14-07-2016

Deutsche Floats Surprise RBS Shipping Bid

RBS

Germany’s biggest lender has emerged as a surprise contender to take on a multibillion dollar shipping finance business even as its share price barely hovers above record lows.

Sky News has learnt that Deutsche Bank has expressed an interest in buying part or all of a $3bn (£2.3bn) Greek shipping portfolio owned by the taxpayer-backed Royal Bank of Scotland (RBS).

The involvement of Deutsche in the auction is unexpected in the context of speculation last week that it was looking to sell $1bn (£760m) of shipping loans in an attempt to boost its capital position.

Sources close to Deutsche, which has a substantial shipping finance business, have sought to dispel that suggestion.

City insiders say the German bank is competing with China Merchants and at least one Japanese bank to acquire the RBS business, although the process remains fluid and may not result in a deal.

The auction comes as the European Central Bank is scrutinising lenders’ exposure to the shipping sector, which has been hit by a downturn likened by some executives to the slump seen during the 2008 global financial crisis.

Even by recent standards, Deutsche Bank has endured a torrid fortnight, with its shares sliding in Frankfurt to record lows, and the International Monetary Fund labelling it the most dangerous systemically important bank in the world.

Deutsche declined to comment on its interest in the RBS shipping business, while the British bank also declined to comment.

Sky News revealed earlier this year that RBS was working with bankers at Lazard to examine options for the shipping loans, which could be run off, sold or hived off in chunks to potential buyers.

An exit from the business would mark another chapter in the bank’s international retrenchment since its £45.5bn bail-out by taxpayers in 2008.

RBS has already exited dozens of countries and is continuing to take steps to shrink its vast balance sheet, which now stands at roughly £700bn.

Under Ross McEwan, its chief executive, the bank continues to wrestle with the sprawling legacy of its expansion under Fred Goodwin, who was ousted with RBS on the brink of collapse.

RBS’ shipping business accounted for just over £8.2bn of its total assets at the end of the third quarter last year, representing not much more than 1% of its overall balance sheet.

Bank insiders said that the portfolio being worked on by Lazard was less than half of that total shipping exposure.

Last autumn, RBS warned of tough conditions in the shipping market, echoed earlier this year by AP Moller-Maersk, the industry giant, which said the environment was worse than during the 2008 financial crisis because of the slowdown in global trade.

An RBS spokesman said in February: “RBS Shipping is a strong franchise with one of the most significant portfolios in European finance.

“In light of our wider strategy to create a simpler, stronger, and more sustainable bank, better aligned to the needs of our customers in the UK and Western Europe, we are actively exploring alternative strategic options for our shipping business.”

Source: Sky News

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