Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — 9M 2023 Earnings Presentation
64 slides from Deutsche Pfandbriefbank's earnings presentation, Nov 14, 2023
Slide 1: Results Q3/9M 2023 - Analyst Presentation
Results Q3/9M 2023 - Analyst Presentation 14 November 2023
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
1. Highlights 9M/23 2. P&L AGENDA 3. REF New Business & Portfolio 4. Funding 5. Capital 6. Summary & Outlook 7. Appendix Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 3
Slide 4: Highlights Q3/9M 2023
HIGHLIGHTS Q3/9M 2023 pbb increases LLPs and is fully on track to deliver on 2026 targets pbb adjusts PBT full-year guidance for 2023 to € 90-110 mn due to increased risk provisioning and substantial business investments In reaction to the ongoing weak CRE markets (esp. in the US), pbb follows its r
Slide 5: Operating & Financial Overview
OPERATING & FINANCIAL OVERVIEW pbb proves operating resilience REF New business Net interest and commission income General and admin. expenses € bn (commitments, incl. extensions > 1 yr.) € mn (IFRS) € mn (IFRS) 40% 46% 47% CIR3 9.0 9.0 502 497 2023e: € ~480 mn 2.4 2023e: Q4 127 135 Q4 Q4 3.3 351 20
Slide 6: Agenda
1. Highlights 9M/23 2. P&L AGENDA 3. REF New Business & Portfolio 4. Funding 5. Capital 6. Summary & Outlook 7. Appendix Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 6
Slide 7: Financials
FINANCIALS pbb profitable despite increased risk costs and substantial expenses for strategic agenda 2026 Income statement € mn Net interest, fee and commission income only slightly down y-o-y despite Q3/22 Q3/23 9M/22 9M/23 loss of TLTRO benefit and floor income, driven by REF portfolio growth, m
Slide 8: Risk Provisioning: Significant increase driven by volatile US market
RISK PROVISIONING Significant increase in risk provisioning mainly driven by volatile US market (esp. in US office segment) Most challenging market environment, driven by high interest rates, high inflation, several geopolitical and economic uncertainties as well as structural changes US market more
Slide 9: Risk Provisioning: Market volatility reflected in increased risk provisioning
RISK PROVISIONING Market volatility reflected in increased risk provisioning Risk provisioning significantly increased by € -83 mn in Q3/23 (9M/23: € -104 mn, 2022: € -44 mn), primarily driven by existing stage 3 US office loans € -95 mn additions in stage 3 (9M/23: € -111 mn) resulting from a limit
Slide 10: Risk Provisioning: Increase in stage 3 loss allowances
RISK PROVISIONING Increase in stage 3 loss allowances reflecting market volatility, esp. in US market Balance sheet – loss allowances 161 bp € mn 494 135 bp 134 bp 59 125 bp 400 410 358 50 64 114 85 bp 31 REF coverage 38 bp 261 139 121 26 bp 155 52 135 96 321 103 34 225 211 22 172 46 36 113 45 55 09
Slide 11: NPL Portfolio
NPL PORTFOLIO Increase in NPL portfolio volume driven only by a few new cases, mainly in the US Non-performing loans – regions Total NPL portfolio € mn (EaD, Basel III) 2.7% NPL increase of net € +241 mn reflects stressed market environment, esp. high 2.3% 1.6% volatility in certain locations/asse
Slide 12: Focus: US REF Portfolio
FOCUS: US REF PORTFOLIO Total US portfolio has been reviewed in 2023 Property types Regions Total US portfolio has been reviewed in 2023, all revaluations 30/09/2023: € 4.9 bn (EaD, Basel III) 30/09/2023: € 4.9 bn (EaD, Basel III) based on external appraisers Boston 2% Retail 1% Seattle 3% Other 2
Slide 13: Agenda
1. Highlights 9M/23 2. P&L AGENDA 3. REF New Business & Portfolio 4. Funding 5. Capital 6. Summary & Outlook 7. Appendix Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 13
Slide 14: REF New Business & Portfolio
REF NEW BUSINESS & PORTFOLIO Strong REF portfolio growth with improving margin Volume of strategic REF portfolio in € bn Growth in strategic REF portfolio benefitting from draw downs (financing volume) of new business and low level of prepayments and repayments +€ 1.2 bn Avg. gross portfolio mar
Slide 15: Diversification by countries and property types
REF NEW BUSINESS & PORTFOLIO Diversification by countries and property types allows to manage business through the cycle As of 30/09/23 Regions Property types Highly selective and risk Mixed use/ Other Hotel other conservative new Nordics business approach in USA Logistics/ 1% 10% 2% 2% and UK sto
Slide 16: Portfolio: Overall quality remains solid
PORTFOLIO Overall portfolio quality remains solid with avg. LTV of 52% despite recent valuation adjustments Portfolio >300% Ø ISC1,2 Overall portfolio quality remains solid with focus on prime € bn (financing volumes) properties in core inner-city locations and conservative risk 53% parameters 52%
Slide 17: Agenda
1. Highlights 9M/23 2. P&L AGENDA 3. REF New Business & Portfolio 4. Funding 5. Capital 6. Summary & Outlook 7. Appendix Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 17
Slide 18: Funding and Liquidity
FUNDING AND LIQUIDITY Funding activity reflects optimisation of refinancing with focus on retail deposits New long-term funding1 Reduced capital market funding with focus on Pfandbrief € bn and retail deposits to substitute Senior Preferred funding Three Pfandbrief Benchmark issued in Q3/23 9/M2
Slide 19: Retail Deposits
RETAIL DEPOSITS Retail deposits up by 34% ytd to € 5.9 bn – ~85% term money Development of retail deposit volume Retail deposits – maturity profile1 € bn 30/09/2023: € 5.9 bn 10% 15% Call money <1% +84% +34% 5.9 8% 1Y term 2Y term 2% 3Y term 4.4 4Y term 13% 24% 5Y term 3.2 7Y term 10Y term 27% 12/21
Slide 20: Agenda
1. Highlights 9M/23 2. P&L AGENDA 3. REF New Business & Portfolio 4. Funding 5. Capital 6. Summary & Outlook 7. Appendix Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 20
Slide 21: Capital: Move to F-IRBA
CAPITAL pbb intends to move to F-IRBA – CET1 ratio expected at ~15% after Basel IV introduction RWA Transitional Q3/9M 2023 € bn (IFRS) period BASEL III BASEL IV Capital ratios down y-o-y due to increased RWA and decreased regulatory capital Largely RWA increase reflects new REF commitments, ind
Slide 22: Agenda
1. Highlights 9M/23 2. P&L AGENDA 3. REF New Business & Portfolio 4. Funding 5. Capital 6. Summary & Outlook 7. Appendix Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 22
Slide 23: Strategic Agenda 2026: Three phases
STRATEGIC AGENDA 2026 We aim to deliver our plan in three phases by 2026 2026 & beyond 2024 & 2025 Release our full potential Accelerate our Further scale up our growth 2023 performance initiatives beyond 2026 Harvest first benefits to lift our performance beyond past levels Invest into our business
Slide 24: Strategic Agenda 2026: Continuous progress in strategic initiatives
STRATEGIC AGENDA 2026 Continuous progress in strategic initiatives 1 2 3 4 5 6 Digitalisation Profitable Green Revenue Focus on core Funding & operational growth finance diversification business diversification revamp Strong REF portfolio Eco Estate GmbH pbb Invest Bundling of PIF and Broa
Slide 25: On track to deliver on 2026 targets
STRATEGIC AGENDA 2026 pbb full on track to deliver on 2026 targets – PBT > € 300 mn, RoE b.t. > 10% REF portfolio (€ bn) The system works as (€ mn) Loss of Drop of NII+NCI in 2023 designed: portfolio TLTRO & floors due € ~ -70 mn loss of growth supported by ~ -70 TLTRO & floor income REF Portfol
Slide 26: 2023 year of investment – costs to be reduced by 2026
STRATEGIC AGENDA 2026 2023 year of investment – costs to be reduced to 2022 level by 2026 Cost-cutting largely predictable – timewise and (€ mn) Uplift 2023 resulting from in terms of amount regular inflation-related + - ~80% of cost reduction expected to materialize salary adjustments and by
Slide 27: Summary
SUMMARY pbb proves operating resilience pbb proves operating resilience in most challenging market environment (CRE, strongly increased/high interest rates, high inflation, several geopolitical and economic uncertainties) Given its sound financial strength, pbb is able to provide for adjusted but si
Slide 28: Agenda
1. Highlights 9M/23 2. P&L AGENDA 3. REF New Business & Portfolio 4. Funding 5. Capital 6. Summary & Outlook 7. Appendix Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 28
Slide 29: Appendix
1. Agenda 2026 2. ESG APPENDIX 3. Financials 4. Portfolio: Operating Processes and Profile 5. Funding & Ratings Contact Details Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 29
Slide 30: Strategic initiatives
Published 9 March 2023, Annual Results 2022 STRATEGIC INITIATIVES Strategic initiatives to further strengthen pbb’s profitability growth trajectory and adapt our strategic focus to changing market conditions 1 2 3 4 5 6 Digitalisation Profitable Green Revenue Focus on core Funding & operational grow
Slide 31: Profitable Growth
Published 9 March 2023, Annual Results 2022 PROFITABLE GROWTH We accelerate profitable, organic growth in our core business Strategic Rationale Measures KPIs We grow our core REF We re-allocate portfolios to continue to improve our margins REF portfolio (€ bn) business in two dimensions: based on cu
Slide 32: Green Finance
Published 9 March 2023, Annual Results 2022 GREEN FINANCE Become the leading green CRE transformation financing partner in Europe Strategic Rationale Measures KPIs We set pbb up as Green Lending Green REF portfolio share1 (%) sustainable finance bank and real estate • We increase share of financed g
Slide 33: Revenue Diversification
Published 9 March 2023, Annual Results 2022 REVENUE DIVERSIFICATION We leverage our core CRE competencies for capital-efficient diversification of our income Strategic Rationale Measures KPIs We continue to diversify pbb Real Estate Investment Management (IM) pbb Group: share of net fee and our busi
Slide 34: Focus on core business and funding diversification
Published 9 March 2023, Annual Results 2022 FOCUS ON CORE BUSINESS AND FUNDING DIVERSIFICATION Diversify funding base to drive cost savings & optimize balance sheet for core business 4 Focus on core business Measures KPIs We optimise our balance • We focus on our REF core business and merge Total as
Slide 35: Digitalisation & Operational Revamp
Published 9 March 2023, Annual Results 2022 DIGITALISATION & OPERATIONAL RECAMP Catalyse profitable growth through digital processes and steadfast cost discipline compensating for investments in strategic initiatives Digitalisation Measures KPIs We continue our We further expedite the successful int
Slide 36: Path to PBT target of >300 mn by 2026
Published 15 May 2023, Q1/23 figures STRATEGIC INITIATIVES pbb’s path to its PBT target of >300 mn by 2026 Simplified waterfall € mn Revenue contribution from strategic initiatives (at constant pbb cost) >300 ~10 ~30 ~40 213 ~40 ~70 ~40 CIR <45% Investments/costs for strategic initiatives to be comp
Slide 37: Cost Cutting Program
Published 10 August 2023, Q2/H1 2023 figures COST CUTTING PROGRAM Cost reduction to 2022 level with medium-term CIR target of <45% by 2026 Cost savings spread among ~40% personnel costs and ~60% non-personnel costs Reduction of ~15% FTE Main drivers: increased process efficiency (esp. digital credit
Slide 38: Guidance 2026
Published 9 March 2023, Annual Results 2022 GUIDANCE 2026 We release our full potential by 2026 and reach a higher profitability level with >10% RoE b.t. > 10% > € 300 < 45% Gross interest 2 RoE b.t. Profit b.t.margin Cost-income ratio (REF new business (> 9% RoCET1 a.t.) > 14% > 30% 50% + 25% CET1
Slide 39: Appendix
1. Agenda 2026 2. ESG APPENDIX 3. Financials 4. Portfolio: Operating Processes and Profile 5. Funding & Ratings Contact Details Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 39
Slide 40: ESG: Strong progress in sustainable finance
ESG Strong progress in sustainable finance activities Green share of REF portfolio1 (green loan eligible assets, %) 74% of REF portfolio scored – scoring of remaining > 30% portfolio ongoing Green share of total REF portfolio currently at 21% 21% 28% on resp. € 6.3 bn (28% based on scored portfo
Slide 41: ESG Program
ESG ESG Program provides for holistic approach with clear responsibilities assigned ESG Programme ESG at core of pbb’s strategy: pbb can make a real difference, reducing the real estate sector`s significant CO2 impact Green finance bank and transformation partner Active portfolio steering wi
Slide 42: Green Loan criteria
GREEN LOAN pbb Green Loan Framework aligned with current regulatory and market developments – specific metrics defined for each criterion pbb Scoring Model EU Taxonomy MAX SCORE: 100 Points III. Additional Sustainability I. Energy Efficiency II. Building Certification Factors Energy demand/-consum
Slide 43: Appendix
1. Agenda 2026 2. ESG APPENDIX 3. Financials 4. Portfolio: Operating Processes and Profile 5. Funding & Ratings Contact Details Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 43
Slide 44: Key Figures pbb Group
KEY FIGURES pbb Group Income statement (€ mn) 2021 Q1/22 Q2/22 Q3/22 Q4/22 2022 Q1/23 Q2/23 Q3/23 9M/23 Net interest income 494 122 120 116 131 489 106 110 132 348 Net fee and commission income 8 2 1 1 4 8 1 1 1 3 Net income from fair value measurement 10 9 5 7 -1 20 1 -1 2 2 Net income from realisa
Slide 45: Key Figures Real Estate Finance (REF)
KEY FIGURES Real Estate Finance (REF) Income statement (€ mn) 2021 Q1/22 Q2/22 Q3/22 Q4/22 2022 Q1/23 Q2/23 Q3/23 9M/23 Net interest income 417 104 103 101 112 420 96 101 117 314 Net fee and commission income 8 2 1 2 3 8 1 1 2 4 Net income from fair value measurement 6 6 4 4 0 14 0 -1 2 1 Net income
Slide 46: Key Figures Non-Core (PIF & VP)
KEY FIGURES Non-Core (PIF & VP) Income statement (€ mn) 2021 Q1/22 Q2/22 Q3/22 Q4/22 2022 Q1/23 Q2/23 Q3/23 9M/23 Net interest income 75 17 17 15 18 67 9 9 14 32 Net fee and commission income 0 0 0 -1 1 0 0 0 -1 -1 Net income from fair value measurement 4 3 1 3 -1 6 1 0 0 1 Net income from realisati
Slide 47: Balance Sheet
BALANCE SHEET Specialist lender with attractive German Pfandbrief as major funding instrument Balance sheet IFRS, € bn Assets 30/09/23 31/12/22 Liabilities & equity 30/09/23 31/12/22 Financial assets at fair value through P&L 0.9 1.1 Financial liabilities at fair value through P&L 0.7 0.7 thereof th
Slide 48: Appendix
1. Agenda 2026 2. ESG APPENDIX 3. Financials 4. Portfolio: Operating Processes and Profile 5. Funding & Ratings Contact Details Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 48
Slide 49: Monitoring Process: Multi-level valuation review
MONITORING PROCESS Multi-level valuation review process Loan Origination Regular annual review (Level 1/2) – revaluation mandatory In addition, reviews on a continuous basis: in case of significant changes (Level 3/4) Event triggered review – revaluation mandatory in case of significant changes (e
Slide 50: Risk Management: Risk mitigating fields of action
RISK MANAGEMENT Risk mitigating fields of action for pbb in worsening credit situations Additional collateral/recourse elements (e.g. cash, deposit) Conservative risk positioning, strong covenant structures, close monitoring Risk mitigating processes and intensive client dialogue fields of action
Slide 51: Portfolio: Total portfolio
PORTFOLIO Total portfolio Regions (EaD, Basel III ) 31/12/2022 / Total: € 50.0 bn 30/09/2023 / Total: € 49.2 bn Hungary < 1% Hungary < 1% Other Europe 5% Other Europe 5% Finland 1% Finland 1% Other Rest of World 2% Other Rest of World 2% Czech Republic 1% Czech Republic 1% Sweden 2% 5% Sweden 2% 5%
Slide 52: Portfolio: Real Estate Finance (REF)
PORTFOLIO Real Estate Finance (REF) Regions Property types 31/12/2022: € 31.0 bn 30/09/2023: € 32.1 bn 31/12/2022: € 31.0 bn 30/09/2023: € 32.1 bn Austria 1% Mixed use 1% Mixed use 1% Austria 1% Other Europe Other Europe Other 1% Other 1% Czech Republic 1% Czech Republic 1% Hotel 4% Hotel 3% Sweden
Slide 53: REF Portfolio LTV development
REF PORTFOLIO LTV development reflecting stressed market environment REF Portfolio: LTV cluster1 € bn Avg. LTV1 12/22: 51% 09/23: 52% 53% 60% 54% 54% 54% 53% 51% 53% 58% 52% 52% 52% 55% 57% 57% 50% 50% 51% 51% 51% 56% 56% 50% 50% 54% 55% 53% 54% 48% 47% 53% 51% 51% 47% 47% 52% 45% 51% 51% 48% 45% 45
Slide 54: REF Portfolio Sub-segments
REF PORTFOLIO Sub-segments Property Regions Evaluation of current situation Challenges Risk positioning General retail property market trading conditions Short Term: threads to income stability as well as Selective approach with foresighted remain challenging and retailers continue to retrench
Slide 55: REF Portfolio Sub-segments
REF PORTFOLIO Sub-segments Property Regions Evaluation of current situation Challenges Risk positioning Net absorption in Europe has recovered, although Cooling of tenant market due to overall situation of Focus on good locations in main European 2023 is still challenging and pre-Covid rates r
Slide 56: Portfolio: Non-Core Unit (PIF & VP)
PORTFOLIO Non-Core Unit (PIF& VP) Regions Borrower classification1 31/12/2022: € 15.2 bn 30/09/2023: € 13.5 bn 31/12/2022: € 15.2 bn 30/09/2023: € 13.5 bn Financial Institution 2% Corporation 1% Financial Institution 2% Other Europe 3% Other Rest of World Corporation 1% Other Europe 3% Other Rest of
Slide 57: Portfolio: Consolidation & Adjustments (C&A)
PORTFOLIO Consolidation & Adjustments (C&A) Regions Borrower classification2 Internal ratings (EL classes) 31/12/2022: € 3.7 bn 31/12/2022: € 3.7 bn 31/12/2022: € 3.7 bn Other Europe Other Rest of World Corporation 9–11 Sweden < 1% Supra UK 1% 8% 6% 1% USA 1% 9% 10% Poland 2% 99% Italy 4% Investment
Slide 58: Appendix
1. Agenda 2026 2. ESG APPENDIX 3. Financials 4. Portfolio: Operating Processes and Profile 5. Funding & Ratings Contact Details Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 58
Slide 59: Funding: Own Funds and Eligible Liabilities exceed 8% TLOF
FUNDING Own Funds and Eligible Liabilities significantly exceed 8% TLOF € bn Buffer for Senior Preferred (SP) MREL2 Composition of Rundown investors due to high volume of (30/09/2023) Liabilities capital instruments and Senior (30/09/2023) Non-Preferred (SNP) liabilities Existing Senior Non-Pref
Slide 60: Funding: Structural shift into retail deposits
FUNDING Structural shift of funding into currently cheaper retail deposits Peer 3 Peer 4 Peer 2 Peer 5 Peer 1 Source: Bloomberg; Treasury Results Q3/9M 2023 (IFRS, pbb Group, unaudited), 14 November 2023 / © Deutsche Pfandbriefbank AG 60
Slide 61: Public benchmark issuances since 2019
FUNDING Public benchmark issuances since 2019 Typesjjjj WKN Launch Date Maturity Date Size Spread1 Coupon Issue/Reoffer Price Mortgage Pfandbrief A2LQNP 21.01.2019 29.01.2024 € 500 mn +8 bp 0.25% 99.812% Senior Preferred A2LQNQ 31.01.2019 07.02.2023 € 500 mn +80 bp 0.75% 99.679% Mortgage Pfandbrief
Slide 62: Mandated Ratings
MANDATED RATINGS Bank ratings S&P Long-term BBB+ Outlook/Trend Stable Short-term A-2 1 Stand-alone rating bbb Long Term Debt Ratings “Preferred” senior unsecured Debt2 BBB+ “Non-preferred” senior unsecured Debt3 BBB- Subordinated Debt BB+ Pfandbrief ratings Moody’s Mortgage Pfandbrief Aa1 Public Sec
Slide 63: 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 64: Contact Details
CONTACT DETAILS Grit Beecken Axel Leupold Head of Comms, Marketing and IR Investor Relations/Rating Agency Relations +49 (0)89 2880 28787 +49 (0)89 2880 23648 grit.beecken@pfandbriefbank.com axel.leupold@pfandbriefbank.com Michael Heuber Head of Investor Relations/Rating Agency Relations +49 (0)89 2
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