Ship Finance ‘Opportunities and Challenges’ Efficient Shipping Finance; The Seminar 24th June 2015 Ship Finance ‘Opportunities and Challenges’ Andy Georgiou Head of Global Shipping Coverage

RBS Shipping What we do: Who we are: Unique 'one-stop' service to the shipping industry, providing banking products and services to owners, charterers, P&I and insurance brokers We provide primarily: Ship finance Operational banking Shipping risk management Wider banking opportunities Who we are: History in Shipping related finance for over 250 years. Banker to c100 of the world’s largest shipping companies, c.75% of which are private. Shipping bank with a portfolio in excess of cUS$13bn with secured on modern high quality vessels (85% under 10 years of age). Efficient Shipping Finance 2

Approach to Ship Finance What approach do commercial banks that lend in the Shipping sector take? Transactional Banking Relationship Banking Big ticket deals Long term Maximise loan return Volatile market - risk / reward relationship Capital intensive Value behind the assets Economies of scale Ancillary business to enhance transaction returns e.g. treasury products Short term gain Operational banking Private banking Both approaches can lead to capital Market opportunities Efficient Shipping Finance 3

The Relevance of Ship Finance Today Commercial Bank Mortgage Finance Mezzanine Finance Top-up finance (Substitute for equity) Bond Markets Debt Capital Markets (Corporate/Convertible Bonds) Equity Markets IPOs, Follow-on Equity Offerings Private Equity A growing trend of medium term investments into shipping Leasing Tax efficient structure Insurance Market Historical involvement in tanker industry, e.g. RV insurance ECA Government-supported financing to clients of local exporters (shipyards) Efficient Shipping Finance 4

Trends in Ship Finance Sources Source: Dealogic 2008 2013 Bulk of financing to the Shipping industry was provided by banks (82%) Total value of deals (across all transaction types) amounted to US$104.8 bn Bank debt has dropped to 60% of financing provided to Shipping Total value of deals (across all transaction types) amounted to US$66.2 bn Efficient Shipping Finance 5

Ship Finance – Banking Portfolios Across Time (1) Source: Marine Money International, April/May 2015 Market – Figures US$380 bn of bank debt made available to Shipping by 27 Banks Aggregate shipping exposure of top 5 Banks amounts to US$190 bn Market – Comments 2008 was the last year before shipping banks’ portfolios were affected by the global financial crisis (post Lehman bankruptcy) This is evidenced by some of the large exposure to Shipping some of the banks above reported proportionate to their aggregate balance sheet Industry – Comments The size of the respective shipping loan portfolios was also inflated to a degree by the continuous y-o-y increases in vessel values and booming conditions for Shipping between 2002-2008 (Shipping super cycle) Efficient Shipping Finance 6

Ship Finance – Banking portfolios Across Time (2) Source: Marine Money International, April/May 2015 Market – Figures US$380bn of bank debt made available to Shipping by 39 Banks Aggregate shipping exposure of top 5 Banks amounts to US$107 bn Market – Comments Traditional banks have decreased their exposure to Shipping Changes in banking landscape (mergers, rebrandings) Non-core divisions have been set up (balance sheet treatment differs) RBS Shipping Provider of finance during all markets. #1 lender to Greek Shipping (Petrofin Research). Efficient Shipping Finance 7

Average Ship Finance Loan Pricing Source: Marine Money Bankers Survey 2015 Efficient Shipping Finance