Steadily declining rates in the shipping industry, which pushed the world’s seventh-largest container shipper, Hanjin Shipping, into bankruptcy last August, are creating heavy shipping loan losses for Germany’s banks.
Commerzbank has warned that its losses on shipping loans, which last year nearly doubled to €559m (US$595m) could grow further this year to €600m, while Deutsche has reported that its own expected losses from shipping loans nearly tripled to €346m from a year earlier.
Stephan Engels, Commerzbank’s chief financial officer (CFO) admitted that there was little immediate prospect of recovery. “Our view for 2017 is just as critical as it was for 2016, as far as shipping overall is concerned,” he said. “We still have -particularly for container ships – more new vessels coming on to the market than are being scrapped. And that in a market which is already on the whole operating below full capacity.”
The Wall Street Journal reports that in the German port of Hamburg state-owned HSH Nordbank is urgently seeking a buyer to avoid liquidation after suffering massive losses on shipping-related debt. European Union (EU) authorities have ordered the bank to be privatised by early 2018 or closed, creating potential losses of up to €15bn or over €3,000 per person for taxpayers in northern Germany.
“Analysts say the continued wave of write-downs indicates German banks remain hesitant to take the painful measures needed to restructure their businesses, almost a decade after the global economic crisis,” the WSJ comments.
Before the industry’s crisis, German lenders became the world’s biggest issuers of shipping loans, owning around US$90bn worth as of 2016 or almost a quarter of all outstanding shipping loans made by large banks, according to Petrofin Global Bank Research. German banks and investors own around 29% of the world’s container-ship capacity, more than any other country, according to Germany’s shipowners’ association the Verband Deutscher Reeder (VDR).
According to reports, last month Royal Bank of Scotland (RBS) concluded a deal to sell at least €600m of shipping loans as part of its efforts to leave the sector, with Japanese financial services group Orix Corp and Germany’s Berenberg Bank named as the buyers.
- A report on the Hanjin Shipping bankruptcy and its impact is in the current issue of Global Treasury Briefing.
ExxonMobil is legally challenging a $2m fine from the US Treasury for allegedly violating sanctions against Russia in 2014 while US Secretary of State Rex Tillerson was still overseeing the company.
Morgan Stanley is moving staff to Frankfurt in time for the March 2019 Brexit deadline.
The US bank, which already has 350 employees based in the city, will transfer some trading activities currently undertaken in London and create a further 150 to 250 jobs according to reports.
BNP Paribas is the latest in a long line of financial service companies to be penalised for misconduct during the financial crisis on both sides of the Atlantic.