* HSH said discussion with EU finished
* Expects simultaneous decision on HSH and other banks
* Sees little upside in shipping division (Adds remarks from board members, background)
HAMBURG, Aug 27 (Reuters) - HSH Nordbank expects the European Commission to rule on the legality of its state bailout in the fourth quarter, a move that will give long-awaited consolidation of German public-sector banks a push.
"We finished discussions with the EU (European Union) in July," Chief Executive Dirk Jens Nonnenmacher told reporters on Friday. "The process will be finished in the fourth quarter."
HSH, like other landesbanks, lost billions of euros on risky investments in the financial crisis, forcing its owners to prop up the lender with 10 billion euros ($12.72 billion) in loan guarantees and a capital injection of 3 billion euros.
The commission, the EU's executive arm, decided to make a bundled ruling on the bailouts of HSH and other state-controlled banks, rather than deciding on HSH's bailout on a standalone basis, Nonnenmacher said.
The commission, tasked with ensuring state aid does not skew competition in the 27-member EU, is seeking a change of ownership at several of Germany's landesbanks, which are typically owned by local savings banks and state governments.
The EU had pushed for fast action, while HSH's owners asked for time until at least 2014 to allow markets and bank asset prices to recover.
Analysts expected the bailouts of BayernLB and HSH would be approved, but that the EU would ask for a sale of the wholesale lenders within a few years.
Nonnenmacher said HSH expected to break even in 2011. It lost 400 million euros in the first half of 2010 as costs for state guarantees and a negative trading result offset an improvement in risk provisioning.
The bank, one of the biggest ship financiers of the world, also benefited from the strong recovery of global trade, which drove up freight rates and put container shippers in a better position to service their loans.
However, little upside potential remained in the shipping industry as overcapacity and a possible global slowdown might drag, HSH board member Torsten Temp said.
"We can call ourselves happy, if we stay at the current level of freight rates," he said, echoing remarks of other industry experts. (Reporting by Arno Schuetze; Editing by Sharon Lindores) ($1=.7861 Euro)