Norwegian shipping lender Maritime & Merchant Bank is lobbying the government for a change in accounting rules during the coronavirus crisis.
The Henning Oldendorff-backed bank operates in dollars but converts this to Norwegian krone in its accounts.
The pandemic and the fall in the oil price have caused an "extreme weakening" of the domestic currency — about 20% — during the first quarter, it said.
This would result in an "unintended tax expense", due to a large unrealised currency gain added to the bank’s equity.
Maritime & Merchant's bill would then "largely exceed" the common 25% corporate tax rate in Norway.
The company said it had "started a process for a rule adjustment for the basis of tax calculation that prevents unintended effects for the future".
The bank is in talks with the ministry of finance.
Profit cut back
In its first-quarter results on Thursday, Maritime & Merchant said it had used the 25% rate for the calculation, paying only $307,000 in tax during the quarter.
Net profit came in at $921,000, against $2.17m in 2019. Interest income was up at $7.24m from $6.63m.
The loan-loss allowance was up at $620,000, versus $80,000 last year, due to uncertainty regarding future market conditions.
All loans are currently performing, however, and there have been no defaults.
The bank has $296m loaned to customers.
"We aim to be a constructive, solution-oriented bank within the frames we are operating," it said.
All credit commitments are closely monitored and followed with a focus on liquidity, the bank added.
Open for business
"The bank is open and new credits will be granted, however with amended lending criteria in view of the prevailing circumstances," Maritime & Merchant said, without giving details.
It believes bulkers and boxships could see a positive development during the second half, depending on the time required to restore activity globally.
Maritime & Merchant said the pandemic has dominated the global economic situation in ways not seen for 80 years.
"For specialised segments like cruise and car transport, Covid-19 has represented nothing less than catastrophic financial consequences," it added.
The tanker segment has been the lone bright spot, the lender said.
"As always when facing a tanker bonanza, it is impossible to estimate how long it will last. But the current earnings are on such levels that it enables many tanker owners to secure and consolidate their respective positions financially," it said.
Generally speaking, the outlook for the second and third quarter for the respective shipping markets are surrounded by a number of questions and uncertainties, the bank said.
But it cited the low orderbook and very low ordering activity as a positive factor.
Henning Oldendorff has a 25% stake in Maritime & Merchant. Norwegian investment banker Endre Rosjo also has 25%, while other investors include shipowners Arne Blystad and Arne Fredly.
In February, it had signalled it had plans to expand its lending base globally.
