Norway’s Biggest Bank Rules Out Loss Scenarios After Russian Ban

DNB ASA, Norway’s biggest bank and one of the world’s largest lenders to the seafood industry, said it won’t lose money as a result of Russia’s ban on fish imports.

The Oslo-based bank predicts it will suffer “no increased loan losses -- not at all” at its seafood division because of President Vladimir Putin’s import restrictions, Anne Hvistendahl, head of the DNB unit, said in a phone interview.

Norway, the world’s biggest salmon producer, has huddled to protect its fishing industry since Putin’s food ban was unveiled at the beginning of August. The government in Oslo has adjusted fishing quotas to support prices and DNB, part government owned, says it’s ready to provide temporary debt relief to aid its marine clients. Russia accounts for about 7 percent of Atlantic salmon demand.

In the first half of 2014, 8.6 percent of Norwegian salmon and as much as 30 percent of its mackerel haul were exported to Russia, Hvistendahl said.

“There is so much mackerel and we had expected -- already before the ban -- some liquidity problems in that part of the industry,” she said. “This is nothing dramatic -- it happens once in a while.” For salmon producers, forward pricing remains “OK,” she said.

Hvistendahl says Norway’s fish industry has a number of options available to it to deal with the import ban. Salmon farmers can redirect volumes so that units in areas unaffected by the restrictions -- such as the Faeroe Islands and Chile -- can export to Russia. Mackerel exporters can also convert their haul into fish meal and oil to circumvent the ban, she said.

Volatile Fish

“It’s important to remember that sanctions and trade bans have always been part of this sector -- it’s happened with the U.S., the EU, with China and with Russia,” Hvistendahl said. “This sector is volatile and prices are volatile -- and it’s important to stress that we don’t worry too much about this.”

DNB customers in the seafood industry suffering temporary liquidity shortages due to the ban will receive support from the bank, she said. Clients will also be allowed to delay debt payments, she said.

“This will even itself out,” Hvistendahl said. “The fish will always find a market.”

Since the beginning of August, shares in Oslo-based Marine Harvest ASA, the world’s biggest salmon farmer, are little changed after recouping 12 percent in losses suffered in the two days after Putin announced his import ban. Shares in Cermaq ASA, another Norwegian fish farmer, are down 2.4 percent in the period, after initially sinking more than 10 percent in the two days after the ban was announced.

Expansion Plans

DNB has about 35 billion kroner ($5.5 billion) in assets tied to the seafood industry and counts seven of the world’s 10 biggest salmon producers among its clients. As of June, the bank reported 14.6 billion kroner in net impaired loans and guarantees. Of that, just 0.2 percent was related to the seafood industry.

Far from scaling back its exposure, DNB is planning to expand its ties to fish producers in coming years and sees opportunities in Asia, the Mediterranean and Iceland, Hvistendahl said. Demand for credit will remain high, she said.

“This is a capital intensive industry -- working capital demand is really high,” she said. “This industry is expected to grow five-fold in Norway by 2050, there is huge growth expected and as it’s capital intensive, the need for financing is there. The most important thing is consolidation -- this industry is still young and fragmented and consolidation will be very important. That’s when you really need a bank.”

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