Nord/LB Continues Running Down Shipping Portfolio

German bank involved in ship financing, Norddeutsche Landesbank (NORD/LB), managed to further reduce the non-performing shipping portfolio in the first quarter of 2018.

The bank’s shipping portfolio amounted to EUR 11.6 billion as of March 31, 2018. At the end of 2017, it totaled EUR 12.1 billion.

Out of the entire portfolio, EUR 7.9 billion at the end of March 2018, compared to EUR 8.2 billion at the end of March 2017, was accounted for by non-performing loans.

Earlier, NORD/LB announced its intention of reducing this number to less than EUR 5 billion by the end of 2019.

The bank concluded Q1 2018 with earnings before taxes of EUR 68 million. After taxes, profit stood at EUR 43 million.

“We have started well into the new year. We are fully on track with our transformation programme. We further reduced our balance sheet as planned and achieved another increase in our capital ratios,” Thomas Bürkle, CEO of NORD/LB, commented.

“We also made further progress in running down the shipping portfolio. Nonetheless, the challenges we face are still demanding. Further strengthening our capital ratios continues to be the top priority. We will present a viable plan for this in conjunction with our owners in the course of this year,” he further said.

Under the new accounting standard IFRS 9, net interest income in the first quarter of 2018 was EUR 352 million, against EUR 406 million recorded in Q1 2017 under IAS 39. As explained, the drop in net interest income was the result primarily of the shrinking of the balance sheet over recent years, in particular, the reduction in the shipping finance portfolio.

Under the risk result, net income of EUR 25 million was recorded in Q1 2018 mainly because of the reversal of loan loss provisions.

“In view of the ongoing crisis in shipping, the bank expects to have to set aside new loan loss provisions as the year progresses, as previously announced, which means that in this respect the first quarter represents a temporary special effect,” the bank said in Q1 2018 income statement.

“In terms of business, we expect a difficult year overall. Given the current framework conditions we nevertheless continue to aim at a profit for the full year 2018,” Bürkle concluded.

Nord/LB ended 2017 with earnings before taxes of EUR 195 million, returning to profitability from a loss before taxes of EUR 1.9 billion suffered in 2016 as a result of the marked intensification of the global shipping crisis.