EUROPE • GERMANY
German shipping finance in reverse gear
German banks’ total shipping credit volume dropped by 15.3% last year to reach €78.2bn at end 2016 compared to €92.3bn a year earlier, writes Dr Jürgen Monzel.
OPINION: CONTAINERSHIP PRESENCE – LOSING GROUND
The following opinion piece has been contributed by Hamburg-based financier Tobias Koenig of Lexington Marine.
The trends are clearly visible and they don't paint a pretty picture of the German maritime industry, once dominating the containership sector worldwide.
Before the begin of the market downturn, about 50% of the world's container fleet was owned by Germans and even more of the fleet was commercially controlled by Germans. They were the go-to address for all the large container operators if modern newbuildings were required to grow their liner networks.
But with the begining of the financial crisis, the once vibrant KG system died a sudden death and has never recovered, since. And it is highly questionable that it ever will come back, even if the markets change, given the regulations introduced by the German government as part of the post financial crisis regulatory frenzy.
While the containership fleet (including orderbook) will double in teu capacity from 2009 to 2020, the market share of German owners is
coming down like an avalanche, which seems to be unstoppable. Latest figures show it at just 21%.
The nine years of shipping crisis have drawn on the once ample cash reserves, which have been built up over decades. The German banks once leaders in ship financing are now taking the lead to being liquidated or are on the block for sale.
While there seems to be plenty of international capital available for shipping, both debt and equity, the buck has not stopped at German owners. Despite the undisputed quality of their companies and the top performance for all the major container lines. The reason for the decline is the very same reason as the success of the past: a closed system strictly suitable for Germans, with protective barriers constructed around it. The former German pride, the Tonnage Tax System is a kiss of death to the German shipping industry, as it prevents the influx of international capital.
If Germany does not want to be erased from the international shipping charts, it has to modernise the accounting and tax laws of the industry and make it competitive with international competition from places like Singapore, New York, Oslo, Athens or London.
Key reason was that some banks reached agreements with customers or third parties to shed non-core assets and non-performing loans. Also, all German finance institutions are taking a very cautious approach to new shipping business on account of a worsening industry outlook combined with the necessity to further increase loan loss provisions and assign more capital against non- performing debt.
An example for the above is HSH Nordbank’s agreement with the EU Commision to offload €8.2bn out of their total exposure amounting to €24bn at end 2015. Some €5bn of non-performing loans relating to 256 vessels, mostly containerships, is being transferred to HSH Portfolio Management AöR, a new company equally-owned by the Federal State of Schleswig-Holstein and the Free and Hanseatic City of Hamburg, while a further €3.2bn worth is being sold
Oher German banks are looking to lighten their shipping portfoliosas well. NordLB decided to cut its shipping credit volume after having agreed to take full control of its loss- making Bremer Landesbank (BLB) which is suffering from weak shipping markets and distressed ship values; the two banks’ combined shipping portfolio worth €18.4bn at the beginning of 2016 should be reduced to €12-14bn by end 2018.
Other German banks are looking to divest parts of their shipping books but do not intend to exit from shipping, while Commerzbank is still following its 2012 decision to completely retire from shipping.
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Seatrade Maritime Review • Quarterly Issue 2 • June 2017
PHOTO: KfW
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