Bank lending to shipping increased 2% last year

BNP Paribas has clung to its position as the world’s largest shipping lender in a year that saw European lenders, and banks in general, make a modest comeback in terms of their ship finance activity.

The latest annual survey of global ship finance by Petrofin Research, which focuses primarily on the top 40 portfolios worldwide, found that last year the banking industry posted 2% growth in ship finance.

Acknowledging that figure could seem underwhelming, Petrofin nonetheless found it notable “given the significant headwinds faced throughout the year”.

These included competition from alternative finance sources and upcoming regulatory pressures. “This growth is a credible performance in a challenging environment,” said the Greece-based consultancy and research house.

The banking sector faced “stiff competition” from alternative financing, particularly Chinese leasing, which “offered more flexible terms”, Petrofin Research said.

Additionally, in anticipation of the Basel IV regulations that came into force at the start of this year, banks had to confront stricter capital requirements and lending limitations.

“Despite these pressures, banks competed aggressively to retain clients, often accepting lower margins to secure new business,” said Petrofin Research.

Cashflow across all shipping sectors remained sufficient to service loans, bolstered by a surge in vessel orders driven by environmental considerations, the survey noted.

“This ESG focus not only increased demand for new ships, but also spurred ship finance activity,” said Petrofin Research.

Another source of growth for some has been the concern felt by many owners with existing Chinese leases or imminent newbuilding deliveries leased back from a Chinese financial owner, according to the survey.

At least some of these are being replaced by conventional bank loans, although Chinese institutions were “not geared” to replace leases with straight mortgage lending themselves.

“We are receiving reports that both major Western banks and their clients have been achieving lower cost refinancings by replacing previous leasing and bank loan transactions as loan margins have fallen and they are also able to obtain longer maturities,” Petrofin Research said.

“The unresolved tariff disputes and potential US penalties on Chinese vessels cloud the long-term outlook for Chinese leasing,” it added.

The top 40 ship finance banks increased their industry lending by 2% to $289.65bn, according to the survey.

BNP Paribas sat at the top of the league table with a portfolio of $20.8bn at end-2024, with fellow French lender Crédit Agricole in fourth spot.

A strong showing by Asian financiers was led by China Exim Bank in second place with an $18.8bn portfolio, and Bank Of China fifth with lending of $12.5bn, according to market estimations.

Rounding out the top five was KfW Ipex in third place with $15.8bn.

Other institutions in the top 10 were Korea Exim Bank, Sumitomo Mitsui Banking Corp., Sumitomo Mitsui Trust Bank, Société Générale, and a new entrant, Spain’s CaixaBank.

The addition of CaixaBank and the increase in the portfolios of four Greek banks were the main drivers behind a 7.8% increase in the collective portfolios of European shipping banks, said Research.

While far less dominant than even a decade ago, Europe still represented the biggest ship finance area with a 52% share of the top 40 banks, lending $152bn, which broke a four-year run of decline.

Asian and Australian banks saw a modest decline mainly due to the focus on leasing finance, but Japanese banks remained prominent.

Despite the growth in bank lending, non-bank finance for the industry was growing at a faster pace, the survey said.

“The growth of the global fleet continues to be funded primarily from non-banking sources, such as leasing, alternative lending, export finance, private equity from funds, public markets and investors.”

Petrofin said that nonetheless the banks in general had “navigated 2024’s challenges with resilience”, adapting to competition, regulatory shifts, and geopolitical disruptions.

“Looking to 2025, uncertainty looms from US-led trade policies, but banks and shipowners remain poised to respond.”