The fairly recently launched niche bank Maritime & Merchant has been busy servicing shipping customers throughout 2017, and demand has been so big that the bank expects to need more capital in the near future, CEO Halvor Sveen tells ShippingWatch.
"There's an interesting growth in our lending, and we're entering 2018 with a lot of optimism, so we expect that we will, in the first half of the year, probably complete a capital expansion," he says, though he declines to specify the size of a potentially necessary capital expansion.
We expect that we will, in the first half of the year, probably complete a capital expansion"
Close to a year after Maritime & Merchant opened officially in Oslo on Dec. 22 2016, the bank has already completed one capital increase, back in March, when the bank received USD 5.2 million in fresh capital.
Increase in loans
The bank focuses on small and medium-sized players in the shipping sector as well as stand alone projects, in which first mortgages are issued to carriers primarily in container, dry bulk and tanker.
"Norwegian investors have been very active in 2017, both in dry bulk and container, and by slowly also in tanker, so it's been spread out across the three main segments. Activity overall has been very good, and we've been able to help many customers realize good projects," says Sveen.
He points to significant demand from the shipping sector, as access to capital from traditional lenders, namely the big banks, in recent years has been reduced.
In the bank's financial report, the item "total lending to and receivables from credit institutions" shows growth throughout the year, and the item stood at USD 93.2 million by the end of the third quarter – an increase of close to USD 18 million compared to the end of the second quarter.
Oslo is in many ways a financial hub in the maritime sector, and in general, a lot of private capital has been raised for shipping"
"It's been a busy year. Oslo is in many ways a financial hub in the maritime sector, and in general, a lot of private capital has been raised for shipping. All stakeholders are gathered here, so that's a very good thing for us as a shipping bank," says Sveen:
"We're getting good synergies from this, and it's been a beneficial situation to do business in our home markets, and we've now gradually opened up for more requests from abroad."
Today around 70 percent of the customers are Norwegian, notes Sveen, adding that an increasing number of foreign carriers are joining the bank's customer portfolio.
"We expect this development to continue in 2018, and we also expect to launch new activities in new continents where we see a somewhat limited availability of shipping loans."
In addition to the capital expansion in march, the first financial reports from Maritime & Merchant show that the bank, since its launch late last year, has booked a deficit of USD 2.2 million.
In light of low orderbooks for new vessels and positive prospects for the global GNP, the bank says in its third quarter report that "there seems to be reason for maintaining an optimistic view on the market for the next 24 months."
While dry bulk, container and tanker shipowners have till now borrowed capital from Maritime & Merchant, one noteworthy sector, in terms of Norway, has been fairly absent from the books, explains Sveen.
"Offshore and oil service is Norway's national industry, and we respect that, but the entire sector has been through a very difficult period with many restructurings and challenges, and we've had no part to play in that, as we are a fairly new bank" says Sveen.
"If we can serve as a sound business partner for someone in the future, we'll do so, but there are no real major opportunities for us there right now, due to factors including the capital intensity in the sector."
Shipping luminaries such as Henning Oldendorff, Arne Blystad and Norwegian billionaire and major investor Endre Røsjø are among the bank's current stakeholders, and former Torm CEO Klaus Kjærulff was among the bank's founding fathers alongside several other high-profile shipping players.
Maritime & Merchant is thus one of the newer players in the lending market at a time when big and illustrious shipping banks have reduced their exposure to the sector. Loan loss provisions totaling billions of dollars on non-performing shipping loans have destroyed the appetites of previously highly active lenders, including those of the major banks.
Sveen, and Maritime & Merchant, project that the lending market going forward will be "more fragmented than in the past."
"We're now seeing a significant reduction in the availability of credit offers in the sector, noting that large banks such as DNB and Nordea operate with clear-cut policies to reduce their lending volumes to the maritime sector," Sveen tells ShippingWatch.
English Edit: Daniel Logan Berg-Munch