German shipping lender Nord/LB has revealed it is working on a new capitalisation plan that could see outside investors brought in.
It said work on strengthening capital ratios was progressing, with the bank working closely with the EU Commission and the banking regulatory authority.
CEO Thomas Burkle said: "We are exploring various capitalisation models. The courses of action under review include the possible participation of external investors and a possible change to the legal form of the bank.
"We have also started on first talks with potential investors in order to assess market expectations.
"By the end of the year, we want to present a comprehensive, viable concept together with our owners.”
Loan losses drop steeply
Risk provisioning fell sharply to EUR 31m in the six months to 30 June, down from EUR 437m a year ago.
But it still expects further provisions this year.
Another priority for the bank is a continuing effort to reduce its non-performing loans (NPLs) portfolio.
Ship financing NPLs were cut to EUR 7.7bn in the first six months, from EUR 9.1bn a year ago.
Nord/LB has said the figure will be less than EUR 5bn by the end of 2019 at the latest.
The bank’s entire ship financing portfolio has already been slashed by EUR 7.5bn since the end of 2015.
The NPL ratio fell to 4% as of 30 June, down from 5.5%.
Profit cut in first six months
Net earnings were down at EUR 54m from EUR 302m, due to a big boost from asset disposals in 2017.
“The underlying conditions in which we are operating remain very challenging. Viewed against this background, this is an acceptable result," Burkle said.
"However, our aspirations are of course much higher. Through our One Bank transformation programme, we are working systematically to improve the bank’s profitability.”
The introduction of the new accounting standard IFRS 9 means there is only limited comparability to last year's results.
But it said net interest income was EUR 618m, from EUR 731m, mainly due to the reduction in total assets in recent years, particularly the significant cutback in the ship financing portfolio.
Total assets were reduced again and stood at EUR 158.7bn, against EUR 163.8bn at the end of 2017.
Risk assets amounted to EUR 46.1bn, down a little from EUR 46.8bn.
“We are still looking to post positive results for financial year 2018”, Burkle added.
“However, priority is being given to measures to systematically reduce the NPL portfolio and further strengthen the capital ratios to, among others, be prepared for future regulatory requirements.
"These measures may have a negative impact on earnings. It is therefore not possible to give a reliable forecast for the year-end results at this stage of the year and in a market environment which remains challenging.”
