| PARIS, Sept 30
PARIS, Sept 30 Credit Agricole CIB, which has a
shipping portfolio worth $15 billion, is likely to set aside
extra provisions this year to cover potential losses after the
sharp downturn in the industry, a senior official at bank said.
Thibaud Escoffier, head of shipping and offshore finance at
the lender's corporate and investment banking unit, said it was
too early to say how large the provisions would be, adding that
the shipping book would "continue to be properly marked".
Parts of the shipping industry are suffering their deepest
downturn ever as international trade slows and freight rates
fall in a market flooded with new vessels.
This has left German banks - among the biggest backers of
ship owners - struggling in particular to recoup tens of
billions of dollars in loans.
Escoffier said Credit Agricole would not expand its exposure
to the industry at a time when Germany's Commerzbank
cuts its shipping business and RBS winds down its own
portfolio in the sector.
"This year will probably be a year when we are going to
register an increase in our specific provisions in shipping,"
Escoffier told Reuters in an interview late on Thursday,
referring to provisions against bad loans.
A third of Credit Agricole CIB's shipping portfolio
comprises export credit guarantees. The portfolio is almost
evenly split between cruise ships, dry bulk vessels, oil tankers
and gas carriers.
"Our ability to weather the ongoing downturn is, as a
result, somewhat different from other European shipping banks,
since our exposure to the container ship market by nature is
small, or to the offshore market downturn, where we have never
been big," Escoffier said.
Tough market conditions led to the collapse of South Korean
container line Hanjin last month, leaving an estimated $14
billion in cargo stranded on its ships.
The departure of some of the sector's biggest lenders might
leave a lending gap for ship financing in the future, which
could be filled by institutional investors looking for
higher-yielding assets when interest rates are at record lows.
Escoffier said the industry is facing a shift in the way
financing is sourced, as financial regulators apply stricter
capital rules that put pressure on profitability and limit
lenders' ability to participate in shipping deals.
"Probably with the new layers of regulation being imposed on
conventional banks and structured finance players... the
leverage that traditional shipping banks would be able to
provide on the whole will come down," Escoffier said.
"We expect to see a certain type of institutional investor
through loan funds coming in and to work together with
traditional shipping banks through credit funds," Escoffier
In a signal of the change, shipping lender Danish Ship
Finance said on Wednesday its major shareholders A.P.
Moller-Maersk, Danske Bank and Nordea
Bank would sell their stakes to a consortium of Danish
investment funds including pension funds.
(Reporting by Maya Nikolaeva and Jonathan Saul; editing by
Richard Lough and Alexandra Hudson)