Hamburg Commercial Bank, the only state-backed German lender sold into private ownership, is planning an acquisition spree as the pressure on the country’s fragmented banking sector to consolidate intensifies.
“I firmly believe that consolidation among German banks will become a more pressing topic in the near future,” chief executive Stefan Ermisch told the Financial Times. “This will provide plenty of opportunity” for the bank, which has amassed a war chest of some €2bn.
Although Ermisch declined to discuss potential targets, he said that smaller specialised lenders who focus on leasing could be of interest.
The ambition marks a remarkable turnround for Hamburg Commercial, which in 2018, when it was then named HSH Nordbank, was sold to a consortium led by US private equity groups Cerberus and JC Flowers. The buyout firms bought the lender for €1bn from the states of Hamburg and Schleswig-Holstein, which in 2009 rescued the bank from insolvency in a €13bn bailout.
Driven by deep cuts to its workforce and a shrinking of its balance sheet, the lender on Thursday reported an eight-fold jump in profits for 2020 to €102m. Revenue, excluding one-offs, was up a fifth to €560m.
The lender has €34bn in total assets and is focused on funding commercial real estate, shipping and infrastructure projects like wind farms.
Ermisch said that its improved performance, combined with a fortified balance sheet, had put the lender on track to take the final step of its privatisation and join the deposit insurance scheme used by private banks. For now, the lender remains part of German public banks’ institutional protection scheme. The Association of German Banks declined to comment on the transition.
Rating agency Moody’s in December upgraded its outlook on the bank to positive, rating it Baa2, the second-lowest rung of investment grade. While praising its cost cutting, the agency cautioned that the bank “has yet to establish a record of sustained profit generation”.
Alongside its results, the lender said that last year its common equity tier one ratio — a key benchmark for balance sheet strength — rose from 18.5 per cent to 27 per cent of risk weighted assets, more than twice the minimum required by regulators. At €624m, non-performing loans stood at less than 2 per cent of the bank’s credit exposure.
Ermisch said he did not intend to keep Hamburg Commercial’s equity ratio at such an elevated level over the long term. Its financial strength could instead be turned to acquiring rival banks.
“This gives us a lot flexibility to play to our strengths in the consolidation wave that will start once the current downturn has ended, whenever this will be,” he said, adding that the lender was also planning to start paying dividends “at some point in the future”.