Norway’s Maritime & Merchant Bank is optimistic about strong tanker markets continuing into 2024.
The niche shipping lender said the credit quality of its tanker portfolio, measured by the probability of default, improved during the third quarter due to increasing vessel values.
It cited the example of a five-year-old aframax that was worth $40m at the end of 2021 and is worth $70m today.
“The major disruptions in the tanker market due to the war between Ukraine and Russia led to a marked increase in the number of tonne-miles…” it added.
“The risk has a corresponding upward curve, and from an investment angle, the main question is how long the particular market situation will last.
“In analyst circles, there is probably a form of consensus that there is likely to be a continued strong tanker market during 2024 on the basis that the various disruptions will persist even if the ongoing war situation were to be scaled down next year.”
A relatively moderate orderbook for tanker newbuildings also lends support to a positive view.
M&M Bank logged net profit of $3.2m in the third quarter, against $2.6m in 2022. Net interest income rose to $6.7m from $5.8m.
There were no credit impairments.
The credit quality of most bulk carrier and boxship loans was “on satisfactory levels, although we have seen a minor increase due to the volatile rates and some downward pressure in the market value of the vessels”.
Bulkers pick up
The dry cargo market experienced some long-waited recovery during the third quarter after a consistently weak first half of the year, but the main trend is still volatile, the bank believes.
The container market is described by many as a “predicted disaster”, it added, in view of decreasing volumes and increasing newbuilding orderbooks.
The market for ship financing continues to develop, with strong competition between the various players and downward pressure on margins, the lender noted.
Credit is coming from a wide range of providers: banks, funds and different lending platforms.
“For the borrower, it is a question of choosing what fulfils the purpose best in the light of the situation at hand. Whether interest rates have peaked in the US and Europe is the big question if we look ahead to the turn of the year,” M&M Bank said.
The present secured overnight financing rate level of 5.32% “might be a pain threshold for many project calculations”, it added. “A stabilisation of the interest level and subsequent gradual reduction would doubtless give a stimulus to the demand for credit.”
M&M Bank is controlled by German shipping magnate Henning Oldendorff and Norwegian investor Endre Rosjo’s Centennial. They own 25% each.
Deutsche Bank, SEB and Societe Generale are also involved.
M&M Bank is listed on Norway’s over-the-counter exchange.