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Eye-watering loss for Nord/LB

November 25 - German state bank Nord/LB, the country's second-largest ship financer, revealed a further decline in results on Thursday and indicated that its full-year losses would surpass an eye-watering EUR1 billion (USD1.05 billion).

The bank placed the blame for this increase in losses down to another rise in the costs of risks within its shipping loan book, particularly that managed by its Bremer Landesbank subsidiary, which is being fully integrated into Nord/LB.

Nord/LB reported a pre-tax loss of EUR624 million (USD661 million) for the first nine months of its current financial year, which is a clear reminder of the difficulties being faced by several banks as they try to manage their non-performing shipping loans.

Nord/LB also expects risk provisioning to be above average in the fourth quarter coming in considerably above EUR2 billion (USD2.10 billion). For 2016 as a whole. In accordance with current estimates, the annual loss is expected to be over EUR 1 billion (USD1.05 billion). With the risk provisioning measures, Nord/LB is once again implementing a substantial increase in coverage for risks from ship finance. This lays the foundations for the further reduction of its ship finance portfolio as well as for a positive earnings performance in 2017 and onwards.

In spring 2016, Nord/LB had already made the strategic decision to considerably reduce its ship finance portfolio from EUR19 billion (USD20.10 billion) at the time. The bank aims to reduce the size of its portfolio to between EUR12 billion (USD12.7) and EUR14 billion (USD14.8 billion) by the end of 2018. Particular focus here is on increasing the quality of the portfolio. Over the first three quarters of 2016, the portfolio had already been scaled back by almost two billion euros. Further measures for scaling back the portfolio are in preparation. This includes a major transaction with the investment company KKR and with a foreign sovereign wealth fund. All in all, NORD/LB expects its ship finance portfolio to stand at around EUR16 billion (USD16.9 billion) by the end of 2016.

With the exception of ship finance, all of Nord/LB's business segments remained very profitable in the first three quarters of 2016. The risk situation in business segments outside ship finance remains relaxed.

"For reasons of caution, we also plan increased risk provisioning for ship finance for subsequent years," said Nord/LB's chief executive officer Gunter Dunkel.

As at September 30, 2016, 21 percent of Nord/LB shipping portfolio comprised multipurpose heavy lift, multipurpose heavy cargo and offshore vessels.

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