Oslo-listed Maritime & Merchant Bank (M&M Bank) has noted a deterioration in the credit quality of tanker loans in a tough first quarter for the sector.

But most of the container ship and bulker portfolio has remained at “very satisfactory levels” due to the strong market in both sectors, the Henning Oldendorff-backed niche lender said.

Net earnings to 31 March were $1.9m, up from $1.5m a year ago, while net interest income rose to $4.8m from $3.3m in 2021.

Impairment allowances increased by $168,000 to $1.6m, compared with a decrease of $191,000 a year ago.

The bank has loaned $317.6m to clients, versus $275.4m at the end of the first three months of 2021.

M&M Bank said the quarter was characterised by “continued very good markets” for container and dry bulk vessels.

This led to an interest in investing in these kinds of ships, increasing asset values.

“Congestion in ports, particularly in China, where Covid-19 still is a disturbing factor, is keeping the effectiveness of the fleet down and the rates on an upward trend,” it said.

The tanker market has been “struggling more or less since the summer of 2020”.

There has been a “minor deterioration” of the credit quality for tankers, reflected in an increase in the loss allowances.

Some of the increase, however, is due to the rise in the overall credit portfolio.

Positive signs

M&M Bank has observed a clear positive development for most tanker segments through the first quarter.

The portfolio is made up of 43% of loans for bulkers, 29% for tankers and 22% for container ships. Gas and specialised ships constitute the rest.

This compares with 35% for bulkers and 36% for tankers at the end of 2021. Boxships were on 24%.

“The war in Ukraine will affect the development of the shipping markets going forward and leave us all with a high degree of uncertainty regarding possible consequences,” the bank said.

“At the same time, vital supplies to the world must be secured and seaborne transportation is the key element and we are dedicated to support this industry.”

M&M Bank is 25% owned by Oldendorff and 25% by Norwegian investor Endre Rosjo’s Centennial, with Deutsche Bank, SEB, Societe Generale and Klaveness Marine Finance also involved.