Danish Ship Finance (DSF) is in good shape to weather the coronavirus crisis thanks to its tapping of new cash sources.
The lender, one of the biggest dedicated maritime financiers, issued its first non-Danish bonds for more than 50 years in 2019.
DSF said it banked €1bn ($1.17m) from two eurobond issues.
The company's management team pledged to continue to approach the Euro market "on a regular basis", although the Danish bond market will remain a primary funding source.
"We are continuously evaluating new initiatives that can provide us with additional levers to pull during periods of adverse market conditions, both in terms of income streams and funding sources," the lender said.
In 2019, core lending delivered a strong performance, with solid growth supported by success in securing new sources of funding, the bank said.
DSF grew the loan book by 5% year on year with five new clients.
The result was a satisfactory increase in income from lending underpinned by negligible loan impairment charges, DSF said.
The overall 2019 financial result, however, suffered from a fall in investment performance, which was significantly lower than in 2018.
Profit down last year
Net profit dipped to DKK 227m ($360m) last year, from DKK 262m in 2018.
Net interest income rose to DKK 516m against DKK 477m the year before.
Loan impairment charges for 2019 amounted to a net reversal of DKK 2m, against a loss of DKK 35m a year ago.
This was driven by a gradual improvement in credit quality across the loan book, apart from loans to the still-challenged offshore ship segment.
"During the past three years, default levels have normalised, coming down from the elevated level in 2016, when the offshore and dry bulk segments in particular experienced severe downturns," DSF said.
In 2019, net write-offs increased to 1.2% of gross lending, up from 0.6% the year before, as a result of workouts on existing non-performing loans within the offshore segment.
Non-performing loans decreased overall by DKK 1.1bn to DKK 4.2bn.
"The effects of the virus outbreak will put a damper on growth expectations in the global economy," the bank said.
OSVs steadier?
DSF added that the troubled offshore vessel sector appears to be gradually stabilising, although this is a slow process.
"We nevertheless expect that existing non-performing loans to clients in the offshore sector will remain troubled in 2020 and beyond with an attendant risk of credit losses being realised," the lender added.
DSF expects loan allowances of DKK 2bn will be enough to cover future credit losses.
The forecast for 2020 profit is between DKK 275m and DKK 350m.
DSF is a top 20 shipping lender, with DKK 41.3bn of loans on its books.
Danish clients make up a third of this, collateralised by 774 vessels.
Sustainability is key
Chairman Eivind Kolding and chief executive Erik Lassen wrote in the annual report: "Most notably in 2019, we ramped up efforts related to sustainability with the overarching goal of supporting clients during the transition to a sustainable shipping industry.
"A prerequisite for our strong offering to clients is our access to the bond markets on competitive terms, enabling efficient funding of loan commitments."
Ratings agency Standard & Poor's has now upgraded its outlook to stable after two years of a negative rating.
DSF said the complexity of its business is growing, not least due to the volume of regulation being imposed on the financial sector on both a national and European Union level. This has been the single largest driver of increases in operating costs in recent years, it added.
