Petrofin Research: Bank Ship Lending Dwindles

Illustration; Image Courtesy: Pixabay

The shipping industry saw USD 42.5 billion removed from the ship lending jar in 2016, according to Petrofin Research’s latest report on global bank ship finance.

The fall has been mainly attributed to the removal of Commerzbank and Royal Bank of Scotland, the lower bank portfolios by many banks, as well as a stabilization of exposure by Chinese banks, as a result of the sharp increase of Chinese Leasing.

According to Petrofin, the top 40 banks had a total of USD 355.25 billion exposure to shipping at the end of December 2016.

“Global bank finance now stands at the 2007 levels. Bank sentiment is still affected by loan losses and high provisions, sales of portfolios to financial institutional funds, international and European restrictions and the still not so bright outlook of shipping, which makes shipping banks quite cautious and seeking safety through known and large clients, higher margins and low finance percentages, as well as stringent terms,” Petrofin explained.

Furthermore, it has been noted that despite the fact that bank finance is coming down, mainly driven by decline of interest and ability by Western banks to maintain their loan portfolios, the global fleet is expanding.

“This results in a lower average bank finance per vessel, and financing of new vessels via a combination of equity, leasing, funds and private individuals’ equity,” Petrofin added.

Geographically speaking, banks in Europe have shown consistent decline with Germany, traditionally the biggest lender, falling sharply again this year. Dutch and Scandinavian banks are showing a slowdown as well.

The Far East also shows a small fall, primarily due to the dominance of Chinese Leasing in financing new and second hand vessels.

With respect to the market outlook for 2018 and beyond, having in mind the slow, and often short-lived recovery rate, especially in the tanker sector, LPG and offshore, Petrofin expects the shipping markets across the board not to be supportive to fresh bank lending.

“Loan portfolios of banks have slimmed as a result of vessel sales, write offs, loan sales and normal reductions via repayments. This has been useful for Western banks seeking to contract their lending as a result of capital constraints. The one ray of hope is the US banks who are coming out of the difficult years in a more robust way and whose capital ratios are stronger and which have room to expand,” Petrofin said.

What is more, as traditional bank finance has decreased substantially, this has left the medium to small owners relying on own funds and private equity. Nevertheless, some banks are preparing to join ship finance, which seem to cater for the medium to smaller owners, such as Warburg Bank and Maritime and Merchant Bank.

“As a general conclusion, we anticipate that over the next couple of years, global shipfinance may form a base. The departure of the previous big lenders, RBS and Commerzbank and the reduction of HSH Nordbank, plus a lot of retrenchment by others, is expected to complete soon. On the other hand, successful banks with a bigger appetite for shipping, such as Credit Suisse, ING, BNP Paribas, ABN Amro and DVB should assist in the above base being formed.

“Finally, for the banking sector as a whole, a recovery may only be anticipated when public market conditions shall be able to support fresh capital increases via the  public markets. Such capital for banks would allow them to grow again and it is expected that their interest in shipfinance shall return especially as the available margins are attractive and the clients and loans involved, of a very high level,” the research company said.

Share this article

Follow World Maritime News

In Depth>

Events>

<< Nov 2017 >>
MTWTFSS
30 31 1 2 3 4 5
6 7 8 9 10 11 12
13 14 15 16 17 18 19
20 21 22 23 24 25 26
27 28 29 30 1 2 3

Maritime Information Warfare 2017

Maritime Information Warfare will focus on the growing need for navies to develop their information exploitation capabilities…

read more >

INTERNATIONAL GREEN SHIPPING AND TECHNOLOGY SUMMIT

The Summit will gather key marine experts and companies around the globe which have a big influence in the industry…

read more >

The CWC 18th Annual World LNG Summit & Awards Evening

The CWC World LNG Summit will continue to give you access to premium networking opportunities as it brings together the who’s who…

read more >

Marintec China 2017

The largest maritime event in Asia Pacific, Marintec China connects maritime professionals from the entire shipbuilding supply chain together.

Over the years, Marintec China has grown to reflect the size and importance of the Asian maritime market. 2015 event is another record-breaking edition with the largest exhibition area and the highest number of industry professionals attending ever. The encouraging figures proven that China remains one of the major shipbuilding nations and Marintec China has been the most authoritative platform in Asia.

With the maritime industry facing great opportunities but also many challenges, it is important for the industry to connect and engage more to ultimately win new business in globally-significant markets. A visit to Marintec China is a great way to learn about the latest technology and innovation of the supply industry, a platform for industry professional to meet face to face, make connection and do business.

Marintec China is poised to be the definitive event and is undoubtedly a must-attend for all involved in the maritime industry.

Marintec China will be held from 5 to 8 December 2017 at the Shanghai New International Expo Centre in Shanghai, China and continue its dedication to serve as the “LEADING” platform “CONNECTING” the community and “STRENGTHENING” the maritime industry.

Marintec China offers the perfect opportunity for companies serving the maritime market to showcase their innovations, products and services to a wide audience. A platform for face to face meetings in business, creating new relationships and consolidating existing ones.

More info

read more >