pbb shares slide 9% on 2025 guidance withdrawal, U.S. exit, German deal talks

Published 18/06/2025, 08:04
Updated 18/06/2025, 13:22
© Reuters.

Investing.com -- Deutsche Pfandbriefbank AG (ETR:PBBG) (pbb) shares dropped over 9% on Wednesday after the bank withdrew its 2025 financial guidance, citing potential extraordinary expenses tied to its planned exit from the U.S. market. 

The move follows a review of its U.S. business, which will be wound down, securitised, or sold.

The German bank’s U.S. loan portfolio stands at €4.1 billion with a weighted average legal maturity of 2.5 years. 

According to Citi Research, which cited pbb’s Q1 2025 disclosures, the portfolio includes around €3.2 billion of performing loans with an average loan-to-value (LTV) of about 70%, heavily concentrated in office properties, with residential and logistics each at 10%. Roughly 87% of the performing portfolio is located on the U.S. East Coast.

The non-performing loans total approximately €0.8 billion, with an average LTV of 101%. These are distributed across the East Coast, Chicago, and the West Coast. Citi noted that €0.2 billion of NPLs have been restructured and remain in regulatory probation until end-2025.

The U.S. operations, conducted via a representative office, contributed €6 million in turnover and €1 million in pre-tax profit in 2024, though Citi cautioned these figures may not fully capture the business’ contribution, as U.S. exposures are booked at the group level.

Due to the uncertainty surrounding potential disposal structures and related losses, pbb withdrew its 2025 targets, except for its CET1 capital ratio goal of at least 14% (Q1 2025: 15.5%). Citi expects the bank to pursue partial disposals or securitisations rather than a full sale upfront.

Prior to withdrawal, pbb had guided for 2025 operating income of €500–540 million, net interest and commission income of €470–490 million, a cost-income ratio of approximately 50%, loan loss provisions below 2024’s €170 million, pre-tax profit above €104 million, and pre-tax RoTE of 3.5–4.5%.

With operating income of €600 million (including fees of €60 million), CIR below 45%, pre-tax ROTE around 8%, capital distributions (including buybacks) of at least 50%, and a CET1 ratio above 15.5%, the bank held on to its 2027 targets.

As part of its Strategy 2027, pbb aims to focus fully on its European business. In line with this shift, the bank disclosed it is in advanced negotiations to acquire a majority stake in a German real estate investment manager with assets under management in the low single-digit billion-euro range. 

The purchase price, including success fees, is expected to be in the mid-double-digit million-euro range, subject to regulatory approvals.

Citi estimates the deal could have a capital impact of around -30 basis points if the purchase price is largely assigned to goodwill. 

While the acquisition would contribute significantly to pbb’s 2027 asset management volume and earnings targets, Citi noted that some investors view the move into asset management as a questionable use of capital.

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