Real estate slump hits Pfandbriefbank: profit slump
Deutsche Pfandbriefbank (pbb) is suffering from the ongoing slump on the real estate market. In the third quarter, pre-tax profit was a good 80 percent lower year-on-year, falling from EUR 52 million to EUR 10 million. The main reason for this was a sharp increase in risk provisions, as the company announced in Garching on Tuesday. "pbb remains profitable even in the current market environment and in 2023," emphasized CEO Andreas Arndt.
In the first three quarters, pre-tax profit fell from 159 to 91 million euros, while net profit also declined by more than 40 percent, from 135 to 77 million euros.
Pfandbriefbank's main business is the financing of commercial real estate. In both Europe and the USA, some investors and project sponsors have run into difficulties due to higher lending rates and shrinking income. This in turn is having an impact on the results of the real estate banks. In the first nine months, Pfandbriefbank invested a total of 104 million in risk provisions, primarily for office financing in the USA.
As a result, pbb had already almost halved its profit forecast, and the Bank now expects pre-tax profit of between 90 and 110 million euros this year instead of the 170 to 200 million euros originally envisaged. CEO Arndt does not expect the real estate market to recover until the second half of 2024.
The ongoing real estate slump has negatively affected various real estate banks, with Pfandbriefbank's pre-tax profit decreasing by 80% in Q3 due to increased risk provisions. Banks specializing in commercial real estate financing, like Pfandbriefbank, are experiencing challenges due to investors and project sponsors facing issues with higher lending rates and shrinking income, affecting their quarterly figures.
Source: www.dpa.com
