We state deferred taxes on differences that will be reversed in future
fiscal years. Deferred tax assets are calculated on the basis of these temporary differences as
well as on tax losses carried forward, provided realization is sufficiently probable. When
computing deferred taxes, we utilize the tax rates that are expected to apply upon reversal
of the temporary differences. As prescribed, we do not discount.
Annual Accounts
150
Consolidated Companies and Consolidation Principles
17 Consolidated companies.
The scope of consolidation changed during the period under review (cf. note 5) as follows.
HSH Nordbank Hypo Aktiengesellschaft, Hamburg (formerly: HKB Hypotheken- und Kommunalkredit-Bank Aktiengesellschaft, Hallbergmoos), which was acquired on September 1,
2003 for EUR 84.5 million, has been included in the Group statement of income on a pro
rata basis pursuant to German Accounting Standard No. 4.
Due to their secondary significance for the economic position of the HSH Nordbank Group,
160 affiliated companies were not included in the scope of consolidation pursuant to
§ 296 (2) of the German Commercial Code, resulting in the following group of consolidated
companies:
No. Name and registered office of the consolidated company
Share in capital
in %
1. HSH Nordbank (Guernsey) Ltd., Guernsey 1)
100.00
2. HSH Nordbank Hypo Aktiengesellschaft, Hamburg 2)
100.00
3. HSH Nordbank International S. A., Luxembourg 3)
100.00
4. Nobis Société des Banques Privées S. A., Luxembourg 4)
5. International Fund Services & Asset Management S. A., Luxembourg 4)
6. HSH N Composits GmbH, Kiel 5)
7. HSH N Funding I, Grand Cayman 6)
80.00
51.61
100.00
58.26
8. HSH N Finance (Guernsey) Ltd., Guernsey 7)
100.00
9. METONO GmbH, Hamburg
100.00
10. PLUS BANK AG, Hamburg 8)
100.00
11. Spielbank SH GmbH, Kiel
100.00
12. Spielbank SH GmbH & Co. Casino Flensburg KG, Flensburg
90.00
13. Spielbank SH GmbH & Co. Casino Kiel KG, Kiel
100.00
14. Spielbank SH GmbH & Co. Casino Lübeck-Travemünde KG, Lübeck-Travemünde
100.00
15. Spielbank SH GmbH & Co. Casino Stadtzentrum Schenefeld KG, Schenefeld
100.00
16. Spielbank SH GmbH & Co. Casino Westerland auf Sylt KG, Westerland/Sylt
90.00
1)
Formerly: Hamburgische Landesbank (Guernsey) Ltd., Guernsey.
Formerly: HKB Hypotheken- und Kommunalkredit-Bank Aktiengesellschaft, Hallbergmoos.
Formerly: Landesbank Schleswig-Holstein International S. A., Luxembourg.
4) As subsidiary of 3.
5) Formerly: LB Kiel Nord Capital GmbH, Kiel.
6) Formerly: LB Kiel Funding I, Grand Cayman; as subsidiary of 6.
7) Formerly: Hamburgische LB Finance (Guernsey) Ltd., Guernsey.
8) Including shares held indirectly via 9.
2)
3)
18 Consolidation principles.
The individual accounts of the companies included in the Group accounts were prepared
in accordance with uniform accounting and valuation principles of HSH Nordbank AG.
Only in the case of the Spielbank Group did the reporting date vary (September 30, 2003).
Insofar as necessary, the annual accounts were adapted to the forms applicable for
financial institutions.
With regard to capital consolidation, the carrying amounts of the holdings were set off
against equity in accordance with the revaluation method pursuant to § 301 (1) No. 2 of
the German Commercial Code. The effective date for first-time consolidation is the date of
acquisition (§ 301 (2) of the Commercial Code). The resulting asset-side differences are reported as goodwill under intangible fixed assets and are systematically depreciated over a
period of 20 years. Liabilities-side differences from first-time consolidation (negative goodwill) have been accounted for in the income statement in the period under review.
All claims and liabilities as well as expenses and income between the companies included
in the Group accounts have been consolidated.
151
Notes to the Balance Sheet
Notes to assets.
19 Claims on associated Savings Banks.
Loans and advances to banks (item 3) include claims on associated Savings Banks:
in € thousands
Bank
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
6,830,640
6,571,941
6,834,913
6,594,151
20 Affiliated companies.
The following items include both securitized and unsecuritized claims on affiliated
companies.
in € thousands
Bank
31 Dec. 2003
1 Jan. 2003
2,889,767
1,395,942
292,836
Group
31 Dec. 2003
1 Jan. 2003
2,676,904
5,845
301,121
757,573
647,225
752,799
91,814
13,397
91,814
5. Bonds and other fixed-income securities
b) bonds
21 Non-affiliated companies.
Claims on non-affiliated companies in which an equity investment is held are included in
the following items:
in € thousands
Bank
31 Dec. 2003
1 Jan. 2003
Group
31 Dec. 2003
1 Jan. 2003
37,726
906,578
37,726
906,578
318,715
469,233
318,715
469,233
317,026
170,976
317,026
170,976
b) bonds
Annual Accounts
152
22 Notes to securities.
We have portrayed additional information on securities in the order of the balance sheet
items:
in € thousands
Bank
31 Dec. 2003
1 Jan. 2003
Group
31 Dec. 2003
1 Jan. 2003
eligible and listed on a stock exchange
792,073
550,822
792,073
550,822
2,092,137
1,003,829
2,092,137
1,003,829
7,715,457
5,177,931
8,099,098
5,177,931
9,703,300
11,865,866
10,050,916
12,223,354
eligible, but not listed on a stock exchange
1,304,417
1,508,693
1,319,131
1,508,693
23,683,853
24,597,836
26,963,391
28,394,997
3,970,790
4,468,485
4,693,546
4,719,343
1,590,226
1,939,330
1,831,280
1,952,055
167,067
56,997
320,563
74,498
1,166,218
542,160
1,169,718
542,160
94,196
96,812
116,560
100,362
1,007,443
533,163
1,014,800
546,019
6,646
44,753
6,646
44,753
32,200
37,000
32,200
37,000
43,497
52,978
43,497
52,978
b) bonds
valued using the diluted lower of cost or market principle
c) own bonds
6. Shares and other non-fixed income securities
valued using the diluted lower of cost or market principle
7. Equity investments in non-affiliated companies
8. Equity investments in affiliated companies
23 Repurchase agreements.
As a borrower in repurchase agreements, we have sold assets in the following amounts
(carrying amounts) and simultaneously contracted to repurchase the same assets at a later
date. The assets continue to be carried on our balance sheet; the consideration received in
return for the assets is reported under the corresponding liability item.
in € thousands
Bank
Carrying amounts of the assets sold under repurchase agreements
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
871,685
987,226
871,685
987,226
24 Subordinated assets.
The Bank reports subordinated assets under the following items:
in € thousands
Bank
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
119,214
70,693
119,214
70,693
22,861
2,184
22,861
2,184
482,960
690,413
584,911
774,768
28,203
27,569
28,203
27,569
b) bonds
6. Shares and other non-fixed-income securities
153
25 Residual maturities.
The balance sheet items below are classified in accordance with their residual maturities
as follows:
in € thousands
Bank
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
12,673,123
18,286,002
11,204,250
16,770,405
3,952,499
6,298,277
4,443,137
6,491,022
11,521,299
9,611,864
12,507,844
10,175,430
4,618,169
5,577,056
4,808,307
5,638,149
13,596,948
12,134,449
13,564,780
11,908,672
7,417,828
8,293,004
7,571,464
8,439,177
– more than 1 year up to 5 years
25,805,982
23,641,549
26,285,644
24,057,771
– more than 5 years
30,049,987
31,535,822
30,501,476
32,203,023
1,283,980
2,266,960
1,283,980
2,266,960
13,273,248
10,704,054
14,333,549
11,854,826
31 Dec. 2003
1 Jan. 2003
– up to 3 months
– more than 3 months up to 1 year
– up to 3 months
– with undetermined maturity
– due in the following year
26 Trust assets.
Trust assets concern the following balance sheet items:
in € thousands
Bank
31 Dec. 2003
1 Jan. 2003
Group
990
990
990
990
376,333
338,845
376,333
338,845
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
Adjustment items for currency translation
417,682
229,032
392,550
235,046
Claims on fiscal authorities
228,511
64,940
254,220
93,471
Claims under options and interest limitation agreements
131,907
103,583
131,907
103,583
Temporarily acquired land and buildings
31,386
193,416
31,386
193,416
Claims under profit transfer agreements and on dividends
57,319
189
57,319
189
27 Other assets.
The major components of other assets are:
in € thousands
Bank
Group
28 Prepaid expenses.
The major items comprising prepaid expenses are:
in € thousands
Discounts (liabilities and bonds issued)
Premiums (claims)
Bank
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
300,554
146,124
301,741
146,124
15,061
20,707
20,258
20,707
Annual Accounts
154
29 Assets pledged as collateral.
The following items were assigned or pledged to third parties to secure the Bank’s/Group’s
own liabilities.
in € thousands
Bank
31 Dec. 2003
Assignment of claims for loans raised
Own securities pledged to central banks
1 Jan. 2003
Group
31 Dec. 2003
1 Jan. 2003
520,419
291,401
520,419
291,401
12,607,677
13,990,342
12,607,677
13,990,342
30 Statement of changes in fixed assets.
Bank
in € thousands
Securities 1)
Equity investments in non-affiliated
companies
Acquisition
cost as at
Additions/
Write-ups
Disposals/
Reclassifications
Accumulated
depreciation as at
Depreciation
Carrying
amount
as at
Carrying
amount
as at
1 Jan.
2003
2003
2003
31 Dec.
2003
2003
31 Dec.
2003
1 Jan.
2003
21,697,123 11,187,066 12,361,908
25,910
523,678
37,263
53,617
1,403,926
378,212
105,765
45,119
1,224
53
thereof: used by the Bank
44,519
1,224
53
Plant and office equipment
83,165
58,699
9,446
10,199
18
22
2,909
23,763,210 11,662,482 12,530,811
86,372
Equity investments in affiliated
companies
Land and buildings
Intangible fixed assets2)
Total
1)
2)
2,045
14,284 20,496,371 21,697,123
2,045
505,279
523,678
6,300
6,300
1,670,073
1,403,926
1,108
1,108
45,182
45,119
1,090
1,090
44,600
44,519
48,100
49,590
84,318
83,165
2,909
7,286
10,199
76,236 22,808,509 23,763,210
Accumulated depreciation on securities includes the general bad debt country provisions attributable thereto (cf. note 8).
The intangible fixed assets reported represent goodwill acquired within the scope of a business operation, which is being systematically depreciated over 10 years.
Group
in € thousands
Securities
Acquisition
cost as at
Additions/
Write-ups
Disposals/
Reclassifications
Accumulated
depreciation as at
Depreciation
Carrying
amount
as at
Carrying
amount
as at
1 Jan.
2003
2003
2003
31 Dec.
2003
2003
31 Dec.
2003
1 Jan.
2003
22,725,219 11,398,069 12,406,717
27,313
Equity investments in non-affiliated
companies
523,678
37,263
53,617
Equity investments in affiliated
companies
752,307
293,701
119,509
63,670
1,244
53
thereof: used by the Group
62,329
1,224
53
Plant and office equipment
107,945
63,268
10,976
256,477
18
22
15,223
24,429,296 11,793,563 12,590,894
122,457
Land and buildings
Intangible fixed assets 1)
Total
1)
2,045
14,284 21,689,258 22,336,360
2,045
505,279
523,678
6,300
6,300
920,199
752,307
4,337
1,521
60,524
60,854
4,208
1,480
59,293
59,602
67,239
55,599
92,998
93,798
15,223
241,250
256,477
94,972 23,509,508 24,023,474
The intangible fixed assets of the Group contain asset-side differences from first-time consolidation totalling EUR 246,278 thousand, which we are depreciating systematically
over a period of 20 years.
155
Notes to Liabilities.
31 Liabilities to associated Savings Banks.
The item “liabilities to banks” includes liabilities to associated Savings Banks:
in € thousands
Bank
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
1,718,661
1,622,808
1,748,796
1,622,952
32 Affiliated companies.
Liabilities to affiliated companies are included in the balance sheet items below:
in € thousands
Bank
31 Dec. 2003
1 Jan. 2003
12,278,308
877,126
15,357
Group
31 Dec. 2003
1 Jan. 2003
10,962,320
9,010
384,584
42,883
155,831
41,312
12,368
–
493
b) bonds issued
33 Non-affiliated companies.
Liabilities to non-affiliated companies in which an equity investment is held are included
in the following items:
in € thousands
Bank
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
493,368
1,734,837
493,368
1,734,837
7,832
85,769
7,832
85,769
–
114,468
–
114,468
b) bonds issued
Annual Accounts
156
34 Residual maturities.
The balance sheet items below are classified in accordance with their residual maturities
as follows:
in € thousands
Bank
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
11,917,303
26,363,044
15,129,944
28,667,230
6,539,490
5,827,266
6,942,757
5,976,120
17,466,416
15,341,435
10,413,942
9,296,664
11,159,357
9,935,438
7,190,295
7,718,940
– up to 3 months
ab) savings deposits with agreed notice periods
of more than 3 months
– up to 3 months
514
742
514
742
1,323
1,481
1,323
1,481
2,255
2,598
2,255
2,598
117
108
117
108
14,983,437
bb) other liabilities with agreed maturities
or notice periods
– up to 3 months
14,731,271
14,157,790
15,670,396
1,232,451
1,341,589
604,103
683,658
6,197,106
6,876,697
6,330,131
6,912,584
16,762,545
14,898,195
17,133,104
14,908,370
10,515,817
12,896,971
11,737,955
14,208,138
– up to 3 months
5,414,108
10,011,215
5,414,108
10,011,215
3,137,400
3,286,804
3,137,400
3,286,804
79,155
–
79,155
–
31 Dec. 2003
1 Jan. 2003
a) bonds issued
– due in the following year
35 Trust liabilities.
Trust liabilities are distributed among the following balance sheet items:
in € thousands
Bank
31 Dec. 2003
1 Jan. 2003
Group
2,998
992
2,998
992
374,325
338,843
374,325
338,843
36 Other liabilities.
The major components of this item are as follows:
in € thousands
Security deposits for assumed debts
Pro rata interest on subordinated debt, profit
participation capital and silent partnership capital
Premiums received from written options
and interest limitation agreements
Bank
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
1,010,434
961,416
1,010,434
961,416
307,635
312,694
237,605
281,864
97,769
81,536
97,769
81,536
157
37 Deferred income.
Deferred income includes:
in € thousands
Bank
Discounts (claims)
Premiums (bonds issued)
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
165,363
189,909
166,851
189,909
13,057
14,791
13,663
14,791
38 Provisions for pensions and similar obligations.
Provisions for pensions and similar obligations are made up of the following items:
in € thousands
Bank
Provisions for retirement payments
Provisions for early retirement payments
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
328,782
328,544
334,574
332,502
38,653
7,135
38,653
7,135
The increase in provisions for early retirement payments is almost exclusively attributable
to the early retirement arrangements made within the scope of the merger.
39 Other provisions.
The major components of other provisions are as follows:
in € thousands
Bank
Group
133,006
146,134
Provisions for personnel expenditure
56,116
58,570
Provisions for securities transactions and financial derivatives
10,710
14,410
Provisions for restructuring expenses
17,683
18,702
Provisions concerning lending activities
40 Special reserve item.
Based on the Tax Relief Act of 1999/2000/2002, the predecessor institutions effected additions to balance sheet assets pursuant to § 280 (1) of the German Commercial Code. Such
additions were allocated in part to the special reserve item in accordance with § 273 of
the German Commercial Code in conjunction with § 52 (16) of the German Income Tax
Act (EStG). The residual amount of EUR 521 thousand, which was not written back in the
preceding years and was taken over in the opening balance sheet, was released in full
through profit and loss in 2003. No further reserves exist.
41 Subordinated debt.
The carrying amounts of the subordinated debts have developed as follows:
in € thousands
Carrying amounts
Bank
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
2,756,376
2,952,683
2,841,224
3,027,305
The conditions for subordinated debts have been arranged to fundamentally fulfil the
requirements of § 10 (5a) of the German Banking Act on inclusion as regulatory capital.
The subordinated debts were issued as loans against borrowers’ notes as well as registered
or bearer bonds in CAD, DEM, EUR, GBP, JPY, LUF, NLG, PTE and USD. The original maturities range from eight years to 40 years. The interest rates range from 2.4 % p.a. to 8.6 % p. a.
No single item exceeds 10 % of the total subordinated debts. Subordinated debts in the
amount of EUR 277,302 thousand (EUR 312,317 thousand in the Group) will mature in less
Annual Accounts
158
than two years. Interest expenses from subordinated debts amounted to EUR 117,732
(previous year: 113,781) thousand in the Bank and EUR 121,481 (previous year: 117,940)
thousand in the Group.
42 Profit participation capital.
Profit participation capital was issued exclusively by HSH Nordbank AG. The claims of the
holders of the profit participation certificates to repayment of the capital rank below other
claims. The other conditions of the profit participation capital were also stipulated as regulatory capital pursuant to the requirements of § 10 (5) of the German Banking Act.
A total volume of EUR 1,438,787 thousand was recognized as regulatory capital pursuant
to § 10 (5) of the German Banking Act.
The following bearer participation certificates were issued:
Year of issue
Nominal amount
Interest rate
in € thousands
in % p.a.
Maturity
1993
51,129
6.25
2005
1993
34,257
6.25
2005
1994
76,694
6.25
2005
1994
65,957
6.25
2005
1994
51,129
6.15
2004
1994
76,694
6.25
2007
In addition, we issued 171 registered participation certificates with a total volume of
EUR 1,140,706 thousand, whose original maturities range from eight to 13 years. The interest rates range from 5.1% p. a. to 7.6 % p.a.
Expenses for profit participation capital amounted to a total of EUR 76,919 thousand in the
fiscal year. No other profit participation certificates were issued in the fiscal year.
43 Fund for general banking risks.
We allocated additional financial resources of EUR 113,359 thousand to the fund for
general banking risks in the fiscal year. The fund thus developed as shown below:
in € thousands
Bank
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
365,000
251,641
365,000
251,641
44 Subscribed capital.
Subscribed capital is made up of the share capital of HSH Nordbank AG and, pursuant to
§ 25 (1) of the Ordinance Regarding Accounting for Banks, the silent partnership capital.
The share capital amounts to EUR 500,000 thousand and is divided into 50,000,000 no-par
registered shares with a theoretical par value of EUR 10.00 each. 5,000,000 of these shares
are preferred shares with no voting rights. On the balance sheet date, no authorized capital existed and no subscription rights to shares in HSH Nordbank AG were outstanding.
159
45 Statement of changes in Group equity.
The statement of changes in Group equity reflects the development of Group equity and
the total Group’s results pursuant to German Accounting Standard No. 7. We have removed
irrelevant columns and rows from the sample statement included in German Accounting
Standard No. 7. Due to the new formation of HSH Nordbank in the fiscal year, we have dispensed with stating the previous years’ figures.
None of the Group companies holds equity investments in HSH Nordbank AG (treasury
shares), which means that the actual equity of the parent company corresponds with the
amounts carried in the Group balance sheet. The issuance of shares in the fiscal year represents a procurement of silent partnership capital. The other changes essentially involve
foreign currency influences on silent partnership capital held in USD.
Pursuant to the profit appropriation proposal of the Managing Board and the Supervisory
Board, a dividend payment of EUR 65,000 thousand is to be made from the profit of HSH
Nordbank AG in the amount of EUR 230,000 thousand. The profit remaining with the subsidiaries will be retained.
in € millions
Parent company
Subscribed
1)
capital
Capital
reserves
4,606.2
500.0
-48.5
Balance as at 1 Jan. 2003
Issuance of shares
Other changes
Consolidated net income for the year
Total Group results
Balance as at 31 Dec. 2003
1)
Minority
shareholders
Group
equity
Group
equity
earned
Accumulated
other
Group
results
Equity as
shown on
Group
balance
sheet
Minority
capital
Equity
1,164.3
–
1.3
5,771.8
3.9
3.9
5,775.7
–
–
–
–
–
-1.3
500.0
-49.8
–
–2.5
–
–2.5
500.0
-52.3
–
–
259.4
–
259.4
2.5
2.5
261.9
–
–
259.4
–
259.4
2.5
2.5
261.9
5,057.7
1,164.3
259.4
–
6,481.4
3.9
3.9
6,485.3
Subscribed capital comprised the following on 31 Dec. 2003:
– Share capital attributable to ordinary shares:
€ 450.0 million
– Share capital attributable to preferred shares:
€ 50.0 million
– Silent partnership capital:
€ 4,557.7 million
46 Regulatory capital.
The regulatory capital pursuant to the German Banking Act is made up of the following:
in € millions
Bank
Regulatory
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
Subscribed capital 1)
5,007.7
4,556.3
5,007.7
4,556.3
Capital reserves
1,164.3
1,164.3
1,164.3
1,164.3
Difference arising from capital consolidation
Fund for general banking risks 2)
Intangible fixed assets
1 Jan. 2003
–
–
-54.1
-41.3
251.6
251.6
251.6
251.6
-10.2
-10.2
-53.8
-11.9
Tier I capital
6,413.4
5,962.0
6,315.7
5,919.0
Tier II capital 3)
4,310.7
4,382.8
4,406.4
4,461.4
Equity investments in non-affiliated companies in
accordance with § 10 (6) sentence 1 No. 1 and
No. 4 of the German Banking Act
Regulatory capital
1)
Not including preferred shares pursuant to § 10 (2a) No. 2 of the Banking Act.
Not including amounts added as per 31 Dec. 2003, cf. note 43.
3) Including preferred shares pursuant to § 10 (2b) No. 2 of the Banking Act.
2)
-44.9
-8.7
-44.9
-37.9
10,679.2
10,336.1
10,677.2
10,342.5
Annual Accounts
160
47 Tier I capital ratio and solvency ratio.
The Tier I capital ratio, which expresses the relationship between Tier I capital (cf. note 46)
and the risk-weighted assets to be included, the solvency ratio, which results from the quotient of regulatory capital and risk-weighted assets plus the market price risk positions, and
the corresponding BIS ratios have developed as follows:
in %
Tier I
capital ratio
Solvency
ratio
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
Principle I ratios 1) of HSH Nordbank AG
6.9
6.3
10.9
10.4
Principle I ratios 1) of the regulatory Group
6.6
6.0
10.6
9.7
BIS ratios 1) of the regulatory Group
6.3
5.6
10.2
9.4
1)
Prior to approval of the annual accounts and the resolution on profit appropriation.
48 Statement of coverage.
The mortgage bonds and public-sector bonds issued by the predecessor institutions and
HSH Nordbank Hypo Aktiengesellschaft are covered as follows:
in € thousands
Bank
31 Dec. 2003
1 Jan. 2003
Group
31 Dec. 2003
1 Jan. 2003
Coverage for mortgage bonds
Bearer bonds
4,122,266
4,351,861
4,182,266
4,351,861
Registered bonds
4,400,314
4,851,056
4,400,314
4,851,056
725,740
718,258
725,740
718,258
–
100
–
100
9,248,320
9,921,275
9,308,320
9,921,275
Registered bonds used as collateral
Redeemed and terminated bonds
Bonds to be covered
Securities issued by public-sector issuers/substitute cover
Covering assets
Surplus coverage
–
–
–
–
11,888,025
12,163,465
11,956,230
12,163,465
–
650,000
–
650,000
11,888,025
12,813,465
11,956,230
12,813,465
2,639,705
2,892,190
2,647,910
2,892,190
Coverage for public-sector bonds
Public-sector bearer bonds
Registered public-sector bonds
Registered public-sector bonds used as collateral
Redeemed and terminated bonds
Bonds to be covered
Securities issued by public-sector issuers/substitute cover
Covering assets
Surplus coverage
8,037,065
10,612,881
8,452,028
10,612,881
10,130,138
10,203,862
10,710,264
10,203,862
189,718
1,432,521
189,718
1,432,521
26,604
–
26,604
–
18,383,525
22,249,264
19,378,614
22,249,264
9,352,915
11,969,628
10,127,349
11,969,628
10,354,866
11,990,233
10,354,866
11,990,233
–
–
216,903
–
19,707,781
23,959,861
20,699,118
23,959,861
1,324,256
1,710,597
1,320,504
1,710,597
161
Notes to the Statement of Income
49 Breakdown of income by geographical market.
Components of the statement of income of HSH Nordbank AG and the HSH Nordbank
Group are broken down by geographical market in the following:
Bank
in € thousands
Interest income
Current income from shares
and other non-fixed-income
securities, equity investments in non-affiliated and
Income from profit
pooling, profit transfer
and partial profit transfer
agreements
Commission income
20021)
2003
Germany
Rest of
Europe
Asia
USA
Germany
Rest of
Europe
Asia
USA
7,365,585
1,371,901
210,063
16,962
7,536,940
1,612,500
261,416
40
163,421
31,683
–
–
245,132
25,338
–
–
5,515
–
–
–
2,052
–
–
–
161,432
65,793
4,904
14,353
175,506
58,249
5,408
43
Net income from trading
activities
66,975
6,581
106
1,023
64,134
5,883
486
–
Other operating income
115,191
15,843
584
–
125,890
16,662
2,309
–
Germany
Rest of
Europe
Asia
USA
Germany
Rest of
Europe
Asia
USA
7,371,505
1,788,658
210,055
16,729
7,527,264
2,054,322
261,416
40
121,467
1,752
–
–
203,110
381
–
–
Group
in € thousands
Interest income
Current income from shares
and other non-fixed-income
securities, equity investments in non-affiliated and
Income from profit
pooling, profit transfer
and partial profit transfer
agreements
20021)
2003
5,150
–
–
–
1,679
–
–
–
196,307
93,717
4,904
14,353
195,157
75,168
5,408
43
Net income from trading
activities
66,975
15,115
106
1,023
64,135
14,083
486
–
Other operating income
157,838
8,448
585
–
171,557
3,832
2,781
–
Commission income
1)
Pro forma figures cf. note 5.
Annual Accounts
162
50 Other operating income.
Other operating income mainly comprised the following items in the fiscal year:
in € thousands
Bank
Group
2003
2003
Tax refunds
61,099
65,050
Refunds of expenses by third parties
24,923
25,360
Rental income
9,288
9,288
Current income from computer services
4,734
4,734
51 Other operating expenses.
Other operating expenses include restructuring expenses of EUR 21,191 (Group: 21,760)
thousand, chiefly due to the merger.
Other Notes
52 Contingent liabilities.
The majority of contingent liabilities are financial guarantees furnished in the scope of our
lending activities, with the exception of the written credit default swaps that are shown
separately below.
in € thousands
Bank
Liabilities from guarantees and indemnity agreements
thereof: written credit default swaps
Group
31 Dec. 2003
1 Jan. 2003
31 Dec. 2003
1 Jan. 2003
25,118,361
23,041,276
14,149,377
13,999,922
7,107,020
7,679,409
7,107,020
7,679,409
53 Other financial obligations.
In addition to the contingent liabilities (cf. note 52) and other obligations reported below
the balance sheet line, shareholder liabilities of EUR 335.4 million exist for outstanding
payments on subscribed capital that have not yet been called in. With respect to the stake
in Liquiditäts-Konsortialbank GmbH, Frankfurt am Main, there is an additional funding
obligation and a limited contingent liability for the additional funding obligations of other
shareholders.
Further obligations result from long-term leasing agreements with companies outside the
Group for land and buildings used for commercial purposes.
54 Letters of comfort.
Except in the case of political risk, HSH Nordbank ensures that the following foreign affiliated companies are able to meet their obligations: HSH Nordbank (Guernsey) Ltd., Guernsey;
HSH Nordbank International S. A., Luxembourg; HSH N Finance B.V. i.L., Amsterdam. Moreover, the Bank has declared its intention to provide HSH Nordbank Hypo Aktiengesellschaft,
Hamburg, and PLUS BANK AG, Hamburg, which are included in the Group accounts, with
unlimited funding to enable them to always be in a position to meet all of their financial
obligations in a timely fashion.
163
55 Notes to shareholdings.
In addition to the consolidated subsidiaries (cf. note 17), we have provided an overview of
our other major shareholdings below. We have compiled a complete listing of our shareholdings pursuant to § 285 No. 11 and § 313 (4) of the German Commercial Code in a separate schedule, which is held at the Local Courts of Hamburg and Kiel.
No. Name and registered office
Share
in capital
%
Equity
in €
thousands
1. Aegean Baltic Bank S. A., Kifissia
51.00
18,000
2)
2. AGV Anlagen- und Grundstücksvermietungsgesellschaft mbH & Co. KG, Wiesbaden
89.99
2)
2)
3. AGV Anlagen-, Grundstücksvermietungs- und Geschäftsführungsgesellschaft mbH,
Wiesbaden
90.00
2)
2)
4. DGAG Deutsche Grundvermögen GmbH, Kiel
37.97
156,086
11,441
5. GEHAG GmbH, Berlin
Profit
in €
thousands
85.00
72,040
103,860
6. Gudme Raaschou Asset Management Holding A/S, Copenhagen
100.00
4,171
816
7. Gudme Raaschou Bankaktieselskab A/S, Copenhagen
100.00
12,190
511
8. HGA Beteiligungs AG, Hamburg
100.00
106,324
10,350
1), 2)
9. HGA Capital Grundbesitz und Anlage GmbH, Hamburg
100.00
2,076
10. HGA Management Investor und Anlage GmbH, Hamburg
100.00
500
1), 2)
11. HSH N Corporate Finance GmbH, Hamburg
100.00
6,102
1,052
12. HSH N Immobilien Development GmbH, Hamburg
100.00
500
1), 2)
13. HSH N Immobilien Holding GmbH, Hamburg
100.00
6,584
177
14. HSH N Invest GmbH, Kiel
100,00
2)
2)
15. HSH N Kapital GmbH, Kiel
100.00
2)
2)
16. HSH N Nordic Finance AB, Stockholm
100.00
2)
2)
17. Lamatos GmbH, Hamburg
100.00
2,387
16,937
18. LB Immo Invest GmbH, Hamburg
50.00
5,002
1), 2)
19. PCA Corporate Finance Oy, Helsinki
65.07
3,174
339
20. Timene Beteiligungsgesellschaft GmbH & Co. KG, Hamburg
21. W. Jacobsen Aktiengesellschaft, Kiel
100.00
3)
3)
92.51
9,902
1,124
1)
A controlling and profit transfer agreement has been concluded with the company.
Not published in accordance with § 286 (3) sentence 1 and § 313 (2) No. 4 of the German Commercial Code.
3) Company newly formed, no information available as yet.
2)
HSH Nordbank AG is a partner with unlimited liability in the following company (§ 285 No. 11a of the German Commercial Code):
GLB GmbH & Co. OHG, Frankfurt am Main
In addition, the Bank has the following shareholdings in accordance with § 340a (4) No. 2 of the German Commercial Code:
Bürgschaftsbank Schleswig-Holstein GmbH, Kiel
Bürgschaftsgemeinschaft Hamburg GmbH, Hamburg
Deutsche Real Estate Aktiengesellschaft, Berlin
FinanzIT GmbH, Hannover
56 Related party disclosures.
We qualify as related legal persons for the companies specified in the list of shareholdings
(cf. notes 12 and 55). Given that in connection with the consolidation, we have eliminated
transactions with related companies included in the Group accounts, we have not stated
them separately pursuant to German Accounting Standard No. 11.13. We have reported
on the remaining transactions with related companies in notes 20, 21, 32, and 33 to the
accounts. We always conclude transactions with related companies under fair market
conditions.
Related natural persons are limited to the members of the corporate bodies of HSH Nordbank AG. The relevant information can be found in notes 63, 67, and 68 to the accounts.
Annual Accounts
164
57 Group cash flow statement.
The cash flow statement indicates the changes in the Group’s financial resources and cash
flows. The flow of cash is broken down into operating activities, investment activities and
financing activities and is shown in close conformity with German Accounting Standard
No. 2-10 (“Cash Flow Statement of Financial Institutions”). The composition of financial
resources corresponds with the balance sheet item “cash reserves”. We have not included
comparative figures, given that their calculation would have caused undue cost or effort.
in € millions
1. Net income for the period
Reconciliation:
2. Write-downs, value adjustments and appreciation on loans and advances,
tangible and financial fixed assets
Write-downs on tangible and financial fixed assets, allocations to value adjustments
Write-ups on tangible and financial fixed assets, reversal of value adjustments
3. Changes in provisions
4. Other non-cash expenses/income
5. Profit/loss from the disposal of tangible and financial fixed assets
Losses
Profits
6. Other adjustments
2003
261.9
659.5
894.7
-235.2
136.0
-0.5
-72.6
117.7
-190.3
-1,118.0
7. Subtotal
8. Changes in loans and advances
a) to banks
b) to customers
9. Changes in securities (excl. financial fixed assets)
10. Changes in other assets from operating activities
11. Changes in liabilities
a) to banks
b) to customers
12. Changes in certificated liabilities
13. Changes in other liabilities from operating activities
14. Interest and dividends received
15. Interest paid
16. Income tax paid
-133.7
8,121.1
8,452.9
-331.7
-4,063.3
-459.6
-5,348.5
-7,921.1
2,572.6
-5,289.1
270.6
9,515.3
-8,016.2
-117.8
17. Cash flow from operating activities
-5,521.1
18. Inflow from the disposal of
a) financial fixed assets
b) tangible fixed assets
19. Outflow for investments in
a) financial fixed assets
b) tangible fixed assets
28,736.9
28,632.8
104.1
-23,274.8
-23,114.7
-160.1
20. Cash flow from investment activities
5,462.1
21. Inflow from equity contributions
22. Distributions from equity
a) dividends paid
b) partial profit transfer
23. Changes in funds from other capital
500.0
-316.9
24. Cash flow from financing activities
25.
26.
27.
28.
29.
Financial resources at the beginning of the period
Cash flow from operating activities
Cash flow from investment activities
Cash flow from financing activities
Changes in financial resources due to consolidation
30. Financial resources at the end of the period
0.0
-316.9
-142.4
40.7
356.5
-5,521.1
5,462.1
40.7
1.5
339.7
165
58 Group segment report.
The Group segment report presents the segments as independent companies with their
own profit and cost responsibility. The segment results are based on internal controlling
data and the external data from the 2003 annual accounts. The segment report was prepared in accordance with German Accounting Standard No. 3-10 (“Segment Reporting of
Financial Institutions”). We did not include comparative figures, given that their calculation would have caused undue cost or effort.
1. Segmentation by business (primary reporting format).
We have created the following segments for the primary reporting format:
• Shipping clients
This segment encompasses business with shipping clients, including the corresponding client business of our branches in the US and in Asia as well as of our subsidiary in
Luxembourg, HSH Nordbank International S. A.
• Real estate clients
The “real estate clients” segment involves business with real estate clients, including the
corresponding client business of our branches in Scandinavia, Great Britain, and Asia.
• Corporate clients
The corporate client business of the entire Group is consolidated in this segment. It
thus also includes the corresponding client business of our branch and subsidiary in
Luxembourg as well as the branches in Scandinavia, Great Britain, Asia, and the US.
• Special corporate and institutional clients
This segment comprises business with transport clients, which operate chiefly in the
areas of aircraft, railways and infrastructure, as well as the business with leasing
clients, savings banks and banks, including the corresponding client business of our
branch and subsidiary in Luxembourg as well as the branches in Great Britain, Scandinavia, Asia, and the US.
• Private clients
This segment involves the business with private clients, including the corresponding
client business of the branches in Asia.
• Financial markets
This segment contains Group-wide trading and refinancing activities as well as portfolio management and liquidity management.
• Other/consolidation
In this category, we report the business of subsidiaries that cannot be assigned to the
segments, central expenses and income and the results of the consolidation.
Income and expenses were generally assigned to the segments in accordance with the
principle of causation. Net interest income has been calculated in accordance with the
market interest rate method; the net income from trading activities of the “financial
markets” segment was measured at market prices. Risk provisions reflect the values shown
in the statement of income and have been assigned to the segments in which they originated.
Risk positions and the resulting regulatory capital requirements are stated in accordance
with banking supervisory regulations. The amounts reported represent annual averages. In
the process, a ratio of 10 % for regulatory capital and 6 % for tier I capital was assumed. The
return on tier I capital is the ratio of operating profit after risk provisioning to the average
tier I capital employed. The cost-income ratio equals the ratio between administrative
expenses and net income (net interest income, net commission income, net income from
trading and the balance of other operating income and expenses). The reported return on
equity equals the quotient of net income before taxes, plus allocations to the fund for
general banking risks in accordance with § 340g of the German Commercial Code, and the
average on-balance-sheet equity less profit and plus the fund for general banking risks in
accordance with § 340g of the German Commercial Code.
Annual Accounts
166
The segment assets comprise the balance sheet assets of the respective segment on the
reporting date.
in € millions
Shipping
clients
Real
estate
clients
Corporate
clients
Special
corporate
and
institutional
clients
Private
clients
Financial
markets
Other/
consolidation
Group
Net interest income
+ Net commission income
+ Net income from trading
+ Balance of other
operating
income/expenses
194.8
61.1
–
205.0
44.5
–
218.4
65.7
–
190.9
85.0
–
45.9
14.9
–
341.1
-20.6
177.3
303.0
-27.3
-94.1
1,499.1
223.3
83.2
–
–
–
–
–
–
88.7
88.7
= Total income
- Personnel expenses
- Other administrative expenses
255.9
11.5
15.2
249.5
17.0
19.2
284.1
27.3
26.5
275.9
19.0
33.0
60.8
16.0
13.9
497.8
41.5
46.9
270.3
215.4
229.8
1,894.3
347.7
384.5
= Operating profit
before risk provisions
and valuation
- Risk provisions
and valuation
229.2
213.3
230.3
223.9
30.9
409.4
-174.9
1,162.1
-1.1
119.9
53.3
92.7
-1.0
58.8
256.8
579.4
230.3
93.4
177.0
131.2
31.9
350.6
-431.7
582.7
17,832.3
17,477.4
15,764.6
15,021.1
2,726.2
22,654.6
11,805.8
103,282.0
1,783.2
1,747.7
1,576.5
1,502.1
272.6
2,265.5
1,180.6
10,328.2
1,069.9
1,048.6
945.9
901.3
163.6
1,359.3
708.3
6,196.9
21.5
10.4
–
8.9
14.5
–
18.7
18.9
–
14.5
18.9
–
19.5
49.2
–
25.8
17.8
–
–
–
9.4
38.7
11.0
17,482.3
25,315.8
16,015.6
68,942.3
3,238.4
35,991.6
4,673.8
171,659.8
= Operating profit
after risk provisions
and valuation
in € millions
Average risk positions
Average employed
regulatory capital
Average employed
tier I capital
in %
Return on tier I capital
Cost-income ratio
Return on equity
in € millions
Segment assets
2. Segmentation by geographical market (secondary reporting format).
We have formed the segments Germany, rest of Europe, Asia and USA for the secondary
reporting format. The geographical breakdown is based on the domicile of the respective
Group company or branch. The definitions of the reporting variables correspond to those
of the primary reporting format.
in € millions
Germany
Rest of
Europe
Asia
USA
Other/
consolidation
Group
Operating profit before risk provisions and valuation
- Risk provisions and valuation
940.9
504.2
286.3
73.8
27.6
0.7
12.2
-1.1
-104.9
1.8
1,162.1
579.4
= Operating profit after risk provisions and valuation
436.7
212.5
26.9
13.3
-106.7
582.7
73,747.8
7,374.8
21,777.6
2,177.8
5,395.0
539.5
1,080.2
108.0
1,281.4
128.1
103,282.0
10,328.2
41.1
19.6
28.5
59.5
–
38.7
in € millions
Risk positions
Average employed regulatory capital
in %
Cost-income ratio
167
59 Deferred taxes.
For the individual accounts of HSH Nordbank AG, we have calculated deferred tax assets of
EUR 117,895 thousand pursuant to § 274 of the German Commercial Code (cf. also note 16).
The deferred tax liabilities of EUR 24,689 thousand were netted against the deferred tax
assets.
We report deferred taxes in the Group accounts pursuant to German Accounting Standard
No. 10. The taxes on income shown in item No. 20 of the Group statement of income are
composed of the following:
in € thousands
2003
Actual taxes on income
thereof: attributable to ordinary income
Result from tax accruals and deferrals
thereof: attributable to ordinary income
107,837
107,837
-103,912
-103,912
Taxes on income
3,925
In the fiscal year under review, deferred taxes of EUR 23,709 thousand were allocated to
equity pursuant to German Accounting Standard No. 10 without effect on profit. The
expected tax expenditure may be reconciled with the reported tax expenditure as follows,
taking into account the tax rates applicable in Germany. In doing so, we have assumed
taxes on Group income at a rate of 41.24 %.
in € thousands
2003
Net income for the Group before taxes
265,780
Expected taxes on income
109,608
Tax effects:
Taxes due to non-deductible expenses
Tax reduction due to tax-free income
Taxes for previous years
Value adjustments not allowed for tax purposes
Effects of losses carried forward
Tax rate variations
Tax rate changes
Other effects
159,573
-203,464
42,815
-45,373
-37,698
-16,828
-3,073
-1,635
Taxes on income
3,925
For the purpose of calculating the effects of deferred taxes, the corporate tax rate of 25%
applicable in Germany in 2004, plus the solidarity surcharge of 1.375% as well as an effective trade tax rate of 18.44% was used for the domestic companies. Due to the solidarity
surcharge for flood victims, the corporate tax rate applicable in 2003 amounted to 26.5%.
The deferred tax assets reported in asset item No. 14 of the Group balance sheet can be
allocated to the following items:
in € thousands
Asset items:
Tax losses carried forward
Securities
Tangible fixed assets
Other assets
Liability items:
Provisions
Fund for general banking risks (§ 340g of the German Commercial Code)
Other liabilities
Deferred taxes
31 Dec. 2003
5,051
43,843
5,726
168
745
21,093
45,613
706
122,945
Annual Accounts
168
The deferred tax liabilities reported in liability item No. 7c) of the Group balance sheet
were created for the following asset items:
in € thousands
31 Dec. 2003
Securities
Equity investments in non-affiliated and affiliated companies
Intangible fixed assets
Tangible fixed assets
Other assets
15,576
25,992
2,186
5,484
52
Deferred taxes
49,290
60 Notes to foreign currencies.
The assets and liabilities carried in foreign currencies are classified as follows into main
currencies and other currencies as at the reporting date:
Bank
Assets
Group
in € thousands
%
in € thousands
%
USD
GBP
CHF
JPY
Other currencies
30,001,257
5,430,548
4,505,281
3,555,184
6,677,178
59.8
10.8
9.0
7.1
13.3
30,933,184
6,245,650
4,653,639
3,738,876
6,891,705
59.0
11.9
8.9
7.1
13.1
Total
50,169,448
100.0
52,463,054
100.0
Bank
Liabilities
Group
in € thousands
%
in € thousands
%
USD
GBP
CHF
JPY
Other currencies
22,510,115
7,408,453
4,590,490
3,675,627
6,451,341
50.4
16.6
10.3
8.2
14.5
24,583,285
7,225,062
4,738,818
3,826,045
6,670,793
52.3
15.4
10.1
8.1
14.2
Total
44,636,026
100.0
47,044,003
100.0
61 Disclosures on derivative financial instruments.
In the following, we present HSH Nordbank Group’s business in the area of derivative
financial instruments. We have not included a corresponding portrayal for the Bank, given
that the differences are not significant.
The following forward transactions had not yet been settled as at the balance sheet date.
They are differentiated according to type as follows:
Foreign currency-related forward transactions.
• Forward exchange transactions/trading transactions
• Forex swap deals/hedging transactions
• Interest rate currency swaps/trading transactions
• Interest rate currency swaps/hedging transactions
• Currency options/trading transactions
• Written currency options/trading transactions
Interest-related forward transactions.
• Interest rate swaps/trading transactions
• Interest rate swaps/hedging transactions
• Forward transactions with fixed-income securities/trading transactions
• Forward transactions with fixed-income securities/hedging transactions
• Forward rate agreements/trading transactions
• Forward rate agreements/hedging transactions
• Written interest rate options/trading transactions
• Written interest rate options/hedging transactions
• Interest rate options/trading transactions
169
• Interest rate options/hedging transactions
• Interest limitation agreements/trading transactions
• Interest limitation agreements/hedging transactions
Other forward transactions.
• Index forward transactions/hedging transactions
• Stock swap transactions/hedging transactions
• Written share options/trading transactions
• Written share options/hedging transactions
• Purchased share options/hedging transactions
• Written index options/trading transactions
• Written index options/hedging transactions
• Purchased index options/trading transactions
• Purchased index options/hedging transactions
• Index-related swap transactions/hedging transactions
Credit derivatives.
• Credit default swaps/hedging transactions
• Total return swaps/hedging transactions
In the fiscal year 2003, we also used derivative financial instruments to an increasingly
large extent for the purpose of efficient risk hedging and taking advantage of market
opportunities as well as for meeting the special financing requirements of our clients. On
the reporting date, the nominal volume of off-balance sheet transactions amounted to EUR
349,930 million, corresponding to approximately 200% of the balance sheet total. Of this
volume, approximately 39% falls to trading transactions. We conduct our derivatives
business exclusively with counterparties of impeccable credit standing. Thus over 88% of
the total nominal volume involves financial institutions domiciled in an OECD country.
The credit risk equivalent of the transactions is calculated in accordance with the market
valuation method.
Replacement costs are also presented within the context of the extended risk portrayal.
Replacement costs are defined as the potential expenditure that would be incurred in connection with concluding replacement transactions required to restore the position following a counterparty default. Replacement costs affect the contracts with positive market
values; no netting against contracts with negative market values was undertaken.
Along with the nominal amounts of the contracts, which have been classified into interestrate risks, currency risks and other price risks, the following tables also show the maturity
structure, the breakdown by counterparty and information on trading transactions with
derivative financial instruments.
Credit derivatives for hedging against credit risks were also established along with the derivative transactions shown in the tables. These credit derivatives are allocated exclusively
to the investment portfolio. The volume for which the Group acted as guarantee (buyer) or
guarantor (seller) for credit default swaps amounted to EUR 2,325 million and EUR 7,130
million, respectively, as at the reporting date. The volume of credit derivatives for which the
Group acted as guarantor (seller) for total return swaps was EUR 64 million as at the reporting date.
Annual Accounts
170
1. Disclosures on volumes.
1.1 Interest rate risks.
in € millions
Nominal
amounts
Credit risk
equivalents
Replacement
costs
2003
2002
2003
2002
2003
2002
Interest rate swaps
FRAs
Interest rate options
– long positions
– short positions
Caps, floors
Stock market transactions
Other interest rate forward transactions
209,626.3
3,845.0
196,410.0
10,092.8
1,306.6
1.8
1,231.8
2.3
4,345.9
3.0
4,468.0
9.6
52.3
169.0
4,990.1
6,379.0
70,368.4
413.2
222.7
2,749.4
2,022.0
2,663.5
18.5
–
20.8
–
22.5
6.0
–
8.7
–
2.0
65.1
–
49.0
–
76.3
26.1
–
23.1
–
1.1
Total interest rate risks
295,430.1
214,573.6
1,370.2
1,250.8
4,539.3
4,527.8
1.2 Currency risks.
in € millions
Nominal
amounts
Credit risk
equivalents
Replacement
costs
2003
2002
2003
2002
2003
2002
Forward exchange transactions
Interest rate currency swaps and currency swaps
Currency options
– long positions
– short positions
Stock market contracts
Other currency-related forward transactions
37,953.2
9,721.4
48,652.9
8,210.9
442.6
178.0
389.3
153.5
1,511.9
325.9
1,339.9
274.7
2,052.4
2,000.6
–
–
2,846.8
2,612.7
–
–
39.5
–
–
–
35.9
–
–
–
101.5
–
–
–
108.3
–
–
–
Total currency risks
51,727.6
62,323.2
660.1
578.7
1,939.3
1,723.0
1.3 Share and other price risks.
in € millions
Nominal
amounts
Stock futures transactions
Stock options
– long positions
– short positions
Stock market contracts
Other forward transactions
Total share and other price risks
Credit risk
equivalents
Replacement
costs
2003
2002
2003
2002
2003
2002
–
4.7
–
0.5
–
2.1
12.2
–
340.4
2,419.4
104.9
92.2
3.0
2,679.9
0.4
–
–
68.5
6.0
–
–
52.1
0.4
–
–
111.2
4.0
–
–
26.8
2,772.0
2,884.7
68.9
58.6
111.6
32.9
2. Breakdown by maturity.
in € millions
Residual maturities
– up to 3 months
– up to 1 year
– up to 5 years
Total
Interest
rate risks
Currency
risks
Share and
other price risks
2003
2002
2003
2002
2003
2002
87,113.6
53,957.4
79,560.5
74,798.6
47,702.0
46,162.8
58,603.8
59,105.1
29,507.3
14,068.2
6,123.4
2,028.7
40,411.5
14,332.8
5,009.1
2,569.9
407.2
482.8
1,366.2
515.8
207.4
478.2
1,995.1
204.0
295,430.1
211,573.6
51,727.6
62,323.2
2,772.0
2,884.7
171
3. Breakdown by counterparty.
in € millions
Nominal
amounts
Credit risk
equivalents
Replacement
costs
2003
2002
2003
2002
2003
2002
OECD banks
Non-OECD banks
Non-banks 1)
Public authorities
309,165.8
2,013.5
36,600.4
2,150.0
258,077.9
785.8
19,023.7
1,894.0
1,586.6
27.2
485.6
–
1,577.7
6.2
303.9
–
5,905.8
43.1
641.4
–
4,689.0
7.9
352.0
–
Total
349,929.7
279,781.5
2,099.4
1,887.8
6,590.3
5,049.0
1)
Including stock market contracts.
4. Trading transactions.
in € millions
Nominal
amounts
Credit risk
equivalents
Replacement
costs
2003
2002
2003
2002
2003
2002
Interest rate contracts
Currency contracts
Stock contracts
125,729.9
11,521.1
334.3
96,805.2
14,744.5
11.6
646.3
161.4
–
523.7
146.2
0.5
2,014.2
345.7
–
1,808.5
442.9
2.1
Total
137,585.3
111,561.3
807.7
670.4
2,359.9
2,253.5
62 Number of employees.
We have calculated the number of employees based on the quarterly levels on a per capita
basis.
Annual average
2003
Bank
2002
Annual average
2003
Group
2002
Male
Female
Total
Total
Male
Female
Total
Total
Full-time employees
Part-time employees
1,833
68
1,242
309
3,075
377
3,317
309
2,192
82
1,468
386
3,660
468
3,766
363
Trainees
1,901
64
1,551
77
3,452
141
3,626
152
2,274
64
1,854
77
4,128
141
4,129
152
Total
1,965
1,628
3,593
3,778
2,338
1,931
4,269
4,281
63 Remuneration paid to the members of the Board of Managing Directors and the
Supervisory Board.
The total remuneration paid to the Board of Managing Directors was EUR 3,643 thousand
in the fiscal year 2003, including EUR 1,390 thousand for variable components. As at December 31, 2003, a total of EUR 24,733 thousand had been set aside for pension obligations
to former members of the Board of Managing Directors or their surviving dependents;
current payments amounted to EUR 3,778 thousand. The Supervisory Board members of
the predecessor institutions received remuneration and expenses allowances of EUR 416
thousand for the period from January 1, 2003 to June 1, 2003. No payments were made to
the Supervisory Board members of HSH Nordbank AG in the fiscal year. Advances, loans,
and other contingent liabilities as at December 31, 2003 amounted to EUR 4,591 thousand
for members of the Board of Managing Directors and EUR 1,804 thousand for members of
the Supervisory Board.
Annual Accounts
172
64 Mandates on other supervisory bodies.
On the balance sheet date, the following mandates were held on supervisory bodies of
major corporations or financial institutions (§ 340a Section 4 No. 1 of the German Commercial Code (HGB) in conjunction with § 267 Para 3 of the Commercial Code or § 340a
Section 1 of the Commercial Code).
1. Members of the Board of Managing Directors.
Alexander Stuhlmann
DekaBank Deutsche Girozentrale, Frankfurt/Main, Berlin
Member of the Administrative Board
HGV Hamburger Gesellschaft für Vermögensund Beteiligungsverwaltung mbH, Hamburg
Member of the Supervisory Board
HSH Nordbank International S. A., Luxembourg
LBS Bausparkasse Hamburg Aktiengesellschaft, Hamburg
Hans Berger
DekaBank Deutsche Girozentrale, Frankfurt/Main, Berlin
Deka Investment GmbH, Frankfurt/Main
Member of the Supervisory Board (until December 31, 2003)
FinanzIT GmbH, Hanover
Nordex AG, Norderstedt
PLUS BANK AG, Hamburg
SIZ Informatik – Zentrum der Sparkassenorganisation GmbH, Bonn
Deputy Chairman of the Supervisory Board
Peter Rieck
B & L Immobilien AG, Hamburg
DEKA Immobilien Investment GmbH, Frankfurt/Main
Deutsche Real Estate Aktiengesellschaft, Berlin
HSH Nordbank Hypo AG, Hamburg
Chairman of the Supervisory Board
LB Immo Invest GmbH, Hamburg
WestInvest Gesellschaft für Investmentfonds mbH, Düsseldorf
173
Deka Investment GmbH, Frankfurt/Main
Member of the Supervisory Board (from January 1, 2004)
Gudme Raaschou Bankaktieselskab A/S, Copenhagen
Member of the Board of Directors
Chairman of the Administrative Board
Hartmut Strauß
Hamburgische Wohnungsbaukreditanstalt, Hamburg
Ulrich W. Ellerbeck
Gudme Raaschou Bankaktieselskab A/S, Copenhagen
Chairman of the Board of Directors
HAW Hamburger Aluminium Werke GmbH, Hamburg
Member of the Administrative Board (from July 7, 2003)
2. Employees.
Walter Groll
LB Immo Invest GmbH, Hamburg
Heinrich Haverkampf
Reinhard Mix
Bürgschaftsbank Schleswig-Holstein GmbH
Dr. Reinhard Schmid
Bernhard Visker
SpriAG Sprinkenhof AG, Hamburg
Annual Accounts
174
65 Executive bodies of the former Hamburgische Landesbank – Girozentrale –.
from January 1, 2003 to June 1, 2003
1. Board of Managing Directors.
Alexander Stuhlmann
Chairman
Peter Rieck
Deputy Chairman
Ulf Gänger
Hartmut Strauß
2. Supervisory Board.
Dr. Wolfgang Peiner
Senator, Head of the Ministry of Finance of the Free and Hanseatic City of Hamburg
Chairman
Hans Berger
Chairman of the Board of Managing Directors of the former Landesbank
Schleswig-Holstein Girozentrale
Deputy Chairman
Horst Baecker
Staff member of the former Hamburgische Landesbank – Girozentrale –
Olaf Behm
Dr. Werner Bohl
Auditor, attorney-at-law
Margitta Dauck
Olaf Cord Dielewicz
President of the Savings Banks Association for Schleswig-Holstein
Heinrich Haasis
President of the Savings Banks Association of Baden-Württemberg
Jens Heiser
Executive member of the Board of Managing Directors of Baugenossenschaft
Dennerstraße-Selbsthilfe eG
Dr. Robert Heller
State councillor, Ministry of Finance of the Free and Hanseatic City of Hamburg
Dr. Thomas Kabisch
Chairman of the Executive Board of MEAG MUNICH ERGO AssetManagement
Gesellschaft mbH
Jutta Langmack
175
Dr. Werner Marnette
Chairman of the Board of Managing Directors of Norddeutsche Affinerie AG
Claus Möller
Minister (retired) of the State of Schleswig-Holstein
Alexander Otto
Chairman of the Executive Board of ECE Projektmanagement GmbH & Co. KG
Dieter Pfisterer
Member of the Board of Managing Directors of the former Landesbank
Dr. Wolf-Albrecht Prautzsch
Deputy Chairman of the Board of Managing Directors (retired) of the former
Westdeutsche Landesbank Girozentrale
Susanne Rüschmann
Dr. Klaus Schmid-Burgk
Dr. Stefan Schulz
State councillor, Ministry of Construction and Transport of the Free and
Hanseatic City of Hamburg
Bernd Steingraeber
Gunnar Uldall
Senator, Head of the Ministry of Economics and Employment of the Free and
Hanseatic City of Hamburg
Carola Zehle
Managing Director of Carl Tiedemann (GmbH & Co.)
3. Shareholders’ Assembly.
Hans Berger
Chairman of the Board of Managing Directors of the former Landesbank
Chairman
Dr. Wolfgang Peiner
Deputy Chairman
Dr. Robert Heller
State councillor, Ministry of Finance of the Free and Hanseatic City of Hamburg
Dr. Rainer Klemmt-Nissen
Executive Director of Government, Ministry of Finance of the Free and Hanseatic
City of Hamburg
Claus Möller
Annual Accounts
176
Dieter Pfisterer
Member of the Board of Managing Directors of the former Landesbank
Dr. Andreas Reuß
Managing Director of HGV Hamburger Gesellschaft für Vermögens- und
Beteiligungsverwaltung mbH
Guest:
Olaf Cord Dielewicz
66 Executive bodies of the former Landesbank Schleswig-Holstein Girozentrale.
from January 1, 2003 to June 1, 2003
1. Board of Managing Directors.
Hans Berger
Chairman
Ulrich W. Ellerbeck
Dieter Pfisterer
2. Administrative Board.
Heide Simonis
Minister-President of the State of Schleswig-Holstein
Chairwoman
Jürgen Sengera
Chairman of the Board of Managing Directors (retired) of WestLB AG
First Deputy Chairman
Olaf Cord Dielewicz
Second Deputy Chairman
Heinrich Haasis
Third Deputy Chairman
Günther Anders
Chairman of the Board of Managing Directors (retired) of Sparkasse
Schleswig-Flensburg
Astrid Balduin
Staff member of the former Landesbank Schleswig-Holstein Girozentrale
Peter Deutschland
Chairman of the DGB, Nord
177
Uwe Döring
State Secretary, Ministry of Finance of the State of Schleswig-Holstein
Theo Dräger
Chairman of the Board of Managing Directors of Drägerwerk AG
Waltraut Fuhrmann
(until March 31, 2003)
Norbert Gansel
Mayor (retired) of the City of Kiel
Helmut Gründel
(from April 1, 2003)
Dietmar Höret
Jörg-Dietrich Kamischke
Chief administrative officer of the district of Schleswig-Flensburg
Hans-Peter Krämer
Chairman of the Board of Managing Directors of Kreissparkasse Köln
Knuth Lausen
Dr. Hans Lukas
Chairman of the Board of Managing Directors of Sparkasse Stormarn
Rieka Meetz-Schawaller
Claus Möller
Dr. Wolfgang Peiner
Karl-Heinz Ravn
Michael Rocca
State Secretary, Ministry of Economic Affairs, Employment and Transport
Erwin Rückemann
Chairman of the Board of Managing Directors of Sparkasse Neumünster
Wolfgang Sander
Hans Dietmar Sauer
Chairman of the Board of Managing Directors of Landesbank Baden-Württemberg
Annual Accounts
178
Michael Schmalz
Dr. Ralf Stegner
Minister of Finance of the State of Schleswig-Holstein
Dr. Fritz Süverkrüp
President of the Kiel Chamber of Commerce and Industry
Jorma Juhani Vaajoki
Managing shareholder of Proxim Oy Ltd., Finland
Gaby Woelk
3. Guarantors’ Assembly.
Heide Simonis
Chairwoman
Jürgen Sengera
First Deputy Chairman
Olaf Cord Dielewicz
Second Deputy Chairman
Heinrich Haasis
Third Deputy Chairman
Dr. Karlheinz Bentele
Chairman of the Board of Managing Directors of the Rhineland Savings Banks
Association
Jörg-Dietrich Kamischke
Chief administrative officer of the district of Schleswig-Flensburg
Dr. Hans Lukas
Claus Möller
Michael Rocca
State Secretary, Ministry of Economic Affairs, Employment and Transport
Hans Dietmar Sauer
Chairman of the Board of Managing Directors of Landesbank Baden-Württemberg
Dr. Ralf Stegner
179
67 The Supervisory Board of HSH Nordbank AG.
1. Members.
Heide Simonis, Kiel
Chairwoman
Astrid Balduin, Kiel
Staff member of HSH Nordbank AG
Deputy Chairwoman (from August 18, 2003)
(from August 14, 2003)
Dr. Wolfgang Peiner, Hamburg
Deputy Chairman (until August 18, 2003)
Olaf Behm, Hamburg
Berthold Bose, Hamburg
Head of financial services sector at ver.di – regional district of Hamburg
Margitta Dauck, Dassendorf
(from August 14, 2003 to December 31, 2003)
Peter Deutschland, Hamburg
Chairman of the DGB, Nord
Olaf Cord Dielewicz, Flensburg
Prof. Dr. Hans-Heinrich Driftmann, Elmshorn
Managing shareholder of Peter Kölln KGaA
Annette Falkenberg, Kiel
Trade union secretary, financial services sector at ver.di – district of Kiel
Dr. Thomas Fischer, Düsseldorf
Chairman of the Board of Managing Directors of WestLB AG
(from February 2, 2004)
Dr. Elisabeth Keßeböhmer, Kiel
Staff member of the HSH Nordbank AG
Dr. Rainer Klemmt-Nissen, Hamburg
Executive Director of Government, Ministry of Finance of the Free and Hanseatic
City of Hamburg
(until August 6, 2003)
Hans-Peter Krämer, Brühl
Chairman of the Board of Managing Directors of Kreissparkasse Köln
Annual Accounts
180
Jutta Langmack, Hamburg
Dr. Hans Lukas, Bad Oldesloe
Alexander Otto, Hamburg
Chairman of the Executive Board of ECE Projektmanagement GmbH & Co. KG
Dr. Manfred Puffer, Meerbusch
Member of the Board of Managing Directors of WestLB AG
Dr. Johannes Ringel, Meerbusch
(from August 6, 2003 to December 31, 2003)
Michael Schmalz, Kiel
Hans-Joachim Schwandt, Reinbek
Jürgen Sengera, Kaarst
Dr. Ralf Stegner, Bordesholm
Bernd Steingraeber, Oldershausen
Gunnar Uldall, Hamburg
Senator, Head of the Ministry of Economics and Employment of the Free
and Hanseatic City of Hamburg
2. Committees.
2.1 Members of the Risk Committee.
Dr. Johannes Ringel
Chairman
(until December 31, 2003)
Hans-Peter Krämer
Chairman
(from January 1, 2004)
Olaf Cord Dielewicz
Deputy Chairman
181
Astrid Balduin
Olaf Behm
Dr. Wolfgang Peiner, Senator
Bernd Steingraeber
Dr. Ralf Stegner, Minister
2.2 Members of the Audit Committee.
Dr. Johannes Ringel
Chairman
Hans-Peter Krämer
Chairman
Olaf Cord Dielewicz
Deputy Chairman
Astrid Balduin
Olaf Behm
Margitta Dauck
Michael Schmalz
Dr. Ralf Stegner, Minister
2.3 Members of the Executive Committee.
Heide Simonis, Minister-President
Chairwoman
Deputy Chairman
Olaf Cord Dielewicz
Dr. Thomas Fischer
Dr. Johannes Ringel
Michael Schmalz
Annual Accounts
182
2.4 Members of the Mediation Committee.
Chairman
Heide Simonis, Minister-President
Astrid Balduin
Olaf Behm
68 Members of the Board of Managing Directors of HSH Nordbank AG.
Alexander Stuhlmann
Chairman
Responsible for the following Centers of Competence:
Communications/Investor Relations, Human Resources,
Private and Business Clients, Legal and Board Advisory Services
1948
Hans Berger
Deputy Chairman
IT/Organization, Audit Department, Shipping and
Savings Banks/Public Sector Customers
1950
Peter Rieck
Participations/Research, Real Estate, Lease Finance as well as Transportation
1952
Franz S. Waas, Ph. D.
Asset Liability Management, Capital Markets as well as
Portfolio Management and Investments
1960
Hartmut Strauß
Controlling/Finance, Credit Risk Management,
Services, Taxes as well as Transaction Services
1949
Ulrich W. Ellerbeck
Financial Institutions/Global Trade Finance as well as Corporates
and Structured Finance
1952
Hamburg/Kiel, March 12, 2004
Stuhlmann
Rieck
Waas
Berger
Strauß
Ellerbeck
183
Auditor’s Certificate.
We have audited the annual financial statements including the accounts of HSH Nordbank AG,
Hamburg/Kiel, along with the Group financial statements prepared by the latter and its report
on the situation of the Bank and the Group for the financial year ended December 31, 2003.
According to German commercial law, the legal representative of the Bank is responsible for
preparing and compiling the records in question. Our task is to provide an assessment, on the
basis of the audit we have performed, of the annual financial statements and the accounting as
well as of the Group financial statements prepared by the Bank and of the management report
and the Group management report.
We conducted our audit in accordance with § 317 of the German Commercial Code, taking
account of the generally accepted auditing principles prevailing in Germany, as laid down by
the Institut der Wirtschaftsprüfer (IDW, auditors’ association). These standards require that we
plan and perform the audit to obtain reasonable assurance as to whether the financial statements are free of material misstatements or violations impacting on the impression conveyed
by the presentation of the financial statements in line with generally accepted accounting principles applicable in Germany and of the management report relating to the asset, financial and
earnings situation. In organizing the audit processes, knowledge of the Bank’s field of activities
and its business and legal environment as well as expectations of possible errors were taken
into account. Within the scope of the audit, the effectiveness of the internal control system as
well as vouchers generated in the process of accounting, the annual and Group financial statements and the management report and the Group management report were largely analyzed
on the basis of samples taken. The scope of the audit also included assessing the accounting
principles used and significant estimates by the legal representatives, as well as evaluating
the overall presentation of the annual and Group financial statements and the management
report and the Group management report. We are confident that our audit provides a sufficiently sound basis on which to form our opinion.
Our audit gave rise to no objections.
In our opinion, the financial statements in line with the generally accepted accounting principles prevailing in Germany give a true and fair view of the Bank’s asset, financial and earnings
situation. The management report and the Group management report give a true and fair overall view of the Bank’s situation and that of the Group and appropriately represents the risks
that lie ahead in future developments.
Hamburg, March 26, 2004
BDO Deutsche Warentreuhand
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Rohardt
German Public Auditor
Erlemann
German Public Auditor
184
Glossary
Anstaltslast (Maintenance obligation)
Obligation on the owners of a bank in the legal form of an institution under public law
to maintain its solvency and to enable it to meet its financial obligations at any time.
The Brussels Agreement of July 17, 2001 determined that Anstaltslast should phase out on
July 18, 2005. This transitional arrangement defined in the Agreement is also applicable
to HSH Nordbank. The states of Hamburg and Schleswig-Holstein determined in the State
Treaty governing the merger that Anstaltslast applies in identical terms to HSH Nordbank
as it did toward the predecessor banks, Hamburgische Landesbank and Landesbank Schleswig-Holstein.
Asset-Backed-Securitization (ABS)
A term used for packaging loans and advances into securities. To this end, selected balance
sheet assets are pooled and sold to a special purpose company. The special purpose company
funds the acquired pool by issuing marketable securities collateralized by the transferred
assets. The purpose of such a transaction is, for example, to reduce a bank’s regulatory
capital requirements.
Basle I/Basle II
Basle I comprises the international regulatory standards on capital adequacy as applied to
banking activities. These standards, first published in 1988, are currently being revised by
the Basle Committee. Central to the new regulations is the abolition of the flat-rate capital
adequacy standard prevailing up to now, in favor of a standard that reflects the actual
risks of the banking activities concerned. Promulgation of the new agreement on capital
adequacy (Basle II) is planned for mid 2004, with the standards coming into effect as from
end 2006.
Core capital ratio
The core capital ratio expresses the relationship between a bank’s core capital and its
➞ Risk-weighted assets.
Cost income ratio (CIR)
CIR is the ratio between administrative expenses and net operating income (net interest
income, net commission income, net income from trading and the balance of other operating income and expenses before risk provisions) in a specified period. CIR provides a quantitative measure of the efficiency of an enterprise. The smaller the CIR, the more efficient
the bank’s business operations.
Credit derivatives
Credit derivatives are financial instruments used to transfer credit risks to third parties
acting as guarantors (the so-called protection sellers). The original lender-borrower relationship of the guarantee (the party selling credit risks, the so-called protection buyer) is neither
changed nor reestablished by this transaction. Credit derivatives are traded on the basis of
standardized master agreements and are subject to an ongoing valuation at market prices.
185
Credit standing
Credit standing is a measure of the default risk of a borrower, or of the creditworthiness of
a bond issuer. The lower the credit standing, the higher the loss exposure associated with a
loan or an investment in bonds.
Cross selling
In addition to the products they are already using, existing customers are offered further
products in line with their requirements. The goal is to systematically utilize existing customer potential and to extend the value of the customer relationships.
Derivatives
Derivatives are financial instruments derived from original investment instruments (for
example currencies, shares, bonds). Derivatives comprise, for example, options, swaps and
futures. Their value depends primarily on the exchange rates and prices of the underlying
instruments, as well as price expectations and volatilities. Derivatives are used, for example,
as a risk management tool, or to take advantage of market opportunities.
Forward transactions and options
In forward transactions and options – as opposed to spot transactions – conclusion of the
contract and settlement/delivery do not coincide. The contractual agreement is to buy/sell
a specified amount of a financial instrument, at a specified price, at a stipulated future
date. A distinction is made between unconditional forward transactions such as futures
(= standardized forward contracts listed on an exchange) and contingent options evidencing
a right, but no obligation on the holder of the contract to exercise that right.
Gewährträgerhaftung (Guarantee obligation)
Under Gewährträgerhaftung, the owners of a bank in the legal form of an institution under
public law have joint and several unlimited liability for the obligations of the bank in the
event that creditors cannot be satisfied out of the assets of the bank. The Brussels Agreement of July 17, 2001 determined that Gewährträgerhaftung should remain for all liabilities
entered into up until July 18, 2001, irrespective of their maturities, and therefore without
temporal limit. Obligations incurred after this date but prior to July 18, 2005 are covered
by Gewährträgerhaftung, if their maturity does not exceed December 31, 2015. This transitional ruling, as defined by the Agreement, also applies to HSH Nordbank. The Free and
Hanseatic City of Hamburg and the State of Schleswig-Holstein determined in the State
Treaty governing the merger that Gewährträgerhaftung applies to exactly the same extent
to HSH Nordbank as it did toward the public sector predecessor banks, Hamburgische
Landesbank and Landesbank Schleswig-Holstein.
Hedging
Hedging specifies a strategy to limit price or interest rate risks by concluding transactions
with compensatory effects to existing or future positions.
186
MaH (Minimum standards for trading activities of credit institutions)
The MaH standards impose requirements on banks to ensure their solvency. Key elements
are the overall responsibility of all managing directors for the proper organization and
supervision of trading activities, standards for risk controlling and risk management, and
the functional separation of the divisions involved in trading, settlement and controlling,
accounting and supervision. Trading must also be separated organizationally from the
other divisions.
MaK (Minimum standards for lending activities of credit institutions)
The MaK standards impose requirements on banks for the limitation of credit risks. They
comprise a framework of conditions for organizing and structuring lending activities,
aiming at developing risk awareness inside credit institutions and enhancing transparency.
Key stipulations concern the predefinition of a credit risk strategy, the separation of specific
functions, clearly defined lending processes, the appropriate monitoring of risks and properly functioning reporting procedures.
Netting
Netting denotes the offsetting of corresponding claims and liabilities. A legally binding
netting agreement will reduce the gross counterparty default risk arising from a bank’s
transactions with the same counterparty to a net exposure.
RaRoC (Risk-adjusted Return on Capital)
The RaRoC ratio relates risk-adjusted income to equity capital employed. Risk-adjusted income is calculated as operating income less costs – where costs include not only personnel
and operating costs, but also standard risk costs, as well as equity costs resulting from risk.
Rating
Internal rating is the detailed evaluation of the risk constituted by a borrower, or of an
individual risk position of that borrower. External ratings are assessments of the creditworthiness of a security (issue ratings), or of a debtor (issuer ratings), by independent rating
agencies (for example Standard & Poor’s, Moody’s, Fitch). Rating agencies and capital markets rely for their assessments of creditworthiness on a number of economic indicators,
among them the adequacy and structure of capitalization, as well as return on equity (RoE),
but also the cost-income ratio. Soft factors such as business model and environment, ownership structure and support, general management, risk profile, risk management, value of
customer relations and selling power are also taken into account.
Risk-weighted assets
According to the German Banking Act (KWG), risk-weighted assets comprise balance sheet
assets as well as off-balance-sheet transactions (including swaps, forward transactions and
options). The ratio of regulatory capital (mainly core and supplementary capital) to riskweighted assets must not fall below 8 %. Weighting factors vary from 0 to 100 % depending
on the grade of risk carried by the asset.
RoE (Return on Equity)
RoE is the ratio of results (net income before taxes) in relation to the equity employed,
expressing the profitability of an enterprise.
187
Syndicated loans
Term for large loans arranged by a consortium of banks. Syndication (the formation of a
consortium of banks) results in a spreading of credit risk across the banks concerned.
VaR (Value at Risk)
VaR is a method of quantifying market price, credit and default risks. On the basis of an
estimated probability distribution, a potential loss ceiling is determined that will not, with
a given probability (for example 99 %), be exceeded within a specified period (for example
ten days). This method enables the bank to determine adequate risk provisions covering
the potential losses calculated.
188
Addresses
Germany
Head Offices
HSH Nordbank AG
Gerhart-Hauptmann-Platz 50
20095 Hamburg
Phone: +49-40-33 33-0
Fax: +49-40-33 33-342 22
Internet: www.hsh-nordbank.com
HSH Nordbank AG
Martensdamm 6
24103 Kiel
Phone: +49-431-900-01
Fax: +49-431-900-341 24
Branches
HSH Nordbank AG Niederlassung Berlin
Mohrenstraße 42
10117 Berlin
Phone: +49-30-20 39-72 17
Fax: +49-30-20 39-72 22
HSH Nordbank AG Niederlassung Lübeck
Breite Straße 36–40
23552 Lübeck
Phone: +49-451-70 35-0
Fax: +49-451-70 35-5119
Subsidiaries and Participations
AGV Anlagen- und Grundstücksvermietungsgesellschaft mbH & Co. KG
Eleonorenstraße 64
55252 Wiesbaden
Phone: +49-611-99191-0
Fax: +49-611-99191-33
DGAG Deutsche Grundvermögen GmbH
Fabrikstraße 7
24103 Kiel
Phone: +49-431-97 96-355
GEHAG GmbH
Mecklenburgische Straße 57
14197 Berlin
HGA Beteiligungs AG
Rosenstraße 11
20095 Hamburg
Phone: +49-40-33 33-44 11
Fax: +49-40-33 33-44 17
HGA Capital Grundbesitz und
Anlage GmbH
Rosenstraße 11
20095 Hamburg
Phone: +49-40-33 33-11105
Fax: +49-40-33 33-342 21
HGA Management Investor und
Anlage GmbH
Rosenstraße 11
20095 Hamburg
Phone: +49-40-33 33-110 66
Fax: +49-40-33 33-342 30
HSH N Corporate Finance GmbH
Zürich-Haus
Domstraße 17–19
20095 Hamburg
Phone: +49-40-30 38 56 56-00
Fax: +49-40-30 38 56 56-49
HSH N Immobilien Holding GmbH
Burchardstraße 14
20095 Hamburg
Phone: +49-40-33 33-125 78
Fax: +49-40-33 33-245 05
HSH N Immobilien Development GmbH
20095 Hamburg
Phone: +49-40-33 33-125 78
Fax: +49-40-33 33-245 05
HSH N Invest GmbH
Gartenstraße 9
24103 Kiel
Phone: +49-431-900-113 18
Fax: +49-431-900-34159
HSH N Kapital GmbH
Gartenstraße 9
24103 Kiel
Phone: +49-431-900-113 18
Fax: +49-431-900-341 59
Rosenstraße 8
20095 Hamburg
Phone: +49-40-30 30 66-0
Fax: +49-40-30 30 66-90
LB Immo Invest GmbH
Mönckebergstraße 11
20095 Hamburg
Phone: +49-40-33 33-44 11
Fax: +49-40-33 33-44 17
189
PLUS BANK AG
Burchardstraße 14
20095 Hamburg
Phone: +49-40-2100-3
Fax: +49-40-21 00-50 00
W. Jacobsen Aktiengesellschaft
Alter Markt 1–2
24103 Kiel
Phone: +49-431-900-127 69
International
North Eastern Europe
HSH Nordbank AG Copenhagen Branch
Kalvebod Brygge 39-41
1560 Copenhagen V
Denmark
Phone: +45-33 44-99 00
Fax: +45-33 44-99 99
Internet: www.hsh-nordbank.dk
HSH Nordbank AG Helsinki Branch
Eteläranta 12, P.O. Box 216
00130 Helsinki
Finland
Phone: +358-9-6133-46 00
Fax: +358-9-6133-46 20
Internet: www.hsh-nordbank.fi
HSH N Bank AG Tyskland, Filial Sverige
Kungsträdsgårdsgatan 10, Box 1721
11187 Stockholm
Sweden
Phone: +46-8-54 50-10 70
Fax: +46-8-54 50-10 89
Internet: www.hsh-nordbank.se
HSH Nordbank AG
Representative Office Oslo
Klingenberggaten 5, 9th Floor
Postboks 1803 Vika
0123 Oslo
Norway
Phone: +47-220157 70
Fax: +47-220157 79
HSH Nordbank AG
Representative Office Poland
Warsaw Financial Centre, 30th Floor
Ul.Emilii Plater 53, 00113 Warsaw
Poland
Phone: +48-22-456 10 60
Fax: +48-22-456 10 69
HSH Nordbank AG
Representative Office Riga
Krisjana Valdemara Street 21
1010 Riga
Latvia
Phone: +371-7 2174 24
Fax: +371-7 2172 24
HSH Nordbank AG
Representative Office Tallinn
2, Roosikrantsi
10119 Tallinn
Estonia
Phone: +372-611 06 70
Fax: +372-611 06 71
Gudme Raaschou
Asset Management Holding A/S
39 – 41, Kalvebod Brygge
1560 Copenhagen V
Denmark
Phone: +45-33 44 90 00
Fax: +45-33 44 90 01
Internet: www.gudme-invest.dk
Gudme Raaschou Bankaktieselskab A/S
39 – 41, Kalvebod Brygge
1560 Copenhagen V
Denmark
Phone: +45-33 44 90 00
Fax: +45-33 44 90 01
Internet: www.gr.dk
PCA Corporate Finance Oy
Eteläranta 12
00130 Helsinki
Finland
Phone: +358-9 6133 44 00
Fax: +358-9 6133 44 55
Internet: www.pca.fi
Western Europe
HSH Nordbank AG London Branch
Moorgate Hall 155, Moorgate
London EC2M6UJ
UK
Phone: +44-207 9 72 92 92
Fax: +44-207 9 72 92 90
HSH Nordbank AG Luxembourg Branch
2 rue Jean Monnet
2180 Luxembourg
Luxembourg
Phone: +352-42 4141 37
Fax: +352-42 4141 330
Internet: www.hsh-nordbank-int.com
190
HSH Nordbank AG Dutch Real Estate Office
c/o Abbey Business Centre
Kantoorgebouw Busitel 1, Orlyplein 85
1043 DS Amsterdam
Netherlands
Phone: +31-20 403 74 90
Fax: +31-20 403 74 91
HSH N Finance (Guernsey) Ltd.
Arnold House, St. Julian’s Avenue
St. Peter Port, Guernsey GY1 3DA
Channel Islands (via UK)
Phone: +49-431 900 254 00
Fax: +49-431 900 6 454 00
HSH Nordbank (Guernsey) Ltd.
Elizabeth House, Les Ruettes Brayes
St. Peter Port, Guernsey GY 1 1EW
Channel Islands (via UK)
Phone: +44-14 817192 00
Fax: +44-14 8172 99 77
HSH Nordbank International S. A.
2 rue Jean Monnet
2180 Luxembourg
Luxembourg
Phone: +352-42 4141-1
Fax: +352-42 4196/97
Internet: www.hsh-nordbank-int.com
North America
HSH Nordbank AG New York Branch
590 Madison Avenue, 28th floor
New York, NY 10022-2540
USA
Phone: +1-212-407 60 00
Fax: +1-212-407 60 33
HSH Nordbank Cayman Islands Branch
590 Madison Avenue, 28th floor
New York, NY 10022-2540
USA
Phone: +1-212-407 60 00
Fax: +1-212-407 60 33
Asia
HSH Nordbank AG Hong Kong Branch
Cheung Kong Centre, 26th Floor
2, Queen’s Road
Hong Kong
PR China
Phone: +852-28 43 26 88
Fax: +852-28 45 9018
HSH Nordbank AG Singapore Branch
#32-03 Centennial Tower
3 Temasek Avenue, Singapore 039190
Phone: +65-65 50 90 00
Fax: +65-65 50 90 05
HSH Nordbank AG
Representative Office Hanoi
Hanoi Central Office Building
Suite 4-03, 4th Floor
44B Ly Thuong Kiet Street,
Hoan Kiem District
Hanoi
Vietnam
Phone: +844-9 34 49 81
Fax: +844-9 34 49 82
HSH Nordbank AG
Representative Office Shanghai
29/F China Insurance Bld.
166, Lu Jia Zui East Road
Pudong
Shanghai
PR China
Phone: +86-2168 41 93 21
Fax: +86-2168 41 94 37
191
192
Publication Information
Published by
HSH Nordbank AG
20095 Hamburg
Phone: +49 40-33 33-0
Fax: +49 40-33 33-342 22
Martensdamm 6
24103 Kiel
Phone: +49 431-900-01
Fax: +49 431-900-341 24
Communications/Investor Relations
Dr. Konrad Kentmann
Phone: +49 40-33 33-108 97
Fax: +49 40-33 33-343 38
E-Mail: konrad.kentmann@hsh-nordbank.com
The Annual Report on the Internet
www.hsh-nordbank.com/InvestorRelations
Consulting for Concept, Text, Design, Realization
Citigate SEA GmbH & Co. KG, Düsseldorf
Photography
Jürgen Herschelmann, Rüdiger Niemz,
Bernd Timme, Jens Wunderlich
The Annual Report is also published in German.

HSH Nordbank AG 2003 Annual Report SET FOR A STRONG

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