Nord LB Increases Loan-Loss Provisions Sevenfold on Ship Crisis

Norddeutsche Landesbank Girozentrale, one of the world’s top shipping lenders, increased loan-loss provisions by more than sevenfold in the first quarter as it doesn’t see a quick end to the industry crisis.

The state-owned bank, which is based in the North German city of Hanover and has been in the ship-financing business for more than 30 years, put aside 241 million euros ($351 million) to cover potential losses on 252 vessels in its portfolio, the company said today in a statement. Provisions totaled 33 million euros a year earlier.

“The ongoing crisis in ship financing continues to challenge us significantly,” Gunter Dunkel, chairman of the managing board of Norddeutsche Landesbank, or Nord LB, said in the statement.

The lender, which is controlled by the German states of Lower Saxony and Saxony Anhalt, is trying to cut bad loans to shipping clients struggling to service their debt amid the slump in demand, overcapacity of vessels and low freight rates.

“We want to slightly reduce our shipping portfolio, but it will continue to be part of our core business,” said Thomas Klodt, a spokesman for Nord LB.

Nord LB said it posted a loss of 32 million euros in the first quarter compared with a profit of 118 million euros a year earlier on the increase in loan-loss provisions.

The bank, which is almost 250 years old, said it has provided loans for 1,795 vessels, including container ships, tankers and bulkers, with an average age of five to seven years.

“The average age of the financed ships is low,” Nord LB said in a presentation with its first-quarter results. “Even after the ship crisis, they will be in duty and earn money.” .

Nord LB said it holds 18 billion euros in shipping loans. At HSH Nordbank, which is based in Hamburg and is the world’s top shipping lender, such loans make up 27 billion euros of the lender’s 125 billion-euro portfolio. Commerzbank AG (CBK), Germany’s second-biggest bank, said it wants to exit ship financing.

“The crisis in the shipping markets will continue to present us with great challenges in the next few quarters,” Dunkel said.

To contact the reporter on this story: Nicholas Brautlecht in Hamburg at nbrautlecht@bloomberg.net

To contact the editor responsible for this story: Angela Cullen at acullen8@bloomberg.net

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