Uncertainty still reigns as Greek ship lending portfolio shifts to UBS 

Switzerland’s largest bank UBS told the market earlier this week about its way forward, including the appointment of a new finance head, Todd Tuckner, and the retention of Credit Suisse CEO Ulrich Koerner as part of a new leadership team after the takeover. Once the transaction is completed in the coming weeks, a new operating model will be implemented.

There has been much speculation regarding UBS acquiring Credit Suisse, including the partial or entire sale of the ship lending portfolio. Following the emergency rescue of its ailing rival in a transaction brokered by Swiss lawmakers in March, question marks still hang over the fate of the enlarged bank’s shipping interests.

UBS was never big on shipping, but today it has the tenth-largest lending portfolio in the industry, at around $10bn. On top of that, Credit Suisse has been holding the top shipping financier position in Greece, Europe’s largest shipowning nation, for the seventh year in a row.
Commenting via LinkedIn, maritime finance boutique Eurofin recently said there is still a lot of doubt about what lies ahead for Credit Suisse’s shipping portfolio and whether UBS will be there to back the sector.

“The uncertainty as to the future of this major lender to our capital intensive industry, emphasises how important it is for shipowners to strengthen their existing banking relations and, in parallel, develop new sources of funding,” Eurofin noted.

Greek shipowner Harry Vafias, CEO of StealthGas and Imperial Petroleum, is among those who are skeptical of UBS’s acquisition of Credit Suisse. “I believe they will gradually reduce their shipping loan book inherited from Credit Suisse, despite all shipping markets doing well currently,” he told sister title Splash Extra recently.

Although a UBS spokesperson was unable to comment on the future of the ship lending business, it is known that UBS Group will initially manage the two separate companies – UBS and Credit Suisse – and that each institution will continue to have its own subsidiaries and branches, serve its clients, and deal with counter-parties. The combined firm will operate with five business divisions, seven functions and four regions, and each will be represented by a group executive board member.

“UBS and Credit Suisse will continue to operate independently for the foreseeable future and UBS will carry out the integration in a phased approach,” the bank said.

While rumours of UBS looking to offload the Swiss banking business of Credit Suisse in an initial public offering emerge, raising further questions about what else is coming, “the integration of the businesses and legal entities will take time,” UBS said.

UBS previously confirmed to Splash that while it is too early to say, as the companies are only at the beginning of a comprehensive integration planning process, the wealth management business with Greek clients is important for the bank, stressing that the businesses of Credit Suisse and UBS are complementary.

“Our wealth management business in Greece is an integral part of our strategy in the Europe region and one we are looking to grow, having recently announced a new market head to support those ambitions,” said the former CEO of UBS, Ralph Hamers, who left in April and was replaced by Sergio Ermotti.

Meanwhile, Ted Petropoulos, who heads research at Petrofin, which monitors Greek and global banks’ shipping portfolios, said that the Credit Suisse clientele consists of quality and financially strong owners who could easily refinance their loans and that, in overall ship financing terms, the impact of the UBS takeover is unlikely to be significant.

“There is also a small probability that UBS will realise that disposing of the shipping portfolio would be against its interests and that it might as well keep a part of Credit Suisse that seemingly worked well,” Petropoulos told Splash Extra, stating further that it is also likely that there will be client overlap with commonly shared clients enjoying the private banking services of both banks and which should assist in a smooth transition.

Several ship finance experts agreed that whichever way UBS decides to go there is still a lot of capital flowing into shipping from many sources these days.

Michael de Visser, head of shipping at Dutch lender NIBC Bank, pointed out: ”Bank funding has become a smaller portion of the total financing pie.”

In reality, shipping is a relatively small part of most banks’ portfolios, and most of them don’t bother with the sector. In the case of UBS and Credit Suisse, for example, the takeover will create a banking behemoth overseeing more than $5trn in total invested assets.

Instead, ship finance circles have been for some time highlighting alternative capital sources, including Chinese and Japanese lessors, alternative lenders and Asian banks as steadily and actively available for new business, resulting in a shift in the market.

“We do not see a significant reduction in the overall availability of financing as there is pent-up-demand for ship financing among the alternative and Asian financiers. As a result, we see it as key for the shipowners to focus on diversifying their financing, both in terms of financing structures and geographic presence,” Vetle Sjuve, an associate and investment banker at Fearnley Securities, noted.

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