Munich, 11 August 2021 – As pre-released on 27 July, Deutsche Pfandbriefbank AG (pbb) has increased profit and new business in the second quarter of 2021, generating a pre-tax profit of €62 million for the second quarter and of €114 million for the first half of 2021 (consolidated figures in accordance with IFRS, reviewed by external auditors). pbb has thus exceeded not only the previous quarter and the same quarter of the previous year, but also the first half of 2020 (Q1 2021: €52 million, Q2 2020: €28 million, H1 2020: €30 million). Based on the solid business development and despite some remaining uncertainty regarding potential risk provisioning requirements, pbb had raised its full-year guidance on pre-tax profit significantly at the end of July, to a result between €180 million and €220 million.
In the second quarter of 2021, pbb increased net interest and commission income to €126 million, and to €251 million in the first half of the year (Q2 2020: €117 million, €H1 2020: €230 million). Once again, lower funding costs and income from interest rate floors in the lending business were the drivers of the increase. Due to higher prepayment fees, net income from realisations was also higher, reaching €17 million in the second quarter, or €38 million in the first half of 2021 (Q2 2020: €2 million, H1 2020: €16 million).
The lower burdens related to the COVID-19 pandemic during the course of the current financial year also showed in the measurement result, and in risk costs. Net income from fair value measurement was balanced in the second quarter; for the first half year, the figure improved to €2 million (Q2 2020: €1 million, H1 2020: €-16 million). With net additions of €23 million in the second quarter and a total of €33 million in the first six months, additions to risk provisions were significantly lower than in the respective previous year’s periods (Q2 2020: €36 million net addition, H1 2020: €70 million net addition).
Thanks to the Group’s strict cost management, general and administrative expenses remained largely stable in the second quarter and first half-year, at €51 million and €102 million respectively (Q2 2020: €49 million, H1 2020: €97 million). Higher expenses, incurred especially for various digitalisation initiatives and other strategic projects, were the main cost drivers.
pbb’s new business also continued to develop positively, with the new business volume in commercial real estate financing climbing to €3.8 billion in the first half of 2021 (H1 2020: €2.7 billion, both including extensions by more than one year). Margins were still under pressure compared to the previous year, but remained stable throughout the reporting period at approximately 170 basis points (bps; H1 2020: > 175 bps). Despite the increase in new business volume, the Real Estate Finance (REF) portfolio decreased slightly, to €26.8 billion, following €27.0 billion as at year-end 2020, as a result of undrawn loan commitments and higher early repayments.
CEO Andreas Arndt commented: “We continue to benefit from our stable, conservative positioning – as also shown by the positive result achieved in the current ECB stress test. Whilst we cannot rule out further burdens in the second half of 2021 due to consequences of the COVID-19 pandemic, we are confident that we will be able to generate a pre-tax profit of between €180 million and €220 million for the full year, following a sound first half-year.”
pbb has once again proven to be stress-resistant in the ECB’s current stress test, achieving a good result within the sector and its German banking peer group. The Bank is in the second-best of four groups as regards maximum capital depletion, and minimum CET1 ratio and Tier 1 Leverage Ratio under stress scenario assumptions. In an adverse stress scenario, pbb’s CET1 ratio remains solidly above the currently valid SREP minimum requirement. The impact of a stress scenario on pbb’s results also remained manageable.
The Bank is aiming to take a decision about further dividend distributions for the year 2020 in the fourth quarter. pbb’s general dividend policy targets a payout ratio of 50% regular dividend plus a special dividend of 25% (based on consolidated profit in accordance with IFRS after taxes and the AT1 coupon). On 23 July 2021, the ECB lifted the general dividend payout restrictions for banks as of 30 September while at the same time requiring banks to remain prudent. pbb had already paid out 36% of profit after taxes attributable to ordinary shareholders in May 2021, thus exhausting the scope set out by the ECB.
Further details and the complete press release can be downloaded here