Prospects for New Bank Finance in 2011

Transcription

1 23 rd Annual Ship Finance & Investment forum 2010 London 16 th 17 th November 2010 Prospects for New Bank Finance in 2011 presented by Ted Petropoulos HEAD

2 Presentation outline 1. The global ship finance market 2. Forecasting shipping finance requirements 3. What is the current attitude to risk among top bankers? Top Bankers Survey 4. What is the risk appetite for shipping finance by banks? Will there be finance for everyone? 5. The emergence of new entrants, and the potential of Chinese lenders 6. Summary and Conclusions

3 - Global ship lending figures (drawn and committed) as of November 2010 are estimated at $500bn (excludes offshore sector), of which 420bn is drawn and $80bn committed but undrawn.

4 - The above totals may underestimate the contribution of Far Eastern and Middle Eastern banks which do not make their figures readily available witnessed a severe drop in fresh lending as well as a significant reduction of loan commitments. However, the growth trend resumed mildly in Given the total no of vessels in the global fleet of 44,784 (Sept.2010, N. Cotzias) of all sizes and ages, the average debt amounts to $9.4m per vessel.

5 - In Graph 1, we present the latest Petrofin Bank Research, on the shipping loan portfolio of the top 40 global ship finance banks representing $449.76bn of total loans. - It should be noted that at the commencement of 2010, the top 40 global shipping bank loans amounted to $436bn. - Consequently, in less than 1 full year, there has been a growth of 13.76bn at 3.14%, as opposed to a fall of 5.7% in

6 - interestingly, the top 6 shipping banks accounted for approx. 40% of the top 40 shipping finance exposure, underlying the heavy commitment by the top banks. - Lastly, European bank exposure accounted for 87% of the top 40 total.

7 Graph 1 Bank Lending to Shipping Ship finance based on data up to November 2010 in $bn Total loans of leading 40 ship finance banks approximately $449.76bn Top 6 Banks Finance approx % of Shipping Loans HSH Nordbak DNB Nor Commerzbank/Deutsche Schiffsbank RBS KfW Nordea BNP PARIBAS / Fortis Belgium BTMU* Lloyds Banking Group Credit Suisse* Credit Agricole CIB Bank of China* DVB HSBC* China Exim* Unicredit SMBC* Bremer Landesbank Deutsche Bank Danish Ship Finance Korea Exim* Citibank Danske Bank/Focus Bank Nord LB SEB ABN Amro ING Natixis ICBC Santander* National Bank of Greece NIBC Swedbank Helaba Alpha bank Emporiki Bank Marfin Egnatia Piraeus Bank* JP Morgan Bank of Ireland Source: Petrofin Bank Research / Marine Money November 2010 * Market estimates

8 2. Forecasting shipping finance requirements - It is difficult to estimate the value for the global order book, as the individual newbuilding prices are not available for every vessel on order. However, as a broad estimate, an approximate value figure for the 6,007 vessels on order (N. Cotzias) of at least $250bn can be used. - Assuming an average figure of 70% finance, the estimated finance requirements are expected at $175bn over the next 4 year period.

9 2. Forecasting shipping finance requirements - The above estimate shall be affected: Upwards Downwards - Fresh orders - Committed finance - Second-hand acquisition finance already in place - Mergers and acquisitions - Cancellations - Conversions / postponements

10 2. Forecasting shipping finance requirements - The new finance requirements should be assessed in the light of an approximately 10% per annum global loan book run off which is estimated at approx $168bn over the next 4-year period. This run off percentage rises during periods of strong shipping markets with healthy cash flows and reduces at times of market troughs.

11 2. Forecasting shipping finance requirements - At first sight, therefore, should banks simply re-lend what they shall receive from loan repayments, a substantial proportion of the required newbuilding finance is capable of being met. - The question, though, is will banks re-lend their surplus cash flow into shipping and / or will they expand or contract their overall ship lending capacity?

12 - Bank lending affected by: 1. State and prospects of the global economy (current IMF growth forecast for 2011 of 4.25%) 2. Lingering effects of liquidity crisis 3. Need to preserve/build up capital ratios 4. Basel III 2. Forecasting shipping finance requirements 5. Prospects for the shipping industry across all sectors 6. Alternative risks/rewards for lending to other sectors 7. Quality of existing loan portfolio / provisions / losses

13 3. What is the current attitude to risk among top bankers? Top Bankers Survey What are the recovery prospects for the world economy, international trade and shipping? Has a recovery begun or will it stall? Is ship finance resuming? Are problem loans still a problem?

14 3. What is the current attitude to risk among top bankers? Top Bankers Survey Results of a Top International Ship Finance Bankers survey, conducted by Petrofin Research in November 2010

15 3. What is the current attitude to risk among top bankers? Top Bankers Survey We posed, between the 26 th October and 8 th November, 14 questions to 29 top ship finance bankers, who collectively hold over $274.66bn in shipping loans portfolios, or approx. 61% of top 43 international bank shipfinance totals ($451.31bn). The results are as follows:

16 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q1: Do you think that the DRY shipping freight market for 2011 shall be: Bankers responses a) The same as now 27.59% b) Higher 3.45% c) Lower 62.07% d) Much lower 6.90%

17 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q2: Do you think that the TANKERS shipping freight markets for 2011 shall be: Bankers responses a) The same as now 27.59% b) Higher 44.83% c) Lower 27.59% d) Much lower 0.00%

18 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q3: Do you think that the CONTAINER shipping freight markets for 2011 shall be Bankers responses a) The same as now 44.83% b) Higher 27.59% c) Lower 27.59% d) Much lower 0.00%

19 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q4: Do you think that the second hand vessel prices across all sectors for 2011 shall be: Bankers responses a) The same as now 31.03% b) Higher 10.34% c) Lower 55.17% d) Much lower 3.45%

20 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q5: Do you believe that new vessel deliveries for dry bulk: Bankers responses a) Have peaked 3.57% b) Will peak in % c) Will peak in % d) Will peak later than %

21 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q6: Do you expect China's growth, currently running at about 9.6%, in the next 12 months to Bankers responses a) Stay the same 41.38% b) Rise to 10% p.a % c) Rise over 10% p.a. 0.00% d) Drop to 6-8% p.a % e) Drop below 6% p.a. 0.00%

22 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q7: Do you think that global economic growth over the period will be Bankers responses a) Under 2% 20.69% b) 3-4% 68.97% c) Between 4-5% 10.34% d) Over 5% 0.00%

23 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q8: Do you think that European ship finance activity in 2011 shall be: Bankers responses a) The same as now 31.03% b) Higher 58.62% c) Much higher 3.45% d) Lower 6.90%

24 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q9: Do you expect the overall global ship finance loan portfolio (loans + commitments) in 2011 to: Bankers responses a) Increase by over 10% 3.45% b) Increase by up to 10% 55.17% c) Stay the same 10.34% d) Reduce up to 10% 24.14% e) Reduce by over 10% 6.90%

25 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q10: For your own institution, do you expect your ship finance portfolio (loans + commitments) in 12 months' time to Bankers responses a) Increase by over 10% 29.63% b) Increase by up to 10% 33.33% c) Stay the same 29.63% d) Reduce up to 10% 3.70% e) Reduce by more than 10% 3.70%

26 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q11: Assuming for new shipping loans that loan spreads (currently about 300bps) over the next 12 months, do you expect loan spreads to? Bankers responses a) Stay the same 62.07% b) Rise 27.59% c) Fall 10.34%

27 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q12: Do you foresee for 2011 non-performing loans to: Bankers responses a) Stay the same 48.28% b) Rise 37.93% c) Fall 13.79%

28 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q13: Do you foresee Far Eastern banks to develop over the next 3-5 years into: Bankers responses a) Major competition 21.43% b) Medium competition 64.29% c) Minor competition 14.29%

29 3. What is the current attitude to risk among top bankers? Top Bankers Survey Q14: Over the next 2-3 years, will ship finance from non-bank sources, i.e. private equity, stock markets, etc. play: Bankers responses a) A similar role 46.43% b) Higher 53.57% c) Lower 0.00%

30 4. What is the risk appetite for shipping finance by banks? Will there be finance for everyone? - We divided the top 42 banks between banks with a reduced capacity, banks with lending capacity and banks with neutral/unclear policy. - We compared the findings with those of mid-2010 and of 1 year ago to determine if the ship finance climate is improving, has remained static, or is worsening. - The results are shown in Graph 2, below

31 60.0% Graph 2 Ship finance banks capacity 2009 Global portfolio, top 42 banks: $463.75bn mid-2010 Global portfolio, top 42 banks: $436.93bn Fall 2010 Global portfolio, top 42 banks: $451.06bn 50.0% Banks with reduced capacity Banks with lending capacity 47.6% 46.6% 48.1% 40.0% Banks with neutral/unclear policy/capacity 36.1% 39.6% 30.0% 31.2% 22 banks 20.0% 16 banks 17.2% 12.3% 21.2% 12 banks 14 banks 18 banks 18 banks 10.0% 12 banks 10 banks 4 banks 0.0% DATA based on 2009 DATA mid 2010 DATA Fall 2010 DATA based on 2009 DATA mid 2010 DATA Fall 2010 DATA based on 2009 DATA mid 2010 DATA Fall 2010

32 4. What is the risk appetite for shipping finance by banks? Will there be finance for everyone? - We note that 2 more banks have slipped from neutral to reduced capacity in the last few months. - It is encouraging, however, that the same number of banks in the category that is lending to shipping, is increasing its portfolio. - The picture that emerges is that there is still not sufficient finance for all, but only for the few.

33 4. What is the risk appetite for shipping finance by banks? Will there be finance for everyone? - As the shipping loan portfolio, however, is on the rise, it allows us for the first time in 2 years to feel some confidence for the future recovery. - Current ship finance is concentrated on the larger private or publicly quoted financially strong companies as banks are very selective. - Small owners are now forced to pay unprecedented high margins to secure loans, if available.

34 5. The emergence of new entrants and the potential of Chinese lenders - Ship finance is very much a lender s market. - Shipping loan margins and fees are highest for over 30 years. - The international shipping industry has performed extremely well during the recent crisis i.e. hardly any bankruptcies. - The industry s cash flow has been adequate to service bank debt.

35 5. The emergence of new entrants and the potential of Chinese lenders - Both banks and clients have shown considerable maturity and flexibility in working together through the 2008/2009 crisis. - There have been considerable improvements in the financial position and liquidity of banks, i.e. the recovery process has begun. - Consequently, it is expected that the shipping industry shall increasingly attract new entrants from 2011 onwards.

36 5. The emergence of new entrants and the potential of Chinese lenders Where will new lenders come from? - Unlikely to come from Europe and the US, where banks are still recovering from the recent banking and liquidity crisis. - Far eastern banks have come through the crisis unscathed and financially stronger. - Liquidity reserves and deposits have been shifting to the Far East.

37 5. The emergence of new entrants and the potential of Chinese lenders Where will new lenders come from? - Far Eastern banks loan to deposit ratios allow room for growth. - Chinese and Korean lenders have started to focus on ship finance as a tool of support for their newbuilding industries. - Liquidity reserves and deposits have been shifting to the Far East.

38 5. The emergence of new entrants and the potential of Chinese lenders What is the capacity of Far Eastern lenders? - In Graph 3, we present the top 50 international banks based on owned assets (source: Bankers Almanac)

39 PETROFIN RESEARCH Graph 3: Top 50 banks worldwide ranked in terms of assets in US$m. BNP Paribas SA, Paris, France The Royal Bank of Scotland Group plc, Edinburgh, UK Crédit Agricole SA, Paris, France Barclays PLC, London, UK Deutsche Bank AG, Frankfurt am Main, Germany Lloyds Banking Group plc, London, UK JPMorgan Chase Bank National Association, New York, USA Banco Santander SA, Boadilla del Monte, Spain The Bank of Tokyo-Mitsubishi UFJ Ltd, Tokyo, Japan Société Générale, Paris La Défense, France Bank of America NA, Charlotte, USA ING Bank NV, Amsterdam, Netherlands Industrial & Commercial Bank of China Limited, Beijing, China UniCredit SpA, Milan, Italy UBS AG, Zürich, Switzerland Bank of China Limited, Beijing, China HSBC Bank plc, London, UK Commerzbank AG, Frankfurt am Main, Germany Crédit Agricole Corporate and Investment Bank, Paris La Défense, France Sumitomo Mitsui Banking Corporation, Tokyo, Japan Citibank NA, New York, USA China Construction Bank Corporation, Beijing, China Bank of Scotland plc, Edinburgh, UK Agricultural Bank of China Limited, Beijing, China Credit Suisse Group, Zürich, Switzerland Intesa Sanpaolo SpA, Milan, Italy Rabobank Nederland, Utrecht, Netherlands Natixis, Paris, France Banco Bilbao Vizcaya Argentaria SA, Madrid, Spain Mizuho Corporate Bank Ltd, Tokyo, Japan Nordea Group, Stockholm, Sweden Mizuho Bank Ltd, Tokyo, Japan ABN AMRO Holding NV, Amsterdam, Netherlands The Norinchukin Bank, Tokyo, Japan Fortis Bank SA/NV, Brussels, Belgium Wells Fargo Bank NA, San Francisco, USA Royal Bank of Canada, Toronto, Canada Banque Fédérative du Crédit Mutuel, Strasbourg, France Landesbank Baden-Württemberg, Stuttgart, Germany Credit Suisse International, London, UK Danske Bank A/S, Copenhagen, Denmark National Australia Bank Ltd, Melbourne, Australia National Westminster Bank Plc, London, UK The Hongkong and Shanghai Banking Corporation Limited, Hong Kong, Hong Kong DZ BANK AG Deutsche Zentral-Genossenschaftsbank, Frankfurt am Main, Germany KfW Bankengruppe, Frankfurt am Main, Germany The Toronto-Dominion Bank, Toronto, Canada Westpac Banking Corporation, Sydney, Australia Commonwealth Bank of Australia, Sydney, Australia Bayerische Landesbank, Munich, Germany 1,658,736 1,627,684 1,593,298 1,494,350 1,468,725 1,465,221 1,441,673 1,430,038 1,332,510 1,296,709 1,281,409 1,214,158 1,211,052 1,194,749 1,162,096 1,161,361 1,107,350 1,067,890 1,028, , , , , , , , , , , , , , , , , , , ,330 2,234,350 2,226,593 2,153,033 2,952,221 2,739,361 Total assets in US$m: 54,325,893 Source: Bankers Almanac 11 th August 2010 ( 559, , , , , , , ,000 1,000,000 1,500,000 2,000,000 2,500,000 3,000,000 3,500,000

40 5. The emergence of new entrants and the potential of Chinese lenders What is the capacity of Far Eastern lenders? - In Graph 4, we present a breakdown of the top 50 international banks by region

41 PETROFIN RESEARCH Graph 4: Top 50 banks worldwide ranked in terms of nationality Total assets in US$m: 54,325, % 70.00% 67.42% 60.00% 50.00% 40.00% 30.00% Source: Bankers Almanac 11 th August 2010 ( % 10.00% 11.02% 9.95% 8.71% 2.90% 0.00% European Americas Chinese Japanese Australian

42 5. The emergence of new entrants and the potential of Chinese lenders - European banks account for 2/3rds of the top banks, which underlines the importance of the European banking sector and how sensitive ship finance is to the recovery prospects of European banks. - Far eastern banks still only account for approx. 20% of the totals. It will take a number of years before the Far East will rise to challenge Western bank dominance; however the process has begun. - It is possible that European banks will not give up the dominance without a fight, in line with their collective financial recovery What is the capacity of Far Eastern lenders?

43 PETROFIN RESEARCH 6. Summary and conclusions