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Moody’s: German Ship Lenders to Require Further Provisioning

October 11, 2016

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, according to a report from Moody’s rating agency.

“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,” Swen Metzler, Vice President – Senior Analyst at Moody’s, said.

“These banks face the risk of persistently high loan-loss provisioning, downward pressure on their profitability, and their ability to build capital,” Metzler added.

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.

Moody’s said that ship leverage, measured as shipping exposure relative to Tier 1 capital, has also increased since 2012, except for HSH.

“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,” Metzler said, adding that “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 EUR 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, Moody’s said.