- Pfandbriefbank continues to suffer from a shortage of commercial real estate
Pbb Continues to Struggle in Weak Commercial Real Estate Market
The German Pfandbriefbank (pbb) continues to grapple with the downturn in the commercial real estate market. In the first half of the year, its pre-tax profit plummeted by over 40% compared to the first half of 2023, from €81 million to €47 million, as reported by pbb. "There's still no sign of a turnaround in the commercial real estate markets," said CEO Kay Wolf. However, the bank expects the market to stabilize somewhat in the second half of the year, predicting a significantly better pre-tax profit for the full year than the €90 million of the previous year. "The bank is profitable, but not yet profitable enough," emphasized Wolf.
The commercial real estate market worldwide was virtually stagnant in 2023, with both prices and deal volumes declining in many countries. The rise in interest rates and weak demand, particularly for offices, were contributing factors. Consequently, pbb had to significantly increase its risk provisions for defaulted and at-risk loans.
Two-Thirds of Job Cuts Implemented
In the first six months, the bank set aside €103 million for risk provisions. This was nearly five times more than in the first half of 2023, but still significantly less than in the second half of the previous year, when pbb set aside €191 million. In the fourth quarter of 2023, the bank even briefly slipped into the red.
Last year, pbb announced plans to reduce its full-time workforce by 150 out of 800 positions, with the process to be handled in a socially responsible manner without forced redundancies. CFO Marcus Schulte said that two-thirds of these job cuts have now been implemented.
In response to the challenges in the commercial real estate market, pbb decided to relocate its headquarters from Frankfurt to Garching near Munich in early 2025. This move is aimed at lowering operational costs and improving efficiency.
Despite the difficulties in the market, pbb remains committed to its international expansion, with Garching serving as a strategic base for its operations in Europe.
