The company set up to deal with HSH Nordbank's toxic shipping loan portfolio said its winding-down process will be delayed by the effects of the coronavirus on shipping markets.
The comment from state-owned "bad bank" Portfoliomanagement came after it reported that it cut its portfolio in 2019, by €376m ($408m) to €3.29bn. This is down 10.2% from 2018.
The resulting low level of interest income — to €23.1m from €33.6m in 2018 — was offset by lower staff and administrative costs.
The bank reported a net loss of €5.5m, against a profit of €15.1m the year before.
The carrying amount of its assets was €1.42bn, down €52m partly due to ship sales.
Loan loss provisions were €5.5m, compared to a reversal of €7.3m in 2018.
Managing board directors Ulrike Helfer and Karl-Hermann Witte wrote in its annual report that moderate improvements in shipping markets continued at a low level last year, with increasing demand for ships and more scrapping.
Portfoliomanagement said Covid-19 is now having an increasingly adverse impact, however.
The "unforeseeable effects" could significantly impact the result this year and extend the winding-up period.
Further measures to speed this up, such as restructuring and the liquidation of loan collateral, will continue this year, and progress will be determined by market developments to a large extent.
Two-thirds of the portfolio has been restructured and the bank is working intensively with customers on the final third.
Some of these are involved in complex legal structures and there are also isolated cases of geopolitically challenging areas where groups operate, restricting the company's restructuring options.
Aa1 and AAA ratings from Moody's and Fitch should ensure it can continue to comfortably access capital, the bank added.
Guarantees from its German federal state sponsors Schleswig-Holstein and Hamburg will also ensure it can build on a stable foundation in challenging times, the company added.
Portfoliomanagement was set up in 2016 to deal with the former HSH Nordbank's legacy loans of €4.3bn covering 253 ships.
The new bank had 154 ships as collateral on 1 January, down 19 during 2019, and a 40% cut since it was founded.
Last week, TradeWinds reported that Portfoliomanagment is trying to auction off six tankers owned by Turkey's Palmali Shipping, which reportedly stopped servicing its debts in 2018.
The German lender has now written to Palmali, asking it to hand over control of the vessels, denizhaber.net reported.
