Published on November 6, 2007
Slide1: The City of London Third Biennial Meeting London The Challenges and Prospects in the Banking Arena for Shipping Alpa Shah SVP & Head of Distribution, DVB Bank AG Contents: Contents DVB at a glance 1 2 The Requirement for Ship Finance & Providers 3 Conclusions Sectors of DVB: Sectors of DVB Slide4: DVB at a glance….The Transport Bank RWA Slide5: New York Curacao Tokyo Hong Kong Singapore Coverage of DVB Shipping DVB Shipping - Key Figures : DVB Shipping - Key Figures 9 regional marketing offices We have financed over 850 ships Number of people involved in shipping: 70 We are not only a shipping bank… But a shipping expertise bank! Activity 2001/2002 2001 2002 Gross Managed Portfolio $ 5.496 mn $ 6.124 mn Net Portfolio $ 4.238 mn $ 4.623 mn Underwriting $ 1.790 mn $ 1.723 mn Syndicated to third parties 24,5% 31,6 % Average deal size $ 21.6 mn $ 24,3 mn New Transactions 83 71 Number of Clients 229 207 Shipping Expertise…..: Shipping Expertise….. We finance visions. We have done so for a hundred years, and we will continue to do so. Finance is a people’s business. No matter how great your plans are, it takes the right people with the right knowledge to understand the opportunities and the risks. We at Nedship Bank have specialized in shipping finance since 1899, and have thus gained the experience required to put us in the lead – and to keep us there. Wherever you are located in the world, if you have great plans to realize, let us share with you our knowledge of modern finance. DVB, Shipping Division, Rotterdam Phone: + 31 10 206 79 00 Fax: +31 10 436 2957 2001: Best overall knowledge of the Tanker Sector: DVB Nedship 2000: Most innovative ship finance institution worldwide: DVB NedshipBank Lloyd´s SHIPPING ECONOMIST: 2002: Most professional overall finance service to shipping: DVB Maritime Asia: 1999: Best Ship Finance Bank in Asia: DVB Contents: Contents DVB at a glance 1 2 The Requirement for Ship Finance & Providers 3 Conclusions Capital Requirement 2003*/2004/2005: Capital Requirement 2003*/2004/2005 Capital Required Newbuildings – 70% 2003 11,2bn 2004 17,3bn 2005 17,0bn Capital Required S&P Capital Required 2003 2,5bn 2004 5,7bn 2005 5,7bn 2003 17,6bn 2004 29,1bn 2005 28,7bn *2nd half 2003 Top-up 35% for unregistered contracts + 3,9bn + 6.1bn + 6.0bn + + + + Who Provides Ship Finance?: Who Provides Ship Finance? Yards Financial Institutions Export Credit Institutions Capital Market (through Investment Banks) Put another way - where does the finance come from: Put another way - where does the finance come from Syndicated Bank Lending 42% Global Ship Finance Loans 10% - Bilateral Lending - Internal Equity Finance - Credit Leasing - Shipyard Finance - Venture Capital - Government KG/KS Schemes 4% Bonds/Public Equity 5% 39% Sources of Finance: Source:Lloyd’s Shipping Economist/DVB Financial Institutions – Bank Debt: Financial Institutions – Bank Debt Main source of Ship finance “Money is cheap” 160bn USD of outstanding shipping loans (Petrofin Research) Number of banks involved in shipping has decreased Bank market consolidation Eg: -CAI/CL -HSH Norbank -Nordea to name a few Strategic decision to reduce shipping activities New entrants unlikely, at least of significant size. Recent new entrants include Chinese banks and increased activity by KEXIM Situation with the Landesbanks Financial Institutions – Bank DebtWhat areas does the finance come from: Financial Institutions – Bank Debt What areas does the finance come from Scandinavian US Asian European Lead arranger roles: Source:Lloyd’s Shipping Economist Global Shipping banks by portfolio size:Source: Nordea/Lloyd’s Shipping Economist: Global Shipping banks by portfolio size: Source: Nordea/Lloyd’s Shipping Economist USD Bn (estimates) Financial Institutions – Bank Debt: Financial Institutions – Bank Debt Prospects and Challenges for Bank Debt providers: Fiercer competition between the dedicated shipping banks - yet lower margins - greater pressure on banks’ return - consolidation in the Ship Finance industry resulting from further banking consolidation? - increased focus on relationship banking Basel II will not make it easier for smaller owners Tightening credit criteria might result in an increase in high-yield bond issuance Investment Banking:Capital Markets - Equity: Investment Banking: Capital Markets - Equity Public Market provides approximately 5% of Equity in shipping Gives access to capital (and promotes transparency) 1993: Starting point for an increase in shipping IPOs 2003: Starting point for an increase in shipping de-listings? (ref:OSE) Challenges and Prospects: Investors have been burnt by Shipping IPOs The Shipping Industry – Over-populated with under-capitalised companies? Recent Exists: Leif Hoegh Bergesen Awilco Recent Year Highs: Frontline Teekay OMI OSG Stelmar Investment Banking:Capital Markets - Equity: Investment Banking: Capital Markets - Equity USD mn Top Companies, Charterers and Shipping Companies Investment Banking:Capital Markets - Equity: Investment Banking: Capital Markets - Equity Investment Banking:Capital Markets - Equity: Investment Banking: Capital Markets - Equity Challenges and Prospects: Investors have been burnt by Shipping IPOs The Shipping Industry – Over-populated with under-capitalised companies? Investment Banking:Capital Markets - Bonds: Investment Banking: Capital Markets - Bonds Current cheap finance from shipping banks should in principle make bonds less attractive…however; High-yield bonds (“Junk-Bonds”) seem to be getting popular again….. Again we have seen “B” rated shipping credits Approximately 1.3bn issued to shipping Challenges and Prospects Late 90s are not forgotten so easily Selective retail market Private placement market “Consolidation” Genmar - Metrostar Teekay - Navion MISC – AET fleet (from NOL) World-Wide – Bergesen Carnival – P&O Princess Bond Issues Teekay Genmar CMA CGM CP Ships Stena OSG Carnival Contents: Contents DVB at a glance 1 2 The Requirement for Ship Finance & Providers 3 Conclusions Banking: The Full Service Approach: Banking: The Full Service Approach The trend: A one-stop-shop Increased emphasis on: Corporate Finance departments: Lease transactions providing clients with attractive funding levels and the required balance sheet treatment of their assets. Advisory/M&A departments Following the consolidation trend advisory services will play an increasingly important role Investment Funds So far a great success for those who have started Other Products Cash management, treasury funds and bunker hedging. SUMMARY: SUMMARY Commercial Banks continue to be the main source of finance for shipping. Banks will focus more on additional products creating fees. Consolidation in the Ship Finance world is not unlikely. Chinese banks are getting more aggressive (beat Japan’s banks in 2002) and Kexim is coming strongly. Only the really big players will have access to the Capital Markets and any sign of asset play tendencies will again ruin the shipping companies reputation. - Consolidation of Shipping companies will continue. Slide24: Thank you for your attention ! The City of London Third Biennial Meeting Finance Requirement – S&P : Finance Requirement – S&P CAPITAL REQUIREMENT FOR EXISTING TONNAGE – Strictly S&P Raw data: Clarkson Research Finance Requirement - Newbuilding: Finance Requirement - Newbuilding FINANCE REQUIREMENT FOR REGISTERED NEWBUILDINGS As from June 2003 Raw data: Clarkson Research / Drewry / MSI Slide27: Singapore Office Fortis DNB DBS Hong Kong Office HSBC (HK) CAI BNP HSH Nordbank New York Office Fortis Nordea DNB London Office Nordea CAI HSH Nordbank DNB Hamburg Office HSH Nordbank Deutsche Schiffsbank Commerzbank Bergen Office DNB Nordea HSH Nordbank Main Competitors by regional office Piraeus Office Royal Bank of Scotland HSH Nordbank Deutsche Schiffsbank National Bank of Greece Rotterdam Office CAI HSH Nordbank Deutsche Schiffsbank Yards/Export Credit Institutions: Yards/Export Credit Institutions Finance on attractive terms – through export credit agencies The 1994 OECD Shipbuilding Agreement - Ratified by certain countries - Unlikely to ever come into force Negotiations for a new Shipbuilding agreement (end 2005) is undertaken by a Special Negotiation Group (SNG) consisting of both OECD and non-OECD members The Never-Ending “EU-Korean” Story - Latest development is the counterclaim from Korea on EU’s Temporary Defensive Mechanism (TDM) (6%) Report from the WTO Dispute Resolution Panel on the initial EU complaint should be available in October THE DISPUTE SHOULD NOT AFFECT THE OECD WORK, BUT WILL IT??