Keeping Afloat NordLB spins off asset management to Warburg

The troubled Landesbank is streamlining its operations as it turns over its asset portfolios to a specialized bank.
Quelle: dpa
Righting NordLB is a work in progress.
(Source: dpa)

As it seeks to keep its troubled shipping loans from sinking it, NordLB has thrown out a lifeline to private banking house M.M. Warburg to take over its asset management business. The two will merge their investment operations under Warburg’s control, becoming with €34 billion ($42 billion) under management one of the largest asset managers in northern Germany.

The partnership will give NordLB executives one less thing to worry about as they focus on turning around a bank that nearly foundered under its nonperforming shipping loans. NordLB, headquartered in Hanover, reported a €1.96 billion loss for 2016, but said in November it has returned to profitability. It whittled down its shipping loan portfolio to €13 billion by the end of 2017 and expects to reduce it to €10 billion in the medium term.

NordLB is one of the Landesbanks that have chronically run into trouble since they expanded beyond their original functions as banker to state governments and clearing banks for regional savings banks. They have struggled to attract top-notch staff and find the best customers.

NordLB customers will be offered an even broader range of products and services. Hinrich Holm, deputy chief executive, NordLB

The venture is a coup for Warburg, which traces its origin to 1798 and is one of the oldest private banking houses still in operation. The Hamburg-based bank was Aryanized during the Nazi period and reclaimed its name and ownership after the war under family scions.

“Alongside our two core business fields private banking and investment banking, we want to further strengthen our successful performance in asset management and continue our focus on the German market here,” Warburg partner Joachim Olearius said in a statement.

Warburg said last month that its asset management operations outperformed its benchmarks in every sector in 2017 through carefully calculated if aggressive positioning. The most dynamic fund, with an 80 percent share in equities, returned 11.4 percent compared to 6.32 percent for the benchmark. Even its most conservative portfolio, with just a 20-percent equity share, returned 5.38 percent, ahead of 2.33 percent for the benchmark.

“With Warburg, we have a highly professional partner in asset management at our side,” Hinrich Holm, deputy chief executive at NordLB, said. “NordLB customers will be offered an even broader range of products and services.”

Warburg will hold 75.1 percent of the new joint venture, giving it virtually complete management control, with NordLB holding the rest. For NordLB, the spinoff is part of its “One Bank” program to streamline its structure and focus on core operations. Last year, NordLB merged its Bremer Landesbank subsidiary into the parent bank.

The asset management joint venture is subject to regulatory approval. Financial details were not disclosed.

Darrell Delamaide is a writer and editor for Handelsblatt Global in Washington, DC. To contact the author: [email protected].