Oslo-listed Nordea Bank has given the first indication of how shipping lenders are reacting to the coronavirus crisis as loan applications increased.
The bank said corporate customers had asked to borrow €13bn ($14bn) in March alone as the outbreak hit Europe.
But the bank expects short-term losses from the economic shutdown, and has upped provision levels to deal with this.
Chief executive Frank Vang-Jensen said the lender has, during the past few years, "significantly de-risked" the balance sheet.
The company remains focused on the credit quality of the existing loan book and on new business opportunities, he said.
Vang-Jensen added that the portfolio is well diversified, with low exposure to industries expected to be immediately affected by Covid-19.
Loan losses rise
"Net loan loss provisions amounted to €154m in the quarter, of which €120m was an additional management judgement to provide coverage for the likely near-term increase in loan losses," he said. This was up from €42m in 2019.
The remaining €34m net loan loss amount benefited from reversals in all business areas.
Nordea now has allowances in place of €2.4bn.
"It is too early to conclude on the economic consequences of Covid-19, but we are ready to take mitigating steps over time. Our immediate priorities are clear. The continued support of our customers, the safety of our employees and ensuring business continuity during these extraordinary times," the CEO added.
The bank has not been able to make forecasts on the longer-term outlook for loan loss provisions due to the outbreak.
First quarter net profit was up at €460m, compared to €443m in 2019.
Net interest income rose to €1.1bn, against €1.05bn in 2019.
The bank risk exposure stood at €152bn at the end of March, down from €163bn the year before.
Net loan losses included €10m in stages one and two of restructuring, while €144m was in the last stage before default, stage three.
Individual provisions of €84m were made in particular due to reduced collateral valuations for already-defaulted offshore assets.
No re-classification yet
Nordea said it had not worsened its customers’ stage classifications due to Covid-19-related liquidity challenges.
"This is in line with regulatory guidance, but Nordea will make necessary adjustments in provisions going forward based on updated financial information as the impacts of the ongoing economic shock on the credit exposures become clearer," the bank added.
The bank has offered instalment-free periods, and has received more than 60,000 requests for these.
"This pandemic has turned into a societal and economic crisis, which will have severe economic consequences and could lead to long-term structural changes in our societies," Vang-Jensen said.
"We are encouraged that Nordic governments and authorities embraced the seriousness of this pandemic early through a variety of actions to limit the effects on society."
He acknowledged that some countries are opening up.
"The duration and extent of the economic impact of Covid-19 remain highly uncertain, and it is too early to predict the shape of the recovery," the chief executive said.
