NordLB Holds Ship Provisions Stable as Slump Drags Into 2015

Norddeutsche Landesbank, Germany’s second biggest financier of ships, held provisions at its marine division stable in the first nine months of 2014 as an industry slump enters its seventh year.

The state-owned bank based in Hanover, Germany, set aside 474 million euros ($591 million) in the period through September from 478 million euros a year earlier, according to a presentation accompanying its interim report today.

“We do not expect the shipping markets to ease significantly in the near future, so we hold on to our conservative risk provisioning,” NordLB said in the presentation.

NordLB, which along with competitors HSH Nordbank AG and Commerzbank AG (CBK) passed the European Central Bank’s health check last month, is trying to cut bad loans to shipping clients struggling to service debt amid a slump in the container-vessel market. Its total non-performing loan ratio increased to 3.9 percent at the end of September from 3.7 percent at the end of 2013.

Freight rates, charged by vessels to transport containers, are expected to be little changed in the near term as the industry battles overcapacity, NordLB said in its interim report. “This is also indicated by the continuing wave of deliveries of primarily large container ships in the fourth quarter and 2015,” the lender said.

The number of vessels NordLB has provided loans to dropped by more than a hundred to 1,582 at the end of September, according to the presentation. Its “exposure” rose to 17.3 billion euros from 16.6 billion at the end of last year mainly as the dollar, the shipping industry’s main currency, strengthened in the third quarter, the bank said.

Total loan-loss provisions at the group, which is controlled by the German states of Lower Saxony and Saxony Anhalt, dropped 28 percent to 464 million euros year-on-year in the first three quarters, it said. Net income more than doubled to 251 million euros.
Source: Bloomberg