Iyo Bank (headquartered in Matsuyama City) has established its Ship Finance Department in Imabari City, specializing in ship financing. As of the end of September 2023, the bank’s ship financing balance has grown to over 1 trillion yen. “Centered in the Seto Inland Sea, and leveraging our strengths in Tokyo and Singapore, we want to contribute to Japan’s maritime industry,” says Koichi Sato, General Manager of the Ship Finance Department, discussing the current state and future prospects of the company. (Interviewer: Hirofumi Yamamoto)
■Responding to New Fuel Vessels
–What are the recent trends in ship financing?
“With the growing trend towards decarbonization, there is an increase in environmentally-friendly ships. Dual-fuel vessels that use new fuels are expensive. However, these ships often come with medium to long-term charters from operators. Our bank does not solely base our assessments on the charter contract contents, but for high-priced ships, the presence of a charter contract with a creditworthy charterer is a significant factor in our decision.”
–What is the ratio of foreign to Japanese charters?
“In recent cases brought to us, it’s roughly 80% foreign and 20% Japanese. While we continue to see many cases from foreign ship operators, we expect to see more from Japanese operators in the future.”
–With the soaring prices of newbuild ships, how are you responding to Japanese shipowners’ newbuild orders?
“There is a variance among Japanese shipowners regarding newbuild orders. Creditworthy Japanese shipowners are ordering futures newbuilds for 2026-2027, even without determined charters. Even in such cases, if they can raise a certain level of own funds, we consider them for financing. Our Japanese shipowner clients vary from those owning only a few vessels to those with a significant number. When considering corporate (shipowner’s corporate credit), we believe it’s important to focus on such overall balance.”
–Iyo Bank seems to have fewer Sale and Lease Back (S&LB) deals.
“While few in number, we do have a lending track record in S&LB deals. In cases where shipowners lease ships to operators under a Bareboat Charter (BBC), it’s usual for operators to handle almost all ship management. The general perception is that BBC carries risks, like deploying ships to hazardous areas. However, our bank doesn’t avoid deals just because they are S&LB or BBC. We base our lending decisions on a comprehensive assessment, considering the operator’s credit and the shipowner’s credit. The key is overall balance.”
■Utilizing the Singapore Branch
–What exactly do you mean by ‘balance’?
“As a regional bank, we start with fostering local industries. This doesn’t mean we only lend to local shipowners. Our Singapore branch has handled multiple overseas cases, with the current lending balance climbing to 1.7 billion USD. What matters to us is whether the deal is beneficial for the client. Elements of lending assessments such as charter contract content, self-capital investment ratio, investment purposes vary, and not all need to result in low risk. If we determine the investment is beneficial for the client’s future, lending is possible. Conversely, if the investment doesn’t seem justifiable for the client, it becomes difficult to lend.”
–How is the collaboration with the Singapore branch?
“Since its establishment in 2016, the Singapore branch has been progressing well but also faces challenges. For the Ship Finance Department based in Imabari, how to organically collaborate with this branch is key.”
–Could you elaborate it?
“How to leverage the knowledge gained overseas for Japanese shipowners, including personnel exchange, is crucial. We want to use the know-how from the Singapore branch to advise and make lending decisions for Japanese shipowners. The experience accumulated there is a valuable asset for our bank. The challenge is how to return this asset to Japan in the future.”
■Profile
Koichi Sato
Joined Iyo Bank in 1993. Served as Assistant General Manager of the Hashihama Branch, Section Chief of the Audit Department, and then Section Chief and Deputy Manager of the Ship Finance Department. Has been in the current position since 2021. Age 52.