Deutsche Bank (DB) Considers Sale Of $1B Shipping Loans

Deutsche Bank AG (DE:DBKGn) (NYSE:DB) is seeking to sell at least $1 billion of shipping loans amid heightened regulatory scrutiny over the banks’ exposure in the troubled industry, according to a Reuters report.

The report quoted sources familiar with the matter, "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.” However, Deutsche Bank does not intend to exit the shipping sector.

As of Mar 31, 2016, Deutsche Bank’s exposure in the Shipping sector accounted for around €5 billion or less than 2% of the company’s total loan exposure. In its latest quarterly report the bank had noted, “A high proportion of the (shipping) portfolio is sub investment-grade rated in reflection of the prolonged challenging market conditions over recent years.”

Notably, recently the European Central Bank (ECB) has commenced a review of banks’ shipping loan books amid increasing provisions for bad debt in a sector that is grappling with crisis.

The major shipping categories – dry-bulk shipping and container shipping – continue to be plagued by crisis arising from excess supply of ships, weak consumer demand and slow global trade. This is consequently taking a toll on the asset quality of the shipping loans.

Several lenders in Germany, which was one of the major centers for maritime finance until the 2008 financial crisis, have been setting aside increased provisions to cover any potential loss tied with shipping loans. The launch of ECB’s review has further triggered banks to weigh options for selling those loans.

Apart from Deutsche Bank, state-backed lender NordLB and HSH Nordbank are also looking to sell off their shipping loans.

The Royal Bank of Scotland (LON:RBS) Group plc (TO:RBS) which is contemplating sale of its Greek ship finance business, reported impairment loss of £196 million in its shipping portfolio during first quarter 2016 “reflecting difficult conditions in some parts of the sector.”

Deutsche Bank currently carries a Zacks Rank #5 (Strong Sell). A couple of favorably-placed stocks in the foreign banks include Canadian Imperial Bank of Commerce (TO:CM) and Royal Bank of Canada (NYSE:RY) , each sporting a Zacks Rank #1 (Strong Buy).


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