MARITIME & MERCHANT BANK ASA Maritime & Merchant Bank ASA
Financial Report
31.03.2024
Financial Report 31.03.2024
Table of Contents
FINANCIAL REPORT 31.03.2024____________________________________________________________ 2
STATEMENT OF PROFIT & LOSS___________________________________________________________ 12
BALANCE SHEET _______________________________________________________________________ 13
STATEMENT OF EQUITY _________________________________________________________________ 14
STATEMENT OF CASH FLOWS ____________________________________________________________ 15
NOTES 31.03.2024._____________________________________________________________________ 16
NOTE 1, REPORTING ENTITY _______________________________________________________________ 16
NOTE 2, GENERAL ACCOUNTING PRINCIPLES ____________________________________________________ 16
NOTE 3, FUNCTIONAL AND PRESENTATION CURRENCY ______________________________________________ 16
RISK_______________________________________________________________________________ 16
NOTE 4, RISK _________________________________________________________________________ 16
Risk Management and Capital Adequacy________________________________________________ 16
Capital Adequacy __________________________________________________________________ 17
Credit Risk ________________________________________________________________________ 17
Loss allowance ____________________________________________________________________ 18
Interest Rate Risk __________________________________________________________________ 24
Reference rates____________________________________________________________________ 24
Currency Risk _____________________________________________________________________ 24
Liquidity Risk ______________________________________________________________________ 25
Operational Risk ___________________________________________________________________ 25
INCOME AND COST __________________________________________________________________ 25
NOTE 5, TAXATION OF PROFIT ______________________________________________________________ 25
ASSETS ____________________________________________________________________________ 26
NOTE 6, FINANCIAL INSTRUMENTS AT FAIR VALUE. ________________________________________________ 26
NOTE 7, FINANCIAL PLEDGES ______________________________________________________________ 27
NOTE 8, OTHER INTANGIBLE ASSETS AND FIXED ASSETS _____________________________________________ 27
LIABILITIES _________________________________________________________________________ 27
NOTE 9, OTHER ASSETS AND FINANCIAL DERIVATIVES.______________________________________________ 27
NOTE 10, OTHER LIABILITIES AND ACCRUED COST_________________________________________________ 28
NOTE 11, SHARE CAPITAL AND SHAREHOLDER INFORMATION _________________________________________ 28
APPENDIX 1, ALTERNATIVE PERFORMANCE MEASURES _______________________________________ 29
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Financial Report 31.03.2024
Financial Report 31.03.2024
The profit for the period before tax is USD 4 521 598 (USD 4 906 213 - 31.03.2023). Return on equity before tax was 14.3% (16% in Q1-2023). The bank has not any non-performing loans and zero credit losses during the period.
The major global geo-political tensions, first and foremost caused by the Ukrainian-Russian war the Israel/Hamas/Hizbollah conflict and the Red Sea unrest caused by attacks for the Yemen based Houtis continue to have a propound effect on the shipping markets - and more or less entirely with a positive sign for the shipping markets.
The various disruptions causing longer sailing distances and congestion seem to have a long-lasting effect on the markets. There is always a certain risk associated with long horizons in shipping, however, it seems to be a common view that the various sanctions imposed towards Russia will continue to be in force even after the war has ended.
The tanker market, both the transport of heavy oil and petroleum products, is experiencing stable earnings over time at a historically high level, and with a corresponding increase in ship values, Clarksons SH Price Index suggest a price increase 3 months trend of 3%.
The dry cargo market has a somewhat more varied performance than tank, but on average the earnings in the trip charter market are approx. 20% so far this year above the same figure from 2023. The capesize segment has surprised positively and contributed to this development, among other things due to a marked increase in Chinese ore imports from Brazil (with a corresponding increase in export of steel products)
In the dry cargo segment, there has also been great interest in buying second-hand ships, so great in fact that the trend in 2024 is ahead of the record year 2022 when 60.9 million dwt were traded. Not surprisingly, the values of 5- and 10-year-old tonnage have reached record levels.
Much has been said and written about the container market in the post pandemic period. We dare say that the positive trend we saw during the 4th quarter of 2023, and which has continued into 2024 has come as a surprise to many. For example, a 6,800 TEU earned in 2023 an average of USD 33,000/day and the earnings so far in 2024 is USD 44,500/day. We admit that there are many uncertainties in the way forward, including a total order book for the segment of over 20% of the sailing fleet and the question how and when the older part of the fleet will be phased/forced out of the market, but the positive development so far has once again emphasized the unpredictability of seaborne transport.
The global economic growth rate (GDP) continues to move sideways with a growth rate in the region of 3.0/3.2% (OECD). China and the US are at 5.3 and 3% respectively in the first quarter of 2024, but the Eurozone continues to deliver disappointing figures around 0 %. Looking at the figures for industrial production, the picture is basically the same. Flat or event sliding numbers for the Eurozone and the western hemisphere, while China, Taiwan and South Korea are showing growth. Isolated these facts are not good news for the shipping markets but as pointed out above, the various disruptions caused by geopolitical disturbances are leading to more ton-miles.
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Financial Report 31.03.2024
Profit for the period (01.01-31.03)
The profit for the period before tax is USD 4 521 599 (USD 4 906 213 - 31.03.2023) and profit after tax is USD 3 391 199 (*) (USD 3 679 592- 31.03.2023).
Net interest income and related income totalled USD 6 566 272 (USD 6 656 675), and other Income (including financial derivatives and fixed income instruments) was USD 356 379 (USD 214 254).
Operating expenses before impairments and losses totalled USD 2 238 239 (USD 2 126 551). The Cost/Income ratio came in at 32.3% (31%).
Loss allowance (Expected Loss) increased with USD 162 812 (decreased USD 161 835), due to increased lending. Credit Loss (Write Offs) was USD 0 (USD 0).
2024 | 2023 | 2023 |
01.01 - 31.03 | 01.01 - 31.03 | 01.01- 31.12 |
Interest Income | 12 578 504 |
Interest Expense | -6 012 232 |
Net Interest Income | 6 566 272 |
Other Income | 356 379 |
Total Income | 6 922 651 |
Operating Expense | -2 238 239 |
Operating Result | 4 684 411 |
Loss Allowance | -162 812 |
Write Off (Credit Loss) |
11 231 841 -4 575 166
6 656 675
214 254
6 870 929
-2 126 551
4 744 379
161 835
45 318 489 -19 139 633
26 178 856
-
066
27 135 922 -8743 298
18 392 624
- 492
Sum Impairment | -162 812 |
Profit Before Tax | 4 521 599 |
Tax* | -1 130 400 |
Profit After Tax* | 3 391 199 |
*see deferred taxes and payable tax on page 8
161 835
4 906 213
-1 226 621
3 679 592
179 492
18 572 116 -5672 129
12 899 987
Net interest income and related income
Net interest income and related income totalled USD 6 566 272 in Q1 (USD 6 656 675 in Q1 2023).
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Financial Report 31.03.2024
Net interest margin is 4.6% (unchanged from in Q1-2023), down from 4.9% in Q4-2023, due to loan disbursements late in the quarter as well as downward pressure on loan margins.
Money market rates (daily average) in USD and NOK are stable
(Source: Infront, Maritime & Merchant Bank ASA)
Net other Income
Net other income amounted to USD 356 379 in Q1 2024 (USD 214 254 in Q1-2023). ¨æå
Value adjustments on derivatives and hedging instrument in Q1 was USD 153 657 (USD 89 297 in Q1-2023).
Net value adjustments on bonds was USD 109 193 (USD -17 333 in Q1-2023).
The principle of assessing financial instruments measured at fair value may lead to significant variation of the Bank's result between quarters.
Net commissions amounted to USD 93 529 in Q1 (USD 142 293 in Q1-2023).
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Financial Report 31.03.2024
Total operating expenses before impairments and losses
Operating expenses before impairments and losses totalled USD 2 238 239 in Q1 (USD 2 126 551 in Q1-2023). Salaries and personnel expenses, including social costs, amounted to USD 1 635 811 (USD 1 474 933 in Q1- 2023) and account for the largest proportion of the overall operating expenses.
Total depreciation and impairment of fixed and intangible assets amounted to USD 81 764 (USD 110 681 in Q1-2023). The Cost/Income ratio came in at 32.3% in Q1 (31% in Q1-2023).
Operating result
Operating result in Q1 amounted to USD 4 684 411 (USD 4 744 379 in Q1-2023).
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Financial Report 31.03.2024
Loan and Loan Loss provisions
Maritime & Merchant Bank ASA has lent USD 378 747 464 (USD 349 251 735 in Q1 2023) to customers.
The Bank has made USD 1 897 341 (USD 1 752 184) in loss allowance (IFRS 9). Change in loss allowance this quarter amounts to USD 162 813 (USD -161 835).
The credit quality of the majority of the loans (measured by PD - Probability of Default) to the bulker and container segment is on satisfactory levels, as we have seen improvement in the bulker rates compared to last year. The credit quality (measured by PD) of the tanker portfolio has remained strong due to the rates. The credit quality of the offshore loans are also very satisfactory.
Higher Loss Allowances at the end of Q1 compared to those at the end of Q1 2023 is due to increased lending.
All commitments (100 %) are in step 1 (100% in Q3-2023).
The bank has no defaulted or non-performing loans by the end of the Q1.
Loss allowance | 31.03.2024 | 31.03.2023 | 31.12.2023 | 31.12.2022 | ||||
Step1 | 1 421 | 328 | 1 205 | 351 | 1 298 | 277 | 1 345 | 649 |
Step2 | 476 013* | 546 833* | 436 250* | 568 370* | ||||
Step3 | 0 | 0 | 0 | 0 | ||||
Sum | 1 897 | 341 | 1 752 | 184 | 1 734 | 527 | 1 914 | 019 |
Loss Allowance/Loan | ||||||||
Ratio | 0,50 % | 0,50 % | 0.51% | 0.51% | ||||
Impairments | 0 | 0 | 0 | |||||
Non performing Loans | 0 | 0 | 0 | 0 |
*Loss allowance in step 2 is a result of anticipated migration in the negative macro scenario
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Financial Report 31.03.2024
Profit before tax
Profit before tax amounted to USD 4 521 598 Q1 (USD 4 906 213 in Q1-2023).
Return on equity before tax was 14.3% (16% in Q1-2023).
Deferred Taxes and payable tax
The Bank operates with USD as functional currency.
In the tax accounting, both P&L and the major part of assets and liabilities are being converted from USD to NOK, including any effect currency fluctuations would have on the equity of the Bank.
The volatility of the NOK against the USD has given the Bank an unintended volatility in the tax expense, due to currency gains/losses related to our equity.
The Bank has started a process for a rule adjustment for the basis of tax calculation that prevents unintended effects for the future.
Common 25% corporate tax rate is used in the first quarter of 2024.
If there is no decision (or a negative one) from the Ministry of Finance within the fiscal year, we will incorporate a full agio effect in Q4 2024. The agio effect (extra taxable income/cost) will be a result of the USDNOK exchange rate at year end. USDNOK 31.12.2023 was 10.16715, and ended at 10.7939 as of 31.03.2024.
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Financial Report 31.03.2024
The agio effect (unintended taxable income/cost) for YTD 2024 is positive NOK 81 103 716. This "phantom" income will result in an increased tax of NOK 20 275 929 (USD 1 878 462).
See Note 5, Tax Calculation.
Deposit and Liquidity
Customer deposits amounted to USD 431 453 157 in Q1-2024 (USD 414 913 238 in Q1-2023).
The deposit to loan ratio was 114% at the end of Q1 2024 (119% in Q1 -2023).
The liquidity situation has been good throughout the quarter. Surplus liquidity of about USD 211 million was mainly invested in interest-bearing securities, deposits in major banks and in Bank of Norway. The securities investments are in bonds with good liquidity and very low risk.
The Bank's short-term liquidity risk measured by LCR (Liquidity Coverage Ratio) was 710% (above a minimum requirement of 100%), and the long-term liquidity risk measured by NSFR (net Stable Funding Ratio) was 158% (above a minimum requirement of 100%).
Total Assets and Lending
Total assets ended at USD 590 123 284 in Q1 2024 (USD 577 592 048 in Q1 2023).
Lending to customer increased from USD 342 910 692 in Q4 2023 to USD 378 747 464 in Q1 2024 (USD 349 251 735 in Q1-2023).
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Financial Report 31.03.2024
Solvency
Core equity ratio (CET1) was 32.0% 31.03.2024 (35.0% 31.03.2023).
The Bank has not issued any subordinated or perpetual bonds.
The Bank paid USD 5 159 995 in dividend for 2023 in April-2024.
Risk factors
Credit risk
The average weighted quality of the portfolio is moderate risk, and the portfolio has a strong concentration around the mid-point. .
All commitments are secured with 1st priority mortgage on vessels, and the large majority of those were secured within 50-55% of appraised values when granted. In combination with an estimated moderate Default Probability, the moderate loan-to-value ratios provide for a sound credit portfolio with a limited potential for future losses, in particular since the vessels' values for most clients have a good margin in relation to the outstanding exposures.
In addition to estimating the Default Probability, we also estimate the Loss Given Default on each exposure. Based on the low leverage of financing in combination with financing non-specialized tonnage with strict covenants, the Loss Given Default for the loan portfolio is satisfactory.
The Bank's estimated risk cost, Expected Loss, is calculated as Probability of Default multiplied with Loss Given Default. It is included in all internal return on capital estimations in connection with granting new loans. The portfolio is distributed in risk classes according to collateral and internal risk classification. The loan portfolio is diversified and is distributed on bulk carriers (51.3%), tankers (29.9%), container vessels (3.5%), LPG (gas) (2.1%), offshore/supply (13.1%) and specialized (0%).
The Bank's internal credit strategy has limits for maximum exposure to the various shipping segments, and Acceptable Risk Criteria form guidelines for the lending strategy.
ESG risk
The International Maritime Organization's (IMO) regulations with regards to the Carbon Intensity Indicator
(CII) was introduced on 1 January 2023. This measures how much CO2 each ship emits annually. The vessels have been measured throughout 2023 for a 12-month emission period based on a detailed and extensive
formula. Each vessel has been assigned a rating as of 31.3.2024 from A to E based on the prior year's data.
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Maritime & Merchant Bank ASA published this content on 16 May 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 16 May 2024 10:12:57 UTC.
