"Weak investment appetite for shipping assets and banks' low willingness to lend to shipping companies have made restructurings more challenging" the bank stated in its first quarter earnings release.
"Market conditions in the tanker, dry cargo and containership markets remained weak and near-term outlook is challenging. Freight rates were low and caused a further deterioration in collateral values, resulting in additional loan loss provisions.The loan loss level remained elevated due to the weak conditions in certain shipping segments," Nordea added.
The comment came as first quarter provisions for shipping were EUR40m ($52m), although a fall from EUR63m in the previous quarter, the amount is still above normal. The bank attributed the provisions to low freight rates causing deterioration in vessel values.
Operating profit in the Shipping, Offshore and Oil Services division, which is also responsible for cruise and ferries, rose from EUR21m in the first quarter of 2012 to EUR33m in the same period of 2013, despite operating income falling from EUR99m in the first quarter 2012 to EUR92m in the first three months of this year.
"Activity with shipping customers remained moderate due to the challenging market conditions, while activity in the offshore and oil service sectors was solid." Nordea commented.
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