German ship lenders are facing increasing risks from the prolonged global shipping industry crisis, with their exposure to the industry remaining significantly higher than that of their European and many global peers, says Moody’s Investors Service in a report.
Moody’s report, entitled “German Ship Lenders — Peer Comparison: Large exposure to the shipping sector will require further provisioning,” is available on www.moodys.com. Moody’s subscribers can access this report via the link provided at the end of this press release. Please note that this report does not constitute a rating action.
“We believe that Bremer Landesbank Kreditanstalt Oldenburg GZ (BremerLB), DVB Bank S.E. (DVB), HSH Nordbank AG (HSH), KFW IPEX-BANK GmbH (KfW IPEX) and Norddeutsche Landesbank GZ (NORD/LB) are the five German banks most vulnerable to a prolonged shipping downturn,” says Swen Metzler, Vice President — Senior Analyst at Moody’s. “These banks face the risk of persistently high loan-loss provisioning, downward pressure on their profitability, and their ability to build capital.”
Shipping exposures at these five German ship lenders still accounted for 350% of their Tier 1 capital at the end of 2015, up from 328% in 2012 and the aggregate problem loan ratio from shipping exposure for this group of banks rose to 30% in 2015 from 20% in 2012, about 3.5 times higher than their overall problem loan ratios.
Ship leverage has also increased since 2012 — measured as shipping exposure relative to Tier 1 capital — except for HSH, notes Moody’s. “DVB’s exposure is now more than 12 times its Tier 1 capital, up from 9.4 times three years ago, with BremerLB at 4.7 times, up from 4.5 times,” explains Mr. Metzler. “For KfW IPEX and NORD/LB, leverage has risen to 2.7 and 2.3 times their capital.” Although HSH cut its shipping loan book and reduced its leverage, its exposure remained at €23.9 billion as of year-end 2015, the highest in volume terms amongst German banks and 3.9 times its capital, according to the rating agency.
In contrast, Commerzbank AG’s, UniCredit Bank AG’s, DekaBank Deutsche Girozentrale’s, and Landesbank Hessen-Thueringen GZ’s ship exposure, is less than their Tier 1 capital, and in aggregate, they have reduced their shipping exposure by around 45% between 2012 and 2015, says Moody’s.