Maritime dents NordLB

Norddeutsche Landesbank’s (NordLB) shipping arm has seen a further deterioration in its financial performance.

The sector reported an interim loss before taxes of EUR 104m ($136.5m) against a loss of EUR 35m for the first half of 2013.

“In the first six months of 2014 developments in the shipping market were mixed,” the Hanover-based bank said.

“On the one hand prices remained relatively stable and continued to bottom out. Rate developments on the other hand disappointed.”

Group net interest income increased despite the sustained low level of interest rates and further reduction in total assets to EUR 995m.

Loan loss provisions were increased by EUR 224m against EUR 432m a year ago, with ship financing again accounting for most of this.

The shipping and aviation sector achieved income of EUR 266m, but this was offset by loss provisions of EUR 288m.

“In recent years we have built up an extraordinarily high risk cover for this segment. We will remain alert and continue to make additional risk provisions," the bank said.

Shipping’s poor performance was the one disappointment as the German bank saw an overall improvement in its financial performance.

Earnings before tax for the first half of the year for the group was EUR 348m against the EUR 96m achieved a year ago.

“This is a very satisfying result. It confirms that our robust business model also works under difficult conditions," said Dr Gunter Dunkel, chairman of NordLB’s managing board.

However, he was quick to caution that it would “be a mistake” to extrapolate the half-year result for the whole year.

“The environment remains difficult, and the shipping crisis will occupy us for some time yet. We remain cautious,” he said.

“For the second half of the year it is expected that freight and charter rates will be volatile, whereby further extreme fluctuations cannot be ruled out, as the temporary positive developments in the tanker and bulker markets seen around the turn of the past year have already shown.

“In addition, unexpected developments, such as the for many market participants surprising failure of the planned appliance between Maersk, MSC and CGA CGM in the container sector, are providing momentum for further speculation.”

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