Deutsche Pfandbriefbank Aims to Return to Previous Level of Profitability by 2024

After the slump in profits in 2023, Deutsche Pfandbriefbank wants to return to its previous level of profitability next year. He expects the bank to “get back to the usual pre-tax level of up to 200 million euros as early as 2024,” said outgoing CEO Andreas Arndt in a telephone press conference on the occasion of the presentation of the quarterly figures. The specialist bank for commercial real estate financing will then set course for 300 million euros in 2026, as already communicated.

The Pfandbrief bank confirmed the quarterly figures and the forecast reduction that it had already published on November 7th. Due to increased risk provisions from 38 to 104 million euros, earnings before taxes fell from 159 to 91 million euros. The bank now expects a result of 90 to 110 million euros for the year as a whole.

Arndt expects the real estate market to bottom out in the first half of 2024 and a recovery to begin in the second half of the year: “Then hopefully things will start to look up again in 2025.” The basic principle for Deutsche Pfandbriefbank is: “We can cope with a crisis.” has long been characterized by a risk-conservative profile.

The CEO made it clear that the bank would have coped better with a 20 to 30% collapse in real estate valuations across the market than with the current situation. Finally, on average in the portfolio of 30.5 billion euros, the loan amounts only make up 52% ​​of the loan-to-value value – so that the loans would be secured even in the event of a sharp drop in prices.

The Pfandbrief bank boss said that instead of such a broad market collapse, the bank was faced with some distressed US real estate. This development is driven by the shorter refinancing cycles that are common in the USA and the more significant rise in interest rates. But: “These are just a few cases, that’s important,” emphasized Arndt.

In these individual cases, a number of factors occur at the same time that lead to a significant value adjustment, explained Arndt: changing tenant requirements as a result of the new working world after the pandemic, a reduced relative value of properties due to new buildings in the neighborhood and a different assessment of transport connections.

According to an investor presentation, non-performing loans in the USA add up to 691 million euros. Nine loans totaling 465 million euros were added in the first nine months. The US portfolio adds up to 4.9 billion euros. The majority (80%) was allocated to finance offices. Regionally, New York is the dominant location with 63% of the loan amount, followed by Chicago (12%).

The market value of non-performing US loans has fallen by 41% in the past twelve months, said Arndt. The remaining loans recorded an average decline of 24%. In Europe, however, the CEO estimates the market-wide decline to be only 10 to 15%: “Europe is much more relaxed when it comes to performance.” For example, in Germany and France it is almost business as usual: “My expectation now would not be that we would see similar declines See.” The new non-performing loans from the Pfandbrief bank in Europe since the beginning of the year add up to 178 million euros.

Arndt has not yet given a forecast for new business next year. From the current perspective, 2024 will be characterized by caution, he simply said: “We will not and cannot make big leaps from a standing start.” In the first nine months of 2023, new business fell from 6.6 to 4.2 billion euros . At the same time, the margin increased by 0.3 percentage points, said Arndt.