“As the global economy and international trade entered into unchartered territory, confidence amongst both banks and owners fell,” said Ted Petropoulos, in the latest Petrofin Bank Research report on Greek ship finance.
Petropoulos said: “The rate of loan requests and the loan throughput by banks fell as credit and risk departments by banks were hard put to support fresh lending at a time of such crisis and uncertainty and sought lending only to the strongest clients and credits often on stringent terms.
“Loan margins started to rise as perceived shipping risk rose and as banks started to face loan restructure requests from hard pressed clients.”
The comments came in Petrofin’s 19th annual overview of bank loan portfolios to Greek shipping, both booked and committed. At the dawn of 2020 bank lending stood at $53.11bn, down a tiny fraction on 12 months earlier, but 8.77% down on 2016’s $57.21bn and a far cry from the dawn of 2009 when bank lending to Greek shipping stood at a record of more than $73bn.
The number of banks involved in Greek ship finance has gone up to 55 from 52 in 2018. Credit Suisse remains in the top position with another substantial increase of 10% and at the end of 2019 its book stood at $7.7bn, more than double second placed BNP Paribas’ $3.15bn portfolio, with HSBC next $2.8bn ahead of Citibank’s $2.7bn. Greece’s Piraeus Bank and Alpha Bank were in fifth and sixth both with $2.5bn.
The top 10 Greek ship financing banks showed a 2.48% decrease compared to the small 1.14% increase in the previous year. In 2019, their share of the total Greek portfolio declined to 56.33% from 57.69% in 2018, but is up on the 56.17% in 2017 and 55.19% in 2016.
In the face of the financial crunch generally, some banks, Greek banks in particular, managed to continue lending to their stronger clients. Others like Cyprus banks have been building a regular niche clientele.
Overall Greek bank lending to the industry was at $9.9bn at the end of 2019, its highest level since 2014. But this is a long way short of the $16.9bn combined Greek bank shipping portfolio at the outbreak of the financial crisis in 2009.
“At a time of rising loan margins internationally, Greek banks were able to secure liquidity at a reduced cost due to ECB [European Central Bank] policy, lower deposit costs the enhanced credit status of Greece and this enabled them to reduce their margins to competitive levels with other non-Greek lenders. Greek banks perceived the pandemic as an opportunity to enhance their position with Greek owners who faced limited finance possibilities,” said Petropoulos.
The top 10 lenders to Greek shipping showed a 2.48% decrease compared to the small 1.14% increase in the previous year. In 2019, their share of the total Greek portfolio declined to 56.33% from 57.69% in 2018, but is up on the 56.17% in 2017 and 55.19% in 2016.
It is interesting to see forward commitments, an indication of each bank’s ship lending momentum and / or the extent of its involvement in newbuilding finance, increased by 11% last year and was “showing a strong momentum by year end”.
Petrofin’s report concluded: “It is difficult to predict when the Greek ship finance market shall recover to pre-pandemic levels. Thus far we are not aware of any fresh banks entering ship finance nor of any existing banks leaving the market. However, the effects of the pandemic crisis are still being worked through the banking system.”
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