Bank ship finance to Greek market seen rising

Although bank ship finance into Greek shipping continued to contract in 2017, the decline is slowing and by the end of this year more banks will become more willing to lend into the Greek market. This is the conclusion of the annual look at Greek ship finance by Petrofin Bank Research.

Lending contracted by 5.62% during 2017 to $54bn, though in 2017 the Greek fleet grew by 7% in deadweight terms to just over 387m dwt, according to Petrofin. The contraction follows one of 8.8% in 2016, the greatest since the onset of the financial crisis in 2009.

With the number of banks involved in Greek ship finance remaining at 51, with a small internal reshuffle, the report supports the evident retrenchment of traditional bank finance as a source of funding for Greek interests.

The top 10 Greek ship financing banks, although they have collectively reduced their loan portfolios, saw their share of the total rise 1% to 56.17% last year, as the whole portfolio has fallen. 

European banks still account for the vast majority of total loans at 78.70%, though their share is steadily dropping. It was 90% in 2013. 

Credit Suisse, with a $6.2bn book is the top lender for the third year in a row, ahead of DVB’s $4.3bn, while BNP Paribas leads a batch of eight banks with Greek portfolios of between $2.0bn and $2.8bn. The leading Greek bank is Piraeus Bank with a $2.8bn book, excluding its ferry fleet. 

The fall in overall Greek loans, both drawn and committed but undrawn, booked both in Greece and worldwide, saw the Petrofin Index for Greek Shipfinance at January 1, 2018 standing at 327 points down from 346 a year earlier and 379 in 2016.

Ted Petropoulos, head of Petrofin Bank Research, discussing the main findings said drawn loans are down 3.69% compared to 5.34% last year. Also, commitments have fallen markedly, by 30.63% compared to a drop of 38% in 2016. "This confirms the underlying contraction of bank ship finance, as well as a switch to other forms of finance like funds and Chinese leasing, which are rapidly expanding," said Petropoulos.

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However, contrary to the overall results, the Greek bank group is the only group showing growth. Four of the five Greek banks show growth, compared to two last year, with one, the Latsis-controlled Eurobank up 24.21%. Overall, Greek bank exposure is up 4.25% and their share of Greek ship finance has risen to 16.84% compared to 15.25% last year and 14.63% in 2015. "This is a resilient performance by Greek banks despite continuing domestic problems and underlines the commitment of Greek banks to shipping," said Petropoulos. 

Further, Petrofin found, total forward commitments, which by definition "show the position of trust in the future of Greek shipping, are down from $3.55bn to $2.4bn".

"However, the forward commitments to newbuildings are up 2%," which Petropoulos says, underlines the emphasis by banks on newbuildings as opposed to second hand vessels and the enhanced appetite will result in more bank finance and non-bank finance being used. 

Concluded, Petropoulos: "Traditional bank finance, especially among western banks, continues its steady decline, but bank finance continues to be the main source of ship finance. 

“The risk / reward of bank ship finance appears to be improving. A more stable international financial climate for banks, coupled by enhanced prospects in shipping, is expected to result in more banks becoming willing to lend into the Greek market. A welcome development and prospect.”

Posted 29 May 2018
David Glass

Greece Correspondent, Seatrade Maritime