NordLB’s Loan Losses Surge Due to Shipping Woes

Due to the repeated deteriorating situation in the shipping markets, German shipping bank Norddeutsche Landesbank (Nord/LB) closed the first quarter of 2016 with earnings before taxes of minus EUR 98 million (USD 109.8 million), as the bank’s risk provisioning surged to EUR 435 million (USD 487.4 million).

Namely, net allocations to loan loss provisions rose from EUR 104 million recorded in the first quarter a year earlier, mostly attributed to the Ship Customers segment, the bank said.

“Without the extraordinary expenses due to the shipping crisis worsening again, we would have seen a seamless continuation of the previous year’s good business results,” the Chairman of NORD/LB’s Managing Board, Dr. Gunter Dunkel, said.

Furthermore, Dunkel said that NORD/LB expects “a further significant increase in risk provisioning,” as the coming quarters would not bring any improvement in the shipping markets.

Led by the slowdown in the shipping market, at the beginning of April 2016, Nord/LB said it will cut its shipping loans by some EUR 5 to 7 billion. The bank’s shipping loans would be decreased from EUR 19 billion to a future volume of some EUR 12 to 14 billion.

“As previously stated, we will continue to gradually reduce our ship finance portfolio, even though this reduction will have an additional negative impact on profit. In this difficult environment we are expecting NORD/LB to close the current year with a negative result,” Dunkel said.

“This will not be possible without additional negative impact on earnings. Nonetheless, Ship Finance is set to remain a key component of our business model in future.”

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