Commerzbank Reduces Shipping Loans Amid Looming DefaultaNicholas Brautlecht
Commerzbank AG, the German lender trying to offload soured shipping loans, reduced its credit portfolio in the crisis-hit sector by 7.1 percent in the second quarter even as it stuck to its forecast that the market will not bottom out until 2014.
Commerzbank’s Deutsche Schiffsbank unit reduced its exposure at default to 17 billion euros ($22.7 billion) from 18.3 billion euros in the first three months of the year, including 4.6 billion euros in bad debt, according to a company presentation today, when the Frankfurt-based lender reported quarterly results.
The collapse of Lehman Brothers Holdings Inc. in September 2008 and the ensuing debt crisis in the euro area propelled the shipping industry into a slump from which it has yet to recover, damping demand for seaborne transport and generating a glut of vessels.
“In the first half of 2013, market trends in the container, tanker and bulker segment were still dominated by excess capacity, putting pressure on and causing declines in charter rates,” Commerzbank said in the interim report.
Commerzbank decided in 2012 to wind down its shipping portfolio to stem the losses. In May, it created Hanseatic Ship Asset Management GmbH, based in Hamburg, to take over and run vessels from clients who are unable to pay their debts, holding off on a sale until values recover, Stefan Otto, the head of the shipping unit, said in an interview in June.
Loan-loss provisions at Deutsche Schiffsbank fell 13 percent to 248 million euros in the first half compared to the year earlier period, the lender said in its report.
“Given the ongoing difficult market conditions, further defaults and associated loan loss provisions are expected in subsequent quarters,” it said.
Commerzbank became the world’s second-biggest financier of ships with the 2009 acquisition of Dresdner Bank and still ranks among the top three lenders in the industry with regard to the size of the portfolio.
The market leader is HSH Nordbank AG, which had 27 billion euros in ship loans in the first quarter, while Norddeutsche Landesbank Girozentrale had 18 billion euros of loans in the sector at the end of March. The shipping units of Nordic banks DNB ASA and Nordea Bank AB have loan portfolios of about 16 billion euros and 12 billion euros, respectively.
Commerzbank’s shipping loans contributed to ratings downgrades by Moody’s and Standard & Poor’s in April and May, respectively. By 2016, Commerzbank wants to further reduce its portfolio in this segment to about 14 billion euros, while a date for a complete exit is too difficult to predict, Otto said in June.