Legacy Shipping Banks Continue to Unwind Non-Performing Loans

euros in stacksA number of shipping banks issued their quarterly reports in the past week. DNB of Norway said its most recent quarterly report that it had to impair US$ 31m (NOK 261m) of loans in its shipping portfolio even as it reported a general positive turn of events in the third quarter of 2018. The bank reported that its shipping loans have seen stable development in the quarter while past im­pairments have been reversed. The bank has a total US$ 7.1 billion (NOK 56 billion) in loans to the shipping industry, mostly in tankers, but also in bulk, gas and containerships as well. Nordea said this week that it has reduced its loans and provisions to shipping and offshore in Q3 by nearly EUR 1.5m vs. Q3 of 2017, leaving them at approximately EUR 8.5 billion at present, also a EUR 300m drop from Q2. The bank saw after-tax earnings EUR 684m in the quarter, albeit about 18% lower than a year ago. DZ Bank is continuing its selloff and break-up plans for DVB Bank. The plan is to first sell DVB’s aviation and land-transport divisions before finding a buyer for its core shipping finance business. Analysts spec­ulate that it may follow a path similar to Commerz­bank, which had its shipping core wound down in a series of portfolio sales, loan repackaging and amort­isation. The German bank currently holds about EUR 7.2 billion in shipping loans, which is none­theless down from the EUR 12.5 billion a year ago. German shipping banks have successfully reduced their exposure to shipping non-performing loans (NPLs) of late, says Moody’s Investors Services, not­ing that their exposure in percentage of Tier 1 capital is now around 60% compared to 100% in 2015.

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