The German Landesbank NordLB is considering taking full control of its smaller peer Bremer Landesbank (BLB), which is struggling under the weight of a portfolio of bad shipping loans.
BLB, in which NordLB already owns 54.8 per cent, warned last week that it would have to take a €400m writedown on its shipping portfolio, and that as a result it was facing a “mid-triple-digit million loss” this year.
The admission prompted concerns about the health of the Bremen-based bank, which had €29bn in assets at the end of 2015, and BLB’s owners have since been holding talks on how to bolster the stricken lender’s capital position.
In a statement late on Friday, NordLB’s chief executive, Gunter Dunkel, and Bremen’s finance minister, Karoline Linnert, said that BLB’s owners — NordLB, the city of Bremen, and the savings banks association in Northrhine Westphalia — had agreed to keep BLB’s capital “intact at an appropriate level”.
“The form and size of the capital increase are currently being intensively discussed,” NordLB and the city of Bremen said. “The necessary decisions will be carried out by the end of 2016.”
Two options are being particularly closely studied. Under the first, NordLB would buy up the city of Bremen’s 41 per cent stake in BLB. Under the second, the city of Bremen’s stake in BLB would be transferred to NordLB, in exchange for a stake in NordLB.
“We agree that Bremer Landesbank should continue to be an active, valuable member of the NordLB group, and should keep its own identity,” said Mr Dunkel. “Negotiations must now begin immediately, so that we can get to a result that its satisfactory for all by the end of the year.”
The problems at BLB are the latest sign of the malaise in the shipping industry, which was hit hard by a combination of a sharp downturn in global trade in the wake of the financial crisis, and a series of ill-timed investments in bigger container vessels.
The strains have fed through from the ship operators to the banks that finance them — many of which are located in Germany, which has a long tradition in ship finance.
NordLB itself warned last month that it would make a loss this year after setting aside an extra €435m to cover potential losses on its shipping loans. Commerzbank, Germany’s second-largest lender, and HSH Nordbank, another north German Landesbank, have also taken big writedowns on their shipping loan portfolios.
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