Deutsche Bank AG (DBK) said European shipping lenders may accelerate sales of distressed loans to buyers such as U.S. private-equity firms as the assets have become a focus of a European Central Bank review.
“The ECB stress test could be another reason why banks are inclined to let more and more papers go and sell at a loss,” Klaus Stoltenberg, global head of shipping at Frankfurt-based Deutsche Bank, said in a speech at a conference in Hamburg today. “Recently we have seen an increase in loan trading.”
The ECB is scrutinizing whether the 128 biggest euro-area banks are setting aside enough money for potential loan losses before it becomes the industry supervisor in November. European lenders led by Germany’s HSH Nordbank AG, Commerzbank AG (CBK) and Norddeutsche Landesbank Girozentrale are facing increased costs from non-performing shipping loans as overcapacity in the industry persists.
Interest in investing in the loans has mainly come from private-equity firms in the U.S., Stoltenberg said in an interview on the sidelines of the conference. “There is no shortage of buyers.”
Private-equity firms pumped more than $7.2 billion into the industry in 2013, according to Marine Money, a shipping newsletter. They entered partnerships, ordered new vessels or bought ship debt at the fastest pace since 2008 as a fifth year of near zero interest rates saw more money chasing fewer deals.
Deutsche Bank is usually not among lenders selling shipping loans, Stoltenberg said. The company is “very conservative” and has only realized losses on two deals, he said.
China’s state-owned banks such as Industrial & Commercial Bank of China Ltd. (601398), the nation’s largest lender, on the other hand “are as active as never before” in European ship financing and prepared to take “hundreds of assets on their books,” Stoltenberg said in his speech.
“Those banks could be the next Landesbanks in a couple of years from now,” he said. Stoltenberg referred to German state-owned banks like HSH Nordbank and NordLB, which have reduced their shipping investments in the recent crisis years.
What Chinese banks “do here is amazing and maybe a little bit worrisome at the same time, as ‘‘we are seeing a huge concentration on vessels on their books,’’ Stoltenberg said.
Deutsche Bank, which Stoltenberg joined last month from NordLB, had shipping assets of 5.9 billion euros ($8.1 billion) at the end of 2013, including 5.3 billion euros of loans and 600 million euros of commitments, spokesman Frank Hartmann said by telephone last month. Hartmann declined to comment on the proportion of the debt that was non-performing.
HSH Nordbank, the world’s largest lender to the industry, reported 9 billion euros of bad shipping debt, or about 43 percent of its loans to the industry, in fourth-quarter earnings published in April.
The container industry, which accounts for the biggest share of the loans among German lenders, continues to suffer from overcapacity since the global financial crisis triggered a trade slump and the worst decline in charter prices since the 1970s.
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