Hannover-headquartered NordLB is set to take over Bremer Landesbank, which was previously jointly owned by the Federal City of Bremen and the Lower Saxon Savings Banks Association, both parties are set to sell their share for a total sum of €180m.
Bremer Landesbank has faced a challenging start of 2016, reporting a net loss of €384m in the first half of 2016, largely due to its high exposure to shipping debt, with the global shipping industry facing an overcapacity crisis, resulting in a high level of nonperforming loans.
Stephan-Andreas Kaulvers, chairman of the board, and Heinrich Engelken, deputy chairman of the board at Bremer Landesbank have responded to the takeover by announcing their resignation.
Bremer Landesbank will remain headquartered in Bremen, with a presence in Oldenburg, as a member of Nord LB Group, it will retain its name and corporate identity.
Taking over full ownership of Bremer Landesbank will represent a challenge for NordLB, which at the moment holds €17.9bn in shipping debt. While it pledged to reduce the total exposure to shipping debt in its portfolio, to €12bn, it so far struggled to consolidate its assets.
In the years following up to the 2008 crisis, the German shipping sector experienced a strong inflow of cash facilitated by Kommanditengesellschaft (KG) Funds, which were sold aggressively by IFA’s while many German banks providing debt funding and the German government offered tax incentives.
The agreement has left a number of German banks, including HSH Nordbank, NordLB and Commerzbank with a high exposure of nonperforming loans to the maritime sector, as the 2014 ECB Assset Quality Review flagged up.
According to a 2014 survey by German regulator Bafin, German banks held €95.5bn in shipping debt, of which almost a third constituted nonperforming loans.