Bank Activity in the Ship Finance Market in the 1990′s

by Ted Petropoulos, Managing Director, Petrofin S.A., Greece

In covering the above topic, I will offer, first, a brief review of the Ship Finance Market in the 1970s and 1980s; second, a detailed review of bank activity over the last five years to where we are today; and third, some predictions for the rest of the decade and beyond.

As a general observation, bank activity follows shipping cycles and the performance of the shipping industry. As the shipping industry improves and its outlook appears secure, the interest of banks in shipping rises and vice versa. This is natural and to be expected. However, it takes time for banks to realise and respond to shipping industry cycles and prospects.

Invariably, by the time the message is received and realised, departments are set up, budgets are determined and lending commences, the industry’s course may well have changed. This phenomenon hits mainly the non-traditional shipping lenders who lack the long term experience and commitment to the industry and are most likely to overreact to changes and realise losses. This pattern has, unfortunately, been a prominent feature of shiplending over the decades and has added to the widespread belief that shiplending is a high risk activity for banks. I will return to this theme later.

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