November 29, 2017 / 11:29 AM / a year ago

Germany's HSH Nordbank expects flat 2017 earnings amid sale

* HSH posts 10 pct pre-tax profit rise in first nine months

* Privatisation of HSH enters final stretches

* Peer NordLB returns to profit, nears asset sale

By Arno Schuetze

FRANKFURT, Nov 29 (Reuters) - German state-backed lender HSH Nordbank said on Wednesday that it expects to post flat 2017 pre-tax profit as the privatisation of the ailing lender enters the home stretch.

Chief Executive Stefan Ermisch said that the bank would continue to support its owners’ sales effort “to the best of our ability”, adding that the bank has established a good basis for private ownership.

Private equity groups Apollo, Cerberus and J.C. Flowers last month submitted binding bids for the bank as part of the EU-enforced privatisation.

HSH Nordbank, which required a state rescue after risky investments turned sour and it was hit by the slump in the shipping industry, must be privatised by the end of February. Its state owners are not allowed to swallow any losses in order to avoid new state aid proceedings.

HSH reduced its total assets by 13 percent to 76.5 billion euros ($91 billion) and reported a 10 percent rise in pre-tax earnings to 201 million euros in the first nine months. In the full year 2016, it posted 121 million euros in pre-tax profit.

The bank, which became the world’s largest ship lender in an aggressive expansion strategy in the 2000s, still has non-performing ship loans worth 6 billion euros in its non-core division, but aims to cut its exposure to 3.6 billion by the end of 2018.

Like its peers, HSH has benefited from first signs of recovery in the shipping market in recent months.

That also lifted local rival NordLB’s nine-month earnings, which on Wednesday reported a pre-tax profit of 326 million euros after a loss of 624 million in the year-earlier period.

NordLB said that it aims to reduce its non-performing ship portfolio to 5 billion by end-2019 from 9.1 billion euros now.

As part of NordLB’s restructuring, the lender has put its property lender Deutsche Hypothekenbank up for sale.

Peers Aareal, Deutsche Pfandbriefbank (PBB) and LBBW are expected to hand in final offers for Deutsche Hypo on Thursday, sources familiar with the matter said.

Aareal and PBB declined to comment, while LBBW was not available for comment. ($1 = 0.8436 euros) (Editing by Adrian Croft)

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