There are plenty of positive indicators for shipping as the industry moves towards 2021, according to DNB head of ocean industries Jan Ole Huseby.
The banker told TradeWinds that he is optimistic for next year in terms of mainstream vessels, but the outlook remains more uncertain for offshore support ships.
In its third-quarter result, Oslo-headquartered DNB said the shipping portfolio has been reduced by NOK 1.57bn ($170m) in the period.
The maritime loan book stood at NOK 47.33bn on 30 September, with NOK 315m in stage three of restructuring — the highest before a default.
Shipping saw net provision reversals of NOK 32m in the third quarter.
"We are focusing on certain names in the industry, having reduced our portfolio to balance it across the wider portfolio of the bank and also to reduce cyclicality," Huseby told TradeWinds.
Welcome rise in rates
"I've said before, I've been surprised by how well some of these shipping sectors are holding up. That is the case for bulkers and boxships now. It's very welcome, but it hasn't had a direct impact on the portfolio."
The executive said the bank is glad rates are up, as this is a positive for the lender and the whole industry.
Huseby added that DNB is always trying to maintain lending levels to the sector.
"It's always about being there on a long-term basis," he said.
But the bank experienced a lack of activity in the second and third quarters.
Huseby described those six months as "very quiet as a result of the uncertainty caused by the pandemic".
Activity increasing
But he said September and October had been very active, with refinancings and new transactions to work on, as well as an active bond market.
DNB arranged bonds for both Teekay LNG, as one of two global coordinators and joint bookrunners, and Wallenius Wilhelmsen as joint lead manager, among others, in the quarter.
"Things are moving in a positive direction, but we're not quite there yet," Huseby said. "It's definitely a good sign, but it's still a bit early to raise the flag to mark the end of the pandemic.
"But things are a bit brighter than at the end of the second quarter."
Turning to the depressed offshore shipping sector, Huseby said the status quo remains from earlier in the year.
DNB's oil, gas and offshore lending stood at NOK 68.42bn on 30 September, but with NOK 9.25bn in stage three.
This compared to NOK 64.52bn in offshore lending a year ago, with NOK 4.12bn in stage three of restructuring, as the Covid-19 pandemic hit the sector this year.
The Norwegian bank's impairments for oil-related industries ended the third quarter at NOK 1.04bn, down NOK 826m from the prior quarter.
Too many ships
"There are still too many ships and not enough activity for the fleet," Huseby said. "There is still a lot of work to be done."
DNB's aim is to create a liquidity runway for owners, whether this involves pushing repayments down the road or restructuring more thoroughly.
Solstad Offshore, Norway's flagship offshore vessel owner, clinched its $2bn restructuring recently, with help from shareholders John Fredriksen and Kjell Inge Rokke.
The deal saw banks convert $1bn of debt into equity, leaving DNB as a major shareholder on 11.45%.
"It was a long process that has materialised in a positive result," Huseby said.
Not a shipowner
"It's a good example of DNB being willing to convert debt to equity. But our main business is as a bank, not a shipowner."
He said it is not certain how long the bank will remain a shareholder.
Looking ahead for shipping markets, Huseby said: "The focus on the energy transition and the uncertainty surrounding the pandemic has kept the orderbook low. I would argue this is a good thing for the markets in the future."
As for onshore, Huseby said there are still too many assets to meet reduced demand.
"Thus, I expect 2021 to remain challenging across the board," he said. "The oil price and the outcome of the pandemic will determine the pace of recovery and activity levels of the oil companies."
