A Shift in Strategy
Commerzbank AG, a German bank that has faced significant challenges due to the economic crisis, is pushing forward with its downsizing efforts. In a major move, the bank has announced that it will be shedding its 4.5 billion euro ($5.05 billion) portfolio of distressed shipping loans [^1^].
Swiftly Swapping Bonds
To achieve this, Commerzbank has returned its regulatory license to offer ship Pfandbriefe, which are secured bonds backed by shipping mortgages. In doing so, the bank has negotiated an exception to the regulation set by the German regulator BaFin. This exception allows Commerzbank to more easily replace the underlying shipping loans with publicly issued bonds, providing the bank with additional flexibility to downsize its ship funding business [^2^].
A Stronger Future
In recent years, the shipping industry has faced challenges due to an oversupply of vessels and sluggish global trade, and Commerzbank was hit hard by these circumstances. However, the bank has made significant progress in its efforts to reduce its exposure to shipping loans. As of March 31st, the bank’s portfolio stood at 4.5 billion euros, down from 20 billion euros in September 2012 [^3^].
A Path Forward
Commerzbank’s goal is to sell off the remaining 4.5 billion euros in shipping loans over the next two years. This significant step will enable the bank to reshape itself and operate from a stronger position. By taking decisive action, Commerzbank is demonstrating its commitment to restructuring and returning to a more stable and sustainable future [^4^].
Disclaimer: The image above is the logo of Commerzbank, used for illustrative purposes only.
[^1^]: Commerzbank is Back in the Black
[^2^]: Federal Financial Supervisory Authority
[^3^]: Commerzbank Announces Downsizing Plans
[^4^]: Commerzbank Sells Distressed Shipping Loans
