Maersk seeks role in trade finance as banks retreat

By Jacob Gronholt-Pedersen

COPENHAGEN (Reuters) - Maersk Line, the world's biggest container shipper, is venturing into trade finance, as it seeks to fill a lending gap left by indebted banks pulling out of the crisis-hit shipping industry.

Moving into traditional bank territory and further down the shipping value chain, Maersk Line, part of A.P. Moller-Maersk <MAERSKb.CO>, is offering to finance shipments and remove the paper trail from financing deals.

Maersk says it has no need to ask for collateral - one of the biggest headaches for banks and customers in trade finance deals - because it is carrying the goods on its vessels.

In trade finance, banks traditionally act as an intermediary for companies importing or exporting goods, but many are being driven out of shipping.

Those that remain have become more conservative in their financing, after some faced hefty fines for failing to spot abuses such as money laundering in their trade finance business.

"In many countries we're seeing banks drastically pulling back their operations in trade finance, especially for small and medium-sized enterprises. There is definitely an unmet market demand out there," Vipul Sardana, global director of trade finance at Maersk, said in an interview.

The World Trade Organisation has said a shortage of trade finance is the second-biggest obstacle to growth in global commerce.

The banking industry itself is seeking to simplify trade finance processes by developing blockchain technology, with advocates saying it has the potential to save billions of dollars in costs and speed up transaction times.

For Maersk the business is still nascent, having extended $140 million in trade finance since early-2016 to customers in India, Singapore, UAE, Spain, the Netherlands and the United States through a digital platform.

It aims to reach $200 million by the year end, all of which will go off the company's own balance sheet, Sardana said. Customers have reported savings of 15 to 30 percent compared to traditional trade finance instruments, said Sardana.

In the six countries where the service is offered, Maersk is only doing what regulators allow without a banking license.

But should the business grow, Sardana says Maersk will look at other options such as partnering with a bank or creating its own financial institution.

"It's not going to be a big bang global rollout, because it's very complex," said Sardana.

The move is also a part of Maersk's wider strategy to simplify things for the customer and capture a bigger part of the shipping value chain as it focuses on the transport and logistics part of its business.

The company gave an upbeat outlook on the global shipping industry in its Q2 earnings release on Wednesday. It announced plans in September it would seek alliances or a separate listing for its energy division, which includes Maersk Oil.

"From a customer point of view, not a lot has changed in the way shipping has been done for the last 100 years," said Sardana, who joined Maersk in 2012 from Bank of America.

He says going into trade finance was a "massive change" for a traditional shipping company such as Maersk.

"For a company that only thinks steel is an asset, to make them think of an outstanding loan is an asset is pretty radical," he said.




(Reporting by Jacob Gronholt-Pedersen, editing by David Evans)

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