Cyprus ship finance holds steady amidst shrinking market

Cyprus banks have remained steady, building a regular niche clientele, in shipping finance as the overall market experiences a sharp contraction, according to Nigel Lowry, Athens correspondent for Lloyd’s List, who spoke to the Cyprus Mail on Wednesday.

A report released by Petrofin Bank Research in Athens on Monday documented the extent of the contraction.
“Cyprus banks have only entered the market about four years ago, and since then they’ve made regular progress. Much of the business has come from Greece, but there have been clients from every major shipping fleet. Much of the dealing is with small and medium-sized ship owners,” Lowry commented.

But the position of Bank of Cyprus and Hellenic Bank, the two major operators in this market, is somewhat counter trend given that many major banks have ceased to operate in the market. “RBS until recently had a $13 billion portfolio in shipping finance, and now it’s completely closed down,” Lowry explains.

“The appetite of Greek and Cypriot Banks to remain active in the sector is clear. The maritime industry is facing unprecedented challenges due to Covid but remains of utmost importance for the Cypriot economy,” says Antonios Spanakis, Head of Ship Finance at Hellenic Bank.

“In that respect, Hellenic Bank applies a mindful approach in extending credit and continues the development of its ship finance portfolio. We have built a portfolio of high quality shipping credits and we confirm our commitment to support our existing and new shipping clients.”

The Petrofin report shows that the novel coronavirus crisis had a strong impact on confidence at banks and non-bank lenders.
Part of the issue was that banking staff were working remotely from home, the report says, and this affected the speed with which transactions could be carried out.

“Credit and risk departments were hard put to support fresh lending at a time of such crisis and uncertainty and sought lending only to the strongest clients and credits often on stringent terms,” according to the survey.

As shipping demand declined, many companies sought help from banks to restructure existing loans, and risk premiums pushed lending rates higher, Lowry noted.

Demand for loans in China came to a halt, the report continued. Meanwhile, non-bank finance vendors became the ‘lenders of last resort,’ and offered stringent conditions.

“Some banks, Greek banks in particular, managed to continue lending to their stronger clients,” however, the report notes. They were able to profit from the improved credit position that Greece now enjoys, having worked through the effects of the last financial crisis.

“Greek banks perceived the pandemic as an opportunity to enhance their position with Greek owners who faced limited finance possibilities,” Petrofin said.
“It is difficult to predict when the Greek ship finance market shall recover to pre-pandemic levels,” said Petrofin.

Credit Suisse has extended its lead as the largest bank lender to Greek shipping, a position it has held now for six years, according to Petrofin.
Credit Suisse’s estimated portfolio increased by 10 per cent in the previous 12 months to $7.7 billion, including $1.2 billion of loans committed but not yet drawn, Lowry said. BNP Paribas is in second place, with a portfolio estimated at $3.15 billion. HSBC is in third place, with a $2.8 billion portfolio.

HSBC rose from fifth place to third, despite the size of its portfolio remaining static at an estimated $2.8bn.

Overall Greek bank lending to the industry was at $9.9 billion at the end of 2019, its highest level since 2014.

“However it is still a long way short of the $16.9 billion combined Greek bank shipping portfolio in December of 2008, a year that also saw total bank lending to Greek shipping at a record of more than $73 billion,” Lowry said.
Source: Cyprus Mail

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