German bank HSH to return unused rescue cash -paper

FRANKFURT Nov 22 (Reuters) - German ship financier HSH Nordbank [HSH.UL] plans to return 13 billion euros ($17.4 billion) in unused guarantees to the German government's bank rescue fund Soffin, HSH's chief executive told a newspaper.

"The agreement with Soffin runs out at the end of the year and we won't renew it," Dirk Jens Nonnenmacher told financial daily Handelsblatt in an interview released in advance of publication on Monday.

HSH had so far used 17 billion euros of the 30 billion in guarantees granted by Soffin and the decision to return the remainder reflected an improved liquidity position at the bank, the paper said.

"Refinancing has become clearly much more stable in recent months. We've been able to drastically reduce our liquidity costs this year," Nonnenmacher said, adding that the bank could now refinance itself more cheaply in the market than it could through Soffin.

A downgrade of the bank by credit rating agency Standard & Poor's earlier this year has had a much smaller impact than originally feared, he said.

"Our investors know that the states of Schleswig-Holstein and Hamburg are standing by the bank," Nonnenmacher said.

Schleswig-Holstein and the city-state of Hamburg together control nearly 86 percent of HSH, with nine trusts advised by financier J.C. Flowers holding a further 9 percent stake.

In May, S&P lowered its long- and short-term counterparty credit ratings on HSH to "BBB+/A-2" from "A/A-1," citing what it said were HSH's bleak earnings outlook and the agency's concerns about HSH's business model. S&P placed HSH on negative outlook.

Handelsblatt said the bank expects to make a 1 billion euro loss this year and a further 700 million loss in 2010.

Nonnenmacher expects to post a profit of at least 100 million euros in 2011, the paper said.

((Reporting by Jonathan Gould; Reuters Messaging: jonathan.gould.reuters.com@reuters.net; +49 69 7565 1242)) ($1=.7458 Euro)