pbb reports slightly higher year-on-year third quarter pre-tay profit of €75 million – concerns persist about developments on real estate markets

pbb Deutsche Pfandbriefbank achieved a profit before taxes of €75 million in the third quarter of 2020, slightly exceeding the previous year’s period (consolidated figures in accordance with IFRS; Q3 2019: €70 million). On a nine-month horizon, profit before taxes of €106 million stayed below the same period of the previous year (9m2019: €187 million), due to significantly higher risk provisioning required as a result of the COVID-19 pandemic. The third quarter benefited from a further increase in net interest and commission income to €127 million (Q3 2019: €113 million), defined by stable interest income from the operating business on the one hand and by the interest benefits from the Bank’s participation in the ECB’s Targeted Longer-Term Refinancing Operations (TLTRO III) on the other hand. Net additions to risk provisions of €14 million (Q3 2019: €10 million) were required due to further reduced valuations for UK shopping centres in the loan portfolio. General and administrative expenses were virtually unchanged at €48 million.

pbb expects a solid operating result before risk costs for the fourth quarter and 2020 as a whole. Due to ongoing uncertainty about the potential risk provisioning required in conjunction with COVID-19 and the latest deterioration of the pandemic, pbb will continue not to issue earnings guidance.

New Commercial Real Estate Finance business developed positively in the third quarter, with both the volume increasing to €1.6 billion (Q2 2020: €1.1 billion, both including extensions beyond one year) and higher margins, resulting in an average gross margin on the new business of above 180 basis points (bp) for the first nine months of the current year. pbb continues to take a risk-conservative approach to new business commitments and extensions.

CEO Andreas Arndt commented: “The third-quarter result is based mainly on the forecast good operating performance. While it supports our expectations for solid net interest income and stable administrative expenses in 2020, it does not eliminate concerns about the impact of a second lockdown and structural changes in the real estate markets brought about by the COVID-19 pandemic. We remain cautious in all respects but continue to see ourselves as well-positioned with a conservative risk strategy, good capital base and a comfortable liquidity position.”