Germany's MM Warburg has taken advantage of the booming market to sell ships and strengthen its balance sheet.
Ship sales in the first quarter of the year saw the German bank cut its loan loss provisions by 70%.
The deals will reduce the bank’s non-performing loan ratio to below 3% in the current fiscal year, the company said.
Volumes transacted by its shipping business grew 20% in 2020 compared with the previous year, as the bank continued to do business throughout the pandemic.
Increases were also recorded in the number of German and international shipping clients, while cash management services were particularly strong.
The shipping desk of the Hamburg-based bank remains “an increasingly important and sustained contribution to the banks success”, the bank said.
Its shipping desk has pursued a consistent strategy since 2016 under the leadership of Jens Dose and Christian Speer.
The management are targeting profitable business in shipping as potential growth area.
“We will occupy niches that present themselves. To do this, we have to recognise market signals early on,” said Speer.
“This approach is gradually reducing risk in the lending book.”
The bank said that institutional investors have discovered certain areas of ship finance to be an attractive asset investment class.
The company is increasingly playing the role "as a loan structurer, originator and asset manager to shipping sector and institutional investors".
Transaction volumes for foreign payments which attracted “substantial commission” had grown by an above average 40%.
Warburg has expanded its ship finance team to help handle the business.
“The shipping finance book that we have established since 2016 has low loan-to-value ratios, short durations, and rapid turnover rates,” Speer said.
He added that the loans related to fungible vessels which were therefore “liquid assets”.
Life in the German market yet
MM Warburg, which operates from ten German cities, is one of a handful of private banks to remain active in the country's ship finance market.
The 223-year-old bank rivals the likes of Berenberg, Ostfriesische Volksbank, MM Warburg, Hamburg Commercial Bank and Norway’s Maritime & Merchant.
Its parent company, the Warburg Group, has assets under management and administration of €76.2bn ($92.7m) in 2020, up from €69.8bn in the previous year.
Net interest income rose by 14.5% in 2020 to €50.2m, from €43.8m.
The company said the net figure for loan loss provisions had fallen to €22.4m, from €79.8m in 2019, mostly due to non-strategic ship finance business.
