INTERVIEW-ABN AMRO steps up shipping finance as sector looks to recovery

* ABN AMRO expects to grow its ship finance business in coming years

* Number of banks lending to shipping markets shrinking

ATHENS, June 4 (Reuters) - ABN AMRO is pumping billions of dollars into its shipping finance business as the sector looks to recovery - just as European rivals cut their exposure due to tougher capital constraints, the Dutch state bank's head of shipping said.

Ship owners ordered large numbers of vessels between 2007 and 2009, just as the global economy sank into crisis. Prospects have brightened in recent months as world trade picks up and the ship glut is absorbed.

Recovery still remains fragile and the industry faces a multi-billion dollar financing hole after many European banks, a major source of funding, cut back lending to boost capital in the wake of financial turmoil.

In contrast, ABN AMRO, which had to be rescued in the 2008 crisis, has tripled its ship finance portfolio to around $7 billion to $8 billion from $2.5 billion in 2009-2010, the bank's head of transportation Gust Biesbroeck told Reuters.

"We expect a growth of 10 to 12 percent of our portfolio this year and the plan for up until 2017 is continued growth at about that pace. Of course, market circumstances allowing," Biesbroeck said on the sidelines of Greece's Posidonia shipping week.

"We started from a very low base. As a result of the financial crisis and everything that happened to our bank and other banks, we lost quite a sizeable portion of our shipping portfolio. So, we quickly took the decision to rebuild our presence in the shipping industry and also we think it is a good time in the cycle to lend money."

Lending to the shipping sector in the Europe, Middle East and Africa region reached $2.08 billion in the second quarter of this year, down from $4.59 billion in the first quarter and the $6.34 billion and $12.98 billion in the fourth and third quarters of last year respectively, Thomson Reuters LPC data showed.

Several European banks - including Britain's Royal Bank of Scotland and Lloyds Banking Group - have been pressured to sell off shipping loans or exit the sector in a bid to boost their capital to comply with new, stricter industry legislation since the financial crisis.

The banks have suffered alongside shipping firms they lent to as the latter endured one of their worst downturns in decades. Many firms defaulted on loans and several collapsed.

As a result, several banks have been offloading what they see as risky assets at cheaper prices to investors such as hedge funds and private equity, even as trading conditions improve.

"The number of dedicated sector banks from Europe as we have seen in the past will continue to be very limited for the foreseeable future," Biesbroeck said.

He said ABN AMRO, which is being readied for an eventual stock market floatation, had looked at the shipping portfolios of other banks "on and off".

"If the opportunity is interesting enough we will definitely look at it," he said.

Biesbroeck said "liquidity is available only for a limited number of borrowers".

"You see really a big differentiation between access to capital for the smaller and the bigger shipping companies and that will have a consequence for the way the market will look in a few years time," he said.

"Third party money - whether it is public equity or private equity, whether it is bonds or any other color or shape of money, is only available for the larger, more transparent shipping companies."

Major shipping banks include Scandinavian lenders Nordea and DNB.

"From 45 active shipping banks, five to six remain now," leading Greek shipowner George Prokopiou told a Capital Link conference in Athens this week. "It is inevitable (for companies) to look at the capital markets as an alternative."

(Editing by William Hardy)