Nord L/B has increased its provisions for bad loans to €1bn ($1.1bn), almost five times higher than expected as the bank moves towards what could be its first full-year loss since 2009.
“The shipping crisis, which further intensified in the first half of the year, has necessitated impairments that were higher than planned,” Dr Gunter Dunkel, Nord L/B’s CEO, said in the bank’s second quarter report.
“Thanks to the good performance of business outside of ship financing and the consistent capital increases of recent years, we have been able to withstand this negative result entirely on our own steam. With the changes made to our ship financing, we have improved the quality of our portfolio and are equipping the bank for the future,” he went on.
Earlier this week, Nord L/B agreed to sell a portfolio of its performing and non-performing shipping loans worth $1.5bn and originated by Nord/LB to KKR Credit, which is buying the loans in partnership with a sovereign wealth fund.
“While the respective measures will result in short-term strains on net profit, we will be strengthening the substance of the bank in the medium term. Consequently, we expect a significant loss for 2016 as a whole, but Nord/LB is capable of absorbing this loss in full,” Dunkel said of the sell-off.