Investor Presentation€¦ · HSH Nordbank AG –2017 results at a glance INVESTOR PRESENTATION...

Investor Presentation

IFRS Group Result as at 31 December 2017

INVESTOR RELATIONS

HAMBURG, 26 APRIL 2018

HSH Nordbank AG – 2017 results at a glance

226.04.2018INVESTOR PRESENTATION

1 Additional loan loss provisions of EUR -1.1bn and revaluation of hybrid capital of EUR 413mn; 2 Coverage ratio is calculated based on the ratio of loan loss provisions in the portfolio to NPE; 3 Pro-forma, not taking into account the regulatory relief effect of the guarantee; 4 Transaction Banking is not an independent segment

Group

EaD: EUR 72.2bn

Net income before taxes: EUR -453mn – without privatisation effects1 net income before taxes of EUR 238mn

NPE ratio: 10.4% (before portfolio-transaction) – down from 17.5% at the end of 2016

Coverage ratio2: 64%

CET1 ratio without guarantee3: 15.4%

Other and Consolidation

► Overall Bank positions at Group level

► Equity and liquidity portfolio (mainly liquidity reserve)

► Net result from restructuring and privatisation, including revaluation of hybrid capital

EaD: EUR 8.7bn

Net income b.t.: EUR 398mn

NPE ratio: 0%

Coverage ratio: 0%

Non-Core Bank

► Non-strategic and non-performing assets

► Portfolio transaction for an NPE ratio of < 2% on Group level after closing

► Group without Non-Core Bank after closing

► Adequate NPE cover thanks to loan loss provisions and collateral values

EaD: EUR 9.8bn

Net income b.t.: EUR -1,583mn

NPE ratio: 68%

Coverage ratio: 65%

Core Bank

► Strategic lending business

► Main earnings components of the Transaction Banking product division allocated to the market units

EaD: EUR 53.7bn

Net income before taxes: EUR 732mn

NPE ratio: 1.6%

Coverage ratio: 50%

Corporate Clients

EaD: EUR 13.9bn

Real Estate Clients

EaD: EUR 11.8bn

Shipping

EaD: EUR 5.5bn

Treasury & Markets

EaD: EUR 22.5bn

Tra

nsa

ctio

n

Ba

nk

in

g4

Implementation of privatisation burdened with two

significant effects on Group net result for 2017

IFRS Group net result in 2017

26.04.2018INVESTOR PRESENTATION 3

Transition to Group net result before taxes without privatisation effects1

in EUR mn

Privatisation effects

2 3 8

-4 5 3

Net resultbefore taxes 2017

without privatisation effects

Loan loss provisionportfolio-transaction

+1,104

Revaluation ofhybrid capital

-413

Net resultbefore taxes 2017

Other and

Consolidation

Non-Core Bank

1 Adjustments with opposite sign in each case

Negative effect from portfolio-transaction just partially compensated by coupon suspension

► Result from revaluation of hybrid capital of EUR 413mn

► Negative effect of EUR -1,1bn loan loss provision for the portfolio-transaction

► Group net result before taxes 2017 without privatisation effects of EUR 238mn

Core Bank with stable operating performance, solid KPIs –

privatisation effects without any implications

IFRS Group net result in 2017


Core Bank net result before taxes of EUR 732mn(PY: EUR 667mn)

Total income of the Core Bank of EUR 1,055mn up year-on-year (EUR 1,032mn), also due to the release of hidden reserves

New business of EUR 8.5bn almost on par with the previous year (PY: EUR 8.9bn)

Core Bank NPE ratio of 1.6% (PY: 1.9%)

Administrative expenses of the Core Bank of EUR -302mn further reduced as planned (PY: EUR -358mn), CIR of 28.2% (PY: 34,6%) not representative due to one-off effects

CET1 ratio at a high level: phase-in without guarantee1 15.4%(PY: 12.6%)

Liquidity ratios: LCR 169%, NSFR 114%

2017 funding plan exceeded

1 Pro-forma, without taking into account the regulatory relief effect of the guarantee; 2 2017 new business plus EUR 0.2bn Treasury & Markets (PY: EUR 0.2bn)

Satisfying business development in the Core Bank in the run-up to the change in ownership

Shipping

0.50.3

Real Estate Clients

4.7

3.8

3.1

Corporate Clients

4.6

2016 2017

New business

in EUR bn

Breakdown of new business2

in EUR bn

Thereof almostEUR 2.3bn (27%) with 120 new clients

2017

8.9

2016

8.5

-4%

►►► 1. Privatisation

2. Core business fields

3. Financial key figures for 2017

4. Outlook for 2018

5. Appendix

26.04.2018

Agenda

INVESTOR PRESENTATION 5

p. 6

p. 18

p. 40

p. 53

p. 55

Future owners rank among the world's most experienced

financial investors in the banking sector

Privatisation


JCF IV NeptunHoldings

S.á.r.l.

GoldenTree Asset Management Lux

S.á.r.l.Chi Centauri LLC

Funds1 initiated byCerberus Capital Management, L.P.

35.0% 12.5% 7.5%

Future ownership structure – private, independent shareholders as of closing

BAWAG P.S.K.

Bank für Arbeitund Wirtschaft und

ÖsterreichischePostsparkasse

Aktiengesellschaft

2.5%

Promontoria Holding 221 B.V.

17.0%


13.5%


12.0%

42.5%

Fund initiated byJ.C. Flowers &

Co. LLC

Fund initiated byGoldenTree

Asset

Management LP

Fund initiated byCentaurus

Capital Fund LP

1 Change in share allocation among the funds initiated by Cerberus possible

CEO

Stefan ErmischCRO

Ulrik Lackschewitz

Market

Torsten Temp

CFO

Oliver Gatzke

Management Board of HSH Nordbank

► New, exclusively private, shareholders that are independent of each other: Funds initiated by Cerberus Capital Management, L.P., J.C. Flowers & Co. LLC, GoldenTree Asset Management L.P., Centaurus Capital LP as well as BAWAG P.S.K. AG

► The federal states of Hamburg and Schleswig-Holstein as well as the Savings Banks Association of Schleswig-Holstein have concluded a purchase agreement for all of their indirectly held shares in HSH Nordbank AG (94.9%) – first successful privatisation of a federal state bank in Germany initiated

► Closing of the purchase agreement subject to various conditions: Among other things, ownership control procedure implemented by the banking supervisory authorities, approval by the European Commission and of the federal state parliaments of Hamburg and Schleswig-Holstein; closing expected in the second or third quarter of 2018

► Relief of almost all legacy burdens thanks to the transfer of NPE (portfolio transaction) – mainly ship financing – to funds initiated by Cerberus Capital Management, L.P., J.C. Flowers & Co. LLC, GoldenTree Asset Management L.P. and CentaurusCapital LP

► Portfolio transaction will improve the credit quality significantly, NPE ratio will be reduced to below 2 percent from today's point of view; dissolution of the Non-Core Bank and full termination of the guarantee upon closing

► One-off burdens from portfolio transaction will be digested well due to a very comfortable capital position – after transaction,CET1 capital ratio expected to come to around 15 percent

HSH Nordbank gets experienced private owners,

legacy assets of Non-Core Bank to be carved-out

Privatisation


2018

Legacy burdens halved – after portfolio transaction

NPE ratio < 2%

Privatisation


Market value = Sales price

2.5

Additional loan loss provision

-1.1

Carrying amount

3.5

Loan loss provision

already formed

-2.8

31.12.2017

6.3

Implications of the portfolio transaction on

net result2

in EUR bn, EaD

Portfolio quality / NPE ratio in the Group

in EUR bn;

72.2

1.2

2017

64.7

-6.3(-9%)

After closing

64.7

65.9

-7.1 NPE

7.5

2016

83.6

69.0

14.6

PerfomingNPE

10.4%

2017

< 2%

After closing

55% 40%

NPE reduction in 2017 by asset class

in EUR bn, EaD

1.8

14.6

Shipping

4.1

NPE2016

Corporates1 NPE2017

0.17.5

Real Estate Other

1.1

Carrying amount

NPE ratio

► NPE almost halved in 2017 to EUR 7.5bn, thus NPE ratio reduced to 10.4% already before closing

► Continuation of stringent winding-down strategy with the aim of achieving an NPE ratio in line with the German market average

► Balance sheet relief after transfer of the portfolio ofEUR 6.3bn at closing

1 Corporate Clients, Energy & Utilities, Infrastructure & Logistics and Aviation; 2 Rounding differences possible

17.5%

2016

Portfoliotransaction

∑ EUR 7.1bn in NPE winding-down

Sale to anSPV that is independentof HSH Nordbank

Dissolution of Non-Core Bank – legacy assets to be

extracted, Core Bank takes healthy part

Privatisation


Corporate Clients

4.3

Shipping

0.6

Portfolio transaction – pro-forma presentation

2017, EaD, in EUR bn, without Other & Consolidation

Core Bank Non-Core Bank

Corporate Clients

Real Estate Clients

Shipping Real Estate Divestments

13.7 11.8 4.9

0.30.2 0.0 0.6 1.0

∑ EUR 6.3bn NPE

Portfolio transaction

Aviation

0.1

0.00.8 1.3 1.1 0.0

0.4

Per

form

ing

NP

E

Treasury &Markets

22.5

0.0

∑ EUR 3.6bn (3.2bn PE; 0.4bn NPE)

Transfer to Core Bank

Group without

Non-Core Bank after closing

∑ EUR 52.9bn PE before transfer,∑ EUR 56.1bn PE after transfer

∑ EUR 0.8bn NPE before transfer,∑ EUR 1.2bn NPE after transfer

► Non-Core Bank assets after portfolio transaction of EUR 3.6bn (thereof EUR 0.4bn NPE) will be taken over by the Core Bank in 2018

► NPE ratio of < 2% after portfolio transaction and dissolution of the Non-Core Bank after transfer

New era – focused and agile bank from northern

Germany for medium-sized clients

Privatisation


2019

► Healthy Bank relieved of the Non-Core Bank and the guarantee; abolition of the previous EU state aid-related restrictions will open up additional business opportunities

► Selective moves to step up international activities in selected business areas in the future: Series of initiatives prepared by the Bank itself; “New Bank” will benefit from the expertise and network of its strong new owners

► Further cost cuts, expansion of product portfolio and strengthening of net commission income to boost profitability

► Focus on improved liability structure and diversified funding base

► Plans for seamless transition from the guarantee scheme from the German Savings Banks Finance Group (SFG) to the Federal Association of German Banks (BdB)

► Sustainable further development of the “New Bank” with solid, competitive key management indicators/KPIs

2018

“New Bank”

–New name, new

brand

Business model for a sustainably profitable Bank

with a healthy balance sheet structure

Privatisation


Profitability

RoE before taxes

Capital

CET1

Costs

CIR1

Objective for 2022

Credit quality

NPE ratio

Total assets

in EUR bn

1 Including other operating result; 2 Smart Loan Servicing

Transformation of the business model

> 8%

~ 40%

~ 15%

~ 2%

~ 55

► Positive business development in 2017 has made the

Bank much more robust

► Further relief of almost all legacy burdens thanks to the

portfolio transaction - transfer of NPE

► Less organisational complexity: Among other things

thanks to dissolution of the Non-Core Bank and termination of the guarantee, expected in 2018

► Optimised liabilities side thanks to improved deposit

structure, among other things by attracting retail deposits

► Liquidity buffer to be reduced in a targeted manner

► Trend towards higher net margins due to decreasing

liquidity costs and rising interest rate environment

► Rising commission income thanks to initiatives by market

and product units

► Increased efficiency thanks, among other things, to further

measures to reduce complexity

► Normalisation of loan loss provisions

► RWA-friendly business approaches by expanding

syndication activities (for example, SLS2 and debt fund)

Liabilities side to be strengthened: reduced wholesale

deposits, expansion of retail deposits

Privatisation


Liabilities structure1

– approximated funding volume

in EUR bn

6.6 1.0Cash reserve

► Reduced total assets/liabilities by reducing concentration risks with regard to deposits

► Establishment of retail deposits via online platform "Zinspilot” (Deposit Solutions) successfully launched at the end of 2017, current volume of deposits of EUR 1.3bn

► Pressure on profitability due to planned current high liquidity position; from the end of 2017, active reduction in surplus liquidity by reducing wholesale deposits

► Drop in funding costs as a central and realistic lever for increasing profitability

Progress in the privatisation process has already been resulting in lower refinancing costs since the autumn of 2017

Prospect of funding levels moving closer to competitors’ levels

Equity and subordinated capital2

Repos

ABF

Pfandbriefe

Development banks

Seniorunsecured

Retail deposits

Wholesale deposits

2022

12

21

8

4

12

8

7

2017

70

14

21

9

4

16

0

25

53

Objective for 2022

1 Rounding differences possible; 2 Incl. trading liabilities and provisions

Established, regional business model will be

further developed and diversified

Privatisation


Portfolio by segment1

EaD in %

1%

3%3%1%

8%

16%

68%

Portfolio by region1

EaD in %

1 EAD as at 31.12.2017; 2Revenue size between EUR 100mn and EUR 1bn

6%

31%

8%

3%

10%16%

12%

14%

Continuity: Business model builds on existing strengths and well established

client relationships

► Stable roots in northern Germany with an in-depth understanding of local markets and strong client loyalty

► Strong position as a bank for corporates with a sector focus

► Long track record as an important partner in specific asset classes (real estate, energy, shipping)

Further development: Strengthening the sector focus on mid-caps2

► Real estate: Focus on new business in German metropolitan regions such as Hamburg,

Frankfurt, Munich, Berlin, Düsseldorf and Stuttgart, as well as gradual expansion of international business in selected countries: Austria, Benelux, France and UK

► Corporate Clients: Continued focus on German medium-sized companies and larger

corporates, as well as project financing in renewable energy (onshore projects) in Germany, Scandinavia, Ireland and the Netherlands, also rail transport, district heating network, data infrastructure

► Shipping: Strategic reduction in ship financing; focus on better credit quality and more

sustainable earnings, particularly in Greece and Singapore

Solid mixture of established market access and further development of the

portfolio provides stability and growth potential

► Portfolio with good levels of regional and sector-related diversification

► Solid risk-return profile with potential in growth markets (e.g. renewable energies)

► Roots in the northern German region as a basis for international activities to be stepped up on a selective basis in Real Estate, Energy & Utilities and Shipping

International organisations

Other

Asia/Pacific

Eastern Europe

Western Europe

Eurozone

Germany

Energy & Utilities

Shipping

Logistics & Infrastructure

Corporates

Real Estate Clients

Non-Core Bank

Other & Consolidation

Treasury &Markets

Transformation based on existing strengths,

supplemented by selected international activities

Privatisation


Excerpt from asset structure1

– EaD by market departments

in EUR bn

Objective for 2022

2 3

6

1 2

1 4

54

2017

~18

Real Estate Clients

Shipping

Corporate Clients

~4

~18

Treasury & Markets

2022

~12

~53

Expansion in Corporate Clients and Real Estate

Clients segments

► New business in the Corporate Clients and Real Estate segments will balance out the maturity profile of the existing portfolio and result in a stable balance sheet with an attractive yield profile

Risk-return profile in new business

► Focus on the quality of assets rather than on market shares will allow for targeted new business in the core markets, including Corporate Clients and Real Estate, based on strong existing business relationships

► Selective moves to step up international activities, numerous clients operate in selected countries – expand scope of business with existing clients:

Energy and Utilities: Scandinavia, Ireland and the Netherlands

Real Estate Clients: Austria, Benelux, France and UK

Risk-conscious business expansion

► Risk profile remains positive, slight RWA increase will be driven by changes in the balance sheet structure (expansion of the client lending business and reduction in liquidity positions)

27 ~30RWA

1 Rounding differences possible

1 0

8 Project financing

Corporates

18

Well positioned with future business model and

solid KPIs – also in comparison with the competition

Privatisation


Capital – CET1 ratio (phase in, without guarantee)in %

Credit quality – NPE ratio

in %

Profitability – RoE after taxes3

in %

1 Sources: EBA Risk Dashboard, 2017-Q3; 2 Without the effect of the release of hidden reserves of EUR 356mn and revaluation of hybrid capital of EUR 413mn; 3 RoE for averages for Germany and Europe on the basis of RoE after taxes; 4 Privatisation effects: additional loan loss provisions of EUR 1.1bn and revaluation of hybrid capital of EUR 413mn, adjusted IFRS net result amounts to EUR 238mn

Before taxes

► Following accelerated wind-down of legacy burdens, sale of market portfolio and portfolio transaction, to achieve an NPE ratio of < 2.0%, as well as a significantly reduced shipping exposure

► Adequate capital ratio even without the guarantee, with a comfortable buffer to SREP requirements

After taxes

► Development of CIR to bring it in line with objective by way of efficiency improvements, an increase in revenue and further cost reduction thanks to dissolution of the Non-Core Bank and of the guarantee, as well as a reduced number of employees

► RoE before taxes of 5.1% excluding privatisation effects4 in 2017

► Improvement in profitability by increasing efficiency, reducing costs, increasing income that does not depend on interest rates and balance sheet turnover rate

Objective already achieved upon closing

Pro forma, not taking into account the regulatory relief effect of the guarantee

Net income b. taxes excl. effects of privatisation4

Costs – CIR

in % Adjusted to reflect extraordinary income2

2017

62.4

Objective2022

40.0

GER1

75.9

EU1

61.8

EU1

14.6

GER1

15.8

Objective2022

15.0

2017

15.4

1.8

Objective2022

2.0

2017

10.4

3.7

EU1GER1

~6.0

~8.0

~2.0

2017

5.1

EU1

7.1

Objective2022

3.3

GER1

Moody's and Fitch: Future Bank with improved

financial strength

Privatisation

1 See also last publications by rating agencies on HSH Nordbank homepage: www.hsh-nordbank.de/de/investorrelations/rating/rating.jsp; 2 RuR: Rating under Review; 3 RWN bzw. RWP: Rating Watch Negative / Rating Watch Positive; 4 Includes what are known as complex structured bonds of German banks that are to be given preferential treatment over non-structured bonds in a bail-in under the new German insolvency law as of 2017 (KWG §46f (6) and (7))


9.06.2017 / 9.03.2018

• “If its privatisation is successful, HSH will emerge as a smaller, financially stronger bank. It would no longer be burdened with high-risk legacy assets and would have fair prospects of sustainable profits”

• "The review for upgrade of HSH's b3 BCA reflects the potential for significant improvement in the bank's solvency profile, and reduced complexity and uncertainty about the bank's future direction, once the required approvals for the announced sale of the bank to a private-sector bidder group are obtained.“

• “After the removal of complexity, HSH can focus on establishing a track record of improving profitability. Following the announced final clean-up of its balance sheet, HSH can be structurally profitable to the extent that its recurring revenue covers its total costs. The clean-up will enable the bank to achieve a major cost relief, considering savings in the areas of risk charges, guarantee fees and the considerable staff costs required for the workout of the nonperforming book.”

• “In our view, efficiency improvements will be paramount for the bank to effectively compete for new lending opportunities while operating with (initially) higher funding costs. We further believe that the bank's new ownership structure will give HSH access to additional process optimisation skills that will help it reposition its cost base."

7.02.2017 /16.03.2018

• “We believe risk reduction efforts over the last two years and stronger impaired coverage had a positive impact on the risk profile of the overall bank, because of measures undertaken in preparation for the sales process, but the viability of its business model remains uncertain”

• “HSH’s VR reflects progress in improving its risk profile in 2017 and Fitch Ratings’ expectation that the agreed sale will allow the bank to continue operating as a commercial bank. We expect further positive VR momentum after the sale closes, reflecting improved asset quality if a removal of bad loans (mainly shipping non performing exposures, NPEs) from the bank proceeds as agreed, and a clearer business model and strategy. HSH’s large, albeit declining, NPE ratio of 11.7% at end-3Q17 remains a negative VR driver.”

• “We expect to upgrade HSH’s VR after the successful privatisation of the bank, subject to receiving the necessary regulatory approvals, if the bank has demonstrated further progress in strengthening its balance sheet. We expect HSH’s VR to remain constrained at or below ‘bb+’ until profitability has improved sustainably, following the privatisation and subject to the development of its business model.”

Moody‘s 1,2

Fitch 1,3

Public-sector Pfandbrief Aa2, RuR, upgrade -

Mortgage Pfandbrief Aa3, RuR, upgrade -

Ship Pfandbrief Baa1, RuR, upgrade -

Long Term Deposits Baa3, RuR, upgrade BBB-, RWN

Senior-senior Unsecured bank debt4 Baa3, RuR, upgrade BBB-, RWN

Senior Unsecured, long term Baa3, RuR, upgrade BBB-, RWN

Short term liabilities P-3, RuR, upgrade F3, RWN

Financial Strength Rating (BCA) / Viability Rating (VR) b3, RuR, upgrade bb-, RWP

http://www.hsh-nordbank.de/de/investorrelations/rating/rating.jsp

►►►

1. Privatisation



4. Outlook for 2018

5. Appendix

26.04.2018

Agenda


p. 6

p. 18

p. 40

p. 53

p. 55

Good market position as the basis for

further business expansion

Core business fields – Corporate Clients / Project Financing

26.04.2018

► Energy & Utilities – Focus at project and sponsor level on

manufacturers, project developers, general contractors andinvestors. Further expansion of very good positioning in established markets, in particular in Scandinavia, Ireland and the Netherlands. Implementation of first few projects in Canadaand the United States

► Infrastructure & Logistics – Focus on clients and projects

from the field of transport, energy and telecommunications infrastructure (niches and new segments), expand excellent footprint in broadband, focus on priority areas such as rail asset financing (locomotives and freight wagons)

► Profitability to increase through the expansion of new business and receivables portfolio with above-average growth in commission income in the period leading up to 2022

Strategic focus


Project Financing

► High market penetration in the area of renewable

energy projects (Top 5 of the European financiers) as well as for Infrastructure & Logistics

► Very strong position in our core markets along the value chain

► High level of advisory expertise, comprehensive project and structuring expertise

► Broad range of high-performance solutions:

Structured financing at project and corporate level

Risk hedging and guarantee business

Payment transactions and cash management

Transaction advisory services such as M&A

ENERGY

& UTILITIES

INFRASTRUCTURE

& LOGISTICS

Industry expertise and client-specific

solutions for larger medium-sized companies

Core business fields – Corporate Clients / Corporates

26.04.2018

► Stepping up medium-sized corporates business with the aim of establishing long-term and profitable client relationships on the basis of industry, product and consultancy expertise

► Nationwide expansion in the focal sectors of retail, food, healthcare and industry & services and selective growth with large clients

► Strengthening the profile of the integrated corporate finance bank by expanding consulting capacity

► Sustainable stabilisation of the cross-selling rate by strengthening sales strategies and via the closer integration of product and customer departments

Strategic focus


Corporates

► Established financing partner in the commercial centre of Hamburg and in the northern German region

► Growth segment of Industry and Services: with individual solutions and locations, close to clients throughout Germany

► Focus sectors include retail, commodities, textiles,

food

► Recognised industry expertise and a strong market position in the healthcare sector

► Competitive differentiation thanks to integrated corporate

finance with consultancy in the areas of structured finance, leveraged buy-out, mergers & acquisitions

FOCUS SECTORS

FOOD

INDUSTRY

TRADE

INDUSTRY &

SERVICES

HEALTHCARE

M & A

STRUCTURED

FINANCE

WEALTH

MANAGEMENT

Challenging environment with negative impact

on net income

Core business fields – Corporate Clients

1 After guarantee effects, foreign exchange result and hedging effect of credit derivative; 2 Represents the ratio of administrative expenses to total income plus “other operating result”

26.04.2018

New business

in EUR bn

Comments

2016 2017

EaD (EUR bn) 14.2 13.9

Total income 251 218

Loan loss provisions in the lending business1

-5 -53

Administrative expenses -149 -124

Net income before taxes 89 41

CIR2

(in %) 58 55


2017

-19%

3.1

2016

3.8

1.1(36%)

Healthcare0.2

(6%)

Logistics &Infrastructure

Industry &Services

Energy &Utilities

Trade &Food Industry

0.6(19%)

0.8(24%)

0.5(15%)

Overview of key indicators

in EUR mn

New business by priority sector

in %

► Corporate Clients generated net income before taxes of EUR 41mn (PY: EUR 89mn) burdened by loan loss provisions for two single exposures; total income: EUR 218mn (PY: EUR 251mn)

► The drop in income is due to a competitive environment and burdens resulting from the offsetting of earnings in connection with the increase in liquidity resources during the privatisation period

► Focal sector of Trade & Food exceeded the plan with regard to new business

► Energy and Infrastructure increased the receivables volume by approximately EUR 0.4bn to EUR 5.7bn, successfully entered the Dutch and Portuguese markets and strengthened the market position in Ireland

Well diversified in terms of sectors

and very solid portfolio quality

Core business fields – Corporate Clients

26.04.2018

► Project financing in the Energy & Utilities focal area dominates the portfolio at EUR 4.6bn (33%)

► Domestic borrowers account for EUR 9.1bn (66%) and international, mainly European, borrowers for EUR 4.7bn (34%) of the financing transactions

► Good diversification across focus sectors

Portfolio by segment and region

in EUR bn, EaD/ in %

INVESTOR PRESENTATION

13-15

0.020.13

16-18

0.280.18

2-5

0.33

2.74

6.17

6-9

0.11

10-12

0.04

0-1

0.84

2.65

0.39

non-guaranteed

guaranteedPortfolio by rating category

in EUR bn, EaD

Investmentgrade

Non-investment grade Defaultcategories

Other

Regions

Industry & Services

Logistics &Infrastructure

2%

Energy &Utilities

23%

5%

6%

20%

13%

13.9

33%

Segments

1%

66%

7%2%

10%

9%

Healthcare

13.9

Trade & Food Industry

Germany

France

Belgium/Lux.

United Kingdom

SpainItaly

Other Europe

Other

► Corporate Clients portfolio of EUR 13.9bn EaD in total, of which EUR 10.0bn (72%) in investment grade and EUR 13.7bn (99%) in rating categories 0 to 9

► NPE ratio of 1.1% with an NPE of EUR 157mn

► Total loan loss provisions of EUR 113mn equivalent to a coverage ratio of 72%

21

∑ 10.05 ∑ 3.68 ∑ 0.16

3%

Selected business deals in 2017

Core business fields – Corporate Clients / Project Financing


WIND FARM STEINAU

HINTERSTEINAU

2017

EUR 77,111,200

GermanyProject finance Sole MLA

WIND FARM

RATIPERÄ

2017

WIND FARM

RATIPERÄ

2017

EUR 66,100,000

FinlandProject finance MLA

WIND FARM

NORTHPOLE

2017

EUR 478,922,000

SwedenProject finance Joint MLA

WIND FARM FLEURY

WF LES RENARDIERES

2017

EUR 88,814,000

FranceProject finance Sole MLA

WIND FARM

CARRICKALLEN

2017

EUR 42,528,000

IrelandProject financeMLA

EUR 595,000,000

G+E GETEC HOLDING

GMBH

2017

GermanyAcquisition financingMandated lead arranger

EUR 165,500,000

EDGE CONNEX

2017

IrelandSenior debtMandated lead arrangerFacility agent

EUR 259,000,000

GBP 322,000,000

BEACON RAIL

2017

LuxembourgAcquisition financing Mandated lead arranger

GBP 520,000,000

RIVERSIDE RESOURCE

RECOVERY LTD

2017

UKRefinancingarranger

PROJECT SPEED

2017

EUR 100,000,000

IrelandRefinancingMandated lead arranger


Core business fields – Corporate Clients / Corporates


Advisor to the

seller

2017

Sale of the shares in Kontora

Family Office GmbH

to the management

Advisor to the

seller

2017

Sale of the shares in

Papierfabrik Meldorf

to Certina Production

GmbH

TER HELL & CO. GMBH

2017

EUR 170,000,000

GermanyAcquisition financingMandated lead arranger

MKM MANSFELDER

KUPFER UND MESSING

GMBH

2017

EUR 180,000,000

GermanyRCF & L/G financingMandated lead arranger

FACTORING LIMIT

extended and

temporarily increased to

EUR 120,000,000

Arranger and

sole lender

2017

NRW BUILDING

TECHNOLOGY

EUR 125,000,000

Acquisition financingMandated lead arranger

2017

Advisor to the

seller

2017

Sale of Röpersberg Group

to AMEOS Group

KOEPFER GROUP

2017

EUR 50,000,000

Syndicated financing Mandated lead arranger

2017 2017

AGC INTERPANE

GROUP

EUR 30,000,000

Term loan & RCFCoordinating MLA& bookrunner, facility & security agent

VAPIANO

EUR 200,000,000

Term Loan & RCFMandated lead arranger

Leading provider of real estate finance with good

market penetration and outstanding expertise

Core business fields – Real Estate

26.04.2018

► Intensive efforts to exploit the potential associated with provision of support to international investors seeking to enter the German market

► Growth via international outbound business, proximity to international clients will facilitate rapid implementation, in particular Austria, Benelux, France and UK

► Tailor-made solutions from asset finance including project financing and risk and liquidity management

► Profitability to increase through the further expansion of new business and receivables portfolio with above-average growth in commission income in the period leading up to 2022

Strategic focus


► Major provider of commercial real estate finance inGerman metropolitan regions with high marketpenetration (at around 50% of the market volume)

► Established, long-standing business relationships with professional real estate investors (national and international), as well as project and propertydevelopers

► Broadening of client base by attracting new clients thatare a good fit for the strategy on an ongoing basis

► Strong range of services including individual financing solutions for existing properties, portfolios, project developments and refurbishments

► Outstanding asset expertise in the front and back office with high level of reliability vis-à-vis investors and swift loan assessment and granting

► Diversified portfolio that is profitable in the long run and offers a very good risk-return profile consisting of residential, office and retail properties

REAL ESTATE

New business expanded and market position

strengthened further

Core business fields – Real Estate Clients

26.04.2018

► Real Estate Clients made a significant contribution to earnings, with EUR 127mn in net income before taxes (PY: EUR 148mn), slightly lower interest margins result in moderate burden

► Approx. EUR 22bn in loan applications in 2017 shows the high level of market penetration

► New business expanded to EUR 4.7bn despite intense competition, market position strengthened further

► Business in the western German metropolitan areas and with international institutional investors continued in Q4 2017

► It was possible to maintain the high market penetration in the core region of northern Germany

+2%

2017

4.7

2016

4.6

New business

in EUR bn


in EUR mn

Comments

2016 2017

EaD (EUR bn) 12.5 11.8



0 2



CIR2

(in %) 26 29


Development of existing and new business

in EUR bn

New businessExisting business, EaD

25

1 After effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative; 2 Calculated as the ratio of administrative expenses to total income plus “other operating result”

11.8

+287%

+15%

2017

4.7

2016

4.6

12.5

2015

4.5

12.3

2014

4.1

11.6

2013

2.8

10.4

2012

2.6

10.3

2011

1.2

10.3

Good level of diversification by type of utilisation

and region


26.04.2018


in EUR bn, EaD/ in %


28%

27%

Düsseldorf / Cologne

13%

3%

13%

4%

Hamburg

Other western Germany

24%

Berlin

Other eastern Germany

Munich

Frankfurt

Schleswig-Holstein

International

Other financings1

Stuttgart

Regions

11.8

28%

11%

9%

8%

3%

12%

7%

4%

3%2%

Type of use

11.8

Residential

Retail

Office

► Real Estate portfolio of EUR 11.8bn EaD in total, of which EUR 6.7bn (56%) investment grade and EUR 11.8bn (100%) in rating categories 0 to 9

► NPE ratio of 0.3% with a fully guaranteed NPE of EUR 35mn

► Total loan loss provisions of EUR 14mn equivalent to a coverage ratio of 39%

► EUR 5.9bn (50%) of the portfolio attributable to financing in western German metropolitan regions – successful strategy of regional presence

► 40% of financing with international investors

► Portfolio shows good diversification in all segments

► Continued expansion of transactions eligible for the cover pool

Portfolio by rating category

in EUR bn, EaDguaranteed

non-guaranteed

Investmentgrade


Operator-runproperties

Othercommercial business

Otherfinancing

1 No regional allocation because no property collateral

26

∑ 6.66 ∑ 5.12 ∑ 0.04

1.68

0.28

0-1

4.41

0.39

2-5

4.70

6-9

0.29

10-12

0.01 0.01

16-18

0.030.02

13-15




RETAIL SHOPPING

CENTRE

2017

EUR 410,000,000

Berlin/DresdenExisting financingArranger

RESIDENTIAL

PORTFOLIOS

2017

EUR 70,000,000

BraunschweigPortfolio financingSole lender

“AM

TAUNUSBRUNNEN”

2017

EUR 45,000,000

KarbenProperty developer financingSole lender

RESIDENTIAL PORTFOLIO

BERLIN LICHTENBERG

2017

EUR 20,000,000

BerlinProject financingSole lender

PORTFOLIO FINANCING

2017

EUR 60,000,000

Munich/FürstenfeldbruckExisting financingSole lender

MARIENKRANKENHAUS

2017

EUR 115,380,000

Frankfurt am MainProperty developer financingSole lender

“STRANDKAI”

2017

EUR 138,700,000

HamburgProject developmentSole lender

“PÖSNA-PARK”

2017

EUR 40,500,000

LeipzigAcquisition financingSole lender

"GREENMAN OPEN”

2017

EUR 173,500,000

GermanyExisting financingArranger

HYATT REGENCY

2017

EUR 38,000,000

MainzExisting financingSole lender

High level of industry expertise and global track record –

portfolio will be developed further on a selective basis

Core business fields – Shipping

26.04.2018

► Selected new business in a recovering market – nevertheless, continued reduction in existing portfolio

► Focus on medium-sized and larger shipping companies with increasing importance of corporate structures in general

► Diversified portfolio of containers, bulkers and tankers with selective involvement in special segments (e.g. car carriers)

► Increase in profitability due to increasing commission business

► Exploit additional business potential resulting from market exit of competitors (market with high barriers to entry)

Strategic focus


► Good market penetration in target markets and segmentswith long-standing client relationships

► Global expertise with considerable financing and structuringcompetence in a long-term growth market

► Excellent client access in major shipping markets: Hamburg1, Athens1, Singapore1, Hong Kong1, New York and Scandinavia

► Individual solutions: Risk Management, Global Cash Management and M&A Advisory, as well as Underwriting

► Portfolio based on a relatively young fleet (average age 7.2 years) with good profit potential

1 Represented directly on location

SHIPPING

FLEET FINANCE

2017

USD 460,000,000

PiraeusShip FinanceArranger

FLEET FINANCE

2017

USD 75,000,000

GermanyShip FinanceSole lender

New business with shipping companies with good credit

ratings, further reduction in portfolio


26.04.2018

► Shipping reports net income before taxes of EUR 94mn, lower

than in the previous year (EUR 104mn) due to a drop in net interest income from declining volume of receivables

► Loan loss provisions of EUR 63mn (PY: EUR 52mn) include reversals of GLLP, in addition, guarantee expense of EUR -18mn put significant pressure on the net result

► In a market environment that remains challenging, selected new business with international shipping companies with good credit ratings of EUR 0.5bn and slightly below plan, but higher than in the previous year (EUR 0.3bn)

+89%

2017

0.5

2016

0.3

New business

in EUR bn


in EUR mn

Comments

2016 2017

EaD (EUR bn) 7.1 5.5

Total income 127 91


52 63



CIR2

(in %) 41 43


Development of existing and new business

in EUR bn

-73%

2017

0.5

5.5

2016

0.3

20.4

0.9

2012

15.3

0.9

2013

16.4

1.5

2014

8.4

0.8

2015

7.1

2011

1.2

18.2

Existing business, EaD New business

29

1 After effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative; 2 Represents the ratio of administrative expenses to total income plus “other operating result”

Before portfolio reallocation After portfolio reallocation

Shipping portfolio reflects slight recovery trends

in the market subject to a time lag


1 Incl. working capital finance; 2 Excl. Germany, Scandinavia and Greece


non-guaranteed

guaranteedPortfolio by rating category

in EUR bn, EaD

Investmentgrade



EUR bn, EaD/ in %

► EUR 3.7bn (66%) of loans attributable to international and EUR 1.8bn (34%) to domestic shipping clients

► Bulkers account for a significant proportion of the Core Bank's shipping portfolio, namely EUR 1.7bn (31%)

► The average age of the ships is 7.2 years

► Number of financed ships comes to 650

► Shipping portfolio of EUR 5.5bn EaD in total, of which EUR 0.7bn (12%) in investment grade and EUR 4.9bn (88%) in rating categories 0 to 9

► NPE ratio of 11.7% with an NPE of EUR 648mn

► Total loan loss provisions of EUR 294mn equivalent to an appropriate coverage ratio of 45%

30

∑ 0.69 ∑ 4.20 ∑ 0.65

15%

Germany

Greece

5%2% 2%

Segments

5.5

31%

30%

19%

4%

16%

18%

20%

34%

5.5

Regions

Middle East/ Africa

5%Americas

Scandinavia

Middle &Eastern Europe

Asia / Pacific

Western Europe2Containers

Bulkers

Tankers

Other ships

Otherfinancing1

0.21

13-15

0.44

0.20

16-18

0.68

10-12

0.37

0.54

6-9

1.56

0.85

2-5

0.40

0.14

0-1

0.080.06

Nearly 90% performing assets and

well-diversified portfolio



non-performingperforming

1 Incl. working capital finance

31

Portfolio by performing and non-performing exposure

in EUR bn, EaD

Capesize

Panamax

Handymax

Handy

Bulkers

1.7

15%

21%

39%

25%

Chemicals

VLCC

Suezmax

Aframax

Panamax

Handy

Tankers

1.1

11%

25%

19%

17%

5%

23%

Diversification within the three large ship classes

in EUR bn, EaD

7.9 / # 176 6.2 / # 196 7.3 / # 177 7.6 / # 101 n.a.7.2 / # 650

Average age / number of ships

Super-Post-Panamax

Post-Panamax

Panamax

New Post-Panamax

Sub-Panamax

Handymax

Handy

Feeder / Feedermax

Containers

1.9

21%

23%

28%

11%

8%

6%2%1%

Shipping

Core Bank

5.5

0.6(12%)

4.9(88%)

Other financings1

0.2

4% 96%

Other ships

0.8

3%97%

Tankers

1.1

4%

96%

Bulkers

1.7

31%

69%

Containers

1.7

2%

98%


Differentiated market developments in the ship

categories


Portfolio-weighted ACTUAL charter rates & second-hand prices

Lowest value (end of 2015 to date)

Bulkers | Charter rates (in USD/day) and second-hand prices (in USD mn)

Containers | Charter rates (in USD/day) and second-hand prices (in USD mn)

Tankers | Charter rates (in USD/day) and second-hand prices (in USD mn)

► Containers: Recovery continues.

Demand being supported by the upturn in the global economy. Accelerated fleet growth, since scrapping activities are decreasing and deliveries are increasing. Recently higher order levels (particularly for large ships). Due to excess demand, utilisation will continue to improve in 2018 and 2019

► Bulkers: Stabilisation is expected. Asia

supporting sustained increase in demand. Scrapping to decrease significantly in the first instance and will only start to rise again in 2019 as a result of regulatory provisions. Orders remain at a moderate level despite low newbuild prices. Deliveries will be halved in 2018. Increasing utilisation of the existing fleet

► Tankers: Cautious recovery expected as

of 2019. Demand growth on a moderate level: OPEC production cuts will act as a damper until the end of 2018; increasing US crude oil exports will not compensate for this. Fleet growth is slowing down. Utilisation is expected to remain at a low level in 2018 and will pick up slightly in the following years

30

35

40

45

50

12/15 06/16 12/16 06/17 12/17 06/18

12

14

16

18

20

22

12/15 06/16 12/16 06/17 12/17 06/18

15

20

25

30

35

40

12/15 06/16 12/16 06/17 12/17 06/187.500

10.000

12.500

15.000

12/15 06/16 12/16 06/17 12/17 06/18

4.000

6.000

8.000

10.000

12.000

14.000

12/15 06/16 12/16 06/17 12/17 06/18

15.000

17.500

20.000

22.500

25.000

27.500

30.000

12/15 06/16 12/16 06/17 12/17 06/18

Sources - graphics: Clarksons, HSH Nordbank; text/forecasts: Marsoft, MSI

Relationship and strong product expertise as basis

for risk-conscious business expansion

Core business fields – Treasury & Markets

26.04.2018

► Moves to forge ahead with syndication activities (“originate to distribute”) will open up new business opportunities

► Expansion of retail deposits via online platform

► Risk-conscious expansion of trading book activities

► Moves to drive ahead with digital transformation (development of bank products and services that are fit for the future)

► Supporting market segments with capital market products in connection with the implementation of their growth strategy

Strategic focus


► Long-standing well-established business relationships with institutional investors, companies and municipalities, as well as federal states

► Recognised expertise in capital market products, as well as comprehensive industry expertise for tailor-made products in the area of risk and liquidity management

► Central operational management of liquidity and market price risks of the Bank's positions

► Refinancing of the Bank and implementation of measures to strengthen capital

► Syndicate function: Arranging loans/financing, for example, by means of promissory notes or bonds

► Service provider for all business units

TREASURY & MARKETS

Treasury & Markets – Funding above plan, results

characterised by release of hidden reserves



Comments

► Treasury & Markets achieved operational successes in banking

book activities and the derivatives business in 2017

► Client business, excluding syndication activities, exceeded the prior-year result, bolstered by a high contribution to earnings from the deposit business with institutional clients

► Raising of funds comfortably above plan. Private placements to institutional investors dominant

► Refinancing diversified further by successful début in attracting retail client deposits

1 After effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative; 2 Represents the ratio of administrative expenses to total income plus “other operating result”; 3 Residual maturity > 1 year; 4 Incl. asset-based funding, repo transactions, and deposits from development banks


in EUR mn

2016 2017

EaD (EUR bn) 18.0 22.5



0 1



CIR2

(in %) 23 15

► Group of institutional investors expanded, underwriting and syndication expanded, debt fund developed to market readiness

► Net income before taxes of EUR 470mn (PY: EUR 326mn). Earnings contribution made by Treasury & Markets above plan, even without special effects of the release of hidden reserves (EUR 356mn)

► Administrative expenses reduced by around 15% year-on-year despite increased requirements, particularly from increase in regulatory requirements and privatisation process

Miscellaneous Secured

funding4

13%

Pfandbriefe 24%

Senior Unsecured

43%

Subordinated

liabilities4%

Silent participations

6%

Share capital

10%

Long-term refinancing structure3

in %

Treasury & Markets – Development of new sources of

refinancing on track for success



Funding

► Long-term funding through funding mix above plan at year-end

► Further structural optimisation of the ABF platform

► Pfandbrief benchmark program successfully continued with the issue of a public-sector Pfandbrief

► Liquidity ratios well above regulatory requirements: LCR 169%, NSFR of 114% and LiqV of 1.79

► Lower refinancing needs for 2018 thanks to optimisation ofthe high liquidity position

Strengthening of liability structure via retail

deposits

German consumer magazine Stiftung Warentest

recommends the 1-year HSH fixed-term deposit via the

“Zinspilot” portal as a top offer

► Access to targeted “Retail”client segment without theBank’s own distribution infrastructure

► Improvement in liability and deposit structure achieved via retail platform; current portfolio of over EUR 1.3bn

► The deposit market offers potential of approximately EUR 2,000bn in Germany alone

► Reduces total costs (interest rate & operating costs) in the event of an increase in retail deposits

► Dedicated volume management possible via the price-sales function

► Diversification and “inactivity” of deposits reduces the refinancing risk

► Lower volatility has a positive effect on CRR ratios (NSFR and LCR) and rating

Selected business deals in 2017 – Debt Capital Markets



FEDERAL STATE OF

RHINELAND-

PALATINATE

2017

EUR 250,000,000

Federal state treasury noteJoint lead manager

LÄNDER JUMBO 52

2017

EUR 1,000,000,000


HAPAG-LLOYD AG

2017

EUR 450,000,000

High yield bondJoint bookrunner

2017

EUR 250,000,000

High yield bondJoint bookrunner

UNIVERSITÄTSKLINIK

UM EPPENDORF

2017

EUR 19,300,000

Registered bondSole arranger

CITY OF DORTMUND

2017

EUR 30,000,000

Promissory note Sole arranger

CITY OF HAGEN

2017

EUR 45,000,000

Promissory note Sole arranger

NORD/LB

2017

EUR 500,000,000

Public-sector PfandbriefJoint lead manager

FEDERAL STATE OF

BERLIN

2017

EUR 250,000,000


HAPAG-LLOYD AG

HAMBURGER

ENERGIENETZE

GMBH

2017

EUR 30,000,000

Registered bondSole arranger

Total new business of EUR 8.5bn has developed in line

with the plan in a challenging environment

Core business fields – New Business


New business

in EUR bn

-4%

2017

8.5

2016

8.9

Breakdown of new business1

in EUR bn

4.7

Real Estate Clients

0.50.3

Shipping

4.6

Corporate Clients

3.1

3.8

2017

2016

1 New business 2017 plus EUR 0.2bn Treasury & Markets (PY: EUR 0.2bn); 2 Cumulative on-balance sheet new business since 2011 that is still in the Core Bank portfolio

New business / NPE since 20112

Treasury &Markets

0.5

Shipping1.5

Real EstateClients

9.0

Corporate Clients8.5

Total19.6

0.0

99.4

6.5

115.5

221.4

NPE

in EUR mn

1.1%

NPE ratio in new business

1.4%

0.1%

6.5%

► New business of EUR 19.6bn since 20112

► NPE ratio in new business 1.1%

► Shipping main driver with an NPE ratio of 6.5% in new business

0.0%

► The focus is on generating new business with an appropriate risk/return profile in a market environment that remains challenging

New business2

in EUR bnThereof almostEUR 2.3bn (27%) with 120 new clients

Core Bank with solid portfolio quality and good NPE

ratio of 1.6%

Core business fields – Portfolio

26.04.2018

► Core Bank portfolio of EUR 53.7bn EaD1, of which EUR 39.6bn (74%) in investment grade and EUR 52.9bn (98%) in rating categories 0 to 9

► NPE volume of EUR 840mn corresponds to an NPE ratio of 1.6%

► Shipping dominates NPE with a volume of EUR 648mn/77% and corresponds to an NPE ratio of 11.7%

► Increase in NPE in the Corporate Clients segment due to larger individual commitments

► Coverage ratio of 50% in the Core Bank at a solid level

Core Bank portfolio by rating category1

in EUR bn, EaD


0.5

13-15

0.40.7

10-12

0.70.7

6-9

9.1

1.6

2-5

14.9

1.3

0-1

21.4

2.0

16-18

0.3

guaranteed non-guaranteed

Investment

grade

Non-investment grade Default

categories

NPE by client divisions2

in EUR mn, EaDnon-guaranteed

guaranteed

38

∑ 39.6 ∑ 13.3 ∑ 0.8

Client business

portfolio

Real EstateClients

CorporateClients

Shipping 18%

38%

44%

∑ EUR 31.2bn EaD

1 Incl. EUR 22.5bn EaD Treasury & Markets; 2 Rounding differences possible

2 05

1 3 2

4 4 3

2 9

NPE Core Bank

Shipping648

Real Estate Clients35 6

Corporate Clients157 24

Other0

59% covered by the guarantee

50% coverage ratio

840

NPL ratio 1.6%Plus EUR 22.5bn EaD

Treasury & Markets

►►►

1. Privatisation



4. Outlook for 2018

5. Appendix

26.04.2018

Agenda


p. 6

p. 18

p. 40

p. 53

p. 55

Portfolio transaction puts pressure on Group net result

Financial key figures for 2017 – Group

in EUR mn, IFRSCore Bank Non-Core Bank

Other and

Consolidation Group

2016 2017 2016 2017 2016 2017 2016 2017

Net interest income 680 773 15 -9 -88 415 607 1,179

Net commission income 81 77 20 20 -14 -32 87 65

Result from hedging 0 0 0 0 -4 -18 -4 -18

Net trading income 186 154 -53 84 -45 16 88 254

Net income from financial investments1

85 51 54 -23 4 64 143 92

Total income 1,032 1,055 36 72 -147 445 921 1,572


47 13 106 -1,295 3 6 156 -1,276

Administrative expenses -358 -302 -299 -202 23 -11 -634 -515

Other operating income 2 16 62 -22 -6 28 58 22

Expenses for bank levy and deposit guarantee fund

-31 -28 -15 -9 -10 -4 -56 -41

Net income before restructuring and

privatisation692 754 -110 -1,456 -137 464 445 -238

Net income from restructuring and privatisation 0 0 0 0 -110 -66 -110 -66

Expenses for government guarantees3

-25 -22 -189 -127 0 0 -214 -149

Net income before taxes 667 732 -299 -1,583 -247 398 121 -453

Income tax expense -52 -75

Net income after taxes 69 -528

1 Incl. result from the financial investments accounted for under the equity method; 2 After effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative; 3 Base premium and subsequent payments (2016)

26.04.2018 40INVESTOR PRESENTATION

Pro-forma, not taking into account the regulatory relief effect

of the guarantee

Core Bank with operating strength –

CET1 ratio at high level


RWA after guarantee

in EUR bn

► RWA reduced by 22% since the end of 2016 to EUR 22.2bn thanks

to winding down measures, reduction in market price risks and weaker US dollar

26.04.2018

1 Calculated as the ratio of net income before taxes to average reported equity capital


CET1 ratio (phase in)

in %

► Core Tier 1 capital ratios improved, largely due to further

RWA reduction

► Pro-forma capital ratio excl. guarantee introduced in preparation for privatisation at a very solid level of 15.4%

41

Group net result and RoE1 before taxes

in EUR mn;

2.5% -9.7%

RoE

-4 5 3

1 2 1

2016 2017

► Group net result before taxes of EUR -453mn (PY: EUR 121mn) characterised, in addition to solid operational development, in

particular by unplanned privatisation effects (additional loan loss provisions of EUR 1.1bn and revaluation of hybrid capital of EUR 413mn). Without these privatisation effects, net income before taxes comes to EUR 238mn. At EUR 356mn, the release of hidden reserves made a positive contribution to the net result as planned (PY: EUR 186mn)

Distribution of net income before taxes

in EUR mn

2016

-23%

Core Bank

2017

22.2

16.5

4.31.3

Non-Core Bank

Other andConsolidation

28.6

1.58.3

18.7

+4.4 PP.

2017

18.5

2016

14.1 15.4

2017

7 3 26 6 7

-2 9 9

3 9 8

-2 4 7

+10%

2017

-1.583

2016

Other and ConsolidationNon-Core BankCore Bank

Systematic deleveraging improves balance sheet

structure – comfortable liquidity ratios


26.04.2018

Leverage ratio3

in %

Bail-in ratio2

in%

► Bail-in ratio of around 10.2% (before senior unsecured) above the

bail-in threshold of 8%

► Maturity of subordinated capital of EUR 0.9bn in Feb. 2017 reduces the bail-in ratio as against 31 December 2016

► Liquidity positions above ECB’s regulatory requirements,

ensure flexibility to respond in the privatisation process

► LiqV: 1.79 (30.9.2017: 1.83)

LCR / NSFR

in %

1 6 91 7 2

1 1 41 1 1

-3 pp

2016

+3 pp

► Leverage ratio comes to a very solid 7.7% and takes into account

the drop in the relevant business volume


Total assets1

in EUR bn

► Total assets down due to reduction in non-strategic and non-

performing portfolio in the Non-Core Bank, slight increase in the Core Bank due to expansion of liquidity reserve

2 2

4 84 8

-17%

Other &Consolidation

Non-Core Bank

Core Bank

2017

70

1012

2016

84

14

Guarantee buffer for the residual

reference portfolio

1 Segment assets; 2 If there are 8% bail-in liabilities in relation to total assets before senior unsecured (bail-in threshold), an application for additional support (up to 5% of total assets) can be submitted to the European resolution fund if need be, but there is no legal entitlement to this (see also SAG/SRM Regulation), see also page 49; 3 Not same period: regulatory disclosure pursuant to the CRR

LCR NSFR

42

2017

2017

-0.8 pp

10.2

2016

11.0

10.9

0.1

2017

7.7

+0.8 pp

2016

6.9

Net interest income from operating business of the Core

Bank above plan, other effects having a positive impact


Net interest income

in EUR mn

► Net interest income within the Group of EUR 1,179mn with operating interest income that is slightly higher than expected based on a

lower average interest-bearing receivables volume of EUR 33bn as planned (EUR 37bn as at 31 Dec. 2016)

► Net operating interest income of EUR 486mn in the Core Bank from client business slightly down on the previous year (EUR 499mn);

burdens due to temporary high levels of liquidity position during the privatisation process

► Other effects of EUR 652mn, including release of hidden reserves as planned in the amount of EUR 266mn (effect of EUR 356mn in total,

thereof an additional EUR 39mn in net trading income and EUR 51mn in net income from financial investments) and from the revaluation of hybrid capital of EUR 413mn

► Average interest-bearing receivables volume in the Non-Core Bank has fallen significantly from EUR 7bn in the previous year to

EUR 4bn, with a resulting drop in net operating interest income to EUR 41mn

Net operating interest income generated by

client business

in EUR mn Non-Core BankCore Bank

Σ 585

Total Bank


Σ 527

4 8 64 9 9

4 18 6

-3%

20172016

6 5 2

5 2 7

+94%

Other effects

Operating interest income in client business

2017

1,179

2016

607

Core Bank makes main contribution to net

commission income


1 Excl. hedge result; 2 Incl. result from financial investments accounted for under the equity method

Net commission income

in EUR mn

Net income from financial

investments2

in EUR mn

Net trading income1

in EUR mn

6 58 7

2016

-25%

2017

9 2

1 4 3-36%

20172016

2 5 4

8 8

+189%

20172016

► Net commission income lower than in the previous year, EUR

77mn contributed by the Core Bank (on par with the previous year)

► Drop due to the fee expenses for the synthetic securitisation transaction executed in Q4 2016

► Cross-selling result showed positive development and exceeds the pro rata plan


► Net trading income benefited from the positive impact of a USD

that was weaker than in the previous year in the foreign exchange result (EUR 76mn), reversals of impairment losses in the credit investment portfolio (EUR 59mn), the release of hidden reserves (EUR 39mn) and improved credit spreads for client derivatives measured at fair value (EUR 62mn)

► Valuation effects on basis swaps (EUR -24mn) had a negative impact

► Net income from financial investments amounted to EUR

92mn and benefited considerably from sales of non-strategic investments (EUR 57mn), the realisation of hidden reserves (EUR 51mn) and value increases in the credit investment portfolio (EUR 23mn). Previous year contained significant income from the sale of securities

Loan loss provisions driven by the portfolio transaction



1 5 6

2016

-1,276

2017

45

Components of loan loss provisions

in EUR mn

Loan loss provisions in the

lending business1

in EUR mn

1 After effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative

► Loan loss provisions after effects of the guarantee and foreign exchange result of EUR -1,276mn (PY: EUR 156mn), of which EUR 13mn is attributable to the Core Bank and EUR -1,295mn is attributable to the Non-Core Bank, and of which EUR 6mn is attributable to Other & Consolidation

► Gross compensation under guarantee of EUR 126mn, of which:

a. compensation/foreign exchange result of EUR -684mn

b. credit derivative of EUR 810mn

► Due to the full balance sheet utilisation of the second loss guarantee in the first quarter of 2017, the loan loss provisions recognised in 2017 were no longer compensated for in full

► Income statement disclosure after guarantee effects of EUR -1,276mn (PY: EUR 156mn)

Thereof EUR 1.1bn for portfoliotransaction

2 6 3

Gross compensation

under guarantee

Net LLP

before guarantee effects

+126-1,276

-1,665

Net loan loss provision

-1,402

Legacy shipping burdens and individual exposures of the

Non-Core Bank dominate loan loss provisions



by business units

in EUR mn


1 Before effects relating to the guarantee, foreign exchange result and hedging effect of credit derivative

► Loan loss provisions in the lending business before foreign exchange effects and compensation of EUR -1.4bn, of which EUR 1.1bn is for the portfolio transaction

► Loan loss provisions by asset class mainly driven by legacy burdens from shipping loans of EUR -1.1bn and individual exposures relating to the years prior to 2009 in the Corporate Clients - Energy segment (Poland, Italy) in the Non-Core Bank

► Reversals of loan loss provisions in the area of Real Estate Clients of EUR 26mn (of which EUR 23mn Non-Core Bank, EUR 3mn Core Bank)

Thereof EUR 1.1bn for

portfolio transaction

Mainly legacy energy burdens in Poland and Italy

Non-Core Bank

Core Bank

Other &Consolidation

Total Bank

-1,413

5

-1,402

6

6

-1,051

4426

3

Shipping

23

-373-43

Real Estate Clients

-330

-4

1-11

Corporate Clients Other

-1,095

Core BankNon-Core BankOther &Consolidation

Administrative expenses markedly reduced by 19%


1 The cost-income ratio represents the ratio of administrative expenses to total income, plus “other operating result”


Net income from restructuring and privatisation

in EUR mn

Administrative expenses

in EUR mn, CIR1

► Personnel expenses down further by 10% to EUR -230mn due

to reduction in the number of employees (-238 FTE in 2017)

► Operating expenses reduced by 10% to EUR -249mn,

particularly thanks to savings with regard to IT costs. Strategic projects, as well as continued substantial expenses for the implementation of regulatory and accounting requirements, counteracted the savings

► Depreciation/amortisation came to EUR -36mn (PY: EUR -

100mn), with the previous year hit by burdens due to write-downs to property, plant and equipment at subsidiaries (EUR -66mn)

► CIR1 of 32% (PY: 65%) overstated due to other effects in total

income

-2 3 0-2 5 6

-2 4 9-2 7 8

-1 00

2017

Personnelexpenses

Depreciation /amortisation

Operatingexpenses

-36

-634

-515

2016

► Restructuring result hit by restructuring and privatisation

expenses (inter alia for advisory services, data rooms and audit activities). Considerable provisions were a burden in the previous year

-6 6

-1 1 0

-40%

2016 2017

65% 32%

Employees

Number of full time employees

-55%

2016

1,9262,164

2015

2,384

2014

2,579

2013

2,834

2012

3,123

2011

3,684

2010

3,388

2009

3,610

2008

4,325

2017

NPE reduced by half in 2017, NPE ratio improved

significantly by at least 7 percentage points to 10.4%


1 Rounding differences possible; 2 Loss provisions before compensation, incl. SLLP and GLLP

► Solid coverage ratio in the Group of 64%, 65% in Shipping

► Including collateral, total risk coverage clearly > 100%

► NPE reduced by 49% from EUR 14.6bn (31 December 2016) to EUR 7.5bn (EUR 72.2bn total EaD)

► NPE ratio reduced from 17.5% (31 December 2016) to 10.4%

► NPE ratio in Shipping of 50% in the Group, 100% in the Non-Core Bank and 12% in the Core Bank

► NPE ratio is 1.6% for the Core Bank


Non-Core Bank

6.7

4.3

1.0

0.9

0.4

Core Bank

0.8

0.6

0.2

Other Real EstateCorporate Clients Shipping

NPE by asset class1

in EUR bn

1.6% 68%

NPE ratio

∑ EUR 7.5bn

Loan loss provisions2 / 64% coverage ratio

Collateral(including Basel II cash flows)

Risk coverage

in EUR bn

Shipping

Real Estate

Corporate Clients

Other0.4

(5%)1.1

(15%)

1.1

(14%)

4.9

(66%)

7.5

NPE total Bank

4.2

4.8

9.0

Risk coverage

50% 65%

Coverage ratio

Risk coverage before senior unsecured

IFRS, in EUR bn, EaD

Receivables from clients

Receivables fromcredit institutions, liquidity buffer, etc.

Total assets

70.4

39.2

31.2

19.7

+163%Liable capital

European resolution fund1

Loan loss provisions/

64% coverage ratio

Collateral values (incl. Basel II cash flows)

Risk coverage

4.8

4.2

7.2

3.5

NPE

7.5

Subordinated capital

Silent participation

Reported equity capital2

Liable capital

Other bail-in eligibleliabilities(incl. senior unsecured)

1 If there are 8% bail-in liabilities in relation to total assets before senior unsecured (bail-in threshold), an application for additional support (up to 5% of total assets) can be submitted to the European resolution fund, but there is no legal entitlement to this (see also SAG/SRM Regulation); 2 Reported equity capital adjusted to reflect “Other Comprehensive Income” items (OCI); NB: This presentation includes assessments and forecasts based on numerous assumptions and subjective valuations both of HSH Nordbank AG and other sources and only represents a non-binding view

► Bail-in ratio of around 10.2% based on reported equity2, silent participations and subordinated capital

► The bail-in ratio is expected to be > 8% in the future, too

► The bail-in ratio is based on the BRRD definition of a threshold (8%) for a drawdown from the resolution fund


Bail-in ratio10.2%

10.2% bail-in ratio – extensive risk coverage thanks to

loan loss provisions, collateral and liable capital


Liable capital

IFRS, in EUR bn

7.2

1.1

1.7

4.4

Pro-formaexcluding

guarantee2

► Capital ratios characterised by considerable RWA

reduction that is above plan (EUR -6.4bn as against end of

2016) and the active management of foreign currency risks and a

US dollar that is weaker than expected

► Part of the regulatory burden for the federal state guarantee is

reflected as a deduction in regulatory equity capital. There was no

equity capital deduction item as at 31 December 2017 (31

December 2016 approx. EUR 0.6bn)

► SREP requirements in 2018: Regulatory early warning

threshold (P2G) of 11.2% (phase-in), consisting of an SREP

requirement of 10.2% (P2R) and early warning buffer of 1.0%

CET1 ratio at high level of 15.4% without guarantee


26.04.2018

CET1 ratios

in %


2 01 3 2 01 4 2 01 5 2 01 6 2 01 7

18.1

18.5

13.414.1

11.612.3

11.3

12.611.8

13.1

Capital ratios

Same period1, in %

3 8 4 0 3 7 2 9 2 2

70

2016

84

2015

97

2014

110

2013

109

RWAafter

guarantee

RWA, total assets, CET1 capital

in EUR bn

CET1 ratio (fully loaded)

CET1 ratio (phase in)

30.6

24.8

20.618.719.7

Overall ratio

4.2

Total assets

CET1capital 4.04.64.03.8

2 7

2017

Pro formaRWA before

guarantee

1Same period: ceteris paribus calculation taking full account of the balance sheet amounts as at the reporting date. Not same period: regulatory disclosure pursuant to the CRR, see Annual Report as at 31 December 2017; 2 Pro forma, not taking into account the regulatory relief effect of the guarantee (recognition as a securitisation transaction)

In-period1

Not in-period,acc. to CRR1

SREPrequirement

2018

11.2

10.2

1.0

CET1 ratiophase in

2017

15.4

CET1 ratiophase in

2017

18.7

CET1 ratiofully loaded

2017

18.1

CET1 ratiophase in

2017

18.5

German GAAP (HGB) – Net result of around EUR -754mn

driven by privatisation effects

Financial key figures for 2017 – HSH Nordbank AG


Net income before loss participation

of silent participations

in EUR mn

► In connection with the imminent multi-year transformation phase, which will be characterised by the move from the public-sector to the

private-sector deposit guarantee fund, but also by restructuring measures to create a new and sustainable bank, as well as additional risks i.e. further increasing capital requirements due to stricter regulatory requirements, HSH Nordbank AG expects, from today's perspective, that it will not be possible, contrary to past plans, to make distributions on the issued hybrid capital instruments at the earliest from the 2020 financial year for the 2019 financial year as originally anticipated, but rather that this will only be possible at the earliest from the 2024 financial year for the 2023 financial year

► Net income before loss participation of silent participations amounted to around EUR -1.0bn (HGB) in 2017

► Silent participations shared in the Bank’s losses in the amount of EUR 285mn in the 2017 financial year

► The carrying amounts of the hybrid instruments, which are listed on the capital markets, correspond to 39.7 % of the original nominal amount due to the attributed losses

► Following the substantial loss incurred in 2017, HSH Nordbank AG also expects to report a negative result in 2018 based on the

HGB accounting standards. The loss is expected to be significantly lower than in 2017 and is expected to be attributable, in particular, to

restructuring expenses, the proposed compensation payment made for the termination of the federal state guarantee and deferred tax effects in connection with the implementation of the portfolio transaction

Loss participation of silent participations

in EUR mn Carrying amounts of the listed hybrid instruments

2 8 5

0

20172016

0

-1,039

2016 2017

52.4% 39.7%

►►►

1. Privatisation



4. Outlook for 2018

5. Appendix

26.04.2018

Agenda


p. 6

p. 18

p. 40

p. 53

p. 55

Loss before taxes of around EUR 100mn forecast for 2018

due to premature termination of the guarantee

Outlook for 2018

The outlook and the assumption of the Bank as a going concern for accounting and measurement purposes are based on assumptions set out in the Annual Report as at 31 December 2017

26.04.2018

► 2018 will be a crucial year of transformation for the Bank, even if it will not yet signal the end of the realignment process. On the one hand, the

coming months will be shaped to a considerable degree by the implementation of the closing conditions to ensure the conclusion of the privatisation process in a manner that can be deemed successful from today's point of view. On the other hand, the operational measures aimed at the realignment of a corporate structure that will be risk-optimised and agile in the future will be defined and implemented as soon as possible. Overall, the Bank is confident, based on its plans, that the efforts made to date and the privatisation process, which the Bank currently believes to have developed in a positive manner, will result in a business model that is sustainable in the long term, provided that the process is completed successfully

► The Bank, which will have been privatised when the share purchase agreement is executed, will develop additional business opportunities in Germany and abroad together with its new international owners, which boast experience in the financial services sector, under a new brand and free from the existing EU restrictions. The focus will remain on medium-sized clients, as well as clients in the real estate, energy, infrastructure and shipping sectors, to which the Bank aims to provide support in all relevant issues relating to financing with a comprehensive product and consultancy approach

► There are, however, also challenges associated with the earnings forecast and the future development of HSH Nordbank. In summary, these relate primarily to risks resulting from adverse developments during the closing process associated with privatisation and, as a result, the fulfilment of the closing conditions agreed as part of the share purchase agreement

► In addition to the specific risks in connection with the privatisation process, the Bank will also face other general challenges.

1. Possible setbacks in the recovery for container vessels and bulkers due to macroeconomic factors and a further deterioration in the tanker segment, a slowdown in the real estate markets, a significantly stronger USD exchange rate, the low level of interest rates, as well as a competitive environment and volatile financial and currency markets (in particular US dollars)

2. Changes in the ratings awarded by the rating agencies, the constant increase in European banking regulatory requirements.

3. It is extremely important that, despite a multitude of influencing factors (e.g. discretionary decisions on the part of the banking supervisory authorities, assumed long-term recovery of the shipping markets), the minimum capital ratios are complied with at both the HSH Nordbank sub-group level and the financial holding company level (HSH Beteiligungs Management GmbH) and liquidity requirements are complied with at all times despite possible adverse developments in the privatisation process or, for instance, in the event of reactions of the rating agencies with a negative impact

► As a result, taking into account the compensation payment of EUR 100mn for the premature termination of the second loss guarantee, a loss before tax of around EUR 100mn is forecast for the 2018 financial year. At the same time, the pro forma CET1 ratio is expected to come in at

around 15 % and the NPE ratio at around 2 %. The earnings forecast is subject to any effects resulting from the closing and the associated change in ownership


►►►

1. Privatisation



4. Outlook for 2018

5. Appendix

26.04.2018

Agenda


p. 6

p. 18

p. 40

p. 53

p. 55

Reference portfolio covered by the guarantee reduced

significantly from EUR 28.8bn (PY) to EUR 14.7bn

Exposure breakdown/guarantee

1 Incl. liquidity reserve; 2 Percentage risk coverage provided by the guarantee in relation to total EaD of the respective division

Risk coverage by the guarantee2

in % / in EUR bn, EaD

Distribution of exposure at default (EaD) within the Group

in % / in EUR bn, EaD

Other &Consolidation1

8.60.1

Aviation

0.1 0.2

Divestments

0.2 1.0

Treasury &Markets1

21.2

1.3

Shipping

3.56.3

Real Estate Clients

11.52.6

Corporate Clients

12.53.1

Total Bank

72.2

57.6

14.7

Non-guaranteedGuaranteed

20.3% 20.0% 18.5% 63.9% 5.8% 71.2% 1.1%84.8%

Other &Consolidation1

8.7

Aviation

0.3

Divestments

1.2

Treasury &Markets1

22.5

Shipping

4.35.5

Real Estate Clients

2.311.8

Corporate Clients

1.713.9

Total Bank

72.2

8.79.8

53.7

100.0% 21.6% 19.5% 13.6% 1.7% 0.5% 12.0%31.1%

26.04.2018

Other & ConsolidationNon-Core BankCore Bank


15.6

14.1

9.8

22.5

1.2 0.38.7

15.6

14.1

9.822.5

1.2 0.38.7

Core Bank with good risk profile – Sale of Non-Core Bank

legacy burdens by way of the portfolio transaction

Loan loss provisions/guarantee

1 Deviations possible due to rounding, portfolio prior to consolidation incl. loan loss provisions for contingent liabilities/securities in the reference portfolio excl. compensation

26.04.2018

Non-Core Bank

Total loan loss provisions1, in EUR bn

EaD distribution, in EUR bn

Core Bank

Total loan loss provisions1, in EUR bn

EaD distribution, in EUR bn

0.010.11 0.000.42 0.29

Total Bank

53.7

6.8(13%)

46.9(87%)

2.8

(51%)2.7

(49%)

Treasury &Markets

22.5

1.3(6%)

21.2(94%)

Shipping

5.5

Real Estate Clients

11.8

1.0

(8%)

10.8

(92%)

Corporate Clients

13.9

1.8

(13%)

12.1

(87%)

Total Non-Core Bank

9.8

7.8(79%)

2.1(21%)

0.2

(15%)1.0

(85%)

Aviation

0.3

0.2

(71%)

0.1

(29%)

Corporate Clients

1.7

1.3

(77%)

0.4

(23%)

Divestments

1.2

Real Estate Clients

2.3

1.6(71%)

0.7(29%)

Shipping

4.3

3.6(83%)

0.7(17%)

4.36 0.52 0.762.91 0.120.06

GuaranteedNon-guaranteed

Non-guaranteed Guaranteed


Portfolio transaction leads to a substantial negative result

of the Non-Core Bank

Financial key figures for 2017 – Non-Core Bank

26.04.2018

Net income before taxes

in EUR mn

Portfolio by asset class

in %

Asset reduction and NPE ratio

in EUR bn, EaD;


Portfolio by currency

in %

► Net income before taxes of EUR 1,583mn (PY: EUR -299mn)

is significantly lower than expected. Significant burden in the form of unplanned loan loss provisions for the portfolio transaction of EUR 1.1bn

► Non-Core Bank relieved of almost all non-performing legacy burdens as a result of the portfolio transaction, to be dissolved in the future

► Accelerated wind-down of legacy burdens extremely successful

► Coverage ratio of 65% reflects solid risk coverage

► Coverage ratio of 68% in Shipping

► Portfolio largely denominated in USD (49%)

► Shipping loans account for a large part of the USD exposure

► Shipping dominates the portfolio at 44%/EUR 4.3bn (Average age: 8.5; number of ships: 391)

► Real Estate Clients account for the second-largest share with 23%/EUR 2.3bn

Aviation4%

Corporate Clients

17%

Real Estate Clients

23%

Divestments12%

Shipping

44%

GBP

12%

EUR35% USD49%

Other

4%

67.7%63.6%Transfer of remaining

assets to the Core Bank

-54%

After portfolio transaction/closing

~3.6

2017

9.8

2016

21.4

NPE ratio

-2 9 9

-1,583

2016 2017

Reference portfolio and guarantee components

Guarantee

Core Bank Non-Core Bank Group

Reference portfolio

(in EUR bn, EaD/percentage distribution)6.8 / 46% 7.8 / 53% 14.7

NPE in the reference portfolio

(EUR bn)

0.5 5.4 5.9

Loan loss provisions

1

in the reference portfolio

(EUR bn)0.2 3.8 4.0

RWA after guarantee

(EUR bn/percentage distribution)0.5 / 15% 2.7 / 85% 3.2

Expenses for government guarantees

(in EUR mn/percentage distribution)-22 / 15% -127 / 85% -149


1 Portfolio prior to consolidation incl. loan loss provisions for contingent liabilities/securities in the reference portfolio excl. compensation

► The vast majority (53%) of the reference portfolio of EUR 14.7bn in total that is covered by the guarantee is attributable to the Non-Core Bank (EUR 7.8bn), with 46% attributable to the Core Bank. The Non-Core Bank will be dissolved after the portfolio transaction and the transfer of the remaining assets to the Core Bank

► 78% of the non-performing exposure of EUR 7.5bn secured by the guarantee

► The portfolio share with the highest risk is in the Non-Core Bank, with RWA of EUR 2.7bn

► The guarantee fees are distributed on the basis of economic capital committed, with 85% attributable to the Non-Core Bank and 15% to the Core Bank

Settled losses

Free capacity for further loss settlement

2017

7.3

2.9

3.0

0.0

Losses to be settled

Guarantee fully utilised – Early termination on

closing expected

Guarantee

1 Incl. credit risks under partial guarantee 2 (credit derivative) and excl. losses to be settled; 2 Regulatory surcharge for foreign currency risks, residual amount and other; 3 Sub-senior

tranche (gross) before reduction in loan loss provisions that have not been compensated for, as at 31 December 2017: regulatory surcharge of EUR 0.5bn (PY: EUR 0.6bn regulatory surcharge ); 4 For details, see the section “Management System” in the 2017 Annual Report

Guarantee structure

in reference portfolio

in EUR bn

Balance sheet breakdown

in EUR bn

Regulatory breakdown

in EUR bn

3.2

Second losstranche:

EUR 10bn

federal state guarantee

13.2

59INVESTOR PRESENTATION

First loss piece

► For regulatory recognition purposes, a sub-senior tranche with a risk weighting of 1,250% is separated from the original senior tranche. The sub-senior tranche is reduced by loan loss provisions that have not been compensated for and is deducted from the regulatory equity capital. As a result of the netting of the sub-senior tranche with loan loss provisions that have not been compensated for, no equity capital deduction item as at the end of 2017 (PY: EUR 0.6bn)

► For the remaining senior tranche, the risk weight currently amounts to around 27%

► CET1 ratio as of March 2018, not taking into account the regulatory RWA relief effect of the second loss guarantee4

Senior tranche

Settled losses

0.1

6.0

1.6

2016

1.0

3.0

2.9

7.3

2017

5.5


Loan loss provisionnot compensated for

Grosscompensation,

loan loss provisions1


2.4 Expected Loss

0.6

Sub-SeniorTranche3

Senior Tranche

Unexpected Loss

2017

2.9

Settled losses7.3

0.6

1.2

4.8

1.6

0.5

5.5

2016

0.1

Free capacity loan loss

provisionsEquitydeduction item Regulatory

surcharge2

Senior tranche

26.04.2018

HSH Nordbank in the top quarter of

European bank issuers

Sustainability rating / CSR Report

26.04.2018

1 Source: imug Beratungsgesellschaft für sozial-ökologische Innovationen mbH - sustainability rating of bank bonds in 2017, imug rating universe

► The issuer HSH Nordbank ranks 17 (52*) among German banks

► Issuer rating/sustainability rating (uncovered bonds)improved from CC (neutral) to CCC (neutral)

► Rating for ship Pfandbriefe improved further and lifted to CCC (neutral)


Rank among European financial institutions1

7 5 %

7 0%

6 6 %

5 0%

2 5 %

3 0%

3 3 %

5 0%

HSH ranks 28 out of 901

Public-sectorPfandbriefe


HSH ranks 48 out of 1861Issuer rating

Ship Pfandbriefe

Mortgage Pfandbriefe


► Rating for mortgage Pfandbriefe maintained at B (positive)

► Rating for public Pfandbriefe back at the level seen in 2015 at BBB (positive)

► With regard to “governance”, HSH Nordbank outperforms the average (around 14%) with performance of around 21%

“Corporate Social

Responsibility” Report

(CSR Report)

► CSR Report publishedfor the first time

► Meets the requirementsof non-financialreporting in accordance withparagraph 289b HGB

► Based on the criteriaof the German Sustainability Code

► Describes non-financial aspects such as environmental, employee-related and social issues, respect for human rights and the fight against corruption and bribery

UNCOVERED BONDSMORTGAGE

PFANDBRIEFEPUBLIC PFANDBRIEFESHIP PFANDBRIEFE

Membership of the guarantee scheme of the

German Savings Banks Finance Group (SFG)


STATUS QUO – guarantee scheme of the German Savings Banks Finance Group

Voluntary

institutional

guarantee

The objective of the guarantee scheme is to protect the member institutions and to avert imminent or existing financial difficulties at these institutions. To achieve this, the protection facility can, for example, contribute new liability funds, provide guarantees or sureties vis-à-vis third parties or even satisfy third-party claims. These measures can be combined with each other. This is designed to rectify the problems faced by the institution in question and prevent the liquidation of the institution pursuant to the German Act on the Recovery and Resolution of Credit Institutions (SAG).

The guarantee scheme has set up a risk monitoring system with corresponding organisational structures for preventative purposes. This system helps imminent financial difficulties to be identified early on/to prevent such difficulties from arising in the first place, and allows suitable counter-measures to be taken. The aim is to prevent a compensation case (see item 2) and allow business relationships with clients to be continued in line with the contractual agreements.

All the securities (not of an equity / regulatory capital nature1) that HSH Nordbank AG has issued willtherefore continue to fall under the institutional protection of the guarantee system of the Savings Banks Finance Group (Art. 39 (1) of the statutes).

Statutory deposit

guarantee fund

If the German Federal Financial Supervisory Authority identifies a compensation case pursuant to the Deposit Guarantee Act (e.g. if the voluntary institutional guarantee has not resulted in the continued existence of the credit institution), then the client is entitled to a reimbursement of his/her deposits from the guarantee scheme up to EUR 100,000. This compensation must be provided within seven working days.

More information can be found at https://www.dsgv.de/en/index.html.

1 In particular pursuant to paragraphs 41, 44 of the Communication from the European Commission 2013/C 216/01 of 30 July 2013 (“Banking Communication”)

61

1

2

- Simplified sample presentation -

Seamless transition of guarantee scheme of the

SFG to the BdB deposit guarantee fund planned


► As of the point at which HSH Nordbank’s membership of the German Savings Bank Association (DSGV) expires, its membership of the guarantee scheme of the German Savings Banks Finance Group (according to section 94 (4) of the Framework Statute) will continue for a further two years. During this period, the institutional protection provided by SFG will remain in force for HSH Nordbank in full

► Target of the bank is to achieve a seamless transition from the SFG guarantee scheme to the BdB deposit guarantee fund with the full protection ceiling of up to 15% of the liable capital of each bank2. If HSH Nordbank had liable capital of approx. EUR 5bn, as it does today, then the protection ceiling would be around EUR 0.75bn per client2

► The statutory deposit guarantee will remain unchanged after the transition to the BdB guarantee scheme

Transition from the SFG guarantee scheme to BdB

SFG guarantee scheme

(DSGV)

Deposit Guarantee Fund

(BdB)

Signing Closing

Statutory deposit

guarantee fund

Membership

… 2018 2019 2020 2021 2022 …

Transitional solutionbeing discussed

Participation in Deposit Guarantee Fund1

Protection ceiling2

1 Membership in BdB necessary for participation in the Deposit Guarantee Fund; 2 Scope of protection depends on admission procedure, up to 15% in accordance with the Framework Statute of the BdB in 2022 of the liable capital of the respective credit institution per client

Admission procedure


For all German banks

(Deposit guarantee of up to EUR 100k)

Protection of unsecured liabilities under guarantee

schemes


Client

deposits

Registered securities

& promissory notes

Bearer

debentures

German

Savings Banks

Finance Group

Private Banks

Term 18 months

Term >18 months

Statutory deposit guarantee fund

Voluntaryinstitutional protection system*

Statutory deposit guarantee fund

Voluntarydeposit guarantee fund

1. Private individuals, foundations

2. Companies, institutionalinvestors, semi-governmental agencies

3. Governmental agencies2, clients similar to banks3

Protection ceiling under the Statutes1

EUR 100k

EUR 100k

1 Staggered scope of protection in relation to the Tier 1 capital of the respective credit institution: 20% up until 2019/15% up until 2024/8.75% as of 2025, means for example, that with capital of approx. EUR 5bn, the protective effect is EUR 1.0/0.75/0.44bn per client; 2For example, federal government, federal states and municipalities; 3 e.g. financial holding companies, asset management companies, companies with factoring and safe custody business

*All issues of HSH Nordbank AG (excluding equity/instruments with equity characteristics, notably under paragraphs 41, 44 of the EU Commission Communication 2013/C 216/01 of 30 July 2013 (“Banking Communication”)) fall under this voluntary institutional protection of the guarantee fund of the Savings Banks Finance Group (Section 39 (1) of the Framework Statute).


IFRS 9 initial application leaves CET1 ratio

without guarantee1

unchanged

Regulation

As of 1 January 2018, IFRS 9 replaces the provisions set out in IAS 39 on accounting and

measurement of financial instruments

Note: Uncertainties associated with the quantification of the effect on equity, fluctuations of +/-EUR 10mn to be expected; 1 indicative, not taking into account the regulatory relief effect of the guarantee

15.4

1 January 2018 Pro-forma CET1 ratio

excl. guarantee

Impact on

CET1 ratio

Main drivers

–

Initial application

effects

Pro forma CET1 ratio (excl. guarantee)1

almost unchanged,

slight effect of +/- 0.1 percentage points, increase in equity is almost offset by increase in regulatory deduction item

Improvement in CET1 ratio (in-period) of around 1.0 to 1.2 percentage

points due to the difference between nominal values and future market values to be recognised in accordance with IFRS 9 for the transaction portfolio, meaning that the volume and the risk weight of the senior securitisation tranche for the guarantee will be significantly reduced. This leads to a significant decline in RWA and, as a result, to a positive effect

Initial application effects estimated on reported equity to total EUR

109mn before taxes, or EUR 79mn after taxes

Calculation of loan loss provisions - new model is based on expected credit losses instead of losses

incurred (increase in general loan loss provisions), thereby increasing loan loss provisions with regard to lifetime expected loss (Level 2) or full 12-month expected loss (Level 1) and reducing the equity capital by approximately

EUR 136mn to EUR 156mn before taxes

Classification provisions

1. Reclassifications of financial assets (securities and loans) from measurement category amortised cost (AC) to fair value through other comprehensive income (FVOCI) - business model “hold and sell” leads to increase in equity of approximately EUR 165mn before taxes

2. Reclassifications of financial assets (in particular transaction portfolio) from measurement category amortised cost (AC) to fair value through profit and loss (FVPL) - “Other” business model leads to increase in equity of EUR 61mn

- Non-binding assessments -


Overview of Pfandbrief cover pools

Treasury & Markets

Source: Disclosures in accordance with section 28 of the German Pfandbrief Act (PfandBG), see. https://www.hsh-nordbank.de/de/investoren/funding/funding/#angaben_gemaess_28pfandbg



Benchmark bonds, in EUR mn

0 Over 10 Y

> 5 Y up to 10 Y936

> 4 Y up to 5 Y590

> 3Y up to 4 Y646

> 2 Y up to 3 Y717

> 18 M up to 2 Y641

12 M up to 18 M257

6 M up to 12 M585

Up to 6 M9

5002.9 years

5.3 years 850

4.5 years 500

3.8 years 500

1.5 years 500

0.8 years 500

0.6 years

3.2 years 500

2.6 years 500

500

29

1.914

575

749

709

140

204

277

201

Over 10 Y

624

> 4 Y up to 5 Y

479

> 5 Y up to 10 Y

326

> 3Y up to 4 Y602

> 2 Y up to 3 Y719

> 18 M up to 2 Y9

12 M up to 18 M294

6 M up to 12 M624

Up to 6 M109 77

189

168

1.205

304

421

285

354

1.113

Maturity structure for mortgage Pfandbriefe

in EUR mnOutstanding

Pfandbriefe Cover assets

418

Pfandbrief circulation

4,380

Further coverage

Ordinary coverage

1654,633

Excess coverage


Cover pool, in EUR mn

Pfandbrief circulation

331

Excess coverage

4,113

Ordinary coverage

2

Further coverage

3,784

9.5%

8.8%

Public-sector Pfandbriefe

Benchmark bonds, in EUR mnMaturity structure for public-sector Pfandbriefe

in EUR mn

Public-sector Pfandbriefe

Cover pool, in EUR mnOutstanding

Pfandbriefe Cover assets

Overview of the Group income statement

Financial key figures over time

1 Incl. result from the financial investments accounted for under the equity method; 2 After effects relating to the guarantee and hedging effect of credit derivative; 3 Base premium and subsequent payments (2016)

26.04.2018

in EUR mn, IFRS

12M

2017

6M

2017

12M

2016

6M

2016

12M

2015

6M

2015

12M

2014

6M

2014

12M

2013

6M

2013

12M

2012

6M

2012

12M

2011

Net interest income 1,179 557 607 374 1,032 448 586 231 929 480 1,520 453 1,362

Net commission income 65 32 87 50 114 62 130 73 104 52 119 44 120

Result from hedging -18 -9 -4 2 12 8 -40 -12 9 10 6 9 4

Net trading income 254 151 88 40 84 71 61 112 193 114 -238 -210 -173

Net income from financial investments1

92 28 143 75 54 56 171 242 261 153 39 142 23

Total income 1,572 759 921 541 1,296 645 908 646 1,496 809 1,446 438 1,336

Loan loss provisions in the lending business

2 -1,276 -241 156 151 304 127 577 337 -833 -192 -656 -111 389

Administrative expenses -515 -246 -634 -277 -634 -302 -724 -338 -755 -382 -821 -385 -837

Other operating income 22 47 58 43 38 53 123 54 44 53 191 253 36

Expenses for bank levy and deposit guarantee fund

-41 -41 -56 -63 -50 -54 -1 - - - - - -

Net income before restructuring

and privatisation-238 278 445 395 954 469 883 699 -48 288 160 195 924

Net income from restructuring and privatisation

-66 -25 -110 -98 -31 -12 -84 -8 -56 -8 -43 -19 -235

Expenses for government guarantees3

-149 -80 -214 -126 -473 -235 -521 -259 -414 -143 -302 -157 -883

Net income before taxes -453 173 121 171 450 222 278 432 -518 137 -185 19 -194

Income tax expense -75 -15 -52 -11 -352 -75 -118 -131 -251 -7 61 35 -63

Net income after taxes -528 158 69 160 98 147 160 301 -769 130 -124 54 -257


Contacts

26.04.2018

Oliver Gatzke

CFO

Harald Müller

Head of Bank Steering

Tel. no.: +49 (0)40 3333 13495

Fax: +49 (0)40 3333 613495

[email protected]

Ralf Löwe

Treasury & Markets

Head of Funding / Debt Investor Relations

Tel. no.: +49 (0)431 900 25421

Fax: +49 (0)431 900 625421

[email protected]

Martin Jonas

Head of Investor Relations

Tel. no.: +49 (0)40 3333 11500

Fax: +49 (0)40 3333 611500

[email protected]

HSH Nordbank AGGerhart-Hauptmann-Platz 50D-20095 Hamburg


HSH Nordbank AGSchloßgarten 14D-24103 Kiel, Germany



mailto:[email protected]



Abbreviations

26.04.2018

ABF Asset-based Funding

AG Aktiengesellschaft [German public limited company]

AöR Anstalt öffentlichen Rechts [German institution under public law]

BRRD Bank Recovery and Resolution Directive

CEO Chief Executive Officer

CET1 Core Equity Tier 1

CFO Chief Financial Officer

CIR Cost-Income Ratio

CRO Chief Risk Officer

EaD Exposure at Default

EinSiG Einlagensicherungsgesetz [German Deposit Guarantee Act]

EL Expected Loss

EU European Union

EUR Euro

EU COM European Commission

SLLP Specific Loan Loss Provision

Excl. Excluding

GBP British pound

P&L Profit and Loss

HSH HSH Nordbank AG

imug Institut für Markt-Umwelt-Gesellschaft

IFRS International Financial Reporting Standards

Incl. Including

KWG Kreditwesengesetz [German Banking Act]

LCR Liquidity Coverage Ratio

LiqV Ratio pursuant to the German Liquidity Regulation


Lux. Luxembourg

Mn Million

Bn Billion

NPE /NPL Non-Performing Exposure / Loan

NSFR Net Stable Funding Ratio

OCI Other Comprehensive Income

GLLP General Loan Loss Provision

pp percentage point(s)

P2G Pillar 2 Guidance

P2R Pillar 2 Requirements

RP Risk Provision

RWA Risk-Weighted Assets

SAG Sanierungs- und Abwicklungsgesetz [German Act on the Recovery and Resolution of Credit

Institutions]

SFG Sparkassen-Finanzgruppe

SREP Supervisory Review and Evaluation Process

UL Unexpected Loss

Unsec. Unsecured

USD US dollar

PY Previous year

e.g. for example

Ø age Average age

2016 / 2017 Financial year 2016/2017

# Number

§ Paragraph

% Percent (figures in percent)

∑ Total

<20% Less than 20%

Disclaimer

26.04.2018

The market information contained in this presentation is for general informational purposes only. It is not intended to replace own market research or other legal, tax or financial information or advice. The presentation is not an invitation to buy or to sell securities or shares of HSH Nordbank and may not be used for advertising purposes. HSH Nordbank AG points out that the market information presented herein is only intended for financially experienced investors who are able to assess the risksand opportunities of the market / markets discussed and obtain comprehensive information from a number of different sources The statements and data contained in this presentation are based on either information thoroughly researched by HSH Nordbank AG or on generally accessible sources that it regards as reliable but which cannot be verified. Although HSH Nordbank AG regards the sources used as reliable, it cannot assess such reliability with absolute certainty. Individual items of information could only be reviewed with regard to their plausibility; however, their factual accuracy was not checked. Furthermore, this presentation contains estimates and forecasts based on numerous assumptions and subjective assessments made by HSH Nordbank AG as well as outside sources and only represents non-binding views of markets and products at the time of publication. HSH Nordbank AG and its employees and organisational bodies accept no responsibility for the completeness, up-to-datedness and accuracy of the information and forecasts provided despite careful checking. This document may only be distributed in accordance with the legal regulations applicable in the relevant countries and persons in possession of this document should acquaint themselves with the applicable local regulations. This presentation does not contain all material information needed to make important financial decisions and may differ from information and estimates from other sources / market participants. Neither HSH Nordbank AG nor its organisational bodies and employees can be held liable for losses or other damage that may arise from the use of this presentation, its contents or otherwise arise in connection with this presentation.HSH Nordbank AG points out that the distribution of this presentation or information in this presentation to third parties is prohibited. Losses incurred by HSH Nordbank AG as the result of the unauthorised distribution of this presentation or any of its contents to third parties are to be compensated for by the distributor. Such person has to hold HSH Nordbank AG harmless from all claims arising from the unauthorised distribution of this presentation or any of its contents to third parties and all legal costs incurred in connection with such claims. This particularly applies to a distribution of this presentation or information contained therein to persons located in the USA.

Management system and defined management indicators of the IFRS Group

The Bank’s integrated management system is aimed at the management of key value drivers – income, efficiency & profitability, risk, capital and liquidity – on a targeted basis. For this purpose the Bank uses a risk-adjusted key indicator and ratio system that ensures that the Total Bank, Core Bank and Non-Core Bank are managed in a uniform and effective manner. The HSH Nordbank Group is managed mainly on the basis of figures for the Group prepared in accordance with theInternational Financial Reporting Standards (IFRS). Within the framework of management reporting, the Bank focuses on the most important management indicators for the individual value drivers of the IFRS Group. The focus is, on the one hand, on the trend of these indicators during the year to date compared to the same period in the previous year and, on the other hand, on their expected change during the rest of 2017 (forecast, opportunities and risk report section). Further information on the management system and defined management indicators of the HSH Nordbank Group can be found in the HSH Nordbank’s Group Management Report for the 2016 financial year in the “Management system“ subsection in the “Basis of the Group“ section.


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