European banks are resuming lending to shipping companies after staying away from the beleaguered industry since the financial crisis.

“They are definitely back. European banks already with a China or Asia desk are getting very much more active. I have begun to see term sheets from them,” said Jonathan Silver, a partner at law firm Norton Rose Fulbright.

Germany, British, French and Norwegian banks were traditionally predominant lenders to the capital-intensive industry until 2008, when the financial meltdown sent several high-profile lenders into distress, saddling their shipping portfolios with piles of non-performing loans.

Germany’s HSH Nordbank, the then-largest ship financier in the world with a US$58 billion portfolio in 2008, quit lending to the sector and saw its book size reduce by 40 per cent as of last year, according to data from trade publication Marine Money International.

Royal Bank of Scotland parked part of its US$15 billion shipping book to its “bad bank” division for restructuring last year. Societe Generale and Lloyds Banking Group also sold their shipping portfolios in the past two years.

“I would like to think [of the comeback] as a symptom of improving fundamentals in the shipping industry, but a search for yield is the most likely cause,” said Peter Illingworth, the head of shipping Asia at Deutsche Bank.

Fees from existing portfolios are not enough to keep up the income stream. The recent surge in new vessel orders opened up opportunities for some banks to lend more to “keep themselves on”, Illingworth said.

The shipbuilding market has seen a mini-recovery since last year, led by the so-called eco-design that burns less fuel and helps shipping lines comply with a raft of environmental regulations due to come into force in the next few years. New vessels totalling 144.8 million dwt of capacity were ordered last year and a further 94.8 million dwt were ordered in the first 10 months of this year, compared with 45.5 million dwt in 2012, according to shipping data provider Clarksons.

Societe Generale, which had closed its Hong Kong shipping desk, is back with two representatives in town. Norway’s DVB, which has no office in the city and bases its Asia headquarters in Singapore, was also visiting Hong Kong more often to participate in deals, industry sources said.

Syndicated loans – the most common means of vessel financing – worth US$54.5 billion flowed into the industry in the first 11 months of this year, surpassing US$50.8 billion for the whole of last year and looking to touch the US$56.7 billion in 2005, when the shipping market was booming, according to Dealogic.

The revival is largely in the shape of fairly basic deals such as syndicated loans, and sale and leaseback. “I don’t think the time has come for exotic structures, such as tax leases. Those are just not available in the market,” said Silver, who advises both lenders and borrowers.

Tax leases refer to leasing structures in which vessel depreciation is accelerated for tax purposes before entering operation, which creates corporate income tax losses for the lessor and brings down financial cost for the lessee.

More capital would be provided by traditional European lenders in Asia from next year, both Illingworth and Silver predicted.

The recent influx of capital, however, has put pressure on loan margins as banks, still reluctant to lend to new or less credible borrowers, tend to lend to top-tier shipowners. Two banking sources said recent margins averaged at 200 basis points, down between 75 and 100 basis points from earlier this year.

The revival is far from even. The European banks are not that active in their domicile countries, and not all banks are stampeding their way back into the industry.

“Unless I’m missing something, I’ll be extremely surprised if the European banks become enormous providers of senior credit like they used to between mid-1990s and 2010, given their capital adequacy issues are still present,” said Randee Day, who heads Day & Partners, a New York-based financial advisory and maritime consulting firm, and advises on shipping finance deals.

“RBS and Lloyds are still almost non-existent in shipping. HSH Nordbank and Commerzbank barely scraped through the recent stress test by the [European Central Bank].

“The banks have to write down their existing portfolios and while that process has begun in Germany, there are still many months of pain before portfolios rationalise and borrowers can reclaim equity in their businesses.”