trending Market Intelligence /marketintelligence/en/news-insights/trending/dD5QDU6xHck7JkUOnNI6HQ2 content esgSubNav
In This List

Global shipping finance tanks, but Greek and French banks are buoyant


Banking Essentials Newsletter: 7th February Edition

Case Study

A Bank Outsources Data Gathering to Meet Basel III Regulations


Private Markets 360° | Episode 8: Powering the Global Private Markets (with Adam Kansler of S&P Global Market Intelligence)


Banks’ Response to Rising Rates & Liquidity Concerns

Global shipping finance tanks, but Greek and French banks are buoyant

Global shipping finance slumped to $300.7 billion at the end of 2018, according to Athens-based Petrofin Research. This is down from $345 billion a year previously and marks the lowest level since Petrofin started compiling the index in 2008.

The research tracks the lending of the top 40 banks active in the shipping finance market, and shows that the rate of decline has accelerated each year since the end of 2015.

Bucking the trend for the decline in shipping finance are Greek and French banks, according to the report. Shipping finance from France and Belgium rebounded to $32 billion compared with $31 billion in 2017, and $28 billion in 2016, while Greek lending climbed to $8 billion after plateauing at the $7 billion mark over the previous two years.

BNP Paribas SA is largely behind the bump in French lending thanks to its "unwavering confidence in the sector," according to the report.

The return of the Greek banks

Greece is the biggest ship-owning nation in the world, accounting for 20% of global seaborne trade as of 2017, according to data from UNCTAD. Greek shipowners play a particularly large role in the crude oil trade, controlling around 29% of tankers globally.

In the years after the global financial crisis, Greek banks pulled back from the shipping market, and their lending to the segment has fallen considerably since 2010, when their exposure totaled $13 billion, according to Petrofin.

Greek lenders spent much of the past decade straining under a heavy burden of bad debts, which has constrained their ability to lend to shipping or other corporate activities. They still have the highest nonperforming loan ratio of any banking system in the EU, at 41.41% as of the first quarter of 2019.

But Greek banks are gradually working through their bad debt pile via a mixture of portfolio sales and securitizations and are likely to receive more support in the near future for their efforts to clean up their balance sheets thanks to a government-backed asset protection scheme. Now Greek banks are anxious to start to grow their commercial loan books again, and shipping could be a natural place to start originating new loans, according to Ted Petropoulos, head of Petrofin Research.

"For Greece, shipping is an attractive industry for banks with few lending alternatives. The clients are known, the business is familiar and the bank can sell all its ancillary services too," he told S&P Global Market Intelligence.

Out of the Greek banks, Piraeus Bank SA has the biggest exposure to shipping with a $2.84 billion loan book as of the end of 2018, according to Petrofin data. National Bank of Greece SA had a $2.46 billion shipping loan book while Alpha Bank AE's totaled $2.34 billion.

SNL Image

A retreat from the market

European banks in particular recorded a stark reduction in shipping finance activity, with a 14% drop in exposure in 2018.

Legacy shipping debt has been a source of considerable pain for certain European banks that were heavy lenders to the industry in the pre-financial crisis years. Hamburg Commercial Bank AG, which is in the midst of a major restructuring, was brought to the edge of collapse by huge volumes of soured shipping debt. German banks have backed away from the sector in recent years, reducing their exposure to shipping to a third of their pre-crisis peak by 2018, according to Moody's.

It is not clear yet whether the massive deleveraging seen in banks' shipping portfolios will continue, according to Petrofin.

"It is yet early days to conclude if banks will continue reducing their exposure in the sector and a great deal will depend on the overall available lending resources of banks and their commercial strategy, as well as the competition by unregulated non-banking funds, leasing companies and other providers," the report said.