Deutsche Pfandbriefbank (PBB) CMD 2024 summary

Strategic direction and business model evolution

• Strategy 2027 focuses on making the business more resilient, diversified, and profitable, with a clear shift toward return on tangible equity as the key performance metric.

• The core commercial real estate finance business will remain central, but with a significant change in portfolio composition, reducing office and US exposure while increasing allocations to asset classes like serviced living, senior housing, data centers, logistics, and hotels.

• Expansion of fee-based, off-balance-sheet business through pbb Invest and Originate & Cooperate aims to generate at least 10% of revenues by 2027, targeting €4–6 billion in assets under management and ~€2 billion in Originate & Cooperate volume.

• The strategy includes a strong focus on Europe, with a more selective and regionally focused approach in the U.S., targeting East Coast gateway cities and prime asset classes.

• Sustainability and green financing are integral, with a target to increase green loan eligibility to 30% by 2026 and over 30% by 2027, alongside ongoing development of ESG products and services.

Financial targets and capital allocation

• By 2027, operating income is targeted to increase by 10% to around €600 million, with a cost-income ratio below 45% and return on tangible equity (ROTE) of 8% (pre-tax).

• Fee business is expected to contribute 10% of total operating income, driven by new investment management and loan origination services.

• The core real estate finance portfolio will be maintained at around €29 billion, with a reduction in non-core assets and a focus on higher-margin, ROTE-accretive business.

• Capital distribution policy includes a minimum 50% payout of distributable income, combining dividends and share buybacks, subject to regulatory approval.

• CET1 ratio is targeted at or above 15.5% by 2027, maintaining a prudent buffer and strategic flexibility.

Portfolio and risk management

• Office exposure will be reduced to below 40%, preferably 35%, by 2027, with increased focus on logistics, hotels, and alternative asset classes.

• U.S. portfolio share will be reduced from 12% to below 10%, with a focus on East Coast cities and prime assets.

• Risk costs are expected to normalize to pre-COVID levels of 15–25 basis points by 2027, supported by diversification and reduced concentration risk.

• Non-core asset reduction will be achieved through maturities, disposals, and liability buybacks, primarily in Austrian and Italian portfolios, reallocating resources to higher-margin businesses.

• Strict cost discipline and operational efficiency improvements will self-fund investments in new business areas, with a third of cost savings not reinvested, lowering the absolute cost base.