Deutsche Pfandbriefbank (PBB) Q4 2025 earnings summary

Executive summary

• 2025 was a transformative year marked by a strategic exit from the U.S. market, significant de-risking of non-performing loans, and a pre-tax loss of €250 million, mainly due to U.S. exit and legacy development NPLs.

• New business volume increased by 23% to €6.3 billion, exceeding guidance but still below original targets.

• The acquisition of Deutsche Investment was completed, expected to diversify income streams and contribute notably from 2026.

• Portfolio volume declined to €27.3 billion due to de-risking and selective new business.

• No dividend will be paid for 2025; future distributions will follow a 50% payout policy via dividends and buybacks.

Financial highlights

• Pre-tax loss of €250 million for 2025, within adjusted guidance, driven by €410 million in risk provisions mainly from U.S. and development portfolio de-risking.

• Operating income declined to €422 million from €544 million year-over-year, mainly due to lower net interest income and reduced portfolio volume.

• Administrative expenses decreased to €236 million, with cost discipline offsetting inflation and strategic investments.

• CET1 ratio at year-end 2025 was 14.9%, well above regulatory requirements.

• Cost income ratio rose to 61% in 2025, expected to rise further in 2026 due to integration costs.

Outlook and guidance

• 2026 pre-tax profit expected between €30–40 million, with continued negative impact from U.S. exit costs.

• New business volume targeted at €7.5–8.5 billion in 2026; portfolio volume expected between €27–28 billion.

• Operating income for 2026 guided at €375–425 million; cost income ratio to temporarily rise to 70–75%.

• Return on tangible equity for the whole bank targeted at 8% by 2028, with operating income of around €600 million.

• Risk costs in core European markets expected to normalize to 25–30 basis points in 2026, and 15–25 basis points by 2028.