Rembert Schneider, spokesman for the bank told the Hannoversche Allgemeine Zeitung paper on Saturday, “We have restored it to the heirs of the previous Jewish owner.”
Although he admitted the bank had a moral duty to return it, he said there was not necessarily a legal one. The official handover actually took place late in 2008, the paper says, but has only now been reported.
The painting, Kinderbild (Katze hinter einem Baum) or "Children's painting (cat behind a tree)," by Franz Marc, is on long-term loan to the Sprengel Museum in Hannover where it will remain.
It will have place of honour in the exhibition "Marc, Macke and Delaunay – the beauty of a shattering world (1910 – 1914)" which opens on March 29, where it will be marked with a sign saying "Private ownership."
Anita Halpin, the granddaughter of Hess, who lives in England, has said she might be prepared to continue the loan of the painting to the museum.
She and her relatives created headlines and waves in the art world in 2006 when they sold the Kirchner painting Berliner Straßenszene or Berlin Street Scene, for around €30 million - shortly after retrieving it from the city's Brücke Museum.
This sparked a controversial discussion about restoration of art to the heirs of Jews who had been forced to sell, or who could only sell their art at artificially reduced prices when desperate to escape the Nazis.
The circumstances in which this latest painting was taken from an exhibition in 1936, into the possession of the Hannover company Pelikan could not be explained despite months of intensive research commissioned by the bank. It is not known whether Hess' son, by then living in exile in London, had ordered the sale or received its full worth.
The Hess heirs have further open claims against ten more German museums, for works which include further Marc and Kirchner paintings.