FOCUSED. DIVERSIFIED. COMPETENT. TRUSTWORTHY. Tanker financing boom or bust? ALMC - Asian Logistics and Maritime Conference, Hong Kong 23. November 2017
Disclaimer This presentation has been prepared by DVB Bank Group. This presentation does not contain or constitute an offer, or the solicitation of an offer, to buy or subscribe for securities to any person. This document is not a prospectus. The presentation is a short summary description of certain aspects in respect of DVB Bank Group. It may not contain all relevant information in respect of the topics covered. This presentation is therefore not a sufficient basis for any investment decision in respect of any securities of DVB Bank Group. This presentation contains forward-looking statements which include statements about our beliefs and expectations as well as the assumptions underlying them. Such statements speak only as of the day they are made since they are based on plans, estimates and projections currently available to the management of DVB Bank Group. Forward-looking statements contain risks and uncertainties, and it cannot be guaranteed that they will turn out to be correct in light of future events or developments. Information and opinions contained in this presentation have been compiled or arrived from sources believed by DVB Bank Group to be reliable. Any statements about DVB Bank Group s market position are based on DVB Bank Group s own estimates, unless explicitly stated otherwise herein. Although the information shown herein has been taken from sources which are believed to be reliable or is based on DVB Bank Group s own estimates, no warranty or representation is made as to the correctness, completeness and accuracy of the information or the assessments made on its basis. DVB Bank Group accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this presentation. Page 2
Contents 01/ DVB At a glance 02/ DVB Shipping Finance portfolio 03/ Tanker market overview & outlook 04/ Shipping Finance Outlook: boom or bust? Page 3
01/ DVB At a glance
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Locations DVB Bank Group 2017 10 offices Amsterdam London Oslo Hamburg Frankfurt/Main New York Curaçao Athens Tokyo Singapore Page 6
Total customer lending volume 24 bn Customer lending volume¹ +1,195% 2.0 3.0 4.2 7.7 8.6 8.0 7.6 8.2 10.8 12.0 14.4 18.5 17.3 19.2 21.7 22.2 20.8 23.3 25.3 25.9 1997 1999 2001 2003 2005 2007 2009 2011 2013 31 Dec 2016 Customer lending volume 1 Aggregate of loans and advances to customers, guarantees and indemnities, irrevocable loan commitments and derivatives nominal volume Page 7
Rating Slide 8
02/ DVB s Shipping Finance portfolio Shipping Finance In-depth expertise Page 9
As of 31 December 2016 Page 10
As of 31 December 2016 Page 11
Shipping Finance portfolio (30 Jun 2017: 11.0 bn) Total lending volume by vessel type Total lending volume by country risk 1.3% Ferries, passenger vessels 1.7% Cruise ships 3.6% Offshore 2.7% Container boxes 3.1% Car carrier 1.3% Others 3.9% Middle East & Africa 0.9% South & Central America 16.1% Container carriers 48.1% Tankers thereof: 14.4% Crude oil tankers 11.6% Gas tankers 11.3% Product tankers 10.8% Chemical tankers 15.2% Asia 55.2% Europe 25.7% Bulk carriers 21.2% North America Page 12
03/ Tanker market overview and outlook
1990-Jan 1990-Sep 1991-May 1992-Jan 1992-Sep 1993-May 1994-Jan 1994-Sep 1995-May 1996-Jan 1996-Sep 1997-May 1998-Jan 1998-Sep 1999-May 2000-Jan 2000-Sep 2001-May 2002-Jan 2002-Sep 2003-May 2004-Jan 2004-Sep 2005-May 2006-Jan 2006-Sep 2007-May 2008-Jan 2008-Sep 2009-May 2010-Jan 2010-Sep 2011-May 2012-Jan 2012-Sep 2013-May 2014-Jan 2014-Sep 2015-May 2016-Jan 2016-Sep 2017-May $'000/day 01/ DVB At a glance 02/ DVB Shipping Finance portfolio 03/ Tanker market overview & outlook 04/ Shipping Finance Outlook: boom or bust? Historical Shipping Market Cycle - Tanker 90 80 70 60 50Financial Crisis (1992-1993) 40The collapse of the European exchange rate mechanism 30 20 Asian Financial Crisis (1997-1999) Global Economies upswing (2002-2008) Chinese economy boom trigged increase in trades Tech. Investment bubble (1999-2002) Global Financial Crisis (2008-2009) Temporary rebound in 2010 post credit crisis Further Recession (2016 20??) Collapse of oil prices (2014-2016) Temporary rebound due to short-term factors 10 0 Average Weighted Earnings All Tankers Average Earnings Source: Clarksons, DVB Shipping and Offshore Research Slide 14
World GDP Growth 01/ DVB At a glance 02/ DVB Shipping Finance portfolio 03/ Tanker market overview & outlook 04/ Shipping Finance Outlook: boom or bust? Demand Dynamics World GDP Growth vs. Oil Demand OECD vs. Non-OECD Oil Demand Mn bbls/day 3.7% 3.6% 3.5% 3.4% 3.3% 3.2% 3.1% 3.0% 2.9% 3.3% 3.4% 3.2% 3.1% 3.4% 3.6% 3.5% 3.4% Forecast 3.4% 106.0 104.0 102.0 100.0 98.0 3.3% 96.0 94.0 92.0 90.0 88.0 86.0 mio bbls/d 70.0 60.0 50.0 40.0 30.0 20.0 10.0 Forecast 2.8% 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 84.0 0.0 2015 2016 2017 2018 2019 2020 2021 2022 World GDP Growth Rate World Oil Demand OECD Non-OECD Source: IMF, IEA, EIA and DVB Shipping and Offshore Research Slide 15
20171002 20170906 20170810 20170717 20170619 20170523 20170427 20170331 20170307 20170208 20170112 20161215 20161118 20161025 20160929 20160905 20160810 20160715 20160620 20160524 20160428 20160404 20160308 20160210 20160114 20151221 20151125 20151030 20151006 20150910 20150817 20150722 20150626 20150602 20150506 20150410 20150316 20150218 20150122 20141224 20141128 20141103 20141008 20140909 20140813 20140718 20140623 20140528 20140501 20140404 20140311 20140212 20140116 01/ DVB At a glance 02/ DVB Shipping Finance portfolio 03/ Tanker market overview & outlook 04/ Shipping Finance Outlook: boom or bust? Demand Dynamics Oil Prices Developments $/barrel 140.00 West Texas Intermediate Grade European Brent Grade 120.00 100.00 80.00 60.00 40.00 20.00 0.00 Source: IEA and EIA Slide 16
Offshore E&P Spending outlook Mn US$ 500,000 450,000 400,000 350,000 300,000 250,000 200,000 150,000 100,000 50,000 Offshore E&P Spending - 2016 2017f 2018f 2019f 2020f 2021f Opex Capex < $50/bbl Capex $50-65/bbl Capex $65-85/bbl Capex > $85/bbl Capex Source: Rystad Energy, DVB Shipping and Offshore Research Slide 17
Supply Dynamics Age Range Number of vessels 2,500 DWT (`000) 250,000 2,099 2,000 200,000 1,632 1,500 150,000 1,000 1,046 100,000 740 566 500 237 297 316 50,000 - >30 yrs 25-29 yrs 20-24 yrs 15-19 yrs 10-14 yrs 5-9 yrs < 5 yrs Order Book 0 Number of vessels DWT '000 (RH) Source: Clarksons, IHS and DVB Shipping and Offshore Research Slide 18
Supply Dynamics Tanker Fleet Growth DWT (`000) Growth % 60 12% 50 10% 40 30 8% 20 6% 10 4% - -10 2% -20 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017e 2018e 2019e Delivered Scheduled Deliveries Scrapped Y-O-Y Fleet Growth (right axis) 0% Source: Clarksons, IHS and DVB Shipping and Offshore Research Slide 19
$ 000 /day 01/ DVB At a glance 02/ DVB Shipping Finance portfolio 03/ Tanker market overview & outlook 04/ Shipping Finance Outlook: boom or bust? Tanker Market Outlook Earnings 35 30 25 20 15 10 5 - Average Earnings All Tankers Average rate Base case High Case Low Case Source: Clarksons and DVB Shipping and Offshore Research Slide 20
2010 1Q 2010 2Q 2010 3Q 2010 4Q 2011 1Q 2011 2Q 2011 3Q 2011 4Q 2012 1Q 2012 2Q 2012 3Q 2012 4Q 2013 1Q 2013 2Q 2013 3Q 2013 4Q 2014 1Q 2014 2Q 2014 3Q 2014 4Q 2015 1Q 2015 2Q 2015 3Q 2015 4Q 2016 1Q 2016 2Q 2016 3Q 2016 4Q 2017 1Q 2017 2Q 2017 3Q F 2017 4Q F 2018 1Q F 2018 2Q F 2018 3Q F 2018 4Q F 2019 1Q F 2019 2Q F 2019 3Q F 2019 4Q 01/ DVB At a glance 02/ DVB Shipping Finance portfolio 03/ Tanker market overview & outlook 04/ Shipping Finance Outlook: boom or bust? Tanker Market Outlook Asset Values 160 5 Years Old Tanker Secondhand Price Index 140 120 100 80 60 40 20 0 Base case High Case Low Case Source: Clarksons and DVB Shipping and Offshore Research Slide 21
04/ Shipping Finance Outlook: boom or bust?
2016 Shipping finance lead table / Asian banks & leasing houses booming / TOP 10/20/30: 30% Asian institutions / Predominately Chinese leasing Slide 23
2016 Lending activity Chinese leasing on the rise / Despite challenging shipping markets, Chinese financial institutions rapidly grew their market share further during 2016. / TOP 10: 50% Chinese players / Leasing the main product / ~USD12 bn new business via Chinese institutions / Traditional finance slower, focus on core/ corporate clients / 2017: Eletson 4xLR2 (second hand) sale & lease back via CSIC Leasing (belongs to: China Shipbuilding Industry Corp.) Slide 24
Increasing requirements more red tape Source:ThomsonReuters Slide 25
Deal volume (US$m) Total No. of deals 01/ DVB At a glance 02/ DVB Shipping Finance portfolio 03/ Tanker market overview & outlook 04/ Shipping Finance Outlook: boom or bust? Global Syndicated Marine Finance Loan Volume (US$m) by World Region $120,000 $100,000 300 250 $80,000 $60,000 $40,000 $20,000 $- 2012 2013 2014 2015 2016 2017 Americas $11,614 $14,904 $21,389 $31,569 $15,706 $10,481 Asia Pacific $11,386 $18,482 $29,696 $19,852 $12,083 $4,048 EMEA $21,765 $33,157 $46,715 $50,025 $25,265 $11,828 Total $44,765 $66,543 $97,800 $101,446 $53,054 $26,357 Total No. of deals 184 203 236 261 200 96 200 150 100 50 0 Slide 26
30 year LIBOR rising trend Source: www.macrotrends.net Slide 27
Shipping Finance Outlook: boom or bust? Overview (1) / Key near-term issues: Basel IV regulations require to refocus on capital efficiency and non-risk-weighted-asset income (instead of loan production). / New requirements & more red tape: Compliance, KYC, / Regulatory burden may lengthen negotiations and approval process / Increasing long-term costs of liquidity; this has partially contributed to shorter loan tenors being preferred across all industries. Page 28
Shipping Finance Outlook: boom or bust Overview (2) / Challenging shipping and offshore markets: banks likely to continue to exit or scale down lending activity / New appetite for traditional shipping and offshore finance is likely to remain muted. / Lending capacity will either be reserved for existing and core clients or focus on credit quality and vessel employment. / Limited availability for finance of older tonnage and upgrades (e.g. BWTS, Scrubbers, Greenhouse gas). Page 29
Contact For further information please visit www.dvbbank.com After scanning this QR with your smartphone, you will have direct access to our website. Domenik Nizet Senior Vice President Shipping Finance Asia Pacific & Middle East Phone: +65 6511 3448 E-mail: domenik.nizet@dvbbank.com DVB Bank SE Singapore Branch 77 Robinson Road #30-02 Singapore 068896 info@dvbbank.com, www.dvbbank.com Page 30