FRANKFURT, Nov 14 (Reuters) – German shipping bank DVB said on Monday it will seek a capital increase after write-downs on bad loans pushed the lender to forecast an even bigger net loss for 2016.
German shipping banks, already struggling to recoup tens of billions of dollars of loans due to a global shipping industry slump, have also been hit by slowing growth in China and sluggish global trade. These banks are believed to be behind up to a quarter of the world’s $400 billion of outstanding shipping loans.
In a sign of the struggles in the wider industry, South Korea’s Hanjin Shipping Co’s was pushed into bankruptcy earlier this year, dragged down by a deep global industry downturn.
Against this backdrop, Frankfurt-based DVB, which is owned by DZ Bank, said it would gain much-needed cash by issuing new shares in a capital increase.
“DVB’s parent company, DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, intends to strengthen DVB’s capitalisation through appropriate measures, also against the background of stricter capital requirements for banks,” DVB said in a statement.
The capital increase is expected to be between 100 million euros ($107.4 million) and 200 million euros, according to one source familiar with the matter.
Reuters reported last week that DVB was preparing a capital increase.
DVB said DZ Bank also now plans to buy the roughly 5 percent of outstanding DVB shares it does not already own. DVB did not give details on who will purchase the newly issued shares but it is likely the buyer will be DZ Bank, meaning DVB would no longer be listed.
Shares in DVB were up 13.3 percent at 1438 GMT.
For the first nine months of 2016, DVB posted a consolidated net loss before taxes of 23.6 million euros.
DVB had warned investors in September it expected a consolidated net loss for 2016 in the double-digit million euro range. It has now predicting the loss to be “in a low negative triple-digit million euro range”.
($1 = 0.9311 euros) (Reporting by Joshua Franklin and Andreas Kroener, editing by Alexander Smith and Louise Heavens)
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