pbb deutsche pfandbriefbank, cee investment awardsBased on solid core business and supported by extraordinary income through the release of write-downs, in 2016, pbb Deutsche Pfandbriefbank achieved its best result since the restart in 2009. Consolidated profit before taxes in accordance with IFRS (prepared and approved) rose by 54 percent, reaching a total of €301 million (2015: €195 million), including extraordinary income of €132 million related to Heta Asset Resolution AG (Heta). The bank’s operating business remained stable.
A slightly reduced net interest income of €404 million (2015: €426 million) was offset by continuously low loan loss provisions of €-1 million (2015: release of €1 million) as well as by reduced general administrative expenses of €198 million (2015: €207 million). Profit after taxes amounted to €197 million, or €1.46 per share.
For the fourth quarter of 2016, pbb posted a pre-tax profit of €55 million (Q4 2015: €30 million).
With new business totalling €10.5 billion, pbb generated its second-highest volume since the restart in 2009, thus holding up well in an ongoing competitive environment (2015: €12 billion; all new business figures including extensions of more than one year). pbb increased its average gross margins on new business, while applying the same high risk standards.
Based on this very positive result, the Management Board and the Supervisory Board will propose to the Annual General Meeting to pay a significantly higher dividend of €1.05 per share. As announced in November, the dividend proposal includes a special dividend in addition to the distribution within the communicated dividend strategy of 40 percent to 50 percent of consolidated profit after taxes in accordance with IFRS. pbb will distribute the entire extraordinary income from the release of write-downs related to Heta. This equates to a dividend yield of 11.5 percent, based on the pbb share price at year-end 2016.
pbb’s CEO/CFO Andreas Arndt, said: “2016 was a good year for pbb and an extraordinary effect turned it into a very good year. The current financial year will not be any less challenging – taking into consideration impending regulatory changes, as well as the competitive situation. We intend to continue with our conservative approach to risk, whilst making prudent investments in new projects and business segments.
Outlook for 2017
For the year 2017, pbb is expecting a stable to slightly weaker net interest income, as a result of improved interest-bearing positions and stable to weaker margins.
The bank is also aiming for a new business volume of between €10.5 billion and €12.5 billion, including extensions of more than one year. The year-on-year increase is expected to result especially from new business generated in the US, as well as from Public Investment Finance and stabilized pre-payments.
pbb anticipates higher loan loss provisions and – as in the previous year – estimates risk costs of 10 to 15 basis points on the Real Estate Finance portfolio. However, the bank does not have any concrete grounds for higher loan loss provisions.
After four years, and with cost reductions of more than 40 percent, pbb sees general administrative expenses rising again. This concerns higher personnel expenses in particular, of which a material part is technical, owing to the end of the reversal of provisions. Even so, pbb aims to keep general administrative expenses below the €220 million mark in 2017.
As communicated already in November 2016, pbb is aiming for a pre-tax profit between €150 million and €170 million, in line with the 2016 operating profit, adjusted for extraordinary income related to Heta.
pbb intends to promote innovations in 2017, with the aim of diversifying its product and service offer, and further enhancing profitability. New technologies and management approaches also allow pbb to reinforce its value chain for both the customer as well as internally. The digitalisation of lending processes on platform models is expected to develop new customer groups and strengthen internal efficiency.