Due to a further escalation of the shipping markets crisis, Germany’s transport finance specialist DVB Bank said that it no longer expects to achieve consolidated net income for the 2016 financial year that approaches net income of the previous year, as originally forecast.
Namely, the crisis results in higher allowances for credit losses on exposures in Shipping Finance and Offshore Finance, as well as on a legacy exposure that “does no longer belong to the Bank’s core business.”
“From today’s perspective, aggregate loan loss provisioning will exceed the previous year’s level,” DVB said, adding that the consolidated net loss for 2016 is now predicted to be in a double-digit million euro range.
Furthermore, DVB no longer anticipates being able to achieve the financial management indicators – return on equity (before taxes), cost/income ratio, and Economic Value Added – as forecast for the 2016 financial year. However, DVB’s tier one and total capital ratios in accordance with the CRR will remain adequate, according to the Bank.
DVB Bank’s generated consolidated net income before taxes of EUR 14.1 million for the first six months of 2016, compared to EUR 75.7 million seen in the same period a year earlier.
“DVB’s performance during the first half of 2016 was burdened by the persistent shipping crisis, the ECB’s low-interest rate policy, and the high costs induced by banking regulation,” Ralf Bedranowsky, CEO and Chairman of DVB Bank SE’s Board of Managing Directors, said.
Allowance for credit losses amounted to EUR 83.4 million, up from previous year’s EUR 39.7 million, in line with DVB’s expectations. The increase was largely required for legacy exposures in the Shipping Finance portfolio, and for financings in the Offshore Finance portfolio, which is burdened by the slump in oil prices.