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SHIPPING FINANCE IN DISTRESS GEORGE XIRADAKIS Founder - Managing Director XRTC Business Consultants

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SHIPPING FINANCE IN DISTRESS GEORGE XIRADAKIS Founder - Managing Director XRTC Business Consultants

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    1. 1 SHIPPING FINANCE IN DISTRESS GEORGE XIRADAKIS Founder - Managing Director XRTC Business Consultants

    2. 2 Annual volume of Shipping Syndicated loans (2010)

    3. Ship finance volume decreases significantly 3

    4. Ship finance volume decreases significantly 4

    5. 5 International Bank Lending to Shipping

    6. 6 Top 40 Banks (Total loans $452bn)

    7. 7 …debt scarcity. Why?

    8. 8 Effects of debt scarcity

    9. 9 The Change

    10. 10 What are the banks doing now?

    11. 11

    12. 12 Equity/Debt Capital Public Markets

    13. 13 Where are we standing right now?

    14. 14 Is there any prospect?

    15. 15 Under this bad environment where do we find money?

    16. Shipbuilding in China (September 2011) 16

    17. 17 China’s Banking Industry China's banking industry has evolved in the last decade from its roots as a policy-oriented lending machine to one that tries to be more market-focused, with most of the nation's top banks going public to highlight their new commercial bent. Chinese banks have benefited over the past years from a jump in interest income and improving margins after a government-backed lending boom in 2009. The $22.1 billion raised by Agricultural Bank of China’s initial public offering (IPO), which was priced in July 2010, is one of the largest world’s ever stock market listings.

    18. 18 Chinese banks are moving towards internationalization trying to establish presences around the world in order to meet Chinese companies banking needs on the one hand but also to help their own growth. In recent years, as Chinese shipping industry becomes stronger, Chinese banks are stepping into global ship finance business to fill up the gap created by the shortage of funding by the traditional shipping financiers being the western banks. China’s Banking Industry

    19. 19 World’s biggest banks by market cap (end 2010)

    20. 20 CHINESE BANKS

    21. 21 2 CHINESE BANKS RANKED IN THE TOP SHIPPING PORTFOLIO LEAGUE TABLE

    22. 22 Active Chinese banks in Shipping Finance China Development Bank (the only Chinese Bank that has signed a bilateral loan with a Greek Shipowner) Industrial and Commercial Bank of China (ICBC) (the world’s biggest bank in market cap) Bank of China (the most international and diversified bank Chinese bank with the biggest international shipping portfolio) CEXIM (the most experienced Chinese bank in Shipping) China Construction Bank Bank of Communications China Merchant Bank

    23. LEASING 23 Besides traditional items, the banks also exploit more channels such as ship financial leasing. Chinese banks are moving into ship owning through the establishment of leasing arms. ICBC, China Construction Bank, China Development Bank, China Merchant Bank, Bank of Communications and Min Sheng Bank have ventured into offering ship leasing services.

    24. Equity 24 The big banking groups have already started seeking the opportunities in the equity market. The forthcoming reform that will ease the entrance of shipping companies in Shanghai Stock Exchange is the driven force for all the banks to develop their Securities companies and improve analytical shipping skills. China Development Bank Securities has already shown its appetite to penetrate the international equity market followed by all big players.

    25. 25 The access to Chinese Bank Financing Not easy for foreign shipowners to access. Only top names can enter the door. Second hand vessels acquisitions are not financed yet. Prerequisite for the financing is the assets to be under construction in Chinese yards or to have a strong Chinese element. Most of the banks require support from the Chinese export credit agencies which results additional cost for the lenders.

    26. 26 China’s Banking Industry – The Future

    27. 27 China’s Banking Industry – The Future Chinese banks could be well positioned because not many big European banks are ready to pounce. CDB has agreed with Frankfurt University’s Goethe Business School for the leadership program for its managers. Six groups per year of 20-30 high ranking CDB staff members each are attending in-house training for issues as leadership, risk management, international banking.

    28. 28 ………… but The Chinese government has been attempting to slow growth in order to prevent an overheating of the economy and also rein in surging property prices. It has introduced property tax in some cities and also raised the amount of liquid cash that the banks need to hold with them as reserves to 20%. Analysts say profits at the country's biggest lenders will be hit as these measures start to take effect.

    29. 29 Matters of consideration of seeking Chinese ship finance Chinese banks are new to ship finance Chinese banks, despite a decade of reforms, remain more political than business entities. China’s market economy is not mature enough. Chinese banks still have a long way to go against western rivals, especially in management level, top professional staff, brand effect, global network and risk control. Chinese lenders' attempts to expand financing for ships are being held back by tax regulations and a lack of expertise.

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