Germany’s top eight shipping financiers, which had 105 billion euros ($144 billion) in loans to the crisis-ridden industry at the end of last year, face “significant asset quality challenges” in 2014, according to Moody’s Investors Service.
The banks, including the world’s biggest shipping lender HSH Nordbank AG, are increasing their loan-loss provisions, reflecting the rising potential for credit losses in the fifth year of the industry’s downturn, Moody’s said in a report published yesterday.
“Struggling shipping companies are finding it hard to service their loans, and consequently non-performing shipping loans will likely continue to rise at the eight German banking groups examined in the report,” Moody’s said.
The shipping industry has yet to recover from a global trade slump triggered by the collapse of Lehman Brothers Holdings Inc. in September 2008 and the ensuing sovereign-debt crisis in the euro area. Aside from HSH Nordbank, the world’s top lenders to the industry also include Commerzbank AG (CBK), DVB Bank SE (DVB) and Norddeutsche Landesbank Girozentrale, known as NordLB.
“Less diversified banks with significant shipping sector concentrations are the most exposed to persistent stress in the sector,” Moody’s said. DVB, HSH, and NordLB are among the “most vulnerable among rated German institutions,” it said.
Almost three-quarters of the loans held by German banks are “in the three worst-hit segments -- container ships, tankers and bulkers,” the ratings firm said.
Comprehensive Assessment
While the eight lenders reviewed have managed to keep liquidations at bay, the shipping loans relative to their capital positions is rising, representing 137 percent of their combined Tier 1 capital, Moody’s said.
Commerzbank and HSH Nordbank are among as many as 130 banks that are undergoing a so-called comprehensive assessment by the European Central Bank to measure the health of lenders deemed to carry systemic risk for the European banking sector as a whole.
The ECB is running the three-stage asset review as a condition for taking over supervision of banks at the end of 2014 as Europe’s leaders attempt to sever the link between fragile banks and debt-laden states.
The Bundesbank listed shipping loans as one of three areas in German banking that are vulnerable to default risk, according to its Financial Stability Review, published on Nov. 14.
European Union finance ministers are meeting in Brussels today in an attempt to break a deadlock over a single resolution mechanism for banks on the continent that fail.