Shipping Woes: DVB Bank Posts Loss
Shipping Financier DVB Bank reported a consolidated net loss before taxes of EUR 135.3 million ($142.4 miln) for 2016 (previous year: consolidated net income of EUR 46.1 million).
Since DVB Bank SE, the parent company of the DVB Bank Group, did not generate a net retained profit during the financial year, regretfully no dividends will be paid.
Due to the persistent downturn in numerous segments of the shipping industry and an ongoing challenging environment for the offshore industry caused by low oil prices, allowance for credit losses largely required for legacy exposures in the Shipping Finance portfolio, and for financings in the Offshore Finance portfolio, rose by €239.9 million to €381.4 million (previous year: €141.5 million).
This increase was triggered, in particular, by the following market developments in the shipping industry – which has struggled for the past eight years, and continued to do so in 2016:
High tonnage overcapacity, being the main contributor to the continued decline in many segments of the shipping industry;
As further tonnage capacities entered the market, this pushed charter rates down even further. In the offshore segments, charter rates have been under pressure since 2015. In the first half of 2016, earnings in the dry bulk shipping markets hit their lowest mark since the shipping crises of the 1980s. Likewise, in container shipping, charter rates slumped during the third quarter of 2016 due to structural overcapacities.
Vessel values developed in accordance with the decline in charter rates.
These market distortions persisted throughout the third and fourth quarters of 2016, further burdening the shipping clients’ liquidity cushions. This in turn affected lenders to a higher extent than before.
Also geopolitical developments brought about lower trading activities in the Eastern Mediterranean, imposing an additional burden for some shipping markets during the third quarter of 2016.
