Norwegian shipping lender Pareto Bank says it has yet to record any loan impairments as a direct result of the coronavirus pandemic.
The niche bank said the effect of the crisis on its maritime book has been "limited" so far, but admitted there is still great uncertainty about the course of an economic recovery.
In the second quarter, Pareto achieved a net profit of NOK 127.9m ($13.73m), up from NOK 86.7m a year ago.
This is a return on equity of 15.7%, compared with 13% in 2019.
Write-downs were "virtually unchanged" from the first quarter, when it made NOK 40.3m of provisions, it said.
Pareto carried out an extraordinary review of selected credit commitments in the period, but this did not result in significant changes in risk classes or impairment requirements, the bank said.
There have still been no individual write-downs directly related to Covid-19, the bank added.
Net interest income was NOK 183.8m to 30 June, up from NOK 164.4m in the second three months of last year. Lending increased by NOK 732m.
Assets on the rise
The lender's total assets amounted to NOK 19.6bn at the end of the quarter, up from NOK 18.4bn a year ago.
Pareto stressed it is still open to new customers.
"Further pressure on the interest margin is expected in the third quarter as interest rate changes and the effect of the fall in Nibor takes effect," the bank said.
The lender said deal flow within corporate financing is "good" and clients are reporting gradually increased activity and turnover.
The effects of Covid-19 on the shipping portfolio has so far been limited, Pareto said.
"A number of shipping segments are, however, affected by the loss of demand and production and thus low rates," the bank added.
"In addition, there are still operational challenges related to crew changes, travel restrictions and port restrictions."
Pareto is expecting some improvement for shipping as a result of more countries gradually easing restrictions.
Lending activity 'good'
The bank said: "There is still great uncertainty related to how lower economic activity and increased unemployment as a result of the pandemic will affect the Norwegian economy.
"In the second quarter, naturally enough, hedging and lending under the state's guarantee scheme had priority. At the same time, ordinary lending activity has been good, and loans have been granted to existing and new customers in all business areas."
Despite a downward adjustment of the rate, the bank has maintained a good interest margin on lending, Pareto added.
The bank's staff have returned to offices after Norway's lockdown was eased, working in two shifts.
Pareto has been in shipping and offshore finance markets since 2011.
At the last count, it had 16 customers and financed 25 vessels.
The largest exposure is a loan of $20.2m and the average commitment size of outstanding loans is $5.2m.
It covers tankers, bulkers, boxships, gas carriers, offshore vessels and car carriers.
