Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — Q2 2020 Earnings Presentation
54 slides from Deutsche Pfandbriefbank's earnings presentation, Aug 12, 2020
Slide 1: Results Q2/H1 2020 Analyst Call
Stable operating half-year results support higher risk provisioning – despite uncertainty from COVID-19, pbb confident to achieve solid full-year result Results Q2/H1 2020 Analyst Call 12 August 2020 Results Q2/H1 2020 (IFRS, pbb Group, unaudited, but reviewed), 12 August 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 Q2/H1 2020 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2020 3
Slide 4: Highlights
Highlights Stable operating half-year results support higher risk provisioning – despite uncertainty from COVID-19, pbb confident to achieve solid full-year result PBT at € 29 mn in Q2/20 (H1/20: € 31 mn) – resilient operating earnings and cost base supports higher risk provisioning NII increase
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% 46% Q2 Q1 Q1 CIR1 Q1 10.5 456 464 202 193 9.3 118 119 61 4.7 2.1 57 115 113 231 48 97 2.6 48
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 2020 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2020 6
Slide 7: COVID-19 impact becomes visible in Q2 market data
Markets COVID-19 impact becomes visible in Q2 market data European CRE Investment volume Office vacancy (€ bn) in % European and US CRE investment volumes decreased 120 350 25,0 in Q2/20 due to COVID-19 100 300 20,0 250 80 200 15,0 However, it is expected that these markets will recover 60 150 1
Slide 8: Sub-segments in special focus
Markets Sub-segments in special focus – unchanged conservative positioning, but recovery phase will persist beyond 2021 REF portfolio: Property types pbb Expectation of market development1 30/06/2020: € 29.2 bn (EaD, Basel III) Hotel Selective approach – focus on business hotels Despite Hotels b
Slide 9: Macro-economic and sector-specific assumptions adjusted
Markets pbb’s macro-economic and sector-specific assumptions adjusted to downwardly revised economic forecasts in Q2/20 pbb GDP assumptions – portfolio weighted 2020 pbb’s scenario assumptions aligned with revised GDP % forecasts of economic institutes in Q2/20 2021 base case assumption of -6.8%
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 Q2/H1 2020 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2020 10
Slide 11: Solid operating performance apart from COVID-19 impacts
Financials Solid operating performance apart from COVID-19 pandemic related impacts Income statement € mn Q2/19 Q2/20 H1/19 H1/20 Key drivers Q2/H1 2020: Operating Income 119 123 238 233 NII up in Q2/20, driven by lower refinancing costs and Net interest income 113 117 229 228 floor income; thus,
Slide 12: NII remains robust
Financials NII remains robust – Q2/20 up +5% q-o-q and +4% y-o-y Income from lending business Key drivers Q2/H1 2020: € mn NII up in Q2/20 (+5% q-o-q; +4% y-o-y), supported by Q2/19 Q2/20 H1/19 H1/20 lower refinancing costs (e.g. lower cash position at Bundesbank, USD tender of Bundesbank, matur
Slide 13: Risk provisioning mainly driven by revised economic assumptions
Financials Risk provisioning mainly driven by downwardly revised economic assumptions (stages 1&2) Net income from risk provisioning Key drivers Q2/H1 2020: € mn Stages 1&2: € -24 mn net additions in Q2/20 (H1/20: € -54 Q2/19 Q2/20 H1/19 H1/20 mn) account for downwardly revised economic assumption
Slide 14: Operating costs under control
Financials Operating costs under control General & administrative expenses and depreciations Key drivers Q2/H1 2020: € mn GAE only slightly up y-o-y Q2/19 Q2/20 H1/19 H1/20 Personnel expenses: Increase due to slightly higher FTE number (06/20: 763; 03/20: 749; 12/19: 752; 06/19: General admin. e
Slide 15: 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 2020 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2020 15
Slide 16: New business
New business Lower REF new business volume in the light of COVID-19 pandemic, but significantly higher gross interest margins REF New business REF new business € bn (commitments, incl. extensions >1 yr) 27.1 26.7 H1/19 FY19 H1/20 26.8 Financing Total volume (€ bn) 4.4 9.0 2.7 volume thereof: 9.5 9.0
Slide 17: Segment reporting
Segment reporting Segment performance reflects impact from COVID-19 pandemic REF PIF Value Portfolio Income statement (IFRS, € mn) Q2/19 Q2/20 H1/19 H1/20 Q2/19 Q2/20 H1/19 H1/20 Q2/19 Q2/20 H1/19 H1/20 Operating income 106 105 209 208 7 11 16 20 5 6 11 3 thereof: Net interest income 96 96 194 189 9
Slide 18: 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 2020 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2020 18
Slide 19: 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) 03/20 06/20 Non-investment grade2 54% Investment grade2 53% 53
Slide 20: NPLs remain on low level
Portfolio NPLs remain on low level Non-performing loans Workout1 Key drivers Q2/H1 2020 € mn (EaD, Basel III) Restructuring2 Non-performing loans (NPLs) up by € 40 mn in Q2/20 0.9% 0.8% 0.9% (06/20: € 500 mn) 0.3% Restructuring loans up to € 486 mn (03/20: € 445 mn) NPL ratio 510 500 € 53 mn n
Slide 21: 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 2020 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2020 21
Slide 22: Strong funding activities pre COVID-19
Funding Strong funding activities pre COVID-19 pandemic at attractive levels – further optimised by participation in TLTRO III New long-term funding1 € bn Funding H1/2020 H1/19: € 4.2 bn H1/20: € 2.4 bn2 Strong funding activities at relatively stable avg. funding spreads y-o-y – H1/20 funding targ
Slide 23: Secondary market spreads stabilized after COVID-19 widening
Funding Secondary market spreads stabilized after COVID-19 widening in March New long-term funding HyPfe € bn1 Öpfe Sen. Unsec. 1.9 1.5 1.3 1.2 0.1 1.2 0.9 0.6 0.5 Spread development of pbb Senior Benchmarks vs iTraxx Bank Senior 0.6 1.2 0.6 0.7 0.1 0.5 (Spread in bp vs. 6m Euribor) Q2/19 Q3/19 Q4/1
Slide 24: 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 25: 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 2020 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2020 25
Slide 26: Capitalisation remains strong
Capital Capitalisation remains strong Basel III: RWA RWA development Q2/H1 2020: € bn (IFRS) RWA slightly up by € 0.1 bn q-o-q, mainly due to technical effects (e.g. regular reviews, reclassification effects) 17.7 17.3 17.4 Further slight increase of RWA expected till year-end due to COVID-19 dr
Slide 27: 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 2020 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2020 27
Slide 28: pbb confident to achieve a solid positive full-year result 2020
Summary & Outlook pbb confident to achieve a solid positive full-year result 2020 Solid operating performance supported further risk provisioning in Q2/20 NII remains robust while operating costs are under control Risk provisioning mainly driven by downwardly revised economic assumptions in the
Slide 29: Appendix
Appendix Results Q2/H1 2020 (IFRS, pbb Group, unaudited, but reviewed), 12 August 2020 29
Slide 30: Economic researchers suggest V-shape development of GDPs
Markets Economic researchers suggest V-shape development of GDPs with strong recovery starting already in H2/20 – further adjustment of pbb scenarios compared to Q1/20 GDP forecasts – pbb portfolio weighted Q2/20: % Peak of infections in April/May, gradual exit from lockdown has 8 begun. Local out
Slide 31: Property market values expected to decline significantly
Markets Property market values expected to decline significantly in pbb‘s portfolio end of 2020 – similar patterns with different pace of recovery until 2023 Development of market values – pbb estimates Market Value 91-83 92-75 96-76 102-80 Change p.a. -9% +1% +5% +6% in % -17% -10% +2% +5% Ranges d
Slide 32: Key figures pbb Group
Key figures pbb Group Income statement (€ mn) 2017 2018 Q1/19 Q2/19 H1/19 2019 Q1/20 Q2/20 H1/20 Net interest income 407 450 116 113 229 458 111 117 228 Net fee and commission income 8 6 1 2 3 6 2 1 3 Net income from fair value measurement -5 -9 -2 -5 -7 -7 -17 1 -16 Net income from realisations 45
Slide 33: Key figures pbb Group H1/19 vs. H1/20
Key figures pbb Group H1/19 vs. H1/20 Income statement REF PIF VP C&A pbb Group (€ mn) H1/19 H1/19 H1/19 H1/19 H1/19 H1/20 H1/20 H1/20 H1/20 H1/20 Net interest income 194 189 18 19 15 18 2 2 229 228 Net fee and commission income 3 3 - - - - - - 3 3 Net income from fair value -5 -3 -1 -1 -1 -12 - - -
Slide 34: Key figures Real Estate Finance (REF)
Key figures Real Estate Finance (REF) Income statement (€ mn) 20173 2018 Q1/194,5 Q2/195 H1/195 20195 Q1/20 Q2/20 H1/20 Net interest income 334 372 98 96 194 388 93 96 189 Net fee and commission income 9 6 1 2 3 7 2 1 3 Net income from fair value measurement - -8 - -5 -5 -8 -4 1 -3 Net income from r
Slide 35: Key figures Public Investment Finance (PIF)
Key figures Public Investment Finance (PIF) Income statement (€ mn) 20173 2018 Q1/194,5 Q2/195 H1/195 20195 Q1/20 Q2/20 H1/20 Net interest income 30 34 9 9 18 37 9 10 19 Net fee and commission income - 1 - - - - - - - Net income from fair value measurement -2 -2 - -1 -1 -2 -1 - -1 Net income from re
Slide 36: Key figures Value Portfolio (VP)
Key figures Value Portfolio (VP) Income statement (€ mn) 20173 2018 Q1/194,5 Q2/195 H1/19 20195 Q1/20 Q2/20 H1/20 Net interest income 37 39 8 7 15 29 8 10 18 Net fee and commission income -1 -1 - - - -1 - - - Net income from fair value measurement -3 1 -2 1 -1 3 -12 - -12 Net income from realisation
Slide 37: Balance sheet
Balance sheet Specialist lender with attractive German Pfandbrief as major funding instrument Balance sheet IFRS, € bn Assets 30/06/20 31/12/19 Liabilities & equity 30/06/20 31/12/19 Financial assets at fair value through P&L 1.5 1.3 Financial liabilities at fair value through P&L 0.7 0.8 thereof th
Slide 38: Portfolio Total portfolio
Portfolio Total portfolio € bn (EaD, Basel III) Regions 31/12/2019 / Total: € 55.5 bn 30/06/2020 / Total: € 58.1 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 39: Portfolio Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) € bn (EaD, Basel III) Regions Property types 31/12/2019: € 29.8 bn 30/06/2020: € 29.2 bn 31/12/2019: € 29.8 bn 30/06/2020: € 29.2 bn Mixed use 2% Mixed use 1% Czech Republic 1% Other Europe Czech Republic 1% Other Europe Other 3% Other 3% Hotel 5% Hotel 5% Austria
Slide 40: Portfolio Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) Regions 31/12/2019 / Total: € 29.8 bn € bn (EaD, Basel III) 30/06/2020 / Total: € 29.2 bn 14.8 14.1 3.5 3.3 3.2 3.3 2.8 2.8 1.3 1.3 0.9 0.9 1.4 1.7 0.5 0.5 0.5 0.5 0.4 0.4 0.3 0.3 0.1 0.1 0.1 0.1 Germany UK France USA Poland Sweden Finland Austria Czech Spain Hung
Slide 41: Special focus: Retail
REF portfolio Special focus: Retail REF portfolio: Property types Retail: Countries 30/06/2020: € 29.2 bn (EaD, Basel III) 30/06/2020: € 4.7 bn (EaD, Basel III) Structural changes to overall retail segment (e.g. e-Commerce, Brexit) resulted in foresighted reduction USA 3% Spain 3% of pbb’s retail
Slide 42: Special focus: Hotel
REF portfolio Special focus: Hotel REF portfolio: Property types Hotel: Countries 30/06/2020: € 29.2 bn (EaD, Basel III) 30/06/2020: € 1.4 bn (EaD, Basel III) Industrial/ Others 4% Focus on business hotels in metropolitan regions of Austria 5% Poland 3% Germany – Frankfurt, Hamburg, Munich, Logi
Slide 43: Special focus: Developments
REF portfolio Special focus: Developments REF portfolio: Loan types Developments: Countries 30/06/2020: € 29.2 bn (EaD, Basel III) 30/06/2020: € 4.7 bn (EaD, Basel III) Portfolio share of 16% with focus on Office (53%) and Residential (24%) mainly in Germany (78%) and France (13%) Others < 1% Deri
Slide 44: Portfolio Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2019: € 7.1 bn 30/06/2020: € 6.8 bn 31/12/2019: € 7.1 bn 30/06/2020: € 6.8 bn Sweden Infrastructure Infrastructure Sweden 1% Other Europe 4% Corporation 2% Finance 1% Corporation 2% Finance 1% Othe
Slide 45: Portfolio Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) Regions 31/12/2019 / Total: € 7.1 bn € bn (EaD, Basel III) 30/06/2020 / Total: € 6.8 bn 3.7 3.6 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 0.1 0.1 France Germany Spain Austria UK Finland Sweden Other Europe Other Rest of World Borrower classificati
Slide 46: Portfolio Value Portfolio (VP)
Portfolio Value Portfolio (VP) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2019: € 15.6 bn 30/06/2020: € 15.7 bn 31/12/2019: € 15.6 bn 30/06/2020: € 15.7 bn Financial Financial Finland <1% Czech Rep. <1% Other Other Rest Other Other Rest Institution Supranational 4% Institution Supr
Slide 47: Portfolio Value Portfolio (VP)
Portfolio Value Portfolio (VP) Regions 31/12/2019 / Total: € 15.6 bn € bn (EaD, Basel III) 30/06/2020 / Total: € 15.7 bn 5.9 6.1 4.2 4.2 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: Portfolio Consolidation & Adjustments (C&A)
Portfolio Consolidation & Adjustments (C&A) € bn (EaD, Basel III) Regions Borrower classification2 31/12/2019: € 2.9 bn 30/06/2020: € 6.4 bn 31/12/2019: € 2.9 bn 30/06/2020: € 6.4 bn Sweden <1% USA <1% Other Europe Financial Supra Institution Corporation <1% Other Rest of World Germany1 France 2% Ot
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 € as of 30/06/2020)1 Composition of MREL2 Liabilities Rundown (30/06/2020) (30/06/2020) € ~ 13.7 bn Substantial buffer for Senior Preferred (SP) investors due to high volume of capital instruments and Senior No
Slide 50: Public benchmark issuances since 2017
Funding Public benchmark issuances since 2017 Type 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% 10
Slide 51: Ratings unchanged – S&P unsecured ratings and outlook affirmed
Ratings Ratings unchanged – S&P Unsecured ratings and outlook recently affirmed Bank ratings S&P Ratings Q2/H1 2020 Long-term A- In the context of the COVID-19 pandemic, rating agencies have been extensively reviewing rating parameters on Outlook/Trend Negative sectorial and individual basis resul
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 ex
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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