Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — Q1 2018 Earnings Presentation
49 slides from Deutsche Pfandbriefbank's earnings presentation, May 14, 2018
Slide 1: Results Q1/18 Analyst Call
Good start into 2018 with PBT of EUR 48 mn in Q1/18 Results Q1/18 Analyst Call 14 May 2018 Annual ResultsResults Q1/18 2017 (IFRS, (IFRS, pbb Group, pbb Group, unaudited), audited, 14approval May 2018from the Supervisory Board pending), 7 March 2018
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. Changes in Financial Reporting 3. Financials 4. New Business & Segment Reporting 5 Portfolio Profile 6 Funding 7 Capital 8 Outlook 2018 Appendix Contact details Results Q1/18 (IFRS, pbb Group, unaudited), 14 May 2018 3
Slide 4: Highlights Q1/18
Highlights Q1/18 Strong PBT of EUR 48 mn in Q1/18 due to solid underlying trends PBT of EUR 48 mn slightly up y-o-y (Q1/17: EUR 47 mn) due to solid underlying trends − Strong NII mainly benefitting from higher avg. strategic financing volume and reduced funding costs − No additions to net risk provi
Slide 5: Highlights: Operating and financial overview
Highlights Operating and financial overview Figures for 2017 and Q1/18 based on new reporting structure (IFRS9) New business Q4 Net interest and commission income General and admin. expenses EUR billions (commitments, incl. extensions >1 yr) EUR millions (IFRS) EUR millions (IFRS) Q3 New structure (
Slide 6: CRE market environment remains highly competitive and challenging
Highlights CRE market environment remains highly competitive and challenging – pbb sticks to risk-conservative approach European CRE investment volume (€ bn) Quarter total (LHS) 12 month rolling total (RHS) Real estate investment market in Europe at elevated levels − Volume saw another pick-up in Q4
Slide 7: Agenda
Agenda 1. Highlights 2. Changes in Financial Reporting 3. Financials 4. New Business & Segment Reporting 5 Portfolio Profile 6 Funding 7 Capital 8 Outlook 2018 Appendix Contact details Results Q1/18 (IFRS, pbb Group, unaudited), 14 May 2018 7
Slide 8: Changes in financial reporting: new structure following IFRS9
Changes in financial reporting New structure following IFRS9 implementation – major changes Income statement Income statement Former structure (IAS 39) New structure (IFRS9) (EUR mn) (EUR mn) Major changes Q1/17 FY17 Q1/17 FY17 Q1/18 Early repayments Net interest income 103 435 and provisions 97 407
Slide 9: Agenda
Agenda 1. Highlights 2. Changes in Financial Reporting 3. Financials 4. New Business & Segment Reporting 5 Portfolio Profile 6 Funding 7 Capital 8 Outlook 2018 Appendix Contact details Results Q1/18 (IFRS, pbb Group, unaudited), 14 May 2018 9
Slide 10: Income statement (new structure)
Income statement (new structure) Solid operating performance – strong NII, no net risk provisioning, GAE on low level Income statement EUR millions Q1/17 Q4/17 Q1/18 Key drivers Q1/18. Operating Income 124 128 113 NII +10% y-o-y, benefitting from reduced funding Net interest income 97 109 107 costs
Slide 11: Income statement: NII up 10% y-o-y
Income statement (new structure) NII up +10% y-o-y, mainly benefitting from reduced funding costs Income from lending business EUR millions Key drivers Q1/18: Q1/17 Q4/17 Q1/18 NII continues to benefit from solid underlying drivers Net interest income 97 109 107 − Avg. strategic financing volume sli
Slide 12: Income statement: no net additions to risk provisions
Income statement (new structure) No net additions to risk provisions required reflecting overall market environment and continued risk conservative business approach Net income from risk provisioning Key drivers Q1/18: EUR millions IAS 39 Incurred Loss Model to be replaced by IFRS9 Expected Credit L
Slide 13: Income statement: operating costs on low level in Q1
Income statement (new structure) Operating costs on typically low level in Q1 – regulatory costs and strategic investments will continue to weigh on overall cost level going forward General & administrative expenses and depreciations EUR millions Key drivers Q1/18: Q1/17 Q4/17 Q1/18 GAE stable y-o-y
Slide 14: Agenda
Agenda 1. Highlights 2. Changes in Financial Reporting 3. Financials 4. New Business & Segment Reporting 5 Portfolio Profile 6 Funding 7 Capital 8 Outlook 2018 Appendix Contact details Results Q1/18 (IFRS, pbb Group, unaudited), 14 May 2018 14
Slide 15: REF: Solid level of new business with improved margins
New business & segment reporting REF: Solid level of new business with improved margins – continued focus on conservative risk positioning New business Q1/17 2017 Q1/18 10.7 Income statement (IFRS, EUR mn) Q1/175 Q4/175 Q1/18 9.5 Total volume (EUR bn) 2.0 10.7 1.7 Operating income 93 103 96 3.8 ther
Slide 16: PIF: Strong competition weighs on new business volume and margins
New business & segment reporting PIF: Strong competition weighs on new business volume and margins – low volume in Q1/18 not representative 1.0 Income statement (IFRS, EUR mn) Q1/173 Q4/173 Q1/18 New business Q1/17 2017 Q1/18 0.9 Operating income 6 6 7 Total volume (EUR bn) 0.4 0.9 0.1 Q4 0.5 0.3 th
Slide 17: VP: Run-down of non-strategic Value Portfolio continued
New business & segment reporting VP: Run-down of non-strategic Value Portfolio continued in line with strategy Income statement (IFRS, EUR mn) Q1/172 Q4/172 Q1/18 -14% Operating income 24 17 8 15.8 thereof: Net interest income 8 12 8 13.8 13.6 Net income from risk provisioning 1 2 2 General administ
Slide 18: Agenda
Agenda 1. Highlights 2. Changes in Financial Reporting 3. Financials 4. New Business & Segment Reporting 5 Portfolio Profile 6 Funding 7 Capital 8 Outlook 2018 Appendix Contact details Results Q1/18 (IFRS, pbb Group, unaudited), 14 May 2018 18
Slide 19: Portfolio: Conservative business and risk strategy continued
Portfolio Conservative business and risk strategy continued – high portfolio quality with 95% investment grade and avg. LTV of 55% Total portfolio: Internal ratings (EL classes) REF Portfolio: Avg. weighted LTVs EUR billions (EaD, Basel III) % (commitments)2 12/17 03/18 Non-investment grade1 Investm
Slide 20: Total problem loans at historically low level
Portfolio Total problem loans continue to be at historically low level Total problem loans Key drivers Q1/18: EUR millions (EaD, Basel III) Workout1 Restructuring2 Total problem loans down -36% y-o-y 0.6% Total problem − No problem loans in PIF and VP loan ratio 0.4% 0.4% − Only EUR 16 mn workout lo
Slide 21: Agenda
Agenda 1. Highlights 2. Changes in Financial Reporting 3. Financials 4. New Business & Segment Reporting 5 Portfolio Profile 6 Funding 7 Capital 8 Outlook 2018 Appendix Contact details Results Q1/18 (IFRS, pbb Group, unaudited), 14 May 2018 21
Slide 22: Funding: Stable, diversified funding profile
Funding Stable, diversified funding profile – further reduction of funding costs in Q1/18 New long-term funding1 Pfandbriefe EUR billions Mortgage Pfandbriefe: EUR 250 mn tap issued in January 2018 and Q1/17: EUR 2.7 bn2 Q1/18: EUR 2.0 bn EUR 750 mn benchmark issued in March 2018 Senior Unsecured Sp
Slide 23: Senior unsecured spreads converged significantly
Funding Senior unsecured spreads converged significantly Spread development of pbb Senior Unsecured Benchmarks vs peers and iTraxx Bank Senior (Spread vs. 6m Euribor) New long-term funding HyPfe EUR billions1 Öpfe 2.5 Sen. Unsec. 2.0 1.2 1.5 2016 2017 1.3 1.1 0.2 0.8 140 0.9 0.9 1.1 0.1 0.5 0.3 0.9
Slide 24: Agenda
Agenda 1. Highlights 2. Changes in Financial Reporting 3. Financials 4. New Business & Segment Reporting 5 Portfolio Profile 6 Funding 7 Capital 8 Outlook 2018 Appendix Contact details Results Q1/18 (IFRS, pbb Group, unaudited), 14 May 2018 24
Slide 25: Capital: Capitalisation remains strong
Capital Capitalisation remains strong - positive IFRS9 first-time application effect Basel III: RWA Basel III: Capital ratios (fully-loaded) EUR billions (IFRS) % (IFRS) incl. approx. EUR +2 bn RWA from ECB harmonisation Ambition in % 03/172 12/171 03/182 -2% levels 14.5 CET 1 19.2 17.6 18.8 ≥12.5 1
Slide 26: Key components of capital planning
Key components of capital planning Capital structure optimised – AT1 issuance in April supports regulatory capital structure, Available Financial Resources/Economic Capital and rating agencies requirements CET1 ratios (fully-loaded) TRIM/Basel IV Cyclical risks Sufficient capital buffer to be adequa
Slide 27: Agenda
Agenda 1. Highlights 2. Changes in Financial Reporting 3. Financials 4. New Business & Segment Reporting 5 Portfolio Profile 6 Funding 7 Capital 8 Outlook 2018 Appendix Contact details Results Q1/18 (IFRS, pbb Group, unaudited), 14 May 2018 27
Slide 28: Summary & Outlook
Summary & Outlook Good start into 2018 pbb well on track – good start into 2018 Full-year guidance 2018 unchanged Ongoing competitive market sentiment Deminishing support from funding costs expected Strategic initiatives underway to strengthen market position and support profitability Expand US busi
Slide 29: Appendix
Appendix Results Q1/18 (IFRS, pbb Group, unaudited), 14 May 2018 29
Slide 30: Change in definition of key ratios and segment allocation
Changes in financial reporting Change in definition of key ratios and segment allocation 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 31: Key figures pbb Group
Key figures pbb Group Income statement – former structure Income statement – new structure 20161 2017 Q1/17 Q2/17 Q3/17 Q4/17 2017 Q1/18 (EUR millions) (EUR millions) Net interest income 404 435 Net interest income 97 99 102 109 407 107 Net fee and commission income 8 8 Net fee and commission income
Slide 32: Key figures pbb Group Q1/17 vs. Q1/18
Key figures pbb Group Q1/17 vs. Q1/18 Income statement – new structure REF PIF VP C&A pbb Group (EUR millions) Q1/17 Q1/18 Q1/17 Q1/18 Q1/17 Q1/18 Q1/17 Q1/18 Q1/17 Q1/18 Net interest income 81 89 7 8 8 8 1 2 97 107 Net fee and commission income 3 1 3 1 Net income from fair value valuations -1 -1 -2
Slide 33: Key figures Real Estate Finance (REF)
Key figures Real Estate Finance (REF) Income statement – former structure 2016 2017 Income statement – new structure Q1/173 Q2/173 Q3/173 Q4/173 20173 Q1/18 (EUR millions) (EUR millions) Net interest income 321 350 Net interest income 81 82 84 87 334 89 Net fee and commission income 9 9 Net fee and
Slide 34: Key figures Public Investment Finance (PIF)
Key figures Public Investment Finance (PIF) Income statement – former structure 2016 2017 Income statement – new structure Q1/173 Q2/173 Q3/173 Q4/173 20173 Q1/18 (EUR millions) (EUR millions) Net interest income 35 36 Net interest income 7 7 8 8 30 8 Net fee and commission income - - Net fee and co
Slide 35: Key figures Value Portfolio (VP)
Key figures Value Portfolio (VP) Income statement – former structure 20161 2017 Income statement – new structure Q1/174 Q2/174 Q3/174 Q4/174 20174 Q1/18 (EUR millions) (EUR millions) Net interest income 41 42 Net interest income 8 8 9 12 37 8 Net fee and commission income -1 -1 Net fee and commissio
Slide 36: Balance sheet
Balance sheet Specialist lender with attractive German Pfandbrief as major funding instrument Balance sheet: 31/03/2018 (31/12/2017) IFRS, EUR billions 57.6 (58.0) 57.6 (58.0) Pos. FV of derivatives 3.3 (3.5) 3.7 (3.8) Neg. FV of derivatives 11.5 (11.6) Liabilities2 0.0 (0.0) Money Market securities
Slide 37: Portfolio: Total portfolio
Portfolio Total portfolio In EUR billion (EaD, Basel III) Regions 31/12/2017 / Total: EUR 57.5bn 31/03/2018 / Total: EUR 57.3bn USA 2% Other Europe USA 2% Other Europe Finland 1% Other Rest of World 3% Finland 1% Other Rest of World 3% Czech Republic 1% Czech Republic 1% Hungary 1% 5% 5% Hungary 1%
Slide 38: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) In EUR billion (EaD, Basel III) Regions Property types 31.12.2017: EUR 28.3 bn 31.03.2018: 28.6 bn 31.12.2017: EUR 28.3 bn 31.03.2018: 28.6 bn Hungary 1% Hungary 1% Czech Republic 1% Czech Republic 1% Other Europe Mixed use 3% Other 4% Mixed use 3% Other 4% Other
Slide 39: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) Regions 31/12/2017 / Total: EUR 28.3 bn EUR billions (EaD, Basel III) 31/03/2018 / Total: EUR 28.6 bn 13.9 14.1 4.7 4.7 3.4 3.4 1.6 1.4 1.4 1.3 1.1 1.1 0.9 1.0 0.5 0.4 0.4 0.4 0.2 0.3 0.2 0.3 0.2 0.1 <0.1 <0.0 Germany UK France Sweden Poland USA Austria Czech Finl
Slide 40: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) In EUR billion (EaD, Basel III) Regions Borrower classification1 31.12.2017: EUR 7.9 bn 31.03.2018: 7.9 bn 31.12.2017: EUR 7.9 bn 31.03.2018: 7.9 bn Sweden 1% Sweden 1% Infrastructure Finance 1% Other Europe 4% Other Europe 4% Corporation 3% Infrastructure F
Slide 41: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) Regions 31/12/2017 / Total: EUR 7.9 bn EUR billions (EaD, Basel III) 31/03/2018 / Total: EUR 7.9 bn 3.5 3.5 1.9 1.9 1.5 1.4 0.3 0.3 0.2 0.2 0.3 0.3 0.1 0.1 0.0 0.0 0.1 0.1 France Germany Spain Austria UK Finland Sweden Other Europe Supra Borrower classificat
Slide 42: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) In EUR billion (EaD, Basel III) Regions Borrower classification1 31.12.2017: EUR 17.0 bn 31.03.2018: 16.8 bn 31.12.2017: EUR 17.0 bn 31.03.2018: 16.8 bn Finland <1% Finland <1% Czech Rep. <1% Czech Rep. <1% Other Other Hungary 1% Other Rest of World Supranational Supra
Slide 43: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) Regions 31/12/2017 / Total: EUR 17.0 bn EUR billions (EaD, Basel III) 31/03/2018 / Total: EUR 16.8 bn 5.6 5.6 4.8 4.7 2.0 2.1 1.2 1.2 1.2 1.2 1.1 1.0 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 Europ
Slide 44: Portfolio: Consolidation & Adjustments (C&A)
Portfolio Consolidation & Adjustments (C&A) In EUR billion (EaD, Basel III) Regions Borrower classification2 31.12.2017: EUR 4.3 bn 31.03.2018: 3.9 bn 31.12.2017: EUR 4.3 bn 31.03.2018: 3.9 bn Financial Institution Other Rest of World Other Rest of World Financial Corporation <1% (related) <1% Corpo
Slide 45: Excursion: Brexit and US-market entry
Excursion: Brexit and US-market entry REF: High portfolio quality in UK and selective new business with low LTVs in US REF Portfolio REF New business 31/03/2018: EUR 28.6 bn (EaD, Basel III) 03/18: EUR 1.7 bn (commitments incl. extensions >1J) Other Europe Nordics 5% Other Europe High portfolio qual
Slide 46: 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 47: Ratings
Ratings Bank ratings S&P DBRS Long-term A- BBB Outlook/Trend Negative Stable Short-term A-2 R-2 (high) Stand-alone rating1 bbb BBB Long Term Debt Ratings “Preferred” senior unsecured Debt2 A- BBB “Non-preferred” senior unsecured Debt3 BBB- BBB Subordinated Debt BB+ BB (high) Pfandbrief ratings Moody
Slide 48: 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 49: 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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