DZ Bank in Final Stage of Selling Parts of DVB

Maritime Activity Reports, Inc.

October 19, 2018

(Photo: DVB Bank)

(Photo: DVB Bank)

Germany's No.2 lender DZ Bank is finalizing the sale of parts of its troubled transport financing division DVB Bank months after struggling to sell the whole business, two sources familiar with the matter said.

DZ Bank has had to make large provisions for bad loans in shipping finance, which is among the reasons for the sale process.

The sources, who declined to be identified due to the sensitivity of the matter, said DZ Bank, which is also the umbrella organisation of German co-operative bank chain Raiffeisen-Volksbanken, was wrapping up the sale of its aviation and land transport finance portfolios. It will then turn to the sale of shipping loans, much of which remain distressed, they added.

DZ Bank and DVB both declined to comment.

"They are hoping to complete this phase as soon as possible. The aviation portfolio is strong," one of the sources said.

They added that potential contenders included Japanese lender Mitsubishi UFJ Financial Group, Japanese financial services group Orix Corp and Australia's Macquarie group - all of whom have a presence in aircraft financing.

MUFG, Orix and Macquarie declined to comment.

One of the sources valued the aviation portfolio for sale at under 1 billion euros ($1.15 billion).

The sources said state-owned German landesbanks such as LBBW were also looking at the aviation and land portfolio, which was primarily focused on rail financing.

DVB is unusual in banking because it straddles both aviation and shipping, and both lending and leasing – a combination rarely found in one package.

Earlier this year DZ Bank ditched efforts to sell the whole of DVB Bank, sources have said, partly due to low offers and its pressured shipping business.

The two sources said a sale of shipping assets would take time.

"It is going to be harder to find buyers for that segment due to the distressed nature of the shipping portfolio," the first source said.

After a decade long slump caused in part by too many vessel orders, segments of the shipping industry are seeing a fragile recovery, but that could be hit by a looming trade war between the United States and China as well as higher fuel prices.

DVB's lending volume at June 30, 2018 totaled 18.3 billion euros, with shipping accounting for 7.2 billion euros. Aviation accounted for 5.4 billion euros, land transport for 1.4 billion euros and investment management related business for 200 million euros, DVB Bank data showed. The remaining 4.1 billion euros mainly consists of non-performing shipping loans.

DVB saw its pre-tax loss fall to 19.4 million euros in the first half of 2018, from a 506.3 million euro loss in the same period last year, the bank's results showed.

($1 = 0.8733 euros)

(Additional reporting by Taiga Uranaka in Tokyo; Editing by Kirsten Donovan)

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