By Jonathan Saul
LONDON, Nov 9 (Reuters) – Bank of Ireland said it is still winding down its shipping business, among a number of banks looking to cut non-core lending and exposure to an industry suffering its worst downturn.
Many European banks are already bogged down by a sluggish economy and face tough capital demands from regulators which are eroding profitability, leaving many looking for ways to shore up their balance sheets.
Parts of the shipping industry are suffering their deepest ever downturn as international trade slows. Around 90 percent of world trade is transported by sea.
“As previously stated, Bank of Ireland no longer lends within the shipping finance sector and we have been winding down the portfolio,” the bank, Ireland’s largest by assets, told Reuters on Tuesday.
Bank of Ireland first flagged efforts to wind down the shipping portfolio in its 2009 annual report. The bank declined to comment on how much progress it had made since then.
“It is still winding down,” a spokesman for the bank said.
Finance industry sources say a number of banks looking for an exit from the sector are aiming to speed up efforts and cut losses given potential new regulations which could mean bigger capital requirements.
According to data from industry publication Marine Money and shipping sources, Bank of Ireland’s shipping finance portfolio reached close to $2 billion at its peak before 2009.
The bank declined to comment on the size of the remaining portfolio but finance sources estimate it has less than $500 million left in shipping loans.
Bank of Ireland led a return to profitability following years of losses after the country’s 2008 banking crash.
Ireland’s two main lenders, Allied Irish Banks and Bank of Ireland, were among European banks that fared worst in the last European stress test in July.
INVESTEC DRAWS LINE
Separately, South African bank and asset manager Investec , which is also listed in London, told Reuters it had decided not to take on any new shipping lending after conducting an assessment of the portfolio.
“We are not taking any new loans in shipping at this time,” she added, declining to provide details on how big the firm’s existing portfolio was but confirming that Investec’s head of shipping, Jeremy Dean, had left.
Finance sources said at its peak Investec’s shipping portfolio was estimated to be in the region of $1 billion.
“What we are seeing is smaller banks are also cutting new lending to shipping. It means there are even less options around for shipping companies at such a tough time,” one source said.
In a further sign of the stress, German shipping group Marenave said this week two of its banks had rejected a restructuring plan aimed at repaying loans and the company was examining “whether the positive going concern forecast for Marenave can continue to be upheld”.
In September, Royal Bank of Scotland said it had begun winding down its shipping business after decades of being a top lender to the sector.
Meanwhile German banks – behind up to a quarter of the world’s $400 billion of outstanding shipping debt – are struggling to recoup their loans.
Sources told Reuters last month that Deutsche Bank was among more than 20 bidders in talks to buy a 3.2 billion euro ($3.53 billion) loan portfolio, which included shipping debt, from state-owned rival HSH Nordbank. ($1 = 0.9072 euros) (Additional reporting by Padraic Halpin in Dublin; Editing by Alexander Smith)
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