Pareto Bank has seen loan losses fall during the third quarter as it remained resistant to Covid-19 pandemic effects.
The Norwegian shipping lender said write-downs and losses amounted to NOK 6.2m ($660,000) in the period, compared with NOK 9.1m in the second quarter.
The niche finance house described this level as "moderate" and not related to Covid-19.
Pareto does not have exposure to the struggling offshore vessel sector.
Loans in stage three, the highest level of restructuring before default, rose NOK 5m to NOK 130m, but there were reversals in stages one and two.
The bank said it wrote off one single loan commitment, without giving details.
Net profit in the three months was NOK 102.9m, up from NOK 96.5m a year ago.
The shipping loan portfolio stood at NOK 978m at 30 September, with 6% rated as "exposed".
This is down from a book of NOK 1.01bn at the end of the second quarter.
The bank's "sweet spot" is loans of between $10m and $20m over three to five years.
Large level of uncertainty
Pareto said there had been continued high uncertainty in shipping markets.
"Further shutdowns and restrictions will have negative effects on all segments," the bank added. "There is a risk of lower volumes in all trades."
Tankers are expected to suffer from lower cargo volumes and less demand for floating storage over the next nine to 12 months, Pareto said.
Dry bulk and container markets are "probably at a turning point", with rising rates and asset values going forward, however, the lender added.
Pareto has seen signs that customers are consolidating and have a reduced risk appetite.
"This may lead to lower demand for credit. Low interest rates put pressure on competitive strength," the bank said.
However, the lender is targeting new business in all sectors, .
But the bank will continue with its stricter credit rules, focusing on liquidity. All customers have to address the potential consequences of a prolonged pandemic, Pareto said.
The lender currently has 17 shipping customers and finances 30 vessels for Norwegian owners and family investment offices.
The largest exposure is $23.7m and the average commitment $5.4m.
The average loan to value of the portfolio is 50%.
"Impact on the [shipping] portfolio related to Covid-19 has so far been manageable and credit quality stable," the bank said.
'Robust solvency'
"At the turn of the quarter, Pareto Bank has a robust solvency, good lending capacity and a high loss-absorbing capacity. The uncertainty in the bank's portfolio has been reduced and the credit quality is stable."
Net interest income rose to NOK 188m from NOK 173m in 2019.
In the third quarter, the bank bought back NOK 1bn of bonds with shorter maturities to reduce surplus liquidity and lower funding costs.
Pareto paid a premium, however, meaning an accounting loss but lower funding costs moving ahead.
The bank has been in shipping and offshore finance markets since 2011.
