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UPDATE 1-German lender NordLB prepares unit sale to repair balance sheet - sources
July 12, 2017 / 10:30 AM / 5 months ago

UPDATE 1-German lender NordLB prepares unit sale to repair balance sheet - sources

(Adds potential bidders, background)

FRANKFURT, July 12 (Reuters) - German state-backed lender NordLB is preparing a sale of its property lender Deutsche Hypothekenbank as it seeks to repair its balance sheet following heavy writedowns related to its exposure to bad shipping loans, people close to the matter said.

The bank has tasked Rothschild with advising it on options for its restructuring, which could include the sale of Deutsche Hypo as early as later this year, the people said, adding that no decisions have been taken so far.

NordLB will only sell profitable Deutsche Hypo if the effect on the bank’s capitalisation is large enough, they added.

“All of the bank’s units have been put under scrutiny,” a NordLB spokesman said, declining to elaborate further. Rothschild declined to comment.

Property lenders such as Aareal and Deutsche Pfandbriefbank (PBB) are seen as potential bidders for Deutsche Hypo, as are public-sector banks including BerlinHyp and other banks and private equity investors.

NordLB said in April it would not need to turn to its owners for extra capital to shoulder a record 2016 loss of 1.96 billion euros ($2.25 billion), caused by 2.94 billion euros in provisions for bad shipping loans.

Germany was one of the world’s main centres of global ship financing before the 2008 financial crisis, and the five German banks with the closest links to the shipping industry still have around 80 billion euros on loan to the sector.

NordLB, as well as peers such as HSH, Commerzbank, DVB and KfW, have taken large writedowns and boosted capital buffers against the risk of shipping loans turning sour.

Deutsche Hypo had a book value of 1.4 billion euros as of December 2016, according to a company presentation.

Listed peers Aareal and PBB trade at 0.8 and 0.6 times their book value. ($1 = 0.8730 euros) (Reporting by Arno Schuetze; Additional reporting by Alexander Huebner; Editing by Victoria Bryan)

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