September 2016 Issue German Banks Count Cost of Global Shipping Crisis

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LONDON/FRANKFURT, Sept 15 (Reuters) – German banks are struggling to recoup tens of billions of dollars of loans as a global shipping industry slump hits them hard.

The lenders – among the biggest backers of shipowners over the past 20 years – are behind up to a quarter of the world’s $400 billion of outstanding shipping loans, three shipping financiers told Reuters.

This would make them collectively more exposed than banks from any other single country in terms of outstanding debt to the sector.

These institutions are now grappling with a near decade-long slump of parts of the shipping sector since the 2008 financial crisis that is also hurting European peers, such as Britain’s Royal Bank of Scotland.

“German banks account for close to $100 billion of shipping debt out of a world total of around $400 billion,” said Dagfinn Lunde, who spent more than a decade as head of shipping at Germany’s DVB Bank until the end of 2013.

The same estimates of German bank exposure and total sector debt were made by two other shipping finance executives, who declined to be named, citing the confidentiality of their business dealings.

Lunde, now a board member of Norway’s Maritime and Merchant Bank, said German lenders had been “throwing money” at the sector when shipping business was brisk. “When the values tumbled, they were left with massive exposure to toxic debt.”