Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — Q3 2020 Earnings Presentation
54 slides from Deutsche Pfandbriefbank's earnings presentation, Nov 11, 2020
Slide 1: Solid Q3/20 with PBT of € 75 mn
Solid Q3/20 with PBT of € 75 mn – concerns persist about further development of real estate markets in the light of COVID-19 pandemic Results Q3/9M 2020 Analyst Call 11 November 2020 Results Q3/9M 2020 (IFRS, pbb Group, unaudited), 11 November 2020
Slide 2: Disclaimer
Disclaimer This presentation is not an offer or invitation to subscribe for or purchase any securities in any jurisdiction, including any jurisdiction of the United States. Securities may not be offered or sold in the United States absent registration or pursuant to an available exemption from reg
Slide 3: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Summary & Outlook Appendix Contact details Results Q3/9M 2020 (IFRS, pbb Group, unaudited), 11 November 2020 3
Slide 4: Good operating performance in Q3/20 in line with expectations
Highlights Good operating performance in Q3/20 in line with expectations – concerns persist about further development of real estate markets in the light of COVID-19 pandemic PBT of € 75 mn in Q3/20 (9M/20: € 106 mn) slightly above prior year’s figure (Q3/19: € 70 mn) after more significant risk p
Slide 5: Operating and financial overview
Operating and financial overview New business Q4 Net interest and commission income Q4 General and admin. expenses Q4 € bn (commitments, incl. extensions >1 yr) Q3 € mn (IFRS) Q3 € mn (IFRS) Q3 Q2 Q2 44% 43% 43% Q2 Q1 Q1 CIR1 Q1 10.5 456 464 202 193 9.3 118 119 358 61 4.7 2.1 57 145 115 113 127 48 2
Slide 6: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Summary & Outlook Appendix Contact details Results Q3/9M 2020 (IFRS, pbb Group, unaudited), 11 November 2020 6
Slide 7: COVID-19 impact becomes visible since Q2 market data
Markets COVID-19 impact becomes visible since Q2 market data – full-year picture depending on further development of COVID-19 pandemic European CRE Investment volume* Office vacancy ** (€ bn) in % f European and US CRE investment volumes decreased in € 160 400 20 18 Q2/20 due to COVID-19. Prelimin
Slide 8: Impact from COVID-19 pandemic depending on stringency and duration of measures
Markets Impact from COVID-19 pandemic very much depending on stringency and duration of measures with accelerating effect on structural challenges – overall, pbb well positioned COVID-19 Pandemic Challenges Structural Challenges Key drivers Key drivers Stringency of measures Digitalisation Dur
Slide 9: Sub-segments in special focus
Markets Sub-segments in special focus: Overall, pbb well positioned, but concerns persist about further development of real estate market in the light of COVID-19 pandemic Property Regions Evaluation of current situation Challenges Risk positioning type Shopping centres: Increased pressure, Decl
Slide 10: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Summary & Outlook Appendix Contact details Results Q3/9M 2020 (IFRS, pbb Group, unaudited), 11 November 2020 10
Slide 11: Solid operating performance apart from COVID-19 pandemic related impacts
Financials Solid operating performance apart from COVID-19 pandemic related impacts Income statement € mn Q3/19 Q3/20 9M/19 9M/20 Key drivers Q3/9M 2020: Operating Income 133 141 371 374 NII up, driven by lower refinancing costs (incl. pos. effect Net interest income 112 126 341 354 from TLTRO III
Slide 12: NII remains robust – Q3/20 up +8% q-o-q and +13% y-o-y
Financials NII remains robust – Q3/20 up +8% q-o-q and +13% y-o-y Income from lending business Key drivers Q3/9M 2020: € mn NII up, supported by Q3/19 Q3/20 9M/19 9M/20 lower refinancing costs (e.g. USD tender of Bundesbank, maturities, pos. effect from TLTRO III since end of June) Net interest
Slide 13: Risk provisioning in line with expectation
Financials Risk provisioning in line with expectation Net income from risk provisioning Key drivers Q3/9M 2020: € mn Revaluation driven additions to risk provisions in stage 3 (€ -31 mn) Q3/19 Q3/20 9M/19 9M/20 for already provisioned UK shopping centres partly compensated by model-driven releases
Slide 14: Risk provision in stage 1&2 depending on macro-economic assumptions
Financials Risk provision in stage 1&2 depending on development of avg. macro-economic assumptions – no change in scenario assumptions pbb GDP assumptions % Total portfolio – weighted 2020 2021 CAGR pbb’s scenario assumptions aligned with GDP forecasts of economic institutes in Q2/20 and Q3/20 B
Slide 15: Operating costs under control
Financials Operating costs under control General & administrative expenses and depreciations Key drivers Q3/9M 2020: € mn GAE only slightly up y-o-y Q3/19 Q3/20 9M/19 9M/20 Personnel expenses: Increase due to higher FTE number (09/20: 772; 06/20: 763; 12/19: 752; 09/19: 750), General admin. expe
Slide 16: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Summary & Outlook Appendix Contact details Results Q3/9M 2020 (IFRS, pbb Group, unaudited), 11 November 2020 16
Slide 17: New business volume of € 1.6 bn in Q3/20
New business New business volume of € 1.6 bn in Q3/20 slightly recovered vs. Q2/20 at further increased avg. gross interest margin REF New business REF new business € bn (commitments, incl. extensions >1 yr) 9M/19 FY19 9M/20 26.8 27.1 26.8 Financing Total volume (€ bn) 6.9 9.0 4.3 volume thereof: 9.
Slide 18: Segment performance reflects impact from COVID-19 pandemic
Segment reporting Segment performance reflects impact from COVID-19 pandemic REF PIF Value Portfolio Income statement (IFRS, € mn) Q3/19 Q3/20 9M/19 9M/20 Q3/19 Q3/20 9M/19 9M/20 Q3/19 Q3/20 9M/19 9M/20 Operating income 110 111 319 319 11 11 27 31 11 18 22 21 thereof: Net interest income 96 105 290
Slide 19: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Summary & Outlook Appendix Contact details Results Q3/9M 2020 (IFRS, pbb Group, unaudited), 11 November 2020 19
Slide 20: Business approach reflected in stable risk parameters – average LTV of 52%
Portfolio pbb’s business approach reflected in stable risk parameters – average LTV of 52% provides solid risk buffer REF Portfolio: Avg. weighted LTVs Total portfolio: Internal ratings (EL classes) % (commitments)1 € bn (EaD, Basel III) 06/20 09/20 Non-investment grade2 54% Investment grade2 53% 52
Slide 21: NPLs remain on low level – no new NPL additions in Q3/20
Portfolio NPLs remain on low level – no new NPL additions in Q3/20 Non-performing loans Workout1 Key drivers Q3/9M 2020 € mn (EaD, Basel III) Restructuring2 Non-performing loans (NPLs) down by € 5 mn in Q3/20 0.9% 0.9% 0.8% 0.6% Restructuring loans down to € 480 mn (06/20: € 486 mn) NPL ratio 51
Slide 22: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Summary & Outlook Appendix Contact details Results Q3/9M 2020 (IFRS, pbb Group, unaudited), 11 November 2020 22
Slide 23: YTD issuance at similar spreads as last year
Funding YTD issuance at similar spreads as last year – successful inaugural SONIA-linked Mortgage Pfandbrief benchmark issued New long-term funding1 € bn Funding 9M/2020 9M/19: € 5.5 bn 9M/20: € 3.4 bn2 Strong funding activities at relatively stable avg. funding spreads y-o-y – € 1.0 bn in Q3/20;
Slide 24: Secondary market spreads tightened further after COVID-19 widening in March
Funding Secondary market spreads tightened further after COVID-19 widening in March New long-term funding HyPfe € bn1 Öpfe Sen. Unsec. 1.9 1.3 1.2 0.1 1.2 0.9 0.6 0.5 Spread development of pbb Senior Benchmarks vs iTraxx Bank Senior 1.2 0.6 0.7 0.1 0.5 0.5 0.4 (Spread in bp vs. 6m Euribor) Q3/19 Q4/
Slide 25: Sufficient liquidity position into 2021
Funding Strong buffers from pre- COVID-19 pandemic funding activities and new funding provide for sufficient liquidity position into 2021 – attractive substitutes to wholesale funding available New long-term funding1 Strong liquidity buffers € bn No major impact from credit lines – pbb’s business
Slide 26: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Summary & Outlook Appendix Contact details Results Q3/9M 2020 (IFRS, pbb Group, unaudited), 11 November 2020 26
Slide 27: Capitalisation remains strong
Capital Capitalisation remains strong Basel III: RWA RWA development Q3/9M 2020: € bn (IFRS) RWA relatively stable y-t-d and slightly up by € 0.4 bn q-o-q, mainly due to technical effects 17.7 17.8 17.4 regular reviews reclassification effects – precautionary PD-downgrade of all business partn
Slide 28: Agenda
Agenda 1. Highlights & Markets 2. Financials 3. New Business & Segment Reporting 4. Portfolio Profile 5. Funding 6. Capital 7. Summary & Outlook Appendix Contact details Results Q3/9M 2020 (IFRS, pbb Group, unaudited), 11 November 2020 28
Slide 29: Summary & Outlook
Summary & Outlook Q3/20 supports expectation to achieve a solid positive full-year result 2020 – uncertainty with regards to risk provisioning persists Solid Q3/20 in line with expectation NII remains robust, supported by positive effects from market funding and TLTRO III Operating costs are und
Slide 30: Appendix
Appendix Results Q3/9M 2020 (IFRS, pbb Group, unaudited), 11 November 2020 30
Slide 31: Key figures pbb Group
Key figures pbb Group Income statement (€ mn) 2017 2018 Q1/19 Q2/19 Q3/19 9M/19 2019 Q1/20 Q2/20 Q3/20 9M/20 Net interest income 407 450 116 113 112 341 458 111 117 126 354 Net fee and commission income 8 6 1 2 1 4 6 2 1 1 4 Net income from fair value measurement -5 -9 -2 -5 5 -2 -7 -17 1 4 -12 Net
Slide 32: Key figures pbb Group 9M/19 vs. 9M/20
Key figures pbb Group 9M/19 vs. 9M/20 Income statement REF PIF VP C&A pbb Group (€ mn) 9M/19 9M/19 9M/19 9M/19 9M/19 9M/20 9M/20 9M/20 9M/20 9M/20 Net interest income 290 294 27 29 21 28 3 3 341 354 Net fee and commission income 5 4 - - -1 - - - 4 4 Net income from fair value -5 -5 -1 -1 4 -6 - - -2
Slide 33: Key figures Real Estate Finance (REF)
Key figures Real Estate Finance (REF) Income statement (€ mn) 20173 2018 Q1/194,5 Q2/195 Q3/195 9M/195 20195 Q1/20 Q2/20 Q3/20 9M/20 Net interest income 334 372 98 96 96 290 388 93 96 105 294 Net fee and commission income 9 6 1 2 2 5 7 2 1 1 4 Net income from fair value measurement - -8 - -5 - -5 -8
Slide 34: Key figures Public Investment Finance (PIF)
Key figures Public Investment Finance (PIF) Income statement (€ mn) 20173 2018 Q1/194,5 Q2/195 Q3/195 9M/195 20195 Q1/20 Q2/20 Q3/20 9M/20 Net interest income 30 34 9 9 9 27 37 9 10 10 29 Net fee and commission income - 1 - - - - - - - - - Net income from fair value measurement -2 -2 - -1 - -1 -2 -1
Slide 35: Key figures Value Portfolio (VP)
Key figures Value Portfolio (VP) Income statement (€ mn) 20173 2018 Q1/194,5 Q2/195 Q3/195 9M/195 20195 Q1/20 Q2/20 Q3/20 9M/20 Net interest income 37 39 8 7 6 21 29 8 10 10 28 Net fee and commission income -1 -1 - - -1 -1 -1 - - - - Net income from fair value measurement -3 1 -2 1 5 4 3 -12 - 6 -6
Slide 36: Balance sheet
Balance sheet Specialist lender with attractive German Pfandbrief as major funding instrument Balance sheet IFRS, € bn Assets 30/09/20 31/12/19 Liabilities & equity 30/09/20 31/12/19 Financial assets at fair value through P&L 1.4 1.3 Financial liabilities at fair value through P&L 0.7 0.8 thereof th
Slide 37: Total portfolio
Portfolio Total portfolio € bn (EaD, Basel III) Regions 31/12/2019 / Total: € 55.5 bn 30/09/2020 / Total: € 58.7 bn Hungary <1% Hungary <1% Other Europe 5% Other Europe 5% Czech Republic 1% Czech Republic 1% Other Rest of World 2% Other Rest of World 2% Finland 1% Finland 1% 2% Sweden 2% 2% Sweden 2
Slide 38: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) € bn (EaD, Basel III) Regions Property types 31/12/2019: € 29.8 bn 30/09/2020: € 29.2 bn 31/12/2019: € 29.8 bn 30/09/2020: € 29.2 bn Mixed use 2% Mixed use 1% Czech Republic 1% Other Europe Czech Republic 1% Other Europe Other 3% Other 2% Hotel 5% Hotel 5% Austria
Slide 39: Real Estate Finance (REF) regions and property types
Portfolio Real Estate Finance (REF) Regions 31/12/2019 / Total: € 29.8 bn € bn (EaD, Basel III) 30/09/2020 / Total: € 29.2 bn 14.8 14.0 3.5 3.2 3.2 3.3 2.8 2.8 1.3 1.4 0.9 0.9 1.4 1.8 0.5 0.5 0.5 0.5 0.4 0.3 0.3 0.3 0.1 0.1 0.1 0.1 Germany UK France USA Poland Sweden Finland Austria Czech Spain Hung
Slide 40: Special focus: Retail
REF portfolio Special focus: Retail REF portfolio: Property types Retail: Countries 30/09/2020: € 29.2 bn (EaD, Basel III) 30/09/2020: € 4.6 bn (EaD, Basel III) Structural changes to overall retail segment (e.g. e-Commerce, Brexit) resulted in foresighted reduction of USA 3% pbb’s retail exposure
Slide 41: Special focus: Hotel
REF portfolio Special focus: Hotel REF portfolio: Property types Hotel: Countries 30/09/2020: € 29.2 bn (EaD, Basel III) 30/09/2020: € 1.4 bn (EaD, Basel III) Industrial/ Others 4% Focus on business hotels in metropolitan regions of Austria 5% Germany – Frankfurt, Hamburg, Munich, Logistics Resi
Slide 42: Special focus: Developments
REF portfolio Special focus: Developments REF portfolio: Loan types Developments: Countries 30/09/2020: € 29.2 bn (EaD, Basel III) 30/09/2020: € 4.7 bn (EaD, Basel III) Portfolio share of 16% with focus on Office (54%) and Residential (22%) mainly in Germany (78%) and France (12%) Strong risk-mi
Slide 43: Markets Sub-segments
Markets Sub-segments Property Regions Evaluation of current situation Challenges Risk positioning type Spain 1% Increase in vacancies expected Financial difficulties of tenants / Focus on top locations Austria 2% Italy 1% Yields increased in a few markets and insolvencies expected to increas
Slide 44: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2019: € 7.1 bn 30/09/2020: € 6.7 bn 31/12/2019: € 7.1 bn 30/09/2020: € 6.7 bn Infrastructure Sweden 1% Other Europe 3% Corporation 2% Finance 1% Corporation 2% Infrastructure Other Europe 4% Finlan
Slide 45: Public Investment Finance (PIF) regions and borrowers
Portfolio Public Investment Finance (PIF) Regions 31/12/2019 / Total: € 7.1 bn € bn (EaD, Basel III) 30/09/2020 / Total: € 6.7 bn 3.7 3.5 1.5 1.4 1.0 0.9 0.3 0.3 0.2 0.2 0.3 0.2 0.1 0.1 <0.1 0.0 0.1 0.1 France Germany Spain Austria UK Finland Sweden Other Europe Other Rest of World Borrower classifi
Slide 46: Value Portfolio (VP)
Portfolio Value Portfolio (VP) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2019: € 15.6 bn 30/09/2020: € 15.6 bn 31/12/2019: € 15.6 bn 30/09/2020: € 15.6 bn Financial Financial Finland <1% Czech Rep. <1% Other Other Rest Other Other Rest Institution Supranational 4% Institution Supr
Slide 47: Value Portfolio (VP) regions and borrowers
Portfolio Value Portfolio (VP) Regions 31/12/2019 / Total: € 15.6 bn € bn (EaD, Basel III) 30/09/2020 / Total: € 15.6 bn 5.9 6.1 4.2 4.1 1.9 1.9 0.9 0.9 0.7 0.7 0.8 0.8 0.9 0.9 0.2 0.2 0.1 <0.1 <0.1 <0.1 Austria Germany Italy Spain France Poland Hungary Czech Finland Other Europe Rest of World Repub
Slide 48: Consolidation & Adjustments (C&A)
Portfolio Consolidation & Adjustments (C&A) € bn (EaD, Basel III) Regions Borrower classification2 31/12/2019: € 2.9 bn 30/09/2020: € 7.2 bn 31/12/2019: € 2.9 bn 30/09/2020: € 7.2 bn Financial USA <1% Sweden <1% Institution Other Europe Regional Supra France 1% Other Rest of World Germany1 UK 1% Oth
Slide 49: Ambition level for Own Funds and Eligible Liabilities of more than 8%
Funding Ambition level for Own Funds and Eligible Liabilities of more than 8 % TLOF (in € bn as of 30/09/2020)1 Composition of MREL2 Liabilities Rundown (30/09/2020) (30/09/2020) ~ 15.0 Substantial buffer for Senior Preferred (SP) investors due to high volume of capital instruments and Senior Non-
Slide 50: Public benchmark issuances since 2017
Funding Public benchmark issuances since 2017 Types WKN Launch Date Maturity Date Size Spread1 Coupon Issue/Reoffer Price Mortgage Pfandbrief A2ADASA 05/01/2017 01/03/2022 GBP 250 mn +55 bp2 3m-Libor +55 bp 100.00% Mortgage Pfandbrief (5th Tap) A1PG3M 16/01/2017 20/12/2019 GBP 50 mn +50 bp2 1.875% 1
Slide 51: Mandated Ratings
Mandated Ratings Bank ratings S&P Long-term A- / CreditWatch Negative Outlook/Trend Negative Short-term A-2 Stand-alone rating1 bbb Long Term Debt Ratings “Preferred” senior unsecured Debt2 A- / CreditWatch Negative “Non-preferred” senior unsecured Debt3 BBB- Subordinated Debt BB+ Pfandbrief ratings
Slide 52: Definition of key ratios
Financial reporting Definition of key ratios General admin. Expenses + Net income from write-downs Cost-Income-Ratio and write-ups on non-financial assets CIR CIR = Operating income IFRS9 Expected Credit Loss Model with 3 stage logic: Credit loss allowances on Stage 1: impaired with 1 year exp
Slide 53: Definition of borrower classifications
Definition of borrower classifications Borrower classification Definition Sovereign Direct and indirect obligations of Central Governments, Central Banks and National Debt Agencies Sovereign (related) Indirect obligations of Non Sovereigns with an explicit first call guarantee by a Sovereign Regiona
Slide 54: Contact details
Contact details Walter Allwicher Head of Communications +49 (0)89 2880 28787 walter.allwicher@pfandbriefbank.com Michael Heuber Head of Investor Relations / Rating Agency Relations +49 (0)89 2880 28778 michael.heuber@pfandbriefbank.com Axel Leupold Investor Relations / Rating Agency Relations +49 (0
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