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Shipping, Offshore & Oil Services Presentation Stockholm - - PowerPoint PPT Presentation

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Shipping, Offshore & Oil Services Presentation Stockholm February 13, 2012 Hans C. Kjelsrud, Head of Shipping, Offshore and Oil Services Disclaimer This presentation contains forward-looking statements that reflect managements current

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Shipping, Offshore & Oil Services Presentation

Stockholm February 13, 2012 Hans C. Kjelsrud, Head of Shipping, Offshore and Oil Services

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Disclaimer

This presentation contains forward-looking statements that reflect management’s current views with respect to certain future events and potential financial performance. Although Nordea believes that the expectations reflected in such forward-looking statements are reasonable, no assurance can be given that such expectations will prove to have been

  • correct. Accordingly, results could differ materially from those set out in the forward-looking

statements as a result of various factors. Important factors that may cause such a difference for Nordea include, but are not limited to: (i) the macroeconomic development, (ii) change in the competitive climate, (iii) change in the regulatory environment and other government actions and (iv) change in interest rate and foreign exchange rate levels. This presentation does not imply that Nordea has undertaken to revise these forward-looking statements, beyond what is required by applicable law or applicable stock exchange regulations if and when circumstances arise that will lead to changes compared to the date when these statements were provided.

2 •

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SLIDE 3

Key messages

  • Nordea is a globally leading shipping and offshore bank with strong long

term relationships with major shipping and offshore companies

  • Operating profit after loan losses of EURm 233 in 2011 – third highest

ever

  • Near term outlook is weak for crude tankers, dry cargo and

containerships but robust for offshore, oil services, cruise and LNG

  • Orderbooks for major shipping segments are gradually reducing and we

are getting closer to a balanced market

  • Our strategy and commitment to the industry remains intact

3 •

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SLIDE 4
  • About our division
  • Financial results
  • Shipping markets
  • Offshore markets
  • Cruise and ferry markets
  • Risk management
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SLIDE 5

Our business

  • A globally leading industry bank with a strong international brand

name and robust historical returns

  • Inherently cyclical and volatile markets, but our loan portfolio is well

diversified across segments, geography and clients

  • Long standing relationships with the worlds leading shipping, offshore

and cruise companies

  • Consistently ranked as a global leader in loan syndications
  • Presence in all Nordic and key international markets

5 •

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SLIDE 6

Our strategy

  • Our strategy is global, but our core markets are Europe, North America

and selected countries in Asia

  • Focus on risk management, capital efficiency, and profitability
  • Broad relationships with large, transparent companies that own and
  • perate modern assets
  • Market leadership built on strong industry and credit skills
  • Leverage our relationship platform to grow products sales
  • Our loans should generally be secured by 1st priority mortgages on

modern assets

6 •

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SLIDE 7

Diversified and balanced portfolio

7 •

Segments Geography Clients

Diversified across:

Exposure of EURm 19,700 with drawn loans of EURm 13,600

Drilling Rigs 10% Supply Vessels 7% Integraded Oil Services 4% FPSO / FSO 3% Other Oil Services 2% Cruise 4% Ferries / Ropax 2% Miscellaneous 11% 11 % 10% 8% 6% 6% 4% 3% 2% 2% 1% 1% Shipping 58 %

Crude Tankers Dry Cargo Product Tankers Chemical Tankers Car Carriers Gas – LNG Gas - LPG RoRo Container Vessel Multi Purpose Other

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SLIDE 8

Competitive landscape

  • Ship finance market dominated by European banks
  • Number of competitors and lending capacity significantly reduced since

start of financial crisis

  • New transactions executed on conservative structures
  • Attractive pricing environment with new transactions priced in range of

250 – 400 bps

  • Recently higher activity within the offshore and oil services segment than

in shipping

  • Limited number of capable lead banks for large transactions

8 •

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SLIDE 9

A typical financing

  • A fleet of modern ships or offshore assets
  • Tenor of 5-7 years
  • 1

st priority mortgages in the assets financed

  • Loan-to-value ratio of 50-75%
  • Loan repayment profile steeper than asset depreciation
  • Minimum security covenant of 120 -140%
  • Covenants in respect of net worth, cash flow, leverage and liquidity

9 •

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SLIDE 10
  • About our division
  • Financial results
  • Shipping markets
  • Offshore markets
  • Cruise and ferry markets
  • Risk management
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SLIDE 11

Financial results (2006 – 2011)

11 •

In EURm 2006 2007 2008 2009 2010 2011 Total income 216 236 313 370 393 433 Total expenses (42) (45) (50) (49) (56) (64) Profit before loan losses 174 191 263 321 336 369 Loan losses, net 1 1 (11) (96) (45) (135) Operating profit 175 192 253 225 292 233 Lending volume 9.371 11,253 13,820 12,852 13,608 13,561

RAROCAR 28% in 2011 Exceeding Nordea Group’s target of 21%

From 2008 to 2011 total income is up 38% while lending volume is down 2%

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SLIDE 12

Continued increase in credit spreads

12 •

  • We expect credit spreads to

continue to increase

  • New loans are typically

priced between 250 and 400 bps

  • Continued imbalances in

supply and demand for financings

(*) From 2010 spreads are affected by a new funds transfer pricing model

Basis points

20 40 60 80 100 120 140 160 180 200 Q1/06 Q2/06 Q3/06 Q4/06 Q1/07 Q2/07 Q3/07 Q4/07 Q1/08 Q2/08 Q3/08 Q4/08 Q1/09 Q2/09 Q3/09 Q4/09 Q1/10 Q2/10 Q3/10 Q4/10 Q1/11 Q2/11 Q3/11 Q4/11

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SLIDE 13
  • About our division
  • Financial results
  • Shipping markets
  • Offshore markets
  • Cruise and ferry markets
  • Risk management
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SLIDE 14

Orderbook shipping (as % of fleet)

14 •

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

1996-01 1996-09 1997-05 1998-01 1998-09 1999-05 2000-01 2000-09 2001-05 2002-01 2002-09 2003-05 2004-01 2004-09 2005-05 2006-01 2006-09 2007-05 2008-01 2008-09 2009-05 2010-01 2010-09 2011-05 2012-01

Tanker Bulker Containerships

Source: Nordea/Clarksons

  • Orderbooks peaked in 2008
  • Limited contracting of new

vessels since then

  • Present orderbooks

probably overstated

  • Limited new orders will be

key to restore market balances

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SLIDE 15

Dry bulk freight rates and values (2001 – 2012)

15 •

Source: Nordea/Clarksons

  • 20

40 60 80 100 120 140 2 000 4 000 6 000 8 000 10 000 12 000 Value USDm Freight Index

Freight Index - BDI Value - Capesize 10Y Value - Capesize. NB

  • Currently at record low

levels, high volatility

  • Weak outlook for the

next 12 months

  • Outlook hampered by

double digit annual fleet growth through 2012

  • Demand dependent on

Chinese import of iron

  • re as input to steel

production

Orderbook 30%

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SLIDE 16

Crude tankers freight rates and values (2001 – 2012)

16 •

20 40 60 80 100 120 140 160 180 500 1 000 1 500 2 000 2 500 3 000 3 500 Value USDm Freight Index Freight Index - BDTI Value - VLCC 10Y value - VLCC NB Source: Nordea/Clarksons

  • Weak earnings and falling

asset values during 2011

  • Charter preference for

modern tonnage

  • Older vessel uneconomical

due to high bunker consumption

  • Strong Chinese growth

partially offset by dampened OECD oil demand

Orderbook 20%

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SLIDE 17

Product tanker freight rates and values (2001 – 2012)

17 •

Source: Nordea/Clarksons 10 20 30 40 50 60 200 400 600 800 1 000 1 200 1 400 1 600 1 800 2 000 Value USDm Freight Index Freight Index - BCTI Value - MR 45k. 10Y Value - MR 47k. NB

  • Deliveries peaked earlier

than for crude tankers

  • Modest product tanker
  • rderbook
  • Closer to market balance

Orderbook 11%

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SLIDE 18

Chemical tankers freight rates and values (2001 – 2012)

18 •

Source: Nordea

  • 0,50

1,00 1,50 2,00 2,50 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Freight & Value Index

Freight index. 1Y TC Value index. NB Value index. 5Y

  • Modest freight rates since 2008

as double digit fleet growth coincided with weak trade development

  • Increased cargo volumes, but

suffers from overhang of capacity

  • Small orderbook is a key factor

for improved market ahead

Orderbook 9%

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SLIDE 19

Container ships freight rates and values (2001 – 2012)

19 •

Source: Nordea/Clarksons

  • 10

20 30 40 50 60 70 80 50 100 150 200 250 Value USDm Freight Index Freight Index Timecharter - Container Value - 3.5k teu. 10Y Value - 3.5k teu NB

  • Marginal exposure for

Nordea

  • Reduced rates and

softening vessel values through 2011

  • Modest consumer

demand in western economies a main contributor

  • Signs of improvements

in the US economy positive

  • Assumed continued

pressure on rates and values the next 12 months

Orderbook 27%

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Other shipping markets

  • Liquified Natural Gas – LNG
  • Strong present market
  • Realisation of important LNG export projects in the Middle

East have lifted fleet utilisation and profitability

  • Positive outlook
  • Liquified Petroleum Gases – LPG
  • Strong freight market through the 2nd half of 2011
  • Major contributor were high Middle East LPG exports

(+17%) and low fleet growth (2%)

  • Positive market conditions expected ahead
  • Car carriers
  • Highly industrialised segment with limited fleet growth
  • Significant scrapping during 2009 helped restore the

market

  • Robust demand from US consumers
  • Conditions expected to remain favourable

20 •

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SLIDE 21

Factors that could improve market outlook

  • Scrapping
  • Charterer preference
  • Delays, cancellations and

conversions

  • Slow steaming
  • Lay up
  • Floating storage
  • Geopolitical events
  • Embargo against Iran
  • Unrest in Libya

21 •

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SLIDE 22
  • About our division
  • Financial results
  • Shipping markets
  • Offshore markets
  • Cruise and ferry markets
  • Risk management
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SLIDE 23

Drilling rigs – day rate development from 2001 to 2012

23 •

Source: Nordea/ODS Petrodata Source: Nordea/ODS Petrodata 100 000 200 000 300 000 400 000 500 000 600 000 700 000

jan 2001 jan 2002 jan 2003 jan 2004 jan 2005 jan 2006 jan 2007 jan 2008 jan 2009 jan 2010 jan 2011 jan 2012

USD/day

Semi-submersible rigs Drillships

  • Strong industry

fundamentals driven by high

  • il price and increased E&P

spending

  • Global fleet of modern
  • ffshore drilling units at

close to full utilization

  • Incremental rig demand from

West Africa, US Gulf, Brazil and South-East Asia

  • Capacity added generally
  • nly against 3 – 5 years

contract with strong counterparts

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SLIDE 24

50 000 100 000 150 000 200 000 250 000

feb-05 jul-05 dec-05 maj-06

  • kt-06

mar-07 aug-07 jan-08 jun-08 nov-08 apr-09 sep-09 feb-10 jul-10 dec-10 maj-11

  • kt-11

AHTS + 15,000 bhp PSV + 3,000 dwt

Supply vessels – day rate development from 2005 to 2012

24 •

Source: Nordea/ODS Petrodata

  • North Sea market usually has

a soft winter season

  • High demand driven by

increased oil and gas production from offshore deepwater fields

  • Strong demand for modern

sophisticated vessels

  • Relatively large orderbook

could limit future rate increase

North Sea

USD/day

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SLIDE 25
  • About our division
  • Financial results
  • Shipping markets
  • Offshore markets
  • Cruise and ferry markets
  • Risk management
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SLIDE 26

Cruise and ferries

  • Ferry and Ropax
  • Our exposure concentrate on major operators on the

northern European trade lanes

  • Significant barriers to entry and a highly concentrated

supply side in respective regions

  • The outlook will be closely linked to the development in the

northern European economies

  • Cruise
  • Industry dominated by three major players with 80% market

share

  • Remains profitable through economic cycles by flexible

pricing and product development

  • Profitability dependent on the US and European economies

26 •

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SLIDE 27
  • About our division
  • Financial results
  • Shipping markets
  • Offshore markets
  • Cruise and ferry markets
  • Risk management
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SLIDE 28

Risk management framework

  • Credit Policy reviewed and approved annually by the Board of Director’s

Risk Committee, laying down principles for lending and customers

  • An overall cap on shipping and other segments exposure is set
  • Main rule is secured lending limited to 75% of market value of modern

collateral vessels, protected by financial covenants

  • Target a diversified Nordic and international credit portfolio with the

leading names in each segment

28 •

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SLIDE 29

Historical loan losses (2001 – 2011)

29 •

In EURm In bps

  • 20

20 40 60 80 100 120

  • 20

20 40 60 80 100 120 140 160 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 Loan loss, net In bps

2005 – 2008: Average loan margins ~ 100 bps 2011: Average loan margins ~ 200 bps

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SLIDE 30

Loan losses analysis (2008 - 2012)

  • More than one third of our aggregate loan losses stem from certain

holding company loans secured by shares and not by shipping and

  • ffshore mortgages
  • Concentration of loan losses in the product and chemical tanker

segments

  • Proportionally higher losses for smaller clients and limited partnerships

(KS financings)

  • Lower losses in our international branches than in our home markets

30 •

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SLIDE 31

Managing throughout the shipping cycle

  • Tightening our credit standards
  • Focus on our relationship strategy with leading companies within each

segment

  • Dedicated workout and restructuring team
  • Increased frequency of stress tests for early detection of problems
  • Accelerate against our collateral is always last resort, but we will not

hesitate to take firm action, if needed

31 •

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SLIDE 32

Key messages

  • Nordea is a globally leading shipping and offshore bank with strong long

term relationships with major shipping and offshore companies

  • Operating profit after loan losses of EURm 233 in 2011 – third highest

ever

  • Near term outlook is weak for crude tankers, dry cargo and

containerships but robust for offshore, oil services, cruise and LNG

  • Orderbooks for major shipping segments are gradually reducing and we

are getting closer to a balanced market

  • Our strategy and commitment to the industry remains intact

32 •

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Shipping, Offshore & Oil Services Presentation

Stockholm February 13, 2012 Hans C. Kjelsrud, Head of Shipping, Offshore and Oil Services