Hamburg Commercial Bank
HCOB, Hamburg
Hamburg Commercial Bank (HCOB), once a flagship of international real estate finance under private equity ownership, is pulling back. In a clear pivot toward core activities and in preparation for a future sale, the bank has announced that it will cease new business in international property lending, reduce exposure in several asset-backed segments, and cut 20% of its workforce.
The move, described by CEO Luc Popelier as a strategic focus rather than a restructuring, will see around €3.5 billion in assets shed over the next two years—roughly 10% of the bank’s balance sheet. Commercial real estate lending will now be confined to Germany, with the rationale that international property markets require local knowledge and operational scale that HCOB no longer sees as viable.
"We are too small to be present in all countries and to maintain the necessary local expertise," Popelier said in a recent interview. "We consider business outside Germany too risky for an institution of our size."
Popelier, who joined HCOB from Belgium's KBC in September 2024, was brought in explicitly to sharpen the bank’s profile ahead of a private equity exit. "We want and will grow in the business with corporate clients, faster than before. We want business that creates value for our customers, for the bank, and for its shareholders. For a new strategic owner, I want to make HCOB as attractive as possible," he told Börsen-Zeitung.
The bank is also reorienting its deposit strategy. Historically reliant on wholesale funding via platforms such as Raisin, HCOB will now cultivate direct retail deposit relationships to stabilise and diversify its funding base. This, combined with a focus on corporate lending, infrastructure, renewables and German commercial real estate, is designed to make HCOB leaner, more predictable—and easier to sell.
From pan-European ambitions to domestic discipline
The decision ends what had been an active cross-border lending strategy, particularly in European secondary cities. HCOB's retrenchment is being closely watched by market participants, particularly at a time when traditional lenders are reassessing real estate exposure under pressure from higher capital requirements and persistently low transaction volumes.
The pivot also affects aircraft and asset-backed lending businesses. Although the bank had only re-entered aviation finance in early 2024 with eight successful deals, Popelier says global businesses like aviation are incompatible with the bank’s new focus. Asset-backed lending, particularly exposure to CLOs and private debt intermediaries, is also being wound down.
While the €3.5 billion scale-back is significant, Popelier stressed that HCOB will remain under ECB supervision due to other criteria beyond balance sheet size. Importantly, he made clear that HCOB is not in crisis. "The bank is attractive and well-capitalised," he said. "It just needs to focus further."
Despite the cuts, HCOB remains profitable. The bank reported a pre-tax profit of €248 million in 2024 and continues to boast a CET1 capital ratio of 17.3%. Total assets rose 7% to €33.6 billion. Loan quality has also improved: the non-performing exposure ratio fell from 2.3% to 1.9% in 2024, and risk provisioning remains robust.
Recent bond market activity underscores confidence in the credit story. HCOB’s latest €500 million senior preferred bond was three times oversubscribed, attracting strong demand from investors in Germany, the UK, France, and beyond. The successful placement helps extend HCOB’s credit curve and burnish its credentials as a focused, stable issuer—essential positioning for a future strategic sale.
Yet the wind-down of its international property business is more than housekeeping. It reflects a recalibration of real estate risk appetite among mid-tier banks and a growing divide between local lenders and globally diversified financiers. For institutional borrowers, the exit of another international lender from Europe’s property market signals an environment where options are narrowing—and competition for credit is about to get fiercer.
So, who could fill the vacuum? Debt funds and insurance-backed lenders are expected to step into the gap, but these capital sources come with different pricing, covenant structures and execution risks. Smaller German banks may also gain share domestically, but few have the cross-border lending infrastructure HCOB once offered.
For HCOB, focus may yield saleability. For the market, it may leave a gap not easily filled.