Thursday 23 November 2017

Bank of Ireland getting out of shipping loans as maritime industry hit by downturn

Shipping taking a hit amid a downturn in international trade. Photo: Bloomberg
Shipping taking a hit amid a downturn in international trade. Photo: Bloomberg

Jonathan Saul

Bank of Ireland said it is still winding down its shipping loan business, among a number of banks looking to cut non-core lending and exposure to an industry suffering its worst downturn.

Many European banks are already bogged down by a sluggish economy and face tough capital demands from regulators which are eroding profitability, leaving many looking for ways to shore up their balance sheets.

Parts of the shipping industry are suffering their deepest ever downturn as international trade slows.Around 90pc of world trade is transported by sea.

"As previously stated, Bank of Ireland no longer lends within the shipping finance sector and we have been winding down the portfolio," the bank, Ireland's largest by assets, told Reuters on Tuesday.

Bank of Ireland first flagged efforts to wind down the shipping portfolio in its 2009 annual report. The bank declined to comment on how much progress it had made since then.

"It is still winding down," a spokesman for the bank said.

Finance industry sources say a number of banks looking for an exit from the sector are aiming to speed up efforts and cut losses given potential new regulations which could mean bigger capital requirements.

According to data from industry publication Marine Money and shipping sources, Bank of Ireland's shipping finance portfolio reached close to €1.8bn at its peak before 2009.

The bank declined to comment on the size of the remaining portfolio but finance sources estimate it has less than $500m left in shipping loans. Bank of Ireland led a return to profitability following years of losses after the country's 2008 banking crash.

AIB and Bank of Ireland, were among European banks that fared worst in the last European stress test in July.

Separately, South African bank and asset manager Investec, which is also listed in London, told Reuters it had decided not to take on any new shipping lending after conducting an assessment of the portfolio.

"We are not taking any new loans in shipping at this time," she added, declining to provide details on how big the firm's existing portfolio was but confirming that Investec's head of shipping, Jeremy Dean, had left. (Reuters)

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