- Profit before taxes reaches €154 million
- Net interest and commission income increases by around 5%,
to €485 million - Net additions to risk provisioning of €126 million – existing provisons more or less double to €261 million in 2020
- €7.3 billion of new business in the REF segment, with a significantly higher average gross margin of around 180 basis points – loan portfolio remains stable
- Dividend proposal of €0.26 per share at the upper limit of the ECB’s
recommendation – further dividend payment to be examined in Q4 - CEO Andreas Arndt: Improved results expected for 2021, thanks to stable to slightly higher net interest and commission income, plus lower risk costs
As reported on 26 February, Deutsche Pfandbriefbank AG (pbb) further increased income from the lending business in 2020, increasing net interest and commission income by around 5%, to €485 million (2019: €464 million). This figure was offset by higher risk costs of €126 million net (2019: €49 million). pbb applied in particular significantly higher model-based (stage 1 and stage 2) provisions for conceivable credit risks due to the COVID-19 pandemic; in addition, provisions were increased for UK retail properties that had already been classified as stage 3 but which saw a further decline in property valuations. Administrative expenses remained unchanged from the previous year, at €204 million (2019: €202 million), thanks to strict cost management. All in all, pbb generated profit before taxes of €154 million. While this was down on the previous year’s high level (2019: €216 million), overall it represents a good performance in a difficult market environment: at €280 million, this has been pbb’s best result in the operative lending business before risk provisioning since the IPO.
After taxes of €37 million and taking into account the AT1 coupon of €17 million, €100 million or €0.74 per share was attributable to ordinary shareholders. On this basis, pbb will propose to shareholders at the Annual General Meeting on 12 May 2021 to distribute a dividend of €0.26 per no-par value share entitled to dividends. This amount corresponds to the maximum permitted under the recommendation put forward by the ECB on the dividend policy of the banks under its direct supervision. Should the ECB reach a more favourable assessment of the market after 30 September, allowing distributions to be increased, pbb will examine options for any further dividend payments at that point.
pbb took a particularly selective approach to new business in the financial year under review, due to the uncertainty arising from the COVID-19 pandemic. After a strong fourth quarter with €3.0 billion pbb originated a total of €7.3 billion in commercial real estate finance business in 2020 while applying even stricter risk parameters (2019: € 9.0 billion; in each case including extensions beyond one year). pbb significantly increased the average gross new business margin to around 180 basis points after approx. 155 basis points in 2019. Thanks to the strong new business and lower volume of prepayments, pbb kept its credit portfolio at a stable level in 2020.
Besides focusing on the management of its credit portfolio and the selection of new business – both of which were particularly important during the pandemic – during 2020 pbb once again invested in consistent expansion of its core business and its digital future. In doing so, pbb focussed on sustainable real estate lending, with ‘green’ bonds; green loans will follow as a next step. At the same time, pbb prepared the launch of a client portal in the first quarter of 2021, started the digitalisation of its client and credit processes, and expanded its CAPVERIANT credit platform.
CEO Andreas Arndt commented: “The whole world was impacted by the COVID-19 pandemic in 2020: the real estate sector and pbb were no exception here. pbb responded to this challenging environment with a strong operative performance, recognising extensive provisions for conceivable credit risks related to COVID-19 and achieving a good result overall.” Arndt remains cautious for the current financial year: “We assume that we will not see the impact of the pandemic on macroeconomic developments and the trajectory of the real estate sector until the second half of the year. Despite all the uncertainty, we consider ourselves in a stable postion with regards to our operating business as well as our risk situation and we expect an improvement in profit before taxes for 2021 compared with 2020. We will maintain our planned investments.”
2021 guidance
For the current financial year 2021, pbb expects stable to slightly higher net interest income, lower risk costs and stable general administrative expenses. For this reason, it guides a higher profit before taxes. It expects to originate new business of between €7.0 billion and €8.0 billion in Commercial Real Estate Finance, on slightly lower gross new business margins. The financing volume of the real estate financing portfolio is expected to rise slightly.
Please find all details in the press release here for download.