Commerzbank AG (CBK), Germany’s second-biggest lender, cut its riskiest shipping and property assets by 33 percent to 8 billion euros ($11 billion) in the third quarter after the sale of its U.K. real estate unit.
Loans identified as “higher risk” fell from 12 billion euros in the previous quarter, the Frankfurt-bank said in a presentation today. The numbers don’t include non-performing loans.
Commerzbank is winding down its shipping and real estate financing arms to focus on corporate and consumer banking. In July, Commerzbank agreed to sell its U.K. real estate loans, valued at about 4 billion euros, to Wells Fargo & Co. (WFC) and Lone Star Funds. The German government owns 17 percent of Commerzbank after an 18.2 billion-euro bailout in 2009.
Most of Commerzbank’s risky property loans are now in Spain, where the bank has lent 3.3 billion euros. The bulk of its property-loan assets is in Germany, including 17.1 billion euros of loans classified as “lower risk,” according to the presentation.
On Oct. 6, Thomas Koentgen, the former head of Commerzbank’s property unit Hypothekenbank Frankfurt, said high investor demand for property in France and Poland would make it easier to sell assets in those markets. Commerzbank has about 2.4 billion euros of loans in France and 900 million euros in Poland. Koentgen, who was speaking at the Expo Real trade fair, left the position on Oct. 14.
Exposure at Default
Commerzbank’s shipping unit Deutsche Schiffsbank cut its exposure at default by one billion euros to 16 billion euros compared with the second quarter, according to the presentation. This includes non-performing loans. The bank is “already close” to its target of reducing the volume of ship financing to 14 billion euros by 2016, it said.
The collapse of Lehman Brothers Holdings Inc. in September 2008 and the ensuing debt crisis in the euro area propelled the shipping industry into a slump from which it has yet to recover, damping demand for seaborne transport and generating a glut of vessels.
HSH Nordbank AG is the market leader in ship financing. It had 25 billion euros in ship loans in the first quarter, its restructuring unit head Wolfgang Topp said in September.
Commerzbank in 2012 decided to wind down its shipping portfolio to stem the losses. In May, it created Hanseatic Ship Asset Management GmbH, based in Hamburg, to take over and run vessels from clients unable to pay their debts, holding off on a sale until values recover.
“We have transfered only three ships to the ship management unit; the total exposure for the ship management unit is still well below 100 million euros,” Commerzbank’s Chief Financial Officer Stephan Engels said on a conference call with analysts today.
This can be a lesson for other ship owners “because as long as they believe that you as an asset manager can take their ship away and run it on your own means that helps in renegotiating certain things,” Engels said.