Moody’s downgraded HSH Nordbank’s standalone financial strength rating, citing the impact of the deepening crisis in the shipping market on the world’s biggest ship finance bank.
The ratings agency said the downgrade to “E,” equivalent to a credit assessment of “caa2,” reflects the “significant” challenges facing the German bank as it seeks to stabilize its franchise and comply with compensation measures for earlier state aid.
Moody’s expects the Hamburg-based bank to seek additional support from its owners, the federal states of Hamburg and Schleswig, because of the deterioration in the quality of its assets and the resulting pressure on capital.
“This support would imply an additional financial burden for the fragile group,” Moody’s said.
HSH Nordbank received a $41 billion state-funded bail out in 2011.
Moody’s said the downgrading also reflected uncertainty in the commercial real estate market, which continues to weigh heavily on HSH’s already poor asset quality.
Given the size of its exposure to shipping and real estate and the credit risk in these sectors, the bank” remains susceptible to market shocks or macroeconomic stress and vulnerable to further asset-quality deterioration in a severe downside scenario,” Moody’s said.
HSH shipping loan portfolio is estimated at $39 billion, including a large exposure to container ships, ahead of second-ranked DNB of Norway, which has a $26 billion loan book.