- Net interest and commission income increased by more than 10%,
to €125 million - Risk provisions at a low level of €10 million and significantly
below the previous year - New business volume increased to €2.1 billion, with only slightly lower
gross margins - CEO Arndt: Strong first quarter confirms our expectations to exceed last year's pre-tax result – we maintain our overall cautious risk assessment
for 2021
Deutsche Pfandbriefbank AG (pbb) starts 2021 on a strong note. With pre-tax profit of €52 million, the real estate lender exceeded the previous year's figure of €2 million by some margin (IFRS, consolidated, unaudited). Once again, the strong results were driven by higher income from the lending business, combined with markedly lower pandemic-related burdens on risk provisions and fair value measurement.
Net interest and commission income rose by more than 10% to €125 million (Q1 2020: €113 million). Net income from risk provisioning declined from €34 million to €10 million, whilst net income from fair value measurement improved from minus €17 million to €2 million. Results also benefited from higher prepayment fees, shown in net income from realisations, which rose from €14 million to €21 million. General and administrative expenses showed a moderate increase, in line with expectations, to €51 million (Q1 2020: €48 million), particularly reflecting pbb’s initiatives to drive digitalisation. Pre-tax profit was burdened by bank levies and similar dues in the amount of €28 million (Q1 2020: 21 Mio. €); the bank levy is recognised for the full year already in the first quarter.
Along with the figures for Q1 2021, pbb has also confirmed its full-year guidance for 2021. pbb expects stable or slightly higher net interest income compared to 2020 as well as lower additions to risk provisions and stable administrative expenses. In view of the persistent macroeconomic uncertainty, pbb refrains from giving a profit range for the time being, but expects lower risk costs overall and a pre-tax result above the previous year's level.
Andreas Arndt, pbb's Chief Executive Officer, said: "The robust level of income from our lending business along with our conservative profile keeps us on track, whilst risk provisioning was lower. First-quarter results have affirmed our expectation that our performance in 2021 will exceed the previous year, even though we cannot rule out additional risk provisions over the course of the year, on account of the COVID-19 pandemic.”
With a volume of €2.1 billion, new business in Commercial Real Estate Finance was higher than in the same quarter of the previous year (Q1 2020: €1.6 billion, in each case including extensions >1 year) despite continued strict risk selection. At around 170 basis points (bp), the average gross margin was almost at the same level as in the first quarter of 2020 (Q1 2020: >170 bp). Reflecting the high volume of new business, pbb's strategic loan portfolio grew by €0.4 billion to €33.2 billion (31 Dec 2020: €32.8 billion).
pbb is making good progress in its strategic initiatives focusing on sustainability and digitalisation. In the second half of 2020, the Bank laid the groundwork for issuing green bonds and successfully placed its first green bond in the first quarter of 2021. At the same time, pbb has started to build up a database that will allow it to grant green loans in the future.
At the end of the first quarter, pbb launched its client portal, improving the interface with its clients in Commercial Real Estate Finance. The portal enables pbb to increase the transparency within its credit process for clients and to simplify document management. The client portal is one element of a comprehensive programme implemented by pbb to digitalise the workflow in the client and credit processes.