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At its peak, there were about 30 shipping banks operating out of Singapore, industry sources said, while now there are 20 lenders providing banking facilities to support shipping clients
MORE lenders are opening offices in Singapore to take advantage of the city state’s maritime hub status and remain closer to shipping clients in the region.
Among them is Fearnley Securities, which is opening its first Asian office this month.
The investment banking company aims to be better positioned to service the group’s regional clients, with an enhanced product offering and physical proximity, its general manager Peter Wessel-Aas, who is relocating from Oslo to spearhead the initiative, told Lloyd’s List.
In May, French investment bank Société Générale said it was setting up a shipping desk in Singapore. Pierre Carassus, one of the co-heads of the shipping desk, will arrive this month, according to a source familiar with the situation.
The Singapore desk has been set up to build closer affinity with its Southeast Asian clients, and support them in their sustainability journey, the bank said.
Société Générale is expanding its shipping finance team in the Asia Pacific region by establishing a presence in Singapore
The number of shipping banks setting up an office Singapore could increase soon, because several banks and financial institutions are in talks with the Maritime and Port Authority of Singapore, according to an industry source.
“Shipping is a capital-intensive industry and requires significant amount of financing,” an MPA spokesperson said, without commenting specifically on future banks planning to set up an office. “The shipping community will benefit from greater access and a wider range of financing options with more diverse financial institutions joining Singapore’s existing strong cluster.”
The return of shipping banks contrasts with the trend seen three to five years ago, when there was an exodus of shipping banks from Singapore.
At the peak, there were about 30 shipping banks operating out of Singapore, industry sources said. Currently there are 20 lenders providing banking facilities to support shipping clients.
The withdrawal coincided with the economic downturn and oil crisis in 2018.
As financial cycles turned, some of the banks either downsized or rethought their shipping portfolios in relation to their overall plans, said Singapore Maritime Foundation executive director Tan Beng Tee.
“It was not specifically due to the lack of business from Singapore but there was a restructuring [from head offices] of major banks with ship finance portfolios,” Ms Tan said.
Some of the banks which pulled out from shipping entirely were ABN AMRO and DVB, while the remaining had sold their books in Asia, sources said. There was also HSH Nordbank, the north German regional bank that collapsed in the wake of the post-financial crisis shipping downturn.
As the banks retreated, Singapore’s shipping finance was left with a gap of $4bn in liquidity, said a shipping banker in Singapore.
What has prompted their return? The most cited answer by several bankers is that shipping is enjoying quite a boom time.
“The container shipping companies for example are enjoying 600%-700% times rise in net profits now. They are flush with money,” said a second shipping banker. “These shipping companies are thinking of what to do with so much money in their hands. Some may be interested to invest in new technology, or to buy more ships. This is an opportunity for bankers to offer some financing or loan products to them.”
Having an office in Singapore will bring the banks closer to their existing or potential clients, thus facilitating networking and business deals, bankers said.
There is a strong international maritime centre ecosystem in Singapore, consisting of more than 170 global shipping groups and a vibrant ecosystem of maritime services such as finance, insurance, and law, the MPA spokesperson said.
Singapore also boasts the second busiest port in the world. “The opportunity cost of not having a presence in Singapore is too big,” said the second banker.
The big maritime community in Singapore means there is a big maritime market to serve in Singapore, and there are business opportunities for different shipping banks, sources said.
Banks in general, will be all looking at the same general lending metrics in some shape or form which boil down to the shipping companies’ finances, the ships they are financing, the outlook for the sector and any guaranteed future cash flows associated with the transaction, said Maritime Strategies International’s Asia director Jianjun Wang.
However, banks both nationally and regionally will operate with different preferences and philosophies, mainly due to their cost of lending, the risk-reward profile, their internal knowledge, local legislation, tax implications, or culture, he said.
“Most Europe banks still prefer traditional loans, while many banks in the Far East are diversifying their lending portfolios to include finance leasing, operating leases or other structures, that give them increased flexibility and a competitive advantage to set themselves apart from their peers.”
The Chinese leasing companies meanwhile can sometimes provide greater liquidity to clients, sources said.
Singapore’s maritime financing ecosystem is bigger than the banks. While debt financing remains a key instrument, it would be useful to explore alternative forms of financing such as ship leasing, bringing in more private equity investors, and create dedicated platforms for investors and the shipping community to network, said Ms Tan.
With many shipowners making more money than they can remember, and banks willing to cut margins to keep the business, it’s a buyer’s market and likely to remain so while good markets last
The MPA continues to engage a wider group of players to grow alternative sources of financing in Singapore, including leasing and private equity, a second spokesperson said. It is working to grow the pool of financial advisory firms and intermediaries who can match shipping companies with various sources of financing and to connect investors with shipping interests in Singapore.
Industry forums such as Maritime Capital Forum are valuable for “sharing information on industry outlook, financing needs and options, and also provide a bridge for financial and shipping players to discuss challenges and financing opportunities,” the spokesperson added.
MPA is also encouraging greater digitalisation to facilitate financing in the maritime sector. In 2020, it signed a deal with DBS Bank to develop solutions to facilitate financing in the bunker sector.
The first live bunker delivery financing pilot transaction with an electronic bunker delivery note was completed in July 2021.
There is also liquidity supply from the alternative financiers, such as FPG AIM, mPartners, Seafin, Transport Capital and Braemar, said MPA.
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Subject: Singapore sees shipping banks rebound
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