Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — H1 2019 Earnings Presentation
47 slides from Deutsche Pfandbriefbank's earnings presentation, Aug 12, 2019
Slide 1: Strong half year results with PBT of EUR 117 mn support positive outlook for FY 2019
Strong half year results with PBT of EUR 117 mn support positive outlook for FY 2019 Results Q2/H1 2019 Analyst Call 12 August 2019 Results Q2/H1 2019 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2019
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 regis
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 Q2/H1 2019 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2019 3
Slide 4: Highlights H1/19
Highlights H1/19 pbb remains well on track – strong operating and financial performance Strong PBT of € 69 mn in Q2/19 (Q2/18: € 74 mn) results in € 117 mn in H1/19 (H1/18: € 122 mn) − Strong NII due to reduced funding costs and increase in strategic REF financing Financials volume y-o-y; income fro
Slide 5: Highlights Operating and financial overview
Highlights Operating and financial overview New business Q4 Net interest and commission income General and admin. expenses € bn (commitments, incl. extensions >1 yr) Q3 € mn (IFRS) € mn (IFRS) Q2 47% 44% 42% Q1 CIR1 11.6 456 199 193 10.5 415 4.2 118 Q4 58 57 Q4 111 4.7 115 232 Q3 49 48 93 2.4 Q3 103
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 Q2/H1 2019 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2019 6
Slide 7: Markets
Markets CRE market environment remains highly competitive and challenging, low interest rate policy of ECB ongoing European CRE Investment volume Office vacancy (€ bn) in % CRE market environment remains highly competitive – 90,00 80,00 300 25 fundamentals for most Continental European markets 250 7
Slide 8: 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 Q2/H1 2019 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2019 8
Slide 9: Financials: H1/19 shows strong performance
Financials H1/19 shows strong performance based on continued solid underlying trends Income statement € mn Q2/18 Q2/19 H1/18 H1/19 Key drivers Q2/H1 2019: Operating Income 119 119 231 238 NII up +4% y-o-y due to reduced funding costs and Net interest income 113 113 220 229 higher avg. strategic fina
Slide 10: Financials: NII up 4% y-o-y
Financials NII up 4% y-o-y – reduced funding costs and higher avg. strategic financing volume Income from lending business (€ mn) Key drivers Q2/H1 2019: Q2/18 Q2/19 H1/18 H1/19 NII up 4% y-o-y Net interest income 113 113 220 229 − Funding costs down y-o-y due to new funding at spreads below maturit
Slide 11: Financials: Risk costs remain on low level
Financials Risk costs remain on low level – however, due to market environment higher risk cost anticipated for H2/19 Net income from risk provisioning Key drivers Q2/H1 2019: € mn No net additions to risk provisions – net additions in stage 3 offset by net releases Q2/18 Q2/19 H1/18 H1/19 − Stage 3
Slide 12: Financials: Operating costs up y-o-y
Financials Operating costs up y-o-y – slight further increase expected going forward General & administrative expenses and depreciations € mn Key drivers Q2/H1 2019: Q2/18 Q2/19 H1/18 H1/19 GAE up y-o-y (€ 93 mn; H1/18: € 88 mn), in line with expectations General admin. expenses -44 -47 -88 -93 − Pe
Slide 13: 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 Q2/H1 2019 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2019 13
Slide 14: New business
New business Solid new business volume – avg. REF gross margins increased in Q2/19, returning to FY/18 levels New business – REF & PIF REF new business € bn (commitments, incl. extensions >1 yr) H1/18 2018 H1/19 10.7 € bn 9.5 Total volume (€ bn) 3.6 9.5 4.4 11.6 Q4 3.8 10.5 thereof: 0.8 2.2 0.9 4.0
Slide 15: Segment reporting
Segment reporting Segment performance with strong NII, low risk and slightly higher operating costs REF PIF Value Portfolio Income statement (IFRS, € mn) Q2/18 Q2/19 H1/18 H1/19 Q2/18 Q2/19 H1/18 H1/19 Q2/18 Q2/19 H1/18 H1/19 Operating income 92 105 188 207 7 6 14 15 19 7 26 14 thereof: Net interest
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 Q2/H1 2019 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2019 16
Slide 17: Portfolio: High portfolio quality with 96% investment grade
Portfolio High portfolio quality with 96% investment grade and avg. LTV of 54% REF Portfolio: Avg. weighted LTVs Total portfolio: Internal ratings (EL classes) % (commitments)2 € bn (EaD, Basel III) 03/19 06/19 Non-investment grade1 55% 55% Investment grade1 54% 54% 30.9 30.6 7.7 7.6 16.3 15.9 4.9 5
Slide 18: Portfolio: Non-performing loans further reduced
Portfolio Non-performing loans further reduced – remain at historically low level Non-performing loans Workout1 Key drivers Q2/H1 2019: € mn (EaD, Basel III) Restructuring2 Only small portfolio of non-performing loans (NPL) with NPL ratio3 of 0.3% 0.6% 0.6% − UK problem loans related to two shopping
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 Q2/H1 2019 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2019 19
Slide 20: Funding: Strong new funding in H1/19
Funding Strong new funding in H1/19 high share of foreign currencies issuances in Q2/19 New long-term funding1 € bn Pfandbriefe H1/18: € 3.0 bn H1/19: € 4.2 bn Mortgage Pfandbrief Benchmarks: € 500 mn 5y in January, $ 600 mn 3y in May and four taps of € 100 mn each in H1/19 Spread -1 0 48 16 21 74 P
Slide 21: Funding: Senior unsecured spreads back on reduced level
Funding Senior unsecured spreads back on reduced level, after widening in 2018 New long-term funding HyPfe € bn1 Öpfe Sen. Unsec. 2.7 1.2 1.5 1.2 1.1 0.9 0.3 0.9 Spread development of pbb Senior Non-Preferred Benchmarks vs iTraxx Bank Senior 0.8 1.0 0.7 1.2 0.4 0.6 (Spread in bp vs. 6m Euribor) 0.1
Slide 22: Funding: Ambition level for Own Funds and Eligible Liabilities
Funding Ambition level for Own Funds and Eligible Liabilites of more than 8 % TLOF (in € as of 30/06/2019) Composition of MREL1 Liabilities Rundown (30 June 2019) (30 June 2019) € ~ 15 bn Substantial buffer for Senior Preferred investors due to high volume of capital SP4 instruments and Senior Non-P
Slide 23: 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 Q2/H1 2019 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2019 23
Slide 24: Capital: Capitalisation remains strong
Capital Capitalisation remains strong – however, regulatory changes expected to result in RWA increase of ~ € 4-5 bn Basel III: RWA Basel III: Capital ratios € bn (IFRS) % (IFRS) Ambition in % 06/181 12/182 03/193 06/194 levels 14.6 CET 1 19.4 18.5 18.8 19.4 ≥12.5 14.3 Tier 1 21.5 20.5 20.9 21.6 ≥16
Slide 25: 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 Q2/H1 2019 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2019 25
Slide 26: Summary & Outlook
Summary & Outlook Strong H1/19 despite ongoing competitive environment Continued good performance in Q2/19 with solid underlying trends – PBT of € 117 mn in H1/19 Net interest income supported by higher than expected REF financing volume and lower refinancing costs No net risk provisioning required
Slide 27: Appendix
Appendix Results Q2/H1 2019 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2019 27
Slide 28: Outlook 2019
Outlook 2019 Guidance increased in June: PBT at upper end or slightly above € 170-190 mn Operating trends 2017 2018 Guidance 2019 Real Estate Finance (REF) New business volume1 (€ bn) 10.7 9.5 € 8.5-9.5 bn Avg. gross margin (bp) >155 ~155 Slightly lower Financing volume (€ bn) 24.9 26.8 Moderate inc
Slide 29: Key figures pbb Group
Key figures pbb Group Income statement (€ mn) 2017 Q1/18 Q2/18 H1/18 2018 Q1/19 Q2/19 H1/19 Net interest income 407 107 113 220 450 116 113 229 Net fee and commission income 8 1 2 3 6 1 2 3 Net income from fair value measurement -5 - 4 4 -9 -2 -5 -7 Net income from realisations 45 9 6 15 32 6 10 16
Slide 30: Key figures pbb Group H1/18 vs. H1/19
Key figures pbb Group H1/18 vs. H1/19 Income statement REF PIF VP C&A pbb Group (€ mn) H1/19 H1/19 H1/19 H1/19 H1/19 H1/18 H1/18 H1/18 H1/18 H1/18 Net interest income 183 192 16 17 18 18 3 2 220 229 Net fee and commission income 3 3 - - - - - - 3 3 Net income from fair value -4 -5 -1 -1 9 -1 - - 4 -
Slide 31: Key figures Real Estate Finance (REF)
Key figures Real Estate Finance (REF) Income statement (€ mn) 20173 Q1/18 Q2/18 H1/18 2018 Q1/194 Q2/19 H1/19 Net interest income 334 89 94 183 372 97 95 192 Net fee and commission income 9 1 2 3 6 1 2 3 Net income from fair value measurement - - -4 -4 -8 - -5 -5 Net income from realisations 45 8 6
Slide 32: Key figures Public Investment Finance (PIF)
Key figures Public Investment Finance (PIF) Income statement (€ mn) 20173 Q1/18 Q2/18 H1/18 2018 Q1/194 Q2/19 H1/19 Net interest income 30 8 8 16 34 9 8 17 Net fee and commission income - - - - 1 - - - Net income from fair value measurement -2 - -1 -1 -2 - -1 -1 Net income from realisations - - - -
Slide 33: Key figures Value Portfolio (VP)
Key figures Value Portfolio (VP) Income statement (€ mn) 20173 Q1/18 Q2/18 H1/18 2018 Q1/194 Q2/19 H1/19 Net interest income 37 8 10 18 39 9 9 18 Net fee and commission income -1 - - - -1 - - - Net income from fair value measurement -3 - 9 9 1 -2 1 -1 Net income from realisations - 1 - 1 - - -1 -1 N
Slide 34: Balance sheet
Balance sheet Specialist lender with attractive German Pfandbrief as major funding instrument Balance sheet IFRS, € bn Assets 30/06/19 31/12/18 Liabilities & equity 30/06/19 31/12/18 Financial assets at fair value through P&L 1.5 1.7 Financial liabilities at fair value through P&0 0.9 0.9 thereof th
Slide 35: Portfolio: Total portfolio
Portfolio Total portfolio € bn (EaD, Basel III) Regions 31/12/2018 / Total: € 58.1 bn 30/06/2019 / Total: € 59.3 bn Hungary <1% Other Europe 6% Hungary <1% Other Europe 6% Czech Republic 1% Czech Republic 1% Other Rest of World 3% Finland 1% Other Rest of World 3% Finland 1% Sweden 2% Sweden 2% Pola
Slide 36: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) € bn (EaD, Basel III) Regions Property types 31/12/2018: € 29.9 bn 30/06/2019: € 30.6 bn 31/12/2018: € 29.9 bn 30/06/2019: € 30.6 bn Mixed use 2% Other 3% Mixed use 2% Czech Republic 1% Other Europe Czech Republic 1% Other Europe Other 3% Hotel 5% Hotel 5% Austria
Slide 37: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) Regions 31/12/2018 / Total: € 29.9 bn € bn (EaD, Basel III) 30/06/2019 / Total: € 30.6 bn 14.9 14.2 4.3 3.9 3.7 3.7 1.9 2.4 1.3 1.3 1.5 1.5 1.2 1.2 0.5 0.5 0.4 0.3 0.4 0.4 0.4 0.4 0.1 0.1 0.1 0.1 Germany UK France USA Poland Sweden Austria Czech Finland Spain Hung
Slide 38: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2018: € 7.6 bn 30/06/2019: € 7.6 bn 31/12/2018: € 7.6 bn 30/06/2019: € 7.6 bn Infrastructure Infrastructure Sweden 1% Sweden 1% Corporation 1% Finance <1% Corporation 2% Finance <1% Other Europe 4%
Slide 39: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) Regions 31/12/2018 / Total: € 7.6 bn € bn (EaD, Basel III) 30/06/2019 / Total: € 7.6 bn 3.9 3.9 1.7 1.6 1.0 1.0 0.3 0.3 0.2 0.2 0.1 0.1 0.3 0.3 0.1 0.1 <0.1 <0.1 France Germany Spain Austria UK Finland Sweden Other Europe Other Rest of World Borrower classif
Slide 40: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2018: € 16.3 bn 30/06/2019: € 15.9 bn 31/12/2018: € 16.3 bn 30/06/2019: € 15.9 bn Finland <1% Finland <1% Financial Czech Rep. <1% Other Other Rest Czech Rep. <1% Other Other Rest Financial Institution Hungar
Slide 41: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) Regions 31/12/2018 / Total: € 16.3 bn € bn (EaD, Basel III) 30/06/2019 / Total: € 15.9 bn 5.9 5.6 4.4 4.4 2.0 2.0 1.2 1.0 0.8 1.0 0.9 0.9 0.7 0.7 0.2 0.2 0.1 0.1 <0.1 <0.1 <0.1 <0.1 Austria Germany Italy Spain France Poland Hungary Czech Finland Other Europe Rest of Wo
Slide 42: Portfolio: Consolidation & Adjustments (C&A)
Portfolio Consolidation & Adjustments (C&A) € bn (EaD, Basel III) Regions Borrower classification2 31/12/2018: € 4.3 bn 30/06/2019: € 5.1 bn 31/12/2018: € 4.3 bn 30/06/2019: € 5.1 bn Corporation <1% Financial Corporation <1% Other Rest of World Other Rest of World Financial Germany1 Other Europe Ins
Slide 43: Funding: Public benchmark issuances since 2016
Funding Public benchmark issuances since 2016 Type WKN Launch Date Maturity Date Size Spread1 Coupon Issue/Reoffer Price Mortgage Pfandbrief A13SWC 12/01/2016 19/01/2023 EUR 750 mn +8 bp 0.50% 99.221% Senior Unsecured A13SWD 28/01/2016 04/02/2019 EUR 500 mn +140 bp 1.25% 99.816% Mortgage Pfandbrief
Slide 44: Mandated Ratings
Mandated Ratings Bank ratings S&P Long-term A- Outlook/Trend Negative Short-term A-2 Stand-alone rating1 bbb Long Term Debt Ratings “Preferred” senior unsecured Debt2 A- “Non-preferred” senior unsecured Debt3 BBB- Subordinated Debt BB+ Pfandbrief ratings Moody’s Public Sector Pfandbrief Aa1 Mortgage
Slide 45: Financial reporting: Change in definition of key ratios
Financial reporting Change in definition of key ratios and segment allocation in 2018 New calculation method of CIR as a result of new P&L structure: General admin. Expenses + Net income from write-downs and write-ups on non-financial assets CIR − In principal, continuation of past structure CIR = −
Slide 46: 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 47: 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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