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Royal Bank of Scotland to Discard $600M of Shipping Loans
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The state-owned British bank, The Royal Bank of Scotland Group plc , is set to dispose approximately $600 million of shipping loans from its portfolio, according to Reuters. The report released by Reuters on Wednesday cited two sources with knowledge of the matter.
Per the sources, these loans primarily emanate from the bank’s Greek shipping business that had been valued at $3 billion, earlier this year. Further, the loans will be sold in various packages. The potential suitors for the company’s various shipping loan tranches include a Japanese financial services firm, Orix Corp, Germany's Berenberg Bank, Merrill Lynch, a unit of Bank of America (BAC - Free Report) , and Davidson Kempner, an asset manager.
In Sep 2016, the bank announced that it had started winding down its global shipping finance business, with a view to save efforts to offload it during a worsening slump within the freight industry. The bank’s overall shipping exposure, then, was 5.514 billion pounds, down from 6.765 billion pounds at the end of June and 6.776 billion pounds from the year-end balance in 2015. Notably, the bank was a top lender to the global shipping industry and its Greek office played an essential part.
German Banks, which provide around 25% of the world’s $400 billion of outstanding shipping debt, are making efforts to recover the loans offered. Similarly, several other lenders have resorted to ending or scaling back their exposure toward such loans. Deutsche Bank AG (DB - Free Report) is one among the German banks, with some of the biggest portfolios of troubled shipping loans.
Notably, nearly 90% of the world trade is conducted through transportation by sea route. However, the shipping industry is in its deepest downturn on record, due to sluggish international trade and declining freight rates stemming from too many industry participants. In addition, the proposed capital requirement rules, set by the Basel Committee, if implemented, may take a toll on the global shipping industry.
Bottom Line
Royal Bank of Scotland, which is over 70% controlled by the government, is currently trying to settle the fines and lawsuits related to its alleged misconduct before and during the financial crisis. The bank is still struggling with the hardships of restructuring through job cuts and assets sale.
The bank collapsed at the height of the financial crisis after its 2008 rights issue and had to be bailed out by the British government, costing taxpayers more than 45 billion pounds.
Last month, the bank failed in the Bank of England's annual stress test of lenders, partially owing to a mounting legal cost for misconduct.
Royal Bank of Scotland currently carries a Zacks Rank #3 (Hold). Shares of the company have declined more than 36% so far this year, significantly underperforming the Zacks categorized Foreign Banks industry’s gain of 6.5%.
Over the last 60 days, the Zacks Consensus Estimate for the stock moved up 11.9% to 47 cents per share for the current year.
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Royal Bank of Scotland to Discard $600M of Shipping Loans
The state-owned British bank, The Royal Bank of Scotland Group plc , is set to dispose approximately $600 million of shipping loans from its portfolio, according to Reuters. The report released by Reuters on Wednesday cited two sources with knowledge of the matter.
Per the sources, these loans primarily emanate from the bank’s Greek shipping business that had been valued at $3 billion, earlier this year. Further, the loans will be sold in various packages. The potential suitors for the company’s various shipping loan tranches include a Japanese financial services firm, Orix Corp, Germany's Berenberg Bank, Merrill Lynch, a unit of Bank of America (BAC - Free Report) , and Davidson Kempner, an asset manager.
In Sep 2016, the bank announced that it had started winding down its global shipping finance business, with a view to save efforts to offload it during a worsening slump within the freight industry. The bank’s overall shipping exposure, then, was 5.514 billion pounds, down from 6.765 billion pounds at the end of June and 6.776 billion pounds from the year-end balance in 2015. Notably, the bank was a top lender to the global shipping industry and its Greek office played an essential part.
German Banks, which provide around 25% of the world’s $400 billion of outstanding shipping debt, are making efforts to recover the loans offered. Similarly, several other lenders have resorted to ending or scaling back their exposure toward such loans. Deutsche Bank AG (DB - Free Report) is one among the German banks, with some of the biggest portfolios of troubled shipping loans.
Notably, nearly 90% of the world trade is conducted through transportation by sea route. However, the shipping industry is in its deepest downturn on record, due to sluggish international trade and declining freight rates stemming from too many industry participants. In addition, the proposed capital requirement rules, set by the Basel Committee, if implemented, may take a toll on the global shipping industry.
Bottom Line
Royal Bank of Scotland, which is over 70% controlled by the government, is currently trying to settle the fines and lawsuits related to its alleged misconduct before and during the financial crisis. The bank is still struggling with the hardships of restructuring through job cuts and assets sale.
The bank collapsed at the height of the financial crisis after its 2008 rights issue and had to be bailed out by the British government, costing taxpayers more than 45 billion pounds.
Last month, the bank failed in the Bank of England's annual stress test of lenders, partially owing to a mounting legal cost for misconduct.
Royal Bank of Scotland currently carries a Zacks Rank #3 (Hold). Shares of the company have declined more than 36% so far this year, significantly underperforming the Zacks categorized Foreign Banks industry’s gain of 6.5%.
Barclays PLC (BCS - Free Report) is a better-ranked stock in the same space, sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the last 60 days, the Zacks Consensus Estimate for the stock moved up 11.9% to 47 cents per share for the current year.
The Best Place to Start Your Stock Search
Today, you are invited to download the full list of 220 Zacks Rank #1 "Strong Buy" stocks – absolutely free of charge. Since 1988, Zacks Rank #1 stocks have nearly tripled the market, with average gains of +26% per year. Plus, you can access the list of portfolio-killing Zacks Rank #5 "Strong Sells" and other private research. See these stocks free >>