Global Ship Finance Book Stabilises

Shipping: hoping for recovery.  File Image / Pixabay.

The shrinking ship finance portfolio of European and US banks in train since the global economic crash of 2008/9 seems to have stabilized, according to new bank research.

For the first time since 2010, European portfolios have increased while overall, global ship finance showed only "a minor decline" in 2019 over the previous year, financial research house Petrofin has found.

"The decline of Western banks' ship finance appears to have run its course," Petrofin's latest research noted.

"Even though there are loan portfolios by DVB and Nord LB still to be disposed, committed Western banks did absorb such declines resulting in the stabilization of Western bank ship finance."

However, the great unknown is the economic impact of Covid-19.

"Bank approvals became more cautious and demanding [as the pandemic unfolded], which resulted in more stringent terms and higher pricing," the research said.

But despite the Covid-19 related pressure on shipping markets, company bankruptcies have been a rarity.

"In all the months of turmoil in the main sectors of dry, wet and containers, there were hardly any insolvencies and for many banks, non-performing  loans remained low."

As the industry looks forward to better times, it is the shape of the recovery that will ultimately determine the banks' appetite for lending.

"Bank policy will depend on the economic recovery and a medical solution for Covid-19," Petrofin said.

And although the ship finance industry's performance during a very difficult period may give rise to comfort, "the geopolitical, pandemic, economic, environmental and trade factors remain" leading to a "constrained" outlook for ship finance in 2020 and 2021.

Petrofin's bellweather global ship finance research is pubished annually.