NordLB Raises Loan-Loss Provisions as Shipping Crisis Persists

Nov. 28 (Bloomberg) — Norddeutsche Landesbank Girozentrale, one of the world’s top shipping lenders, increased loan-loss provisions by 2 percent in the third quarter as the industry crisis entered its sixth year.

The state-owned bank based in the North German city of Hanover set aside 210 million euros ($286 million) in the period, compared with 206 million euros in the third quarter of last year, it said in a statement today. In the first nine months, provisions rose 82 percent to 642 million euros.

“Despite signs of slight improvement, we will still have to contend with the effects of the shipping crisis until well into the next year,” Gunter Dunkel, chairman of the managing board of Norddeutsche Landesbank, or NordLB, said in the e- mailed statement.

The lender, controlled by the German states of Lower Saxony and Saxony Anhalt, is trying to cut bad loans to shipping clients who are struggling to service their debt as a slump triggered by the global credit crisis drags on.

The number of vessels in NordLB’s loan portfolio fell to 1,728 at the end of September from 1,820 at the end of 2012. Its exposure declined to 16.9 billion euros from 17 billion euros at the end of June and 18 billion euros at the end of last year, spokesman Thomas Klodt said by phone.

In its ship finance business, NordLB had loan-loss provisions of 1 billion euros for 278 of the 1,728 vessels, according to a presentation accompanying third-quarter results. The share of non-performing loans in the bank’s total credit portfolio rose to 3.8 percent from 2.7 percent, it said.

According to the Bundesbank’s Financial Stability Review, the exposure of Germany’s top seven shipping lenders was at 86 billion euros in the middle of 2013, down from 97 billion euros in mid-2012. There is “especially high” default risk for shipping loans, it said in the Nov. 14 report.

– Nicholas Brautlecht, Copyright 2013 Bloomberg.

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