Global shipping funding collapses, but Greek and French banks are dynamic

Global funding for shipping fell to $ 300.7 billion at the end of 2018, according to Athens-based Petrofin Research. This is down from $ 345 billion a year earlier and marks the lowest level since Petrofin began compiling the index in 2008.

Research tracks loans from the top 40 banks active in the shipping finance market and shows that the rate of decline has accelerated every year since the end of 2015.

Greek and French banks are thwarting the downward trend in funding for shipping, according to the report. Maritime finance from France and Belgium rebounded to $ 32 billion from $ 31 billion in 2017 and $ 28 billion in 2016, while Greek loans soared to $ 8 billion after peaking at $ 7 billion dollars over the previous two years.

BNP Paribas SA is largely behind the French credit bump thanks to its “unwavering confidence in the sector”, according to the report.

The return of Greek banks

Greece is the world’s largest shipping country, accounting for 20% of global maritime trade in 2017, according to UNCTAD data. Greek shipowners play a particularly important role in the crude oil trade, controlling around 29% of the world’s tankers.

In the years following the global financial crisis, Greek banks withdrew from the shipping market and their lending to the segment has declined significantly since 2010, when their exposure stood at $ 13 billion, according to Petrofin.

Greek lenders have spent much of the past decade carrying a heavy burden of bad debt, which has limited their ability to lend to shipping or other business activities. They still have the highest NPL rate of any EU banking system, at 41.41% in Q1 2019.

But Greek banks are gradually resolving their bad debt pile through a mix of portfolio sales and securitizations and are expected to receive more support in the near future for their efforts to clean up their balance sheets through an asset protection program backed by the government. Now Greek banks are eager to start growing their commercial loan portfolios again, and shipping could be a natural place to start taking new loans, according to Ted Petropoulos, director of Petrofin Research.

For Greece, shipping is an attractive industry for banks with few lending alternatives. The customers are known, the business is familiar and the bank can also sell all of its ancillary services, ”he told S&P Global Market Intelligence.

Among Greek banks, Piraeus Bank SA is the most exposed to shipping with a loan portfolio of $ 2.84 billion at the end of 2018, according to data from Petrofin. National Bank of Greece SA had a shipping loan portfolio of $ 2.46 billion, while those of Alpha Bank AE totaled $ 2.34 billion.

A withdrawal from the market

European banks in particular recorded a sharp reduction in maritime financing activity, with a 14% drop in exposure in 2018.

The old maritime debt was a source of considerable suffering for some European banks which were big lenders to the industry in the years before the financial crisis. Hamburg Commercial Bank AG, which is in the midst of a major restructuring, has been brought to the brink of collapse by huge volumes of soured maritime debt. German banks have pulled out of the sector in recent years, reducing their exposure to shipping to a third of their pre-crisis peak by 2018, according to Moody’s.

It is not yet clear whether the massive deleveraging seen in banks’ maritime portfolios will continue, according to Petrofin.

“It is still early days to determine whether banks will continue to reduce their exposure to the sector and this will largely depend on the banks’ overall credit resources available and their business strategy, as well as on competition from unregulated non-bank funds, leasing companies and other suppliers, ”the report says.

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