FRANKFURT Aug 28 German state-backed lender NordLB said it was confident of its position in upcoming health checks of Europe's banking sector, despite a troubled market in its specialty business of ship financing.
The landesbank is seen as one of the German lenders that may have the toughest time in a review of asset quality and in stress tests by the European Central Bank and the European Banking Authority, the results of which are due in October.
"We will not participate in speculation about the outcome of the stress tests but we feel we are well prepared for them," a NordLB spokesman said.
"We are relaxed about October," he added.
The financial health checks are aimed at giving regulators clear insight into the state of the banking sector before the ECB takes over responsibility for banking supervision in the euro area in November.
NordLB's Common Equity Tier 1 ratio - a measure of its capital strength - stood at 10.7 percent at the end of June, compared with an ECB benchmark of 8 percent.
The landesbank said it added a further 224 million euros ($296 million) to its buffers against bad loans - mainly in its ship financing business - in the first half of the year, which was substantially less than the 432 million added in the first half of 2013.
"We have built up an extraordinarily high risk shield for this segment over the last few years," NordLB Chief Executive Gunter Dunkel said in a statement.
"We will stay alert and continue to build risk provisions," he said, adding that the environment for shipping remained difficult and the bank would need to deal with it for some time to come.
($1 = 0.7569 euro) (Reporting by Jonathan Gould and Andreas Kroener; Editing by Maria Sheahan)