RBS 2009 Annual Report Download - page 141

Business review
Risk, capital and liquidity management
139RBS Group Annual Report and Accounts 2009
The Group’s shipping portfolio is primarily focused on fully secured
mortgage finance business in the dry bulk and tanker sectors, with a
limited exposure to container vessels.
The performance of the sector over the past twelve months has been
materially impacted by both the global downturn and the high volume of
new capacity that has been delivered and will continue to come on
stream into 2011.
The Group’s strategy is to focus on cash flows relating to the ships
financed and to work with long-term industry participants in Europe and
North America where the Group has long-standing relationships and
where the companies have demonstrated an ability to withstand cyclical
down turns with a consistent track record through cyclical volatility.
Asset selection has been to focus on modern tonnage (average vessel
age is eight years).
The Group has refined its strategy during the course of 2009 to define a
core business focussed on a well established client base of owners in
Europe and North America where the Group has long-standing
relationships with companies that have a demonstrated ability to
withstand cyclical downturns.
The performance of the portfolio reflects a rising level of stress with a
number of transactions restructured in response to asset price
reductions and security covenant breaches. The value of the fleet is
reviewed on a quarterly basis and a large majority of deals remain fully
secured. There have been few instances of payment default and in the
majority of cases owners have supported transactions via cash
injections. Cases on the Group’s watch list that are more closely
monitored and controlled have increased and now stand at £1 billion, or
7% of the total portfolio.
Shipping
2009 2008
Core Non-Core Total Total
Sector £m £m £m % £m %
Dry bulk 2,568 777 3,345 28 3,775 28
Tankers 3,103 1,640 4,743 39 4,975 37
Container 756 685 1,441 12 1,256 10
Gas/offshore 137 1,851 1,988 16 1,786 13
Other 168 419 587 5 1,549 12
6,732 5,372 12,104 100 13,341 100
Note:
(1) Figures shown relate to direct shipping financing exposure and do not include related operating lease and counterparty exposures of £1.1 billion in 2009 and £3.3 billion in 2008.