Global Shipping Meltdown Mauls German Banks, Retail Investors, Taxpayers

Germany holds 25% of global shipping loans as industry collapses.
When Commerzbank, Germany’s second largest bank, reported earnings on Thursday, it made another groan in direction of the collapsing maritime shipping industry. It raised its loan loss provisions to 900 million, as it said, ‘in timely response to the deterioration in the shipping markets.’ It warned that its losses on shipping loans alone could reach 600 million in 2017 after having nearly doubled to 559 million last year.
At one point, Commerzbank had 18 billion in shipping loans. Over the years, as the shipping crisis worsened, it has whittled down its shipping loan portfolio to 5 billion.
But Commerzbank is neither alone nor the biggest player among German lenders. Before the Financial Crisis, German lenders went on a wild binge and became the world’s biggest issuers of shipping loans that ended up funding horrendous overcapacity of ships, just when global trade would face enormous challenges. Of the $400 billion in maritime loans issued by large banks, German banks hold nearly $100 billion.
Bankruptcies have cascaded through the shipping industry, starting with bulk carriers during the Financial Crisis then converging on container carriers. In August last year it sunk Hanjin, the sixth largest container carrier in the world. In Germany, these bankruptcies have created a financial bloodbath that has led to serial bank bailouts with much more pain to come.

This post was published at Wolf Street on Feb 10, 2017.