NEWS

DNB, the world leader in syndicated loans to shipping this year, said on
Friday its 0.2 percent non-performing loan rate for the sector is bound to rise
as crude transport rates stay weak and already low dry-bulk rates could fall
further.

Its shares rose 2.3 percent, outperforming a 0.7 percent rise in the OBX
index as investors have already priced in a downturn, with no more negative news
found in the company’s comments and ratings agency Fitch reaffirming its A+
rating.

“Everyone knows that they will have to take some losses in this area in the
years to come,” Per Groenborg, an analyst at Danske Markets said. “But still you
get the impression that they have a sensible grip on this business
area.”

“In my opinion it is impossible to attach anything negative to what they said
today, even though it’s clear that the shipping-book is a negative asset,”
Groenborg said.

DNB is one of the most exposed banks to the downturn in the global shipping
sector as over 10 percent of its loans are to the sector.

A slew of ships ordered when times were good has continued to be launched
this year, outpacing demand in the dry bulk and tanker markets, depressing
freight rates and battering ship owners’ earnings.

“With the shipping markets remaining where they are today, we must expect
some negative migration in the portfolio, but we do not expect dramatic shifts,”
Harald Serck-Hanssen, head of DNB’s shipping business told a conference
call.

DNB shares have fallen 32 percent since the start of the year and the fall
was aggravated by its heavy exposure to shipping.

“We stick to our ‘buy’ rating and believe the current share price reaction is
exaggerated,” Nordea Bank said in a research note.

“DNB has a proven track record of handling downturns in rates and vessel
values, which is why we are not overly concerned.”

FITCH REAFFIRMS RATING

Fitch added that DNB had resilient profitability and acceptable capital
ratios.

“As one of the leading global lenders to shipping, DNB will invariably be
affected by the cyclicality in the sector, although its long-standing
relationship with most of its customers and experience in the sector is likely
to mitigate this,” Fitch said in.

DNB said about 37 percent of the 86 billion crowns ($14.35 billion) on loan
to the traditional shipping sector were considered to be in the “most difficult”
segments of the industry.

“We hope for some of the factors to surprise us positively but we are
prepared for the worst in the dry bulk sector,” Serck-Hanssen said. “We have
considerable loss-absorbing capacity”.

Nordea, a rival in the shipping sector, said it aimed to maintain its
exposure to shipping in 2012 as some key segments, like the LNG market,
continued to offer value.

The bank said it may opt by choice to take a provision on performing loans
due to the market’s sluggish outlook.

DNB said the tanker market was the most distressed and there was little
improvement in sight for rates but the bank’s portfolio in the segment was
especially robust.

Rates in the dry bulk segment could fall even further in 2012 while container
rates were seen improving slightly, DNB said.

It said it saw restructuring taking place in the container market, with some
players exiting that business or mergers and acquisitions taking place.