Shipping Woes: DVB Bank Posts Loss

Pics: DVB Bank

By Aiswarya Lakshmi

Shipping Financier DVB Bank reported a consolidated net loss
before taxes of EUR 135.3 million ($142.4 miln) for 2016
(previous year: consolidated net income of EUR 46.1 million).

Since DVB Bank SE, the parent company of the DVB Bank Group, did
not generate a net retained profit during the financial year,
regretfully no dividends will be paid.

Due to the persistent downturn in numerous segments of the
shipping industry and an ongoing challenging environment for the
offshore industry caused by low oil prices, allowance for credit
losses largely required for legacy exposures in the Shipping
Finance portfolio, and for financings in the Offshore Finance
portfolio, rose by €239.9 million to €381.4 million (previous
year: €141.5 million).

This increase was triggered, in particular, by the following
market developments in the shipping industry - which has
struggled for the past eight years, and continued to do so in
2016:

High tonnage overcapacity, being the main contributor to the
continued decline in many segments of the shipping industry;

As further tonnage capacities entered the market, this pushed
charter rates down even further. In the offshore segments,
charter rates have been under pressure since 2015. In the first
half of 2016, earnings in the dry bulk shipping markets hit their
lowest mark since the shipping crises of the 1980s. Likewise, in
container shipping, charter rates slumped during the third
quarter of 2016 due to structural overcapacities.

Vessel values developed in accordance with the decline in charter
rates.

These market distortions persisted throughout the third and
fourth quarters of 2016, further burdening the shipping clients'
liquidity cushions. This in turn affected lenders to a higher
extent than before.

Also geopolitical developments brought about lower trading
activities in the Eastern Mediterranean, imposing an additional
burden for some shipping markets during the third quarter of
2016.

Mar 3, 2017

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