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HSH-NORDBANK.COM
9TH ANNUAL MARINE MONEY ISTANBUL SHIP FINANCE CONFERENCE, THURSDAY 10TH OF MAY, 2012
SWISSOTEL – THE BOSPHORUS
The European Debt Crisis and it´s Impact on Ship Finance
Dr. Jerzy Majewski
Shipping Origination Europe
HSH Nordbank
Agenda
1. A Year Ago: The Ship Finance Spring
2. Sovereign Debt Crisis and Banks
3. Addressing the Sovereign Debt Crisis – The Policy Response
4. How Can Banks Improve Capital and Liquidity Ratios?
5. Deleverage and Improve Funding – What does it Mean for Shipping?
6. Ship Finance becomes a Rare Commodity
7. Outlook: Is all this that gloomy?
8. HSH Nordbank Shipping
19. April 2023 2
EurozoneTrouble in the Banking Sector
Financial Times
19. April 2023 4Dealogic, Clarkson Intelligence Weekly
1. Bank Lending (in public domaine) for the period Q3 10 – Q2 11 reached USD 78bn falling short only of two record calendar years 2007 and 2008
2. Margins go down and structures get softer
While the Euro Sovereign debt crisis has been already looming large…
1. Eurozone finance ministers set up a permanent bailout found, called European Stability Mechanism, worth about EUR 500bn (Feb 2011)
2. First EUR 110bn rescue package for Greece agreed (April 2011)
3. All this apparently safeguarded by the brave new regulatory framework Basel III and under a close surveillance of the European Bank Authority (EBA) and its monitoring tool Stress Test with its surprisingly positive outcomes…
A Year Ago: The Ship Finance Spring
Stress Tests
5Financial Times
19. April 2023 6 IMF “Global Financial Stability Assessment”, April 2012
Sovereign Debt Crisis and Banks
Channels through which Sovereign Crisis is affecting European Banks Banks´ sizable sovereign exposures as a potential contagion channel
Negative spillover via valuation losses on sovereign holdings impair banks ability to obtain secured lendingRestricting lending may cause further negative circular feedback effects
19. April 2023 7IMF “Global Financial Stability Assessment”, April 2012
Faced with the unfolding Sovereign Debt Crisis the policy responded with unprecedented actions aimed at bringing much-needed relief:
1. Establish credible firewall, i.e. European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF)
2. Provide the extraordinary European Central Bank (ECB) facility (3Y)
3. Implement the EBA Third Stress Test recommendations aimed at strengthening capital basis:
Increase capital - Core Tier One Ratio (CR1) to reach a level of 9% by the end of June 2012, pre-drawing the requirements of Basel III “game changer”
Improve capital and liquidity ratios
EBA Third Stress Test key findings:
Equity shortfall i.a. Commerzbank, BNP Paribas, Societe Generale, Deutsche Bank, NordLB, DNB NOR, most of the Greek banks, UniCredit and three other Italian Banks
USD funding identified as the predominant weakness of European banks
Addressing the Euro Sovereign Debt Crisis – The Policy Response
19. April 2023 8Bloomberg, 5y CDS spreads for selected shipping banks
1. European Banks – the main provider of ship finance (75-80%) are all affected (clearly Eurozone banks more than the Non-Eurozone banks (-> Nordic Banks)
Funding Costs on a Rise Again
19. April 2023 9Bloomberg, EUR/USD swap rates
1. EUR/USD swap rates
2. USD funded banks plus those with an easier access to USD have a clear advantage over Eurozone banks (other EUR/USD swaps)
Funding Costs on a Rise Again (ii)
19. April 2023 10IMF “Global Financial Stability Assessment”, April 2012
How Can Banks Improve Capital and Liquidity Ratios?
Deleverage and Improve FundingUSD funded, long term, high volume and high-risk business first to go
19. April 2023 11Business Monitor International: Industry Trend Analysis – Shipping Finance An Increasingly Rare Commodity , 11 April, 2012 Fitch: Ship Financing: Industry Downturn Compounded by Capital and Liquidity Challenges at Banks , 29 March 2012
1. Several Shipping Banks have been downgraded, some of them need to improve capital adequacy ratio and consequently reduce RWA
2. Several traditional shipping Banks have already decided to exit shipping market in the aftermath of financial crisis back in 2008, i.e. Alliance&Leicester, Lloyds TSB/Bank of Scotland, WestLB, Bank of Ireland
3. New names circulated in the market having recently announced partial exit include: UniCredit, BNP Paribas and Societe Generale
4. Other banks differentiate clearly between non-core and core business with former being a wind-down book and latter selective growth scenario: Commerzbank, Crédit Agricole, RBS, HSH Nordbank
5. In addition, several local banks significantly reduced their ship finance related activities: Greece, Italy and Turkey
What Does it Mean For Shipping?
19. April 2023 12FußzeileDealogic, Marine Money
Dealogic League Tables as of 1Q/2012 shows the magnitude of these changes
Ship Finance becomes a rare commodity
19. April 2023 13FußzeileMarine Money: Freshly Minted April 20, 2012
Global Maritime Finance Volume 1Q 2005 - 2012
Ship Finance becomes a rare commodity (ii)
19. April 2023 14* USD 51bn debt on average needed over the next three years, see: The Funding Gap: Myth or Reality? Andrew Hampson, Tufton Oceanic at the Marine Money London, 26th January 2012; Petrofin: Bank Research November 2011, Greek Ship Finance April 2012
How much funds are really needed as NB orders are going down (in various segments one digit already) and asset prices seem to be at the rock bottom levels?*
Will there be enough money for shipping?
Petrofin Research (40 global ship finance banks representing USD 461bn out of a total global ship finance estimate of USD 500bn analysed over the period of 2009-2011):
• with neutral policy
• unclear policy, and
• those with lending capacity
Results: there are (still) 30% of banks with lending capacity (admittedly down from stable 45% over the last three years)
Petrofin on Greek Ship Finance
• Nine banks with double digit growth rates (i.a. ABN Amro, ING, DVB, Citi, Exim)
• Several new banks in Greek Shipping (i.a. Commenwealth Bank Australia, Standard Chartered, Danish Ship Finance, Fokus, SEB)
Outlook: Is all this that gloomy?
19. April 2023 15FußzeilePetrofin Bank Research November 2011
Outlook: Is all this that gloomy (ii)?
Bank Lending to Shipping: Top 40 banks total Volume USD 461,19bn (449,76bn, 2010)
19. April 2023 16FußzeileLloyds List, Tradewinds, Marine Money
1. Despite poor 1Q 2012 results funding provided to shipping/offshore was not all that bad..
2. NOK Bond markets is booming – 22 bond deals in shipping and offshore during 1Q/2012 aggregating NOK 13.2bn (USD 2.3bn). Margins for top borrowers in the range of 400-500 bps on a unsecured non-amortizing basis vs. current bank spreads seem to be an attractive funding source
3. Several banks have announced their budgets / confirmed their commitment (given the limited needs in terms of genuine new business and the decreased values could be sufficient to keep system alive and help to reestablish a new equilibrium)
4. Among those who recently confirmed their commitment and demonstrated availability of lending capacity to the industry: i.a. DVB, Standard Chartered, ABN Amro, Deutsche Bank, Citi, KfW, HSH Nordbank and last but not least the Dealogic League Tables stalwarts - the Nordic banks
Outlook: Is all this that gloomy (iii)?
19. April 2023 17Fußzeile
1. Current Portfolio
2. New Business
3. Key Growth Areas
4. New Segments
5. Key Strategy Elements
6. Corporate Finance
7. Risk Management Advisory
HSH Nordbank Shipping – where we are and where and how do we want to grow?
HSH Nordbank Shipping Team – Global ReachAmericas – Europe - Asia
HamburgBernd Gabor► Head Shipping Europe
Phone: +49 40 3333 13886
New YorkChristian Bock► Head Shipping Americas
Phone: +1 212 407 6070
19. April 2023 18
Kiel
Hamburg
Athen
New York
Singapur
Hongkong
AthensLoukas Lagaras► Head Shipping Greece
Phone: +30 210 4295 302
Singapore / Hong KongKeng Mun Lee► Head Shipping Asia
Phone: +65 6550 9068
Your contacts:
New York
Hamburg Kiel
Athen
Singapur
Hong Kong
Ingmar Loges► Global Head Shipping
International Clients
Phone: +65 6550 [email protected]. [email protected]
Christian Nieswandt► Global Head Shipping
Domestic Clients
Phone: +49 40 3333-11828
