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Danske Bank: Old shipping involvements are a strain

Danske Bank's finances are epecially strained by customer relations in shipping, dating back to the time before the financial crisis, yet the bank intends to maintain its stake in the sector, currently at USD 9 billion, the bank tells ShippingWatch.

Besides the instances that have been covered by the media, the shipping involovements that have been straining Danske Bank's finances in recent years are primarily smaller ones, dating back to the time before the bank established its own shipping department, says Danske Bank's Global Head of Shipping, Øivind Haraldsen, to Shippingwatch, while stressing that the bank has no plans to "pull the rug out" under its customers. The companies concerned are minor Scandivanian shipping companies, on which the bank has been performing impairments in the last few years.

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Struggling Danish and Swedish customers

"The impairments we've done have primarily been on struggling Danish and Swedish shipping companies, of which most are small or minor companies. We will continue to see impairments, but we expect these to become smaller in the future. But that doesn't mean we have any plans to withdraw from the shipping companies that are struggling right now, as long as we believe they stand a good chance of doing well once the market gets back on its feet. We have no plans for a significant reduction of our exposure to the sector on the short term, what will happen is probably that our current exporsure will become smaller over the years, as some of the payments and loans expire," says Øivind Haraldsen (photo) to ShippingWatch.

The bank feels the shipping industry's crisis most acutely in the bulk and tank segments. The example best known to the public is Torm, but other areas (which constitute more than 60 percent of the bank's shipping portfolio) are described by the bank as solid business. These are, among others, involvements in offshore, gas tonnage, ships for car transportations, as well as the cruise and ferry businesses.

Dry bulk close to bottom

In Denmark, the bank has been losing money on, among others, a series of limited partnerships, even though the acumulated shipping market has been a good business for the past eight years. In 2005, Danske Bank gathered its shipping investments in one unit, consisting of 15 employees: eight in Oslo, six in Copenhagen, and one in Gothenburg. And the results have been a stronger and more professional effort from the bank in this area. But there is nothing to do about the market conditions:

"Personally I believe that dry bulk is close to the bottom, and that the market will turn in 2014. There are many new deliveries this year, but then the number of deliveries will turn around, while demand will go up. The gas segment is looking good, and the prospects for offshore are also good. The U.S. economy is starting to improve, and there's still the prospect of positive growth in China, at 7-8 percent," says Øivind Haraldsen, who also believes that product tank will do fairly well in the tank segment.

Shipping impairments accounted for 3.4 percent of the bank's loans and guarantees in the first half of 2012.

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