NordLB Unit Discussing Capital Boost as More Shipping Loans Sourby
Bremer Landesbank may issue AT1 capital, securitize loans
German bank won’t comment on report NordLB offered full merger
Bremer Landesbank, one of Germany’s biggest maritime lenders, plans to boost capital to cover souring loans in its 6.5 billion-euro ($7.4 billion) shipping portfolio as the bank’s losses may reach half a billion euros this year.
The lender, based in the northwestern port city of Bremen, is considering issuing additional Tier 1 securities that count as equity for capital purposes to institutions such as German pension funds, while also securitizing loan packages for sale to foreign investors, Ina Elbin, a spokeswoman for the firm, said Tuesday. The bank’s owners, including majority stakeholder Norddeutsche Landesbank, are also discussing ways to shore up capital, she said.
Bremer Landesbank, which is also 41 percent owned by the city-state of Bremen, said it has no knowledge of whether NordLB is considering a full takeover. Reuters reported Monday that NordLB, which owns 55 percent of Bremer Landesbank, had offered to merge with the subsidiary.
Bremer Landesbank’s supervisory board plans to meet Friday to discuss the equity measures, according to a person familiar with the matter. Spokespeople at NordLB and the Bremen finance ministry declined to comment as discussions were ongoing.
Bremer Landesbank said on June 2 that it expects a “mid three-digit million figure” loss for 2016, and "unplanned value adjustments in its portfolio of shipping loans in the amount of a high three-digit million figure."
The financial woes of the lender, which has 29 billion euros in assets, underline how Germany’s dominance in shipping finance has turned from a symbol of national pride to a burden. The nation has the world’s biggest container shipping fleet.
Bad shipping loans and other non-performing credits have been a top priority for the European Central Bank since it took over as the region’s banking supervisor in late 2014. The ECB estimates euro-area banks had about 1.2 trillion euros in bad loans on their books at the end of September. ECB spokeswoman Uta Harnischfeger declined to comment on Bremer Landesbank.
HSH Nordbank AG, Germany’s biggest shipping lender, is relying on aid from its state owners, the governments of Hamburg and Schleswig-Holstein, to continue operations. In October, the EU ordered the Hamburg-based bank to transfer as much as 6.2 billion euros in shipping loans to a bad bank as part of a plan to privatize the lender by 2018. HSH also plans to sell at least 2 billion euros of faulty loans on the open market.
NordLB, which is controlled by the state of Lower Saxony, aims to shrink its maritime-loan book to as little as 12 billion euros by 2021 from about 18 billion euros at the end of March because it doesn’t expect the shipping market to improve in the next few years. The bank plans for Bremer Landesbank, which is fully consolidated in NordLB’s results, to shrink its shipping loan book to 4.5 billion euros over the same period.