The decline has been evident in recent years and is down from the $57.21bn registered in 2016.A key finding in the 20th annual Petrofin Bank Research’s survey of lending to Greeks was that this decline occurred despite a record of near a 20% rise of ship finance by Greek and Cypriot banks in the year.
In his analysis, Ted Petropoulos, Head of Petrofin Research, said, “This year’s research of Greek shipping portfolios paints a picture of mixed partial growth and more extended decline”.
Petropoulos said the underlying factors behind the decline may be attributed in part to extraordinary circumstances. “The physical restrictions on travelling, meetings and developing new client of additional client business has played its role. There were, though, some persistent factors, such as the adverse regulatory restrictions and operating difficulties, which constrained banks’ lending ability and appetite.
“European banks in particular reviewed their lending policies across the board with shipping being an easy target for elimination with little ripple effects. As banks began to sell buildings and slash staff numbers, being involved in ship finance in general and Greek finance in particular made little sense,” said Petropoulos.
Overall, finance was provided by 56 banks, 27 of them with portfolios of over $100m each. The 29 other lenders have a total portfolio of just over $7bn and are primarily located in the Far East, examples being Tokyo Century Bank and Mizuho Marubeni Leasing Company which are reported to be bilaterally lending to selected Greek clients.
Credit Suisse continued for the seventh year running to be the leading lender with BNP Paribas again at the second place. Two banks dropped out of the list. DVB’s portfolio is fast winding down in the process of leaving shipping. Also, Nord LB is left out for the first time as its portfolio is being wound down / sold. The big Greek banks occupy the 3rd, 4th 6th and 7th positions, with Piraeus Bank’s $2.9bn book the largest and moving the bank up two places overall compared to last year. DNV and Nord LB which added to the long list of departees or rapidly consolidating banks over recent years.
The small Cypriot, Greek, Norwegian and other banks that have been attracted to the industry have a small overall impact and cannot offset the departure of the big banks. This trend can be seen by a decline in ship finance by European lenders “despite the rise of Greek banks”, which now amount to 73.84% of the total as opposed to 81.04% in 2016. The shipping syndications market registered a record rise though, of 33.73%.
The report says Greek banks having identified shipping as a core lending activity. They also benefit greatly from Greece’s hugely improved S&P and Moody’s rating. “Supported by a lower cost of funding and attractive loan yields, Greek banks built up market share by targeting their client base and expanding to quality well-known names,” said Petrofin’s research team.
Chinese leasing has been generally available, despite the pandemic, as China lessors’ shipping portfolios in 2020 grew 11.4% year-on-year to $60.5bn. Alternative sources of capital were also tapped and in general
Greek owners still enjoyed ship financing choice, even though traditional bank lending is still the least expensive. As 2020 progressed, loans to asset finance levels approached 50-55% for bank lending and 60-65% for leasing. Furthermore, in the course of the year, confidence returned both for banks and clients alike and ship finance volumes rose.
The mood of the Greek community is reflected in the fact forward commitments to newbuildings have increased by 12.92%, continuing a strong momentum which started in 2019, despite the slowdown in Greek shipbuilding orders. Newbuilding finance has always been very closely connected to market fluctuations, more so than secondhand vessel finance.
The 2020 Petrofin Bank Research continues to highlight the shift of ship finance to the East and the development of non-bank finance as a key competitor to traditional bank finance.
“It is difficult to see circumstances whereby the European banks will expand into major lenders in the future, which was the focus until a decade ago. We do expect, though, an expansion of the number of ship finance banks in the years to come,” concludes Petropoulos.
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