Bad Bank

HSH Nordbank sold to private equity group, ending sad chapter in German banking

HSH Nordbank dead branches DPA
Spring may be just around the corner. Source: DPA

Hamburg and Schleswig-Holstein got in just under the wire to meet a European Union deadline for selling the troubled HSH Nordbank to a group of US investors, but the sale represents a bittersweet ending for a sad saga that shows German banking in a bad light.

The €1 billion purchase price was more than the state owners could have hoped for a year ago. But it hardly makes up for the €10 billion-plus the two governments have poured into the bank to bail it out after an ill-advised foray into shipping loans that made HSH Nordbank the global leader in maritime finance but nearly sunk it when the sector went into a slump. Total losses could reach €14 billion depending on whether the state has to pay off guarantees.

The investor group, headed by private equity funds Cerberus and J.C. Flowers, are acquiring a bank that will effectively be cleansed of remaining bad loans. Bank management under CEO Stefan Ermisch has worked successfully over the past year to reduce the number of bad loans with those remaining transferred to a holding company that remains in state ownership.

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