Lloyds Banking Group has sold billions of dollars in shipping loans in recent months as the British bank accelerates its exit from the sector and reduces capital exposure, ship finance sources said.
Lloyds, its British rival Royal Bank of Scotland and Germany’s Commerzbank and HSH are among European banks seeking to sell shipping loans to investors including private equity funds to strengthen their balance sheets.
The sources said Lloyds’ shipping portfolio was now worth in the region of $1.5 billion to $3 billion.
Lloyds has not given regular updates on its shipping market exposure but it stood at 7 billion pounds ($11.37 billion) at the end of 2012.
“Lloyds has been actively deleveraging in this area as with other non-core assets,” one banking source said.
The sources said Lloyds had offloaded parts of its shipping portfolio to private equity funds and more discreetly to other banks.
“They are doing a good job writing it down and they are packaging and selling it off to strategic buyers,” one ship finance source said.
Lloyds is 33 percent owned by the UK government, which wants it to focus on lending to British households and businesses. It needs to plug an 8.6-billon-pound shortfall identified by Britain’s financial regulator in June before it can persuade the regulator to allow it to pay dividends again.
RBS said on Wednesday it was placing its entire shipping business inside a ‘capital resolution group’, which would house its internal ‘bad bank’, but does not plan to exit the shipping industry entirely.
Separately, struggling German public-sector lender HSH Nordbank said on Wednesday it had secured $700 million in funding from Citigroup, backed with 30 ship loans from HSH’s portfolio, as part of efforts to diversify its refinancing.
Shipping companies say the sector will continue to face tighter lending conditions given the scale-back by many banks.
“Some of the smaller, more thinly capitalised ship owners ... will still struggle,” said Nick Fletcher of Commonwealth Bank of Australia, one of the few banks boosting lending to the sector.
Fotini Karamanli, chief executive of dry bulk ship owner Hellenic Carriers, added: “The reality is ship financing is more expensive today and the terms under which it is provided are stricter.” (Reuters)