KfW Group, Germany’s state-owned development lender, may make 1.5 billion Euros ($2 billion) of new shipping loans this year, even as rivals scale back operations in the crisis-hit industry.
While that is less than new lending of 2 billion Euros in 2011, KfW IPEX-Bank plans to keep the size of its 13.5 billion- euro shipping portfolio “stable,” Christian K. Murach, head of transportation finance and a member of the lender’s management board, said in an interview in Frankfurt.
“There is plenty of room for new business because we didn’t grow as aggressively as many others in the past few years,” Murach, 57, said in his 13th floor office, decorated with models of Hapag-Lloyd AG ships and Airbus SAS planes.“Some other banks don’t have the manpower or capital for new lending, so there is less competition in the market, and the pricing you can demand is fairly attractive.”
Commerzbank AG (CBK), Germany’s second-largest lender, and Hamburg-based HSH Nordbank AG are scaling back their shipping portfolios amid new capital rules and to obtain approval for bailouts they received during the global financial crisis. That comes as slumping freight rates and soaring fuel prices push smaller shipping lines into insolvency and led to losses for major container operators last year.
“The picture for the shipping industry is not great at all and there won’t be much relief in 2012,” Murach said. Growth in new container shipping tonnage is likely to outstrip demand “until at least 2013 and probably even beyond,” he said.
KfW is the world’s seventh-largest shipping lender with a market share of some 4 percent among the world’s top 40 shipping banks, according to Athens-based vessel-finance consultant Petrofin SA. The ranking is topped by HSH Nordbank, followed by Norway’s DNB ASA (DNB), Commerzbank and Sweden’s Nordea AB (NDA).
Transportation financing is “an important part” of IPEX’s business and will remain a major part of its 60 billion-euro lending portfolio despite the shipping crisis, Murach said.
Banks which continue to lend to the industry are likely to benefit from rivals pulling back, according to Fitch Ratings.
“Well-capitalized banks which are in a position to continue providing ship lending will benefit from much lower competitive pressure within the market,” Fitch said in a report on March 29.
Ship finance lending margins “have typically doubled since 2008 and are the highest they have been for several decades, although this is offset by the heightened risk involved.”
Most of IPEX’s new loans this year are likely to be to the offshore shipping industry, including for vessels needed for wind farms and oil drilling rigs, and for ferries and roll-on roll-off ships, Murach said. IPEX also expects “a major role” for companies that supply goods to shipyards, he said.
IPEX is helping to finance two new cruise ships, the largest ever built in Germany, for Norwegian Cruise Line Holding Ltd.
A lot of banks have stopped new lending to the shipping industry, making it “a problem” for IPEX to find partners for bigger projects, such as cruise ships, which often cost more than 500 million euros, Murach said.
Shipping loan losses and provisions among banks will probably increase this year, said Murach, who has worked for KfW for 28 years.
“We don’t foresee any positive development for the industry in general in 2012,” he said.
Last year, three ships that IPEX helped finance were auctioned after the owners filed for insolvency, Murach said. While he doesn’t foresee “any major pipeline” of seizures this year, if needed, IPEX may take ownership of some ships in 2012, Murach said. (Bloomberg)