Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — FY2022 Earnings Presentation
62 slides from Deutsche Pfandbriefbank's earnings presentation, Mar 9, 2023
Slide 1: Annual Results 2022 Analyst Presentation
pbb Deutsche Pfandbriefbank Annual Results 2022 Analyst Presentation 09 March 2023 Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 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
Agenda 1. Introduction 2. Operative highlights 3. Financial highlights 4. ESG 5. Strategic outlook 6. Summary 7. Appendix Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 2023 3
Slide 4: pbb's growth strategy
pbb‘s growth strategy We are expanding our leading position as a European specialist bank for commercial real estate financing to create added value for all our stakeholders We intend to grow in our core In all we do, we are fully We intend to remain a reliable business – commercial real estate comm
Slide 5: Our ambition 2026
Our ambition 2026 Building on our conservative-risk approach we want to accelerate growth to reach a higher profitability level with > 10% RoE before tax in 2026 We drive profitability in our core REF business and expand to capital-light business models > 10% RoE before tax vs. 6.3% in 2022 Translat
Slide 6: Agenda
Agenda 1. Introduction 2. Operative highlights 3. Financial highlights 4. ESG 5. Strategic outlook 6. Summary 7. Appendix Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 2023 6
Slide 7: Results 2022
Results 2022 pbb demonstrates resilient business performance thanks to its robust business model Strong resilience Sound operative performance Strong capital base with against market trend: with pre-tax profit of € 213 mn CET1 ratio of 16.7% REF portfolio growth of within forecast range (Basel IV-ca
Slide 8: Operative highlights 2022
Operative highlights 2022 pbb is committed to continuing its resilient business development and … € 9 bn ~ 170 bp REF new business1 Gross interest margin2 (REF new business) + € 1.7 bn + 37.5% REF portfolio3; total € 29.3 bn pbb direkt; total € 4.4 bn 1. Incl. extensions > 1 year 2. Net of FX-effect
Slide 9: Operative highlights 2022: green transformation
Operative highlights 2022 … to leading the green transformation of the real estate sector + € 1.2 bn 11% Green Loans1 Green REF Portfolio share2 ( 24% on scored portfolio ) + € 1.9 bn € 2.9 bn Green Bonds3 Green Bonds3 outstanding 1. Explicit green loan documentation with client in place according t
Slide 10: CRE Markets: Investment volumes plunged in Q4/22
CRE Markets Investment volumes plunged in Q4/22, both in Europe and the US European and US Investment volume1 (€ bn) – European and US CRE investment volumes declined 1.000 € significantly in Q4/22 as due to weak sentiment number 900 € of buyers and sellers fell to the lowest level since 2013 800 €
Slide 11: REF new business & portfolio
REF new business & portfolio Strategic portfolio grows slightly while new business margins pick up in Q4 Volume of strategic REF portfolio (financing volume) – Growth driven by strategic initiatives and low pre- € bn 77% payments – Strong new business margin pick-up of 40bp in Q4/22 Share of strateg
Slide 12: REF new business & portfolio: diversification by countries and property types
REF new business & portfolio Diversification by countries and property types enables for flexible approach Regions Property types – New business 2022 USA 17% with focus on Germany, Logistics USA, Nordics 22% Germany 42% France 9% Office 45% – Main property types € 9.0 bn Office, Residential Nordics
Slide 13: Funding: resilient and cost efficient Pfandbrief
Funding Strong funding based on resilient and cost efficient Pfandbrief – unsecured funding increasingly shifted into more favorable retail deposit base New long-term funding1 – Strong focus on benchmarks, asset matching currencies (USD, € bn GBP, SEK) and green refinancing in 2022 – Pfandbrief fund
Slide 14: Funding: structural shifts in funding costs
Funding Structural shifts in funding costs – contrary to Senior Preferred, retail deposits cheapened significantly while Pfandbrief spreads have remained largely stable Senior Preferred pbb direkt Pfandbrief Spread Development (6M-Euribor) pbb vs peers Spread Development vs 6M-Euribor Spread Develop
Slide 15: Agenda
Agenda 1. Introduction 2. Operative highlights 3. Financial highlights 4. ESG 5. Strategic outlook 6. Summary 7. Appendix Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 2023 15
Slide 16: Financial highlights
Financial highlights pbb has a strong track record of delivering on guidance and shareholder return € 213 mn 16.7% PBT (RoE before tax of 6.3%) CET 1 ratio1 € 1.27 € 0.95 / 75% EPS DPS Payout Ratio2 Proposal for FY 2022 1. Calibrated towards anticipated Basel IV levels (fully loaded) 2. Based on con
Slide 17: NII and NCI
NII and NCI pbb proves strong NII resilience – income from realisations significantly lower NII and NCI – NII supported by resilient portfolio profitability and growth € mn (IFRS) 502 497 – + € 1.4 bn avg. REF financing volume 482 – + € 1.2 bn build-up of favorable pbb direkt retail deposits 127 135
Slide 18: Risk provisioning
Risk provisioning Level of risk provisioning confirms risk conservative positioning throughout the cycle Net income from risk provisioning – Stage 1&2: Net additions of - € 5 mn (Q4/22: net release € 7 mn) – € mn (IFRS) improved macro and model parameter compensate for stage movements and increase i
Slide 19: Risk provisioning: comfortable buffer
Risk provisioning Comfortable buffer for challenges to come – conservative risk profile aims at a long-term sustainable provisioning level of 40-80bp on the REF portfolio throughout the cycle Balance sheet – loss allowances € mn 135 bp 133 bp 125 bp 398 400 5 4 358 85 bp 29 38 bp 261 REF coverage 26
Slide 20: GAE: costs under control
GAE Costs under control while investing in strategic development General and admin. expenses – Cost discipline to remain integral part of strategy € mn (IFRS) – CIR on competitive level 46% 42% – Investment in strategic projects to continue in difficult CIR1 40% times, e.g., customer portal, digital
Slide 21: PBT: reliable and resilient earnings performance
PBT pbb‘s business model and positioning provide for reliable and resilient earnings performance Pre-tax profit – PBT with strong resilience throughout the cycle € mn (IFRS) – Interest rate driven decline in prepayment fees from 242 extraordinarily high previous year level by - € 66 mn y-o-y 213 56
Slide 22: Capital
Capital Strong capital base allows taking advantage of profitable growth opportunities even in current market environment Basel III: RWA – RWA already calibrated towards anticipated Basel IV levels (fully € bn (IFRS) loaded) 17.7 17.3 17.0 – RWA up y-o-y mainly due to 16.8 – increase in REF portfoli
Slide 23: Agenda
Agenda 1. Introduction 2. Operative highlights 3. Financial highlights 4. ESG 5. Strategic outlook 6. Summary 7. Appendix Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 2023 23
Slide 24: ESG: Progress in all areas
ESG Progress in all areas + € 1.9 bn Upgrade to AA Green Bonds1 MSCI ESG Rating 11% + € 1.2 bn Green REF Portfolio share2 Green Loans3 ( 24% on scored portfolio ) 1. According to pbb’s green bond framework 2. Based on total REF portfolio; 24% based on scored REF portfolio of 45% as of 31 December 20
Slide 25: ESG at core of pbb strategy and brand
ESG ESG at core of pbb strategy and brand – further strong progress in 2022 ESG Programme – ESG at core of pbb’s strategy: – pbb can make a real difference, reducing the real estate ESG Committee sector`s significant CO2 impact – Green finance bank and transformation partner ESG Programme Management
Slide 26: Sustainable finance bank and transformation partner
ESG pbb as sustainable finance bank and transformation partner – > 30% green REF portfolio share targeted by 2026 Green share of REF portfolio (green loan eligible assets) – Sustainable finance defined as key element of pbb’s ESG strategy % – Ambitious green new business and portfolio goals to becom
Slide 27: Agenda
Agenda 1. Introduction 2. Operative highlights 3. Financial highlights 4. ESG 5. Strategic outlook 6. Summary 7. Appendix Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 2023 27
Slide 28: pbb's path to a > 9% RoE after tax by 2026
pbb’s path to a > 9% RoE after tax1 by 2026 We have put concrete initiatives in motion 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 growt
Slide 29: Profitable growth
1 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 current market opportunities across our asse
Slide 30: Green Finance
2 Green Finance Become the leading green CRE transformation financing partner in Europe Strategic Rationale Measures KPIs We set pbb up as sustainable Green Lending Green REF portfolio share1 (%) finance bank and real estate • We increase share of financed green properties in our transformation part
Slide 31: Revenue diversification
3 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 business model • We finalize the ramp-up of ou
Slide 32: Focus on core business and funding diversification
4/5 Focus on core business and funding diversification Diversify funding base to drive cost savings & optimise 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 assets PIF & VP (€ bn) sheet structure for
Slide 33: Digitalisation & operational revamp
6 Digitalisation & operational revamp Catalyze profitable growth through digital processes and steadfast cost discipline compensating for investments in strategic initiatives Digitalisation Measures KPIs We continue our digitalisation We further expedite the successful introduction of our digital CI
Slide 34: The road ahead
The road ahead 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 Start
Slide 35: Guidance 2023
Guidance 2023 In 2023, we invest in our business to lay the foundation for accelerated growth and a higher profitability level 2022 2023 financial targets REF new business1 € 9.0 bn € 9.0-10.0 bn Pre-tax profit € 213 mn € 170-200 mn NII + NCI € 497 mn > € 450 mn Income from realisations € 15 mn € 20
Slide 36: Guidance 2026
Guidance 2026 We release our full potential by 2026 and reach a higher profitability level with > 10% RoE b.t. > 10% > € 300 < 45% RoE b.t. Profit b.t. Cost-income ratio (> 9% RoCET1 a.t.) > 14% > 30% 50% + 25% CET1 ratio1 Green REF portfolio share2 Payout ratio for 2023-253 1. 1Calibrated towards a
Slide 37: Agenda
Agenda 1. Introduction 2. Operative highlights 3. Financial highlights 4. ESG 5. Strategic outlook 6. Summary 7. Appendix Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 2023 37
Slide 38: Summary
Summary Strong resilience, reliable operative performance and strong capital basis, pbb has the flexibility to further grow and deliver attractive shareholder returns across the cycle Building on this robust business model, pbb intends to achieve a RoE of > 10% (pre-tax) by 2026 by implementing its
Slide 39: Investment highlights
Investment highlights Delivering on its investment proposition lies in pbb’s DNA Real Estate is a decent inflation hedge and is expected to pbb has proven its ability to grow remain a resilient asset class with profitable growth its strategic REF portfolio in difficult opportunities market environme
Slide 40: Appendix
Appendix 1. ESG 2. Dividend & Financials 3. Portfolio Profile 4. Funding & Ratings Contact details Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 2023 40
Slide 41: Green Loan criteria
Green Loan pbb Green Loan Framework aligned with current regulatory and market developments – specific metrics defined for each criteria pbb Scoring Model EU Taxonomy MAX SCORE: 100 Points III. Additional Sustainability I. Energy Efficiency II. Building Certification Factors • Energy demand/-consump
Slide 42: ESG Ratings
ESG Ratings Continuous improvement reflected in ESG ratings – Upgrade by MSCI from “A“ to “AA“ pbb rating/score ISS ESG MSCI Moody‘s ESG Solutions Continuous improvement of ESG LAST UPDATE: November 2022 LAST UPDATE: May 2022 LAST UPDATE: February 2023 organisational set-up, governance, strategy A
Slide 43: Appendix
Appendix 1. ESG 2. Dividend & Financials 3. Portfolio Profile 4. Funding & Ratings Contact details Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 2023 43
Slide 44: Results 2022: attractive shareholder return
Results 2022 pbb continues to deliver attractive shareholder return Profit attributable to shareholders DPS (proposal) Payout ratio (proposal) € mn (IFRS) € 0.95 Dividend policy 75%1 213 2023–2025 -26 187 50% 25% -16 171 + regular dividend special dividend – Payout ratio based on consolidated IFRS p
Slide 45: Key figures pbb Group
Key figures pbb Group Income statement (€ mn) 2020 Q1/21 Q2/21 Q3/21 Q4/21 2021 Q1/22 Q2/22 Q3/22 Q4/22 2022 7 Net interest income 476 123 123 123 125 494 122 120 116 131 489 Net fee and commission income 6 2 3 1 2 8 2 1 1 4 8 Net income from fair value measurement -8 2 - 1 7 10 9 5 7 -1 20 Net inco
Slide 46: Key figures Real Estate Finance (REF)
Key figures Real Estate Finance (REF) Income statement (€ mn) 2020 Q1/21 Q2/21 Q3/21 Q4/21 2021 Q1/22 Q2/22 Q3/22 Q4/22 2022 3 Net interest income 396 104 104 103 106 417 104 103 101 112 420 Net fee and commission income 6 2 3 1 2 8 2 1 2 3 8 Net income from fair value measurement -6 1 - 1 4 6 6 4 4
Slide 47: Key figures Public Investment Finance (PIF)
Key figures Public Investment Finance (PIF) Income statement (€ mn) 2020 Q1/21 Q2/21 Q3/21 Q4/21 2021 Q1/22 Q2/22 Q3/22 Q4/22 2022 Net interest income 38 9 9 10 9 37 8 8 8 8 32 Net fee and commission income - - - - - - - - - - - Net income from fair value measurement -1 - - - 1 1 1 - 1 -1 1 Net inco
Slide 48: Key figures Value Portfolio (VP)
Key figures Value Portfolio (VP) Income statement (€ mn) 2020 Q1/21 Q2/21 Q3/21 Q4/21 2021 Q1/22 Q2/22 Q3/22 Q4/22 2022 Net interest income 38 9 10 9 10 38 9 9 7 10 35 Net fee and commission income - - - - - - - - -1 1 - Net income from fair value measurement -1 1 - - 2 3 2 1 2 - 5 Net income from r
Slide 49: Balance sheet
Balance sheet Specialist lender with attractive German Pfandbrief as major funding instrument Balance sheet IFRS, € bn Assets 31/12/22 31/12/21 Liabilities & equity 31/12/22 31/12/21 Financial assets at fair value through P&L 1.1 1.2 Financial liabilities at fair value through P&L 0.7 0.6 thereof th
Slide 50: Appendix
Appendix 1. ESG 2. Dividend & Financials 3. Portfolio Profile 4. Funding & Ratings Contact details Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 2023 50
Slide 51: Portfolio: Total portfolio
Portfolio Total portfolio Regions € bn2 31/12/2021 / Total: € 57.5 bn 31/12/2022 / Total: € 50.0 bn Hungary < 1% Hungary < 1% Finland 1% Other Europe 5% Other Europe 5% Finland 1% Czech Republic 1% Other Rest of World 2% Other Rest of World 2% Czech Republic 1% Sweden 2% 5% 5% Sweden 2% Poland Polan
Slide 52: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) € bn2 Regions Property types 31/12/2021: € 29.7 bn 31/12/2022: € 31.0 bn 31/12/2021: € 29.7 bn 31/12/2022: € 31.0 bn Austria 1% Mixed use 2% Other 2% Mixed use 1% Austria 1% Other Europe Other Europe Other 1% Czech Republic 1% Hotel 4% Hotel 4% Czech Republic 1% R
Slide 53: REF new business & portfolio: LTVs and internal ratings
REF new business & portfolio Business approach reflected in stable risk parameters and continued low average LTV of 51%, providing solid risk buffer REF Portfolio: Avg. weighted LTVs Total portfolio: Internal ratings (EL classes) (commitments)1 € bn (EaD, Basel III) 09/22 12/22 Non-investment grade
Slide 54: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) € bn3 Regions Borrower classification1 31/12/2021: € 5.7 bn 31/12/2022: € 4.7 bn 31/12/2021: € 5.7 bn 31/12/2022: € 4.7 bn Finland 1% Other Europe 3% Corporation 2% Infrastructure Finland 1% Other Europe 3% Supranational Finance 1% PSE (related) 1% Corporati
Slide 55: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) € bn3 Regions Borrower classification1 31/12/2021: € 13.8 bn 31/12/2022: € 10.6 bn 31/12/2021: € 13.8 bn 31/12/2022: € 10.6 bn Financial Institution 3% Other Other Rest Other Other Rest Financial Institution Supranational 4% Supranational 4% PSE < 1% Europe 4% of World
Slide 56: Portfolio: Consolidation & Adjustments (C&A)
Portfolio Consolidation & Adjustments (C&A) € bn4 Regions Borrower classification2 Internal ratings (EL classes) 31/12/2021: € 8.3 bn 31/12/2021: € 8.3 bn 31/12/2021: € 8.3 bn UK <1% Sweden <1% 9–11 15–18 Financial Institution Poland 1% Other Europe Regional Supra 2% USA 1% Government <1% Corporatio
Slide 57: Appendix
Appendix 1. ESG 2. Dividend & Financials 3. Portfolio Profile 4. Funding & Ratings Contact details Annual Results 2022 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 09 March 2023 57
Slide 58: Funding: Own Funds and Eligible Liabilities exceed 8% TLOF
Funding Own Funds and Eligible Liabilities significantly exceed 8% TLOF (in € bn as of 31/12/2022)1 MREL2 Composition of Rundown (31/12/2022) Liabilities (31/12/2022) – Buffer for Senior Preferred (SP) investors due to high volume of capital instruments ~ 16.1 and Senior Non-Preferred (SNP) liabilit
Slide 59: Funding: Public benchmark issuances since 2019
Funding Public benchmark issuances since 2019 Types WKN Launch Date mnaturity Date Size Spread1 Coupon Issue/Reoffer Price mnortgage 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% mnortgage Pfandbrief (
Slide 60: Mandated Ratings
Mandated Ratings Bank ratings S&P Long-term BBB+ Outlook/Trend Stable Short-term A-2 Stand-alone rating1 bbb Long Term Debt Ratings “Preferred” senior unsecured Debt2 BBB+ “Non-preferred” senior unsecured Debt 3 BBB- Subordinated Debt BB+ Pfandbrief ratings Moody’s Public Sector Pfandbrief Aa1 Mortg
Slide 61: 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 62: Contact details
Contact details Grit Beecken Axel Leupold Head of Communications 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 2880 28778
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