December 6, 2017 / 2:37 PM / 5 days ago

UPDATE 1-NordLB says needs to bolster capital buffers

* NordLB needs CET of 13 pct, currently has 12 pct - CEO

* NordLB owner says no new state aid planned

* Unit sale planned January, should mitigate problem (Adds owner quote, background)

HANOVER, Germany, Dec 6 (Reuters) - German state-backed lender NordLB said it needed to bolster its capital buffers as it continues to suffer from high writedowns linked to its exposure to the ailing ship industry.

“For our business model we would at least need a core equity tier 1 ratio in the 13 percent range,” Chief Executive Thomas Buerkle said late on Tuesday, adding that no capital increase was planned in the short term.

NordLB is 65 percent owned by the German states of Lower Saxony and Saxony-Anhalt, with municipal savings banks owning the rest. Any capital injection by the state draws scrutiny from the European Union, which wants to make sure that competition is not hampered.

Lower Saxony’s finance minister, Reinhold Hilbers, said pumping new state money into NordLB was not on the agenda. He said it was “ambitious” for NordLB to meet the challenges on its own “but that remains our goal.”

NordLB currently has a CET1 ratio of 12 percent and the CEO said a thicker capital buffer was needed.

“The market expects more, the ratings agencies and our owners expect more,” Buerkle said, adding that there were also signals from the financial regulator that capital needed to be bolstered.

Buerkle said he expected the bank to decide in January on a sale of its Deutsche Hypo unit, proceeds of which would also bolster NordLB’s capital.

He also said he was still seeking synergies from the takeover of Bremer Landesbank by simplifying processes and to reducing costs, including cutting 1,250 of its 6000 jobs.

After a record loss of roughly 2 billion euros ($2.4 billion) last year the bank aimed to break even this year, Buerkle said.

It aims to reduce its non-performing portfolio of ship loans to 5 billion euros by the end of 2019 from 9 billion now.

Managing ship loans was a skill that NordLB understands well, Buerkle said, adding that this ability could be offered in case the planned sale of peer HSH Nordbank fell through.

“But of course, we have no excess capital,” he said, signalling that NordLB would not act as a buyer of HSH.

To avoid new state aid proceedings, HSH’s state owners are not allowed to absorb any losses in a potential sale of the bank. That could prompt them to opt to wind down HSH’s assets on their own.

$1 = 0.8462 euros Reporting by Klaus Lauer; Writing by Arno Schuetze; Editing by Douglas Busvine and Edmund Blair

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