pbb’s pre-tax profit – whilst stable in operating terms – falls to €2 million, due to COVID-19-related effects of €45 million

  • At €113 million, net interest and commission income almost matches the results of the same quarter of 2019
  • Risk provisioning recognised in an amount of €34 million – of which €32 million was induced by the COVID-19 pandemic
  • Widened credit spreads have turned net income from fair value measurement negative: €-17 million, of which €13 million was attributable to COVID-19
  • New Commercial Real Estate Finance business of €1.6 billion originated in line with plan, and in accordance with conservative risk assessment

Munich, 13 May 2020 – As reported on 4 May 2020, extraordinary effects related to the COVID-19 pandemic have burdened profit before taxes of Deutsche Pfandbriefbank AG (pbb) for the first quarter of 2020: despite good operating earnings, the net figure fell to €2 million (Q1 2019: €48 million; consolidated figures in accordance with IFRS). Specifically, at €113 million, the aggregate of net interest income and net commission income was almost in line with the results of the same quarter of the previous year (Q1 2019: €117 million) – general and administrative expenses amounted to €48 million (Q1 2019: €46 million). Conversely, net income from risk provisioning rose markedly, to €-34 million (Q1 2019: €-1 million), predominantly model-driven, whilst net income from fair value measurement declined to €-17 million (Q1 2019: €-2 million), due especially to wider credit spreads. In addition, the estimated burden from the bank levy of approximately €20 million was recognised for the full year (Q1 2019: €20 million – the figures incorporate pledged collateral of 15% in each case). Excluding the extraordinary burdens caused by the COVID-19 pandemic, pbb would have generated pre-tax profit of €47 million in the first quarter.

pbb withdrew the forecast for the full year 2020 on 4 May 2020. In particular, the development of risk provisioning and net income from fair value measurement cannot be reliably forecast, due to uncertainty concerning the macroeconomic environment and real estate market developments. pbb anticipates an economic recovery commencing in the second half of 2020, with a gradual recovery of market values for most property types over subsequent years. Hence, the Bank expects stable operating performance in terms of net interest income and general and administrative expenses for 2020. 

Net interest income was affected, on the one hand, by the lower portfolio of interest-bearing financings; on the other hand, it was burdened by the usual extensive funding activities at the beginning of the year, as well as a notable excess of funding raised in the previous year. General and administrative expenses increased compared to the first quarter of 2019, especially due to higher non-personnel expenses for regulatory projects.

Net income from risk provisioning comprises model-based loss allowances of €30 million for non-credit impaired financings (stages 1 and 2), plus €4 million risk provisioning on credit-impaired financings (stage 3; Q1 2019: €1 million in stages 1 and 2, and €0 million in stage 3 – all figures are on a net basis). Of these totals, €32 million (gross) was directly attributable to the effects of the COVID-19 pandemic. pbb had already markedly raised model-based risk provisioning for the fourth quarter of the previous year.

The changed situation on real estate markets during the first quarter due to the COVID-19 pandemic did not yet have a material impact on pbb’s new business volume in Commercial Real Estate Finance. At €1.6 billion, it came in at the planned level, below the figure for the same quarter of the previous year (Q1 2019: €1.9 billion – in each case including extensions beyond one year). At the same time, the average gross margin on new business rose to more than 170 basis points (bp), compared to an average of approximately 155 bp for the full year 2019.

CEO Andreas Arndt commented: “We are still confident of being able to achieve a good operating performance, but uncertainty caused by the volatile environment currently does not permit any reliable forecast for the year 2020. pbb is well capitalised and has the necessary liquidity to support clients with their transactions, and to exploit business opportunities in the market.”


Media contacts
Walter Allwicher, +49 89 2880-28787, walter.allwicher@pfandbriefbank.com