Deutsche Pfandbriefbank (PBB) Q3 2024 earnings summary

Executive summary

• Pre-tax profit for the first nine months reached €87 million, slightly below the prior year due to higher risk provisions, with Q3 being the strongest quarter year-to-date.

• Operating result rose to €425 million, up 2.4% year-over-year, driven by higher net interest income and focus on profitable new business.

• Pre-provision profit increased 16% to €227 million, covering elevated risk provisioning.

• The group remained profitable despite a challenging commercial real estate market and increased credit loss allowances.

• Strategy 2027 focuses on strengthening core commercial real estate financing, developing fee income, reducing non-core portfolio, and increasing efficiency through technology and AI.

Financial highlights

• Net interest income increased to €359 million in the first nine months, with operating income rising to €425 million, a 2% year-over-year increase.

• Risk provisions for the first nine months were €140 million, with Q3 provisions down 34% from Q2.

• General and administrative expenses remained stable at €179 million, despite inflation and higher Q3 expenses from IT and strategic investments.

• Cost-income ratio improved to 45.6% from 47.2% year-over-year and is currently at 46%.

• Total assets decreased to €45.2 billion from €50.9 billion at year-end 2023.

Outlook and guidance

• On track to fulfill full-year profit before tax guidance for 2024, despite challenging macro and market environment.

• Full-year new business volume expected at around €5.5 billion, slightly below initial guidance.

• Operating income guidance for FY/24: €525–550 million; NII+NCI: €475–500 million.

• CET1 ratio guidance at ≥14%, with cost-income ratio expected to temporarily rise to 50-57% by year-end, then fall below 45% by end of 2027.

• Strategy 2027 aims for a more diversified and resilient portfolio, with new business focused on high-growth asset classes and fee income expected to contribute 10% of total income by 2027.