Deutsche Pfandbriefbank AG (pbb), a leading European specialist bank for commercial real estate finance, stayed on course in the current financial year’s first quarter for a profit before taxes of €170 to €200 million as per its full-year guidance (consolidated figures in accordance with IFRS). pbb also reports good progress in the implementation of its strategy for a return on equity before taxes of at least 10 percent by 2026. Against the backdrop of a challenging market environment and including the bank levy for the full year, the Bank’s profit before taxes in the first quarter of the current financial year was €32 million, following €42 million in the same period last year.
“These past weeks have proven once again that our conservative approach to risk is correct”, said CEO Andreas Arndt. “Our capital buffer is very adequate for what is currently a difficult market situation. Even though commercial real estate markets are in a challenging position, our loss allowance remains stable. We expect markets to calm down by the end of the year, and are looking forward to seizing growth opportunities at the right time.”
pbb will concentrate on diversifying its business model in the years to come, establishing a broader foundation for future revenue growth and increased profitability, as announced in March 2023. Regardless of market headwinds, the Bank continues to aim for a profit before taxes of more than €300 million in 2026. In pursuit of this goal, pbb plans to – firstly – profitably grow its commercial real estate finance business. Secondly, adding to its core competence, the Bank plans to expand its off-balance sheet commission-based activities. Thirdly, pbb aims to establish a broader and cheaper base for refinancings by further growing retail customer deposits. These initiatives are expected to make an additional profit contribution of more than €100 million in total by 2026. Whilst carrying out these initiatives the costs should, despite investments, remain at the same level as in 2022 so that a cost/income ratio of under 45 percent is reached. To achieve this, a cost reduction program is in preparation, with a focus on IT expenses and process efficiencies as well as insourcing and nearshoring and a reduction in consultant expenses
To enable the implementation of its strategic agenda and a stronger focus on its core business in commercial real estate finance (Real Estate Finance, REF), pbb in March decided to merge the Public Investment Finance (PIF) segment and the Value Portfolio (VP) and transfer these two business areas into a new segment called “Non-Core”. This restructuring will also see the intermediation franchise of Capveriant, a jointly held subsidiary of pbb and Caisse des Dépôts (CDC) that specialises in brokering municipal loans, be shortly transferred or discontinued, for which concrete talks are taking place. Merging the PIF and VP segments into a Non-Core segment enabled the sale of securities, yielding a positive profit contribution of €8 million.
Implementation of pbb’s strategic initiatives is bearing fruit. The interest-bearing REF portfolio has seen a margin increase, and the foundation for an increase in commission income has been laid in the form of cooperation agreements with Universal Investment and Amundi. Universal Investment will be pbb’s service capital management company (Kapitalverwaltungsgesellschaft), while the cooperation with Amundi focuses on fund distribution. Preparation for a debut open-ended real estate special investment fund is underway. Dr Pamela Hoerr joined the Bank on 17 April 2023 as Senior General Manager and designated member of the Management Board to support the development of the new segment.
