In its 11th annual analysis of the bank l oan portfolios to Hellenic Shipping, Petrofin Bank Research mentioned that the overall loans (drawn and committed, but undrawn) booked both domestically and worldwide for 2011 rose from $66.235 billion to $67.694 billion, a growth of 2.2%. the reason behind this modest increase was the emergence of 16 new banks, new to Hellenic ship finance, which have developed a visible presence. This presence is increasingly manifesting itself via participation in public companies’ syndicated/club deals, as well as restructures, and which collectively amount to $2.71bn of Hellenic ship finance exposure said Petrofin.
Nevertheless, during 2011, the Hellenic ship finance market has been adversely affected by a series of factors, such as poor shipping market across most sectors, decline of vessels’ earnings and values, poor immediate prospects for most shipping sectors due to over-ordering and over-supply conditions, increased loan provisions, restructurings and/or defaults, the Hellenic State crisis and the announced departure from ship finance and / or Greek ship finance of a number of banks. The above adverse factors have created difficult credit conditions for new loans with only the most financially robust owners being provided with some limited finance said Petrofin Bank Research.
“In 2011, there was a fall in the Committed but undrawn Greek exposure from $9.153bn in 2010 to $7.115bn in 2011, i.e. -22.27%. This fall signifies that, as previous commitments, essentially for newbuildings, turned into loans, they were not replaced by fresh commitments. This affects both the ability of existing n/b orders being financed, as well as the possibility of placing new orders. In essence, the international banks, via credit restrictions, shall be instrumental in assisting the restoring, over time, of market equilibrium. Whereas for large financially strong public and private Greek companies some ship finance is still available, there are virtually no prospects for the smaller to medium-sized owners, who are often reduced to paying in cash for purchases” said Petrofin in its analysis.
Furthermore, it mentioned that “on a positive note, where finance is available, the rule of thumb is for 50%, unless there is secured employment in place, whilst margins and fees have increased yields to 350-400 basis points or higher. Given the low values applicable today, the above terms represent significant opportunities for profitable transactions for all banks and an incentive for newcomers to enter shipping counter-cyclically. Drawn Loans are up to $60.58bn, again counting in the $2.71bn of the other banks, representing a rise of 6.13% from 2010’s $57.082bn.
The Hellenic banks loan portfolios’ fall is the biggest so far (-8.6%), from $15.884bn in 2010 to $14.517bn in 2011, whereas in 2010 it was only 1.59% lower compared to 2009 (from $16.14bn to $15.883bn). In view of the Hellenic State crisis, the continuing recession in Hellas, the high cost of liquidity, the losses due to the PSI and the Hellenic banks’ capital inadequacy, it is hardly surprising that their portfolios have declined and, especially so, their future commitment, which have fallen by 59% in one year. We further believe that the decline would have been higher, had shipping conditions been better, enabling Hellenic bank clients to repay loans faster via cashflow, vessel sales, or re-financings. Once re-capitalised Hellenic banks will seek to apply their new liquidity to those sectors offering the highest rewards, whilst maintaining sufficient liquidity for the future. Consequently, the outlook for Hellenic banks towards ship finance remains hazy.
Additionally, international banks with a Hellenic presence are re-assessing their position in the light of the Hellenic State crisis and concerns over a possible departure of Hellas from the euro” commented Petrofin.
“The number of banks involved in Hellenic shipfinance is 55, including the 16 (new) banks. However, LBG, Bank of Ireland, Santander and Natixis are running off their Hellenic portfolios and there are market rumours of their attempts to sell their shipping portfolios, which so far has not been successful. The top 10 Hellenic ship financing banks held 59.29% in 2011 compared to 63.10% of the market in 2010. The top 10 banks still dominate the market but their percentage is coming down, as some of the leading ship finance banks are contracting their presence.
In view of the potential for additional banks (local, Far eastern and Western) entering the Hellenic ship finance market and the continuous difficulties associated with European banks, forming the vast majority of current lenders, it is expected that the Hellenic ship finance market will become more fragmented and the share of the top 10 banks shall continue to decline. Interestingly, there appears for the first time since the 80s, a possibility of North American banks entering Greek ship finance primarily via loans to US quoted public companies” mentioned the report.
European banks continue to account for the vast majority of total loans, 95.58%, but the reduction of this percentage from 97% last year points to new interest in Greek ship finance from elsewhere. It is noticeable that these names cover a very wide spectrum of nationalities.
“RBS remained the market leader with $11.455bn. Commerzbank-Deutsche Schiffsbank, Credit Suisse*, DNB, and DVB are, together with RBS, the top five. No Greek banks in their midst for the first time. Emporiki moves to first place in terms of Greek banks with NBG now second, closely followed by Marfin and Alpha bank. Only the Aegean Baltic reported an overall growth of 10.86%. The total percentage of German banks in Hellenic ship finance now stands at 26.17%, from 26.95% in 2010 and 28.74% in 2009. Star (growth) performers in 2011 have been ABN Amro and ING with increases of 228% and 199% respectively. However, the following banks have also reported growth: Commerzbank/Deutsche Schiffs (0.9%), Credit Suisse (market estimate: 11.11%), DVB (30.22%), HSBC (4.35%), Unicredit (2%), Citibank (bilateral only: 17.87%), China Exim (market estimate: 30.77%), KEXIM (market estimate: 25%), Aegean Baltic (10.86%) and Deka (4.4%).
Continuing our research into the percentage of Committed but Undrawn loans that refer to Newbuildings, we note that the largest percentage of Committed and Undrawn loans continues to refer to Newbuilding orders, but with a significant fall to 68.28% from 82.89% of Committed but Undrawn in 2010. This underlines the reduced interest in committed n/b finance by banks in the light of their own restraints and the poor conditions of the shipping market” concluded Petrofin Bank Research.
Nikos Roussanoglou, Hellenic Shipping News Worldwide