HSH Nordbank, the world’s largest shipping lender, Says Shipping Crisis May Worsen Through 2014

HSH Nordbank Says Shipping Crisis May Worsen Through 2014

HSH Nordbank AG, the world’s largest shipping lender, said the crisis buffeting the industry may worsen through 2014 as clients contend with a drop in demand and the arrival of a new generation of container vessels.

HSH Nordbank, which holds 27 billion euros ($35 billion) of shipping loans in its portfolio, has taken provisions to prepare for the worst-case scenario, HSH Chief Executive Officer Constantin von Oesterreich told journalists in Hamburg, the bank’s home city, last night.“The market doesn’t move sideways for a long time, it will either get better or worse,” he said. “It could very well be that it will get tougher before the end of 2014.” A recovery is unlikely before that, said von Oesterreich.

HSH Nordbank, which is controlled by the German states of Hamburg and Schleswig-Holstein, is trying to reduce bad loans to shipping clients struggling to service their debt amid the slump in demand, overcapacity of vessels and low freight rates.

Shipping loans make up 27 billion euros of the lender’s 125 billion-euro portfolio, von Oesterreich said. “That’s a really high number,” he said.

Hamburg and Schleswig-Holstein have increased guarantees to cover potential losses at HSH Nordbank to 10 billion euros from 7 billion euros, a step the bank expects the European Union to grant preliminary approval for by June 16, von Oesterreich said.

First-quarter net income fell 41 percent to 73 million euros, von Oesterreich said before the official release of the results tomorrow.

In the first quarter of last year, HSH Nordbank profited from the repurchase of subordinated bonds, which boosted earnings by 261 million euros, Rune Hoffmann, the company’s spokesman, said.

To contact the reporter on this story: Nicholas Brautlecht in Hamburg at nbrautlecht@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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