German state-controlled lender NordLB has agreed to take full control of its loss-making Bremer Landesbank (BLB) unit, which is suffering from a weak shipping market that is chipping away at its capital.

The owners of BLB said in a joint statement late on Wednesday that the city of Bremen would receive 180 million euros ($201 million) for its 41 percent stake in the bank.

Sources familiar with the matter had flagged the upcoming deal to Reuters in June, after regulators asked the Bremen-based lender to shore up its capital against bad shipping loans.

BLB, which has around 30 billion euros in assets, also reported first-half financial results late on Wednesday, posting an after-tax loss of 384 million euros as it had to more than quadruple its risk provisions.

Sources had told Reuters that the European Central Bank had urged BLB to increase its capital, and weekly magazine Focus reported that the lender needed 700 million euros in additional equity.

Germany was one of the world’s main centres of global ship finance before the 2008 financial crisis, and the five German banks with the closest links to the shipping industry still have around 80 billion euros on loan to the sector.

NordLB and BLB, as well as peers such as HSH, Commerzbank, DVB and KFW, have taken writedowns and boosted capital buffers against the risk of shipping loans turning sour.

“We expect that the situation on shipping markets will not improve in the short term,” BLB Chief Executive Stephan-Andreas Kaulvers said in a statement, adding that the bank expected to need capital from its owner to reach its 2016 target for a tier 1 capital ratio of 11.5 percent.

($1 = 0.8969 euros) (Reporting by Maria Sheahan; Editing by Subhranshu Sahu)

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