Exclusive: Deutsche Bank to sell $1 billion of shipping debt to boost capital - sources

Wed Jul 6, 2016 9:45am EDT
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By Jonathan Saul, Arno Schuetze and Andreas Kröner

LONDON/FRANKFURT (Reuters) - Deutsche Bank (DBKGn.DE: Quote) is looking to sell at least $1 billion of shipping loans to reduce its exposure to a sector whose lenders face closer scrutiny from the European Central Bank, sources told Reuters.

While the oil tanker trade has picked up, the container and dry bulk shipping industries are struggling with their worst downturn due to a glut of ships, a faltering global economy and weaker consumer demand.

Banking and finance sources familiar with the matter said Germany's biggest lender was initially looking to offload at least $1 billion.

"They are looking to lighten their portfolio and this includes toxic debt. It makes commercial sense to try and sell off some of their book," one finance source said. "They are not looking to exit shipping."

Deutsche Bank, which has around $5 billion to $6 billion worth of total exposure to the shipping sector, declined to comment.

Germany was one of the world's main centers of global ship finance before the 2008 financial crisis, and lenders there still have around 80 billion euros ($88.62 billion) on loan to the sector.

Deutsche Bank's ratio of non-performing loans stands at about 5 percent, compared with 10 to 15 percent among competitors, one banking source estimated.

Reuters reported last month that the European Central Bank has launched a review of banks' lending to the shipping sector. This has raised concerns among lenders that they may be required to set aside more capital and make higher loss provisions against loans to the industry.   Continued...

Shareholders of Deutsche Bank arrive for the bank's annual general meeting in Frankfurt, Germany, May 19, 2016. Picture taken with a long exposure.  REUTERS/Kai Pfaffenbach