As Thomas Mirow considers potential acquirers for HSH Nordbank AG, the German state-owned lender put up for sale this week, he says a Chinese suitor is more likely than a buyer from a nearby country.
Despite a push by European lawmakers to bolster cross-border ties, banks are “shrinking their balance sheets rather than expanding them” because of tougher regulations and reduced profitability, said Mirow, the supervisory board chief at HSH.
The Hamburg-based bank, with €88bn ($94 billion) in assets, could be attractive to a Chinese buyer seeking access to Germany’s so-called Mittelstand, the medium-sized businesses that are the backbone of the country’s economy, he said in an interview in Frankfurt.
HSH’s close connections to such companies might make it “an interesting asset from the Chinese point of view,” said Mirow.
A lack of cross-border interest within Europe means HSH’s majority owners, the states of Hamburg and Schleswig-Holstein, may have to pin their hopes on a sale to a strategic investor from Asia or Germany by the end of February next year, under a European Union-imposed deadline. Wider interest could bolster bidding prices and also increase its chances of survival.
Mirow’s view runs counter to the aims of EU lawmakers and supervisors to shore up the pan-European financial system via what they call a banking union across the bloc. The region’s biggest banks, slow to boost capital levels after the financial crisis, are retreating to national markets and scaling back risk as they work to satisfy regulators trying to make lenders more resilient to shocks.
The sale was ordered by the EU as part of a restructuring to keep the bank in business. HSH has transferred €5bn of bad debt into a separate bad bank controlled by the states and started selling an extra €3.2bn euros in legacy loans, including shipping and real estate credits, as it seeks to sell the rest of the bank.
In an initial deal, Australia’s Macquarie Bank and Bank of America Merill Lynch bought €800m aviation loans and €540m in real estate credits, respectively, HSH said in a statement yesterday. A further €300m in credits went to individual unidentified investors in the sale managed by UBS Group AG. Talks to divest further packages are at an advanced stage, HSH said.
HSH buckled under excessive risk-taking prior to the financial crisis, when it had sought to expand beyond its roots as a regional lender to companies and savings banks into global capital markets.
While European investments by Chinese firms are drawing closer regulatory scrutiny as countries assess possible national security concerns, HSH’s location in Germany’s biggest port, with strong trading links to Asia, makes the bank more open to such scenarios, Mirow said.
