Norddeutsche Landesbank, Germany’s second biggest financier of vessels, expects its losses on 17.7 billion euros ($19.4 billion) in shipping loans to rise “significantly” this year.
Losses racked up over a seven-year slump in the container vessel market doubled to 500 million euros last year, the state-owned bank said. Non-performing loans totaled 6.5 billion euros or 37 percent of shipping loans on the books.
“I expect actual losses to rise significantly as this is typically the case toward the end of a cycle,” Thomas Buerkle, board member responsible for risk management, said at a news conference on Tuesday.
The 2008 financial crisis triggered the worst slump in prices for cargo carriage since the industry went global in the 1970s. NordLB, which is based in the northern city of Hanover, and other German marine lenders such as HSH Nordbank AG and Commerzbank AG have yet to recover.
Shipping loans swelled 6.6 percent to 17.7 billion euros at the end of December from a year earlier, NordLB said in a presentation. The number of vessels receiving credit fell to 1,544 vessels from 1,698 ships a year earlier.
The bank set aside 718 million euros to cover losses on shipping loans last year, up from 676 million euros in 2013. Provisions are expected to fall this year.
“I expect that we have reached a peak in 2013 and 2014,” Chief Executive Officer Gunter Dunkel told reporters.
While container shipping shows signs of improvement, the market for bulk carriers remains difficult, the bank said. “We have stopped believing that we will see a sustained recovery in all shipping segments,” Dunkel said.
Declining coal cargoes to China have also led to a collapse in commodity shipping rates since November. The Baltic Dry Index, measuring freight costs for everything from coal to iron ore to grains, fell to a record low of 509 points on Feb. 18 and last stood at 600 points, way below its one-year average of 884 points.