German banks are still struggling with bad loans from exposure to the shipping industry, the Deutsche Well has reported.
The banks are struggling to recoup tens of billions of dollars of loans as a global shipping industry slump hits them hard, according to the newspaper which cited a report published in late January by German public broadcaster ARD. The report has suggested that the northern German states of Hamburg and Schleswig-Holstein may have to offer up to 20 billion euros (USD 21.4 billion) in credit guarantees to prop up banks with bad investments in container shipping.
“Many competitors here have hardly any chance against the new mega-shipping companies in Asia,” reporter Heinz-Roger Dohms wrote. “There is so much over-capacity on the world market that they can’t afford to send their container ships out at all, or have to do so at charter rates that don’t even cover costs.”
That’s bad news for the banks that underwrite German shipping companies – and German banks maintain around USD 100 billion in shipping loans, a quarter of the world’s total.
Bad loans in the ship industry, which has been in distress for years, are weighing on Germanys banks, according to a Handelsblatt analysis of the balance sheets of large financial institutions. Virtually all banks involved in the ship business set aside significantly higher provisions for bad loans last year.
Maritime shipping has become one of the biggest problems for German banks and it does not only affect the usual northern, coastal-based suspects like HSH Nordbank and NordLB.
Dekabank, for example, trimmed its business outlook for 2016 by a fifth because the bank set aside an unexpectedly large amount for bad ship loans in the first two quarters.
