Deutsche Pfandbriefbank (PBB) Q2 2025 earnings summary

Executive summary

• Transformation strategy accelerated with the acquisition of Deutsche Investment Group and exit from the U.S. real estate market, incurring significant one-off risk charges and supporting a shift to European markets and fee-generating business.

• U.S. exit resulted in a one-off cost of €340 million and a reported pre-tax loss of €249 million for H1 2025, compared to a €47 million profit in H1 2024; adjusted pre-tax profit was €65 million.

• Operating performance remains stable excluding U.S.-related one-off charges, with adjusted operating income in H1 2025 at €237 million and new business ROTE at 10–11%.

• U.S. portfolio reduced by 29–30% since end-2023, now representing 12% of total portfolio but 45% of total NPLs; exit to be completed within 6–12 months.

• Acquisition of Deutsche Investment Group (AuM €3 billion) expected to close by Q1 2026, adding €34 million recurring fee income and supporting strategic 2027 targets.

Financial highlights

• H1 2025 operating income impacted by €-314 million one-off U.S. risk charges; reported pre-tax loss of €-249 million, but adjusted pre-tax profit of €65 million.

• Net interest income declined year-over-year to €211–215 million due to reduced portfolio volume and higher refinancing costs; gross interest margin stable at ~240bp.

• General and administrative expenses down to €115 million in H1 2025, reflecting IT transformation completion.

• Cost-income ratio rose to 70% due to U.S. exit charges, but adjusted ratio is 52%.

• CET1 ratio stands at 15.3% post-U.S. exit, with a moderate 40 basis point impact from the exit.

Outlook and guidance

• Strategy 2027 targets confirmed: operating income ~€600 million, ROTE 8%, CIR <45%, CET1 ratio >15.5%, capital distribution ≥50%.

• New business in real estate finance expected between €6.5–7.5 billion for full year 2025, with portfolio stable at €28–29 billion.

• ROTE for new business at 10–11% in H1 2025, above 2027 target of 8%.

• Fee income targeted to exceed 10% of total operating income by 2027, supported by Deutsche Investment Group acquisition.

• Full-year pre-tax profit expected to be significantly below 2024, with a net loss anticipated; CET1 ratio forecasted at 14.0–15.5% under Basel IV.