After shipping finance virtually stalled, there are now signs that activity is returning to the Cypriot market
The banking crisis that hit Cyprus between 2012 and 2013 was one of the worst to afflict any country in modern times. The second largest bank, Cyprus Popular bank (Laiki Bank) was forced to close, and many foreign banks scaled back or sold their ship finance portfolios.
But the revival of the financial situation in Cyprus has now led to stability in the local shipping sector. The gap left by the once dominant foreign banks has been filled by local banks, Greek banks with subsidiaries, and/or independent entities based in Cyprus. Yet the smaller size of these banks means they must be very selective of their clients. How the prospective client behaved during the downturn and the quality of the clients ‘soft assets’ (management, ownership, history) is considered by local banks to be as important as the quality of the asset.
Eurobank Cyprus, head of shipping finance, Milios Constantinos told delegates at the 2020 4th Capital Link Cyprus Shipping Forum that the bank’s aim was to use its group’s size to supply shipping loans to Cypriot owners “under prudent terms”. He noted that Eurobank’s size meant its current portfolio was actually larger than the aggregate of the shipping portfolio for the whole of Cyprus. He said it is also very active on the corporate side, with its overseas branches providing operational support for owners in Cyprus.
Hellenic Banks’ senior business development officer Antonios Spanakis said that the bank’s approach to shipping finance was a counter-cyclical play. The bank formed the shipping finance division in 2016, at a low point in the market. “This proved to be the right decision and the bank’s portfolio in the sector has grown remarkably,” said Mr Spanakis. “We have financed over 40 vessels and successfully competed against Greek and foreign banks.”
Those banks supporting Cyprus-based shipowners are clear on what is required in the market. Mr Spanakis said the majority of owners are small to medium companies with a limited fleet of vessels. The larger companies are well taken care of by the big US and European banks, with a global chain of offices. For many of the large owners with interest in the newbuilding sector, it is now natural to turn to Chinese leasing companies. Most of the Cypriot banks emphasis however is on providing a close, relationship-based service.
While Hellenic Bank entered the local ship finance market on a counter-cyclical strategy, this does not mean it is looking to finance ‘bargain’ vessels. “We conduct our own market research,” said Mr Spanakis. “We find that if a vessel is below market value, there is a reason for that, and that is a warning signal.”
AstroBank is another institution that has returned to the growing shipping finance market. “We have been growing our local market share each year since the formation,” said unit manager Christos Xygkakis. This encouraged AstroBank’s board of directors to call for an expansion into other business sectors, including shipping finance. “The bank took on a shipping finance expert and a marine insurance specialist,” said Mr Xygkakis. The first shipping finance loan was approved and the funds drawn-down at the end of 2018. The bank has provided loans locally. AstroBank has been actively expanding, having acquired USB Cyprus and submitted a successful bid for the acquisition of NBG Cyprus. Like the other banks now active in Cyprus, AstroBank is confident that the revival is on a firm footing.