Mainland banks drive full speed into financing for new ships

PUBLISHED : Thursday, 13 January, 2011, 12:00am
UPDATED : Thursday, 13 January, 2011, 12:00am

Mainland banks are likely to have secured a record volume of ship finance deals last year as they supported Chinese and foreign shipowners with orders at Chinese shipyards while also competing in the global ship finance market.

The top three lenders - Bank of China, Industrial and Commercial Bank of China and Export-Import Bank of China - advanced more than US$1.5 billion worth of ship finance loans between January and September last year.

If the portfolios of smaller banks, including the Agricultural Bank of China, China Development Bank, China Merchants Bank and China Construction Bank Corp, are taken into account, last year's loan volume most likely exceeded US$2 billion.

While detailed figures for loan volumes are difficult to obtain, banking analyst Dealogic estimated that Bank of China and Export-Import Bank alone agreed to loans of more than US$1.4 billion in the first nine months of last year.

In the same period in 2009, the two banks together lent a tenth of this amount, or about US$154 million.

These sums may appear relatively small given that a very large oil tanker cost a shipowner US$150 million at the height of the shipping boom in 2008.

But Dealogic estimated that US$18.4 billion in new money was advanced by Western and Asian banks in the first nine months of last year to finance ships on order at shipyards worldwide rather than to refinance existing deals.

As a result, the two Chinese lenders were responsible for lending about 9 per cent of the total advanced by international ship finance banks such as DnB Nor, Mitsubishi UFJ Financial Group and BNP Paribas.

This reflected the tighter conditions imposed by Western banks on lending to capital-intensive industries such as shipping.

It is already clear mainland banks are becoming increasingly big players in the international ship finance sector.

Rodricks Wong, a financial analyst with Marine Money, said ICBC grew its shipping loan book from US$2.2 billion in 2008 to US$4.7 billion in 2009.

Wong added that the Bank of China had a shipping loan portfolio of US$12.1 billion at the end of 2009. Both loan books have grown since.

Charging ahead

Of worldwide loans for ships in the first nine months of last year, the top two mainland banks accounted for about: 9%