Helaba Annual Report 2016
Annual Report 2016

Corporate Finance

Helaba's Corporate Finance core business division operates from the Frankfurt am Main, Düsseldorf, New York and London sites. Serving both customers of Helaba itself and customers of the Sparkassen, it structures and arranges tailored finance for companies and the public sector and also provides complete design, contract drafting and tax engineering services. Total business volume at the Corporate Finance business division rose to € 38.6 bn in 2016.

Corporate loans business represents one of the cornerstones of Helaba's corporate customer business. A reliable partner for finance, the Bank provides a wide range of credit products to help corporate customers advance their business and make the investments their aspirations demand. Corporate loans are very important in cementing the customer relationship and are hence also a central tool for attracting new customers. Key products include syndicated loans and development loans as well as bilateral loans, credit lines and promissory note loans. The Bank maintains a strategic dialogue with its corporate customers with regard to their financing needs. It assumes an active role in the design of loan transactions of all sizes and takes on structuring tasks as a lead player in the implementation of financing instructions. It also assists its customers in the facility agent function in syndicated finance transactions. The total volume of business in this area reached € 13.8 bn in 2016.

The year ended proved a very good one for acquisition finance business – as predicted – thanks to a favourable economic background, especially the low level of interest rates. Helaba claimed a substantial share of this strong market, with 20 domestic and international transactions, and forged partnerships with customers from all segments. More good progress is expected in 2017.

Helaba concluded approximately € 1 bn of new transactions in the ABS/forfaiting area. The volume of business rose only moderately though, from € 5.9 bn to € 6.4 bn, because the high level of liquidity in the market led to many financing deals being completed instead using more straightforward corporate loan structures. It is difficult to offset the combination of shrinking margins and rising regulatory costs by increasing volume and the Bank is consequently working to extend the product range, for example by expanding supply chain finance. It is also stepping up efforts to attract ABS mandates in relation to customer current asset optimisation.

Helaba has a reputation among customers of the Bank and of the German Sparkassen as a reliable partner for foreign trade finance. Bucking the wider trend, the Bank grew its business with corporate customers in the areas of buyer's credit products and guarantee transactions in particular. Income generated from business with customers of the Sparkassen increased by 6 % year on year. Risk transfer services in the documentary business were a priority and Helaba also built up collaboration in the area of buyer's credit for Sparkasse customers, underlining the closeness of its partnership with the Sparkassen. Helaba expects growth in the buyer's credit area for 2017 in the Middle East and, on a selective basis, in Latin America. Documentary business will continue to be dominated by the effects of tough competition in relation to terms and risk transfer, with small transactions the order of the day in the Sparkasse segment.

The leasing sector in Germany made very good progress: investments totalling approximately € 64 bn were financed through leasing, which equates to a year-on-year increase of around 9 %. The Leasing Finance business division saw only moderate growth in the financial year ended due in large part to a further increase in competition from the financial community. Transactions concluded in relation to real estate included long-term financing arrangements for administrative and logistics facilities in Germany. The desire to lock in a low interest rate is currently one of the main motivating factors for concluding long-term real estate transactions. Helaba again stepped up direct co-operation with leasing companies in connection with financing through loans and credit lines and intends to continue developing its successful collaborative relationship with the Deutsche Leasing Group and the many co-operative ventures.

The civil aviation market remained stable in 2016. Airline profits moved into record-breaking territory as air traffic measured by seat kilometres sold increased by around 6 % – well ahead of the rate of global economic growth. Once again in 2016 Helaba managed to conclude 29 attractive financing deals with airlines and aircraft leasing companies with which it has a long history of trusting co-operation. Expectations for business in 2017 are positive again, although competitive pressure will continue to grow.

Conditions in the shipping industry, which has experienced a succession of difficult years, continued to deteriorate. This led to a significant increase in the allowance for losses on loans and advances in this segment. The market is not expected to recover to any significant degree in 2017. Helaba focused its efforts in this area on portfolio management.

Providing project finance to help realise infrastructure projects is a business area of interest to a great many banks, including an increasing number of foreign banks, and a growing contingent of other institutional investors. Transport infrastructure projects, such as public-private partnership models for the development of the German motorway network, and projects of the international energy sector are both particularly popular. Helaba concluded financing arrangements in the energy segment for a number of quite large transactions – including ten wind power projects and two combined cycle power plants.

The Bank arranges structured finance throughout Germany in the key infrastructure and renewable energy segments in the form of joint loans with Sparkassen. Helaba continued to build on its position as a leading S-Group bank, in particular through the financing of wind farms. The realisation of the initial tranche of wind power projects to have gone through the competitive bidding process is imminent. The Bank expects rising customer demand in the infrastructure field for finance to enable remunicipalisation projects, especially in relation to electricity and gas networks.

Helaba's group contractual trust or "group CTA" model offers customers and S-Group partners a proven and cost-efficient alternative to proprietary CTA models. Helaba ranks among the market leaders in this area with a volume of approximately € 2.2 bn entrusted to it under the group CTA. CTA business focuses on the creation of successor solutions for existing in-house CTA models in connection with the sale of companies. This market is expected to see further growth in 2017. The prevailing low level of interest rates also affects the market for the external financing of pension obligations. The investment focus is shifting to asset classes involving material assets due to the persistently low yields available in the bond market. The Bank offers customers solutions based on (bank) guarantees as well as CTA solutions to protect company pension scheme entitlements not covered by the PSVaG mutual insurance association for pensions and credit held in semiretirement and long-term flextime accounts in the event of insolvency.

Helaba sold 44.2 % of its shares in the HANNOVER LEASING Group to CORESTATE Capital Holding S.A. with the notarised contract of sale of 15 December 2016. It retains a minority stake of 5.1 % in the HANNOVER LEASING Group. The completion of this transaction is conditional on the conclusion of the ownership control procedure by BaFin, which is expected to come in the first half of 2017.

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