Lending by the world’s top 40 shipping banks suffered its steepest drop since Athens-based analysis company Petrofin Research started gauging the industry 12 years ago.
The banks’ shipping portfolios shrunk by 13% last year to nearly $301bn, Petrofin said in its latest annual survey published on Wednesday. The reading has dropped from $455bn at the end of 2011 to its lowest level since 2007, when Petrofin’s data series began.
“The decline of Western bank ship finance has assumed dramatic proportions,” Ted Petropoulos-led Petrofin said in a comment. “Despite the rise in the global fleet, around $160bn has been shed via natural repayments, provisions or loan portfolio sales.”
That trend will likely continue in the future as bank regulators impose higher capital ratios and lenders put an emphasis on fee-generating, non-risk assets and services, the Petrofin report said.
Banks in the Far East, which took up much of the business dropped by European banks in recent years, are also losing their appetite.
Lending by traditional Chinese lenders also declined by 13% last year. Bank of China, the world’s biggest shipping lender in 2017, dropped to fourth rank last year after shedding $1.5bn of loans to $16bn, Petropoulos estimated.
“Credit conditions and volumes in China have come under enhanced central bank scrutiny,” he said.
Bank of China has been replaced at the top of the table by China Exim, whose portfolio rose by $500m in 2018 to $17.5bn, according to Petrofin. French lender BNP Paribas is a close second with a portfolio of $17.13bn, up from $16.8bn the year before.
Largely unregulated Far Eastern leasing companies are taking up much of the slack. Chinese leasing to shipping alone climbed to $51.3bn at the end of last year, from $47bn in 2017, according to Petropoulos.
"Although leasing has not replaced bank finance, it has gained both in popularity and volume and is often, especially for the medium to small owners, the only available and affordable source of finance,” he said.
The Greek analyst said he expected shipping funding by leasing companies to increase further in the future. Some lenders, like Societe Generale and Piraeus Bank, have already formed strategic alliances with Far Eastern leasing players, or are considering to do so, as TradeWinds has reported.
Investment by private funds and family companies are also set to grow further, Petrofin said.
