re german banks, just in in-tray
Subject: Fw: Commerzbank May See Losses on Shipping Loans, Analysts Say
Commerzbank AG, the German lender buying Dresdner Bank AG, faces potential losses on more than 22 billion euros ($32 billion) in shipping loans as world trade volumes plunge, analysts from banks including Nomura Holdings Inc. said.
Writedowns and provisions for assets including shipping loans may increase if the global recession worsens, Doreen Schmidt, a London-based analyst at Nomura, wrote in a note to investors on Dec. 5. The Frankfurt-based bank will have 22.1 billion euros in ship loans after combining with Dresdner, said Carsten Werle, an analyst at Sal. Oppenheim in Frankfurt.
Commerzbank will double its stake in ship financier Deutsche Schiffsbank AG to 80 percent after it completes the Dresdner purchase in January. Half of commodity shipping lines are likely to breach loan terms in the months ahead as rental rates and vessel prices fall, Nordea Bank AB, the world’s largest arranger of loans to the industry, said last month.
“The shipping loans could hide risks that have gone unnoticed until now,” said Konrad Becker, a Munich-based analyst at Merck Finck & Co. “The drastic fall in shipping rates and global trade amid the economic downturn means the worst is yet to come.”
Stefan Roberg, a spokesman for Commerzbank in Frankfurt, declined to comment.
The Baltic Dry Index, a measure of commodity shipping costs, has fallen about 93 percent to near a 22-year low since reaching a record in May as the recession saps demand for raw materials. Banks finance ship construction and purchases.
Repricing Loans
Norway’s Dnb NOR Bank ASA said on Nov. 24 it would use breaches of loan accords to reprice loans, renegotiate terms and block dividend payouts. HSH Nordbank AG, a German competitor that does most of its ship lending to container shipping lines, had its long-term debt and deposit ratings lowered on Nov. 20 by Moody’s Investors Service, which cited “accelerated weakening” in the shipping business.
“The dramatic decline in prices for ship’s freight implies high default risks in the industry,” said Werle in a note to investors on Dec. 12. The amount of ship loans held by Commerzbank will be near that of market leader HSH Nordbank after it combines with Dresdner, he said, citing a trade magazine.
“Overall, we consider commercial real estate, the large corporate business and shipping exposure the most likely sources of negative surprises in risk provision,” Werle said.
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