Due to the severe deterioration in the shipping markets during the first half of 2016, German shipping bank Norddeutsche Landesbank (Nord/LB) increased its risk provisioning from ship financing as it closed the first half of the year with earnings before taxes of minus EUR 364 million (USD 410.9 million).
The increase in the risk provisioning is also partly due to the previously announced reduction in Nord/LB’s shipping portfolio.
Since the end of 2015, the value of the bank’s shipping portfolio has been reduced by EUR 1.1 billion, from EUR 19 billion to EUR 17.9 billion. Nord/LB plans to continue reducing its ship financing portfolio to around EUR 12-14 billion.
Net allocations to loan loss provisions rose to EUR 1 billion and remained predominantly attributable to specific valuation allowances in the shipping portfolio.
“The shipping crisis, which further intensified in the first half of the year, has necessitated impairments that were higher than planned,” said Nord/LB CEO Dr Gunter Dunkel.
“Thanks to the good performance of business outside of ship financing and the consistent capital increases of recent years, we have been able to withstand this negative result entirely on our own steam. With the changes made to our ship financing, we have improved the quality of our portfolio and are equipping the bank for the future,” Dunkel added.
Earlier in August, the bank reached an agreement with KKR Credit to sell a ship financing portfolio. The total volume of the transaction will be around EUR 1.3 billion and concern around 100 ships, the bank said.
Nord/LB said that it expects a significant loss for 2016 as a whole, adding that it is “capable of absorbing this loss in full.”