Danske Bank has lost many millions from being one of the world's largest lenders to the shipping industry, with a focus on Nordic shipping companies and the Nordic offshore sector. In addition to this, the bank has become co-owner of several companies that it didn't necessarily want a part of, such as the tanker company Torm.
But now it looks like the bank might be able to start over, without having to make provisions every year, writing off large sums on its lending engagements because shipping companies were unable to comply with their commitments during the financial crisis.
In the financial report for the first six months of the year, published last week, Danske Bank - for the first time in a long while - was able to calculate its totalt provision items for shipping to what practically amounts to a big fat zero. This quite simply because the bank believes that there's no need to put money aside to cover losses from the sector. Or put another way, as far as Danske Bank is concerned, the crisis in shipping has reached bottomed out.
"Our provisions item stands at plus/minus zero, which is positive, as it indicates an improvement in the sector, while we also believe that we've now made enough previous provisions. Based on our exposure and the current state of the market, we believe that this will continue for now," says the bank's Head of Shipping, Øivind Haraldsen, to ShippingWatch.
His statement comes shortly after Nordea also announced that the crisis, and thus the banks' major provisions on shipping, looks like a done deal for now.
However, the positive developments don't mean that Danske Bank plans to expand on its shipping commitments. Rather, Øivind Haraldsen sees a sligthly declining trend in business volumes as the current engagements are reduced, which in itself amounts to an annual reduction of 10-15 percent.
"Beyond this natural reduction. we plan to maintain our current level of commitments," says Øivind Haraldsen.
In Denmark, the bank's primary customer is the Maersk group, while in Norway the bank's client list is focused on offshore and niche segments such as chemical tank, ships for car transports and, to a certain extent, tank and dry bulk. Danske Bank's exposure to shipping and offshore amounts to a total of USD 8.88 billion.
Shipping-related impairments amounted to 3.4 percent of the bank's loans and securities in the first half of 2012.