Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — Q1 2020 Earnings Presentation
58 slides from Deutsche Pfandbriefbank's earnings presentation, May 13, 2020
Slide 1: Results Q1/20 Analyst Call
Good operating performance in Q1/20, but results affected by COVID-19 pandemic – PBT of EUR 2 mn Results Q1/20 Analyst Call 13 May 2020 Results Q1/20 (IFRS, pbb Group, unaudited), 13 May 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 Q1/20 (IFRS, pbb Group, unaudited), 13 May 2020 3
Slide 4: COVID-19 pandemic
COVID-19 pandemic COVID-19 unprecedented, invades all areas of business and social/public life pbb fully operational across all areas – approx. 90% of staff working from home, incl. critical functions such as origination, bank operations, risk management and treasury Staff and Situation supporte
Slide 5: COVID-19 pandemic: accounting and economic assumptions
COVID-19 pandemic COVID-19 unprecedented, invades all areas of business and social/public life Accounting and EBA/ECB, IDW, IASB statements aim to avoid cyclical overreaction pbb uses longer term calibration for property price assumptions for 2020, but has so far abstained from using any other r
Slide 6: Q1/20 results
Q1/20 results Good operating performance in Q1/20, but results affected by COVID-19 pandemic Good operating result impacted by € 45 mn COVID-19 pandemic effects – PBT at € 2 mn in Q1/20 (Q1/19: € 48 mn) NII slightly reduced y-o-y, mainly reflecting lower average interest bearing financing volume
Slide 7: 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 48% Q2 Q2 44% 43% Q2 Q1 Q1 CIR1 Q1 10.5 456 464 202 193 9.3 9 118 119 61 4.7 2.1 57 115 113 48 2.6 48 2.1
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 Q1/20 (IFRS, pbb Group, unaudited), 13 May 2020 8
Slide 9: Markets: COVID-19 impact barely reflected in Q1/20 investment figures
Markets COVID-19 impact is barely reflected in Q1/20 investment figures since most of the activity was front-loaded in January and February European CRE Investment volume Office vacancy (€ bn) in % European and US CRE investment volumes remained 120 350 25 300 on solid levels in Q1/20 100 20 80 25
Slide 10: Markets: Sub-segments in special focus
Markets Sub-segments in special focus REF portfolio: Property types 31/03/2020: € 29.4 bn (EaD, Basel III) pbb Expectation of Market development1 Hotel Industrial/ Others 4% Logistics Selective approach – focus on business hotels Complete standstill of tourist and business activities since mid
Slide 11: 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 – IMF forecasts strongest dip but also strongest recovery GDP forecasts – pbb portfolio weighted Q2/20: % Peak of infections in April/May and gradual exit from lockdown 8 begins pbb scen
Slide 12: Property market values expected to decline significantly by end of 2020
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 90-80 92-72 98-76 99-83 Change p.a. -10% +1% +4% +3% in % -20% -8% +4% +7% Ranges du
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 Q1/20 (IFRS, pbb Group, unaudited), 13 May 2020 13
Slide 14: Financials: Income statement
Financials Good operating performance, but results affected by COVID-19 pandemic Income statement € mn Q1/19 Q4/19 Q1/20 Key drivers Q1/20: Operating Income 119 135 110 NII slightly down y-o-y, mainly reflecting lower average Net interest income 116 117 111 interest bearing financing volume Net fe
Slide 15: NII slightly down y-o-y
Financials NII slightly down y-o-y, mainly reflecting lower average interest bearing financing volume Income from lending business Key drivers Q1/20: € mn NII slightly down y-o-y Q1/19 Q4/19 Q1/20 Avg. strategic REF financing volume lower by € -0.4 bn y-o-y to € 26.9 bn (Q1/19: € 27.3 bn) Net in
Slide 16: Fair value measurements affected by COVID-19 credit spread effects
Financials Fair value measurements mainly affected by COVID-19 pandemic related credit spread driven valuation effects Net income from fair value measurement Key drivers Q1/20: € mn Q1/19 Q4/19 Q1/20 Net income from fair value measurement mainly driven by credit spread driven valuation effects rel
Slide 17: Risk provisioning mainly model based stage 1 and 2 additions
Financials Risk provisioning mainly related to model based (stage 1 and 2) additions driven by COVID-19 pandemic; only small default related (stage 3) addition for UK shopping centre Net income from risk provisioning Key drivers Q1/20: € mn Net income from risk provision in stages 1 and 2 of € -30
Slide 18: IFRS accounting in the context of COVID-19
Risk provisioning IFRS accounting in the context of COVID-19 – pbb has applied only parts of the application aids of the European regulators Topic Problem / Effect Regulator's relief pbb's application Use of macroeconomic (GDP) and Measurement pbb used mid-/longer term sector-specific parameters Lon
Slide 19: Operating costs slightly up y-o-y
Financials Operating costs slightly up y-o-y, reflecting higher costs for regulatory projects General & administrative expenses and depreciations Key drivers Q1/20: € mn GAE only slightly up y-o-y Q1/19 Q4/19 Q1/20 Personnel expenses stable despite slightly higher FTE number y-o-y (Q1/20: 749 FT
Slide 20: 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 Q1/20 (IFRS, pbb Group, unaudited), 13 May 2020 20
Slide 21: REF new business volume of € 1.6 bn on solid level
New business REF new business volume of € 1.6 bn on solid level in Q1/20 – however, currently lower investment activity observed due to COVID-19 pandemic REF New business REF new business € bn (commitments, incl. extensions >1 yr) 27.1 26.8 Q1/19 FY19 Q1/20 26.8 Financing Total volume (€ bn) 1.9 9.0
Slide 22: pbb's business approach in times of COVID-19 pandemic
New business pbb‘s business approach in times of COVID -19 pandemic Key messages How to originate new business1 in COVID-19 times? pbb remains highly selective and is even more cautious compared to its Prime A locations already strict risk standards Ongoing focus on quality Top sponsors – pr
Slide 23: Segment reporting
Segment reporting Segment performance reflects impact from COVID-19 pandemic REF PIF Value Portfolio Income statement (IFRS, € mn) Q1/19 Q4/19 Q1/20 Q1/19 Q4/19 Q1/20 Q1/19 Q4/19 Q1/20 Operating income 103 117 103 9 9 9 6 7 -3 thereof: Net interest income 98 98 93 9 10 9 8 8 8 Net income from realis
Slide 24: 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 Q1/20 (IFRS, pbb Group, unaudited), 13 May 2020 24
Slide 25: Stable risk parameters – unchanged average LTV of 53%
Portfolio pbb’s business approach reflected in stable risk parameters – unchanged average LTV of 53% provides solid cushion REF Portfolio: Avg. weighted LTVs Total portfolio: Internal ratings (EL classes) % (commitments)1 € bn (EaD, Basel III) 12/19 03/20 Non-investment grade2 55% Investment grade2
Slide 26: NPL ratio remains on low level
Portfolio NPL ratio remains on low level – no impact from COVID-19 pandemic Non-performing loans Workout1 Key drivers Q1/20 € mn (EaD, Basel III) Restructuring2 Non-performing loans (NPLs) down in Q1/20 (€ 460 mn) 0.9% 0.8% 0.6 97% restructuring loans – decrease by € 50 mn q-o-q reflects NPL rat
Slide 27: 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 Q1/20 (IFRS, pbb Group, unaudited), 13 May 2020 27
Slide 28: Strong funding activities pre COVID-19 crisis
Funding Strong funding activities pre COVID-19 crisis at attractive levels New long-term funding1 € bn Funding Q1/2020 Q1/19: € 2.7 bn Q1/20: € 1.9 bn Strong funding activities at lower avg. funding spreads y-o-y – Q1/20 funding targets already met mid-February Spread Pfandbrief volume dominated
Slide 29: Q1/20 funding needs already met mid-February
Funding Q1/20 funding needs already met mid-February, prior to strong spread widening in the course of COVID-19 pandemic New long-term funding HyPfe € bn1 Öpfe 2.7 Sen. Unsec. 1.9 1.2 1.5 1.3 1.2 0.3 0.1 1.2 0.9 0.6 1.2 1.2 Spread development of pbb Senior Benchmarks vs iTraxx Bank Senior 0.6 0.6 0.
Slide 30: Strong buffers provide sufficient funding position into 2020
Funding Strong buffers from pre-crisis funding activities provide for sufficient funding position into 2020 – attractive substitutes to wholesale funding available New long-term funding1 € bn Strong liquidity buffers Reduced need Funding surplus from Strong pre-crisis for wholesale No major impact
Slide 31: Ratings unchanged
Ratings Ratings unchanged – S&P Unsecured ratings and outlook recently affirmed Bank ratings S&P Ratings Q1/2020 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 resultin
Slide 32: 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 Q1/20 (IFRS, pbb Group, unaudited), 13 May 2020 32
Slide 33: Capitalisation remains strong – withdrawal of dividend proposal
Capital Capitalisation remains strong – withdrawal of dividend proposal and full retention of 2019 profit follows ECB recommendation and accounts for COVID-19 pandemic uncertainties Basel III: RWA RWA development Q1/20: € bn (IFRS) RWA down € 0.4 bn q-o-q mainly due to technical effects (e.g. regu
Slide 34: 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 Q1/20 (IFRS, pbb Group, unaudited), 13 May 2020 34
Slide 35: Summary & Outlook
Summary & Outlook Operative performance expected to be resilient despite COVID-19 Solid operating performance in Q1/20 – impact from COVID-19 pandemic related to changed economic and sector specific forecast assumptions and fair value measurements, but no COVID-19 related defaults so far Risk prov
Slide 36: Appendix
Appendix Results Q1/20 (IFRS, pbb Group, unaudited), 13 May 2020 36
Slide 37: Key figures pbb Group
Key figures pbb Group Income statement (€ mn) 2017 2018 Q1/19 Q2/19 Q3/19 Q4/19 2019 Q1/20 Net interest income 407 450 116 113 112 117 458 111 Net fee and commission income 8 6 1 2 1 2 6 2 Net income from fair value measurement -5 -9 -2 -5 5 -5 -7 -17 Net income from realisations 45 32 6 10 15 17 48
Slide 38: Key figures pbb Group Q1/19 vs. Q1/20
Key figures pbb Group Q1/19 vs. Q1/20 Income statement REF PIF VP C&A pbb Group (€ mn) Q1/19 Q1/19 Q1/19 Q1/19 Q1/19 Q1/20 Q1/20 Q1/20 Q1/20 Q1/20 Net interest income 97 93 9 9 9 8 1 1 116 111 Net fee and commission income 1 2 - - - - - - 1 2 Net income from fair value - -4 - -1 -2 -12 - - -2 -17 me
Slide 39: Key figures Real Estate Finance (REF)
Key figures Real Estate Finance (REF) Income statement (€ mn) 20173 2018 Q1/194,5 Q2/195 Q3/195 Q4/195 20195 Q1/20 Net interest income 334 372 98 96 96 98 388 93 Net fee and commission income 9 6 1 2 2 2 7 2 Net income from fair value measurement - -8 - -5 - -3 -8 -4 Net income from realisations 45
Slide 40: Key figures Public Investment Finance (PIF)
Key figures Public Investment Finance (PIF) Income statement (€ mn) 20173 2018 Q1/194,5 Q2/195 Q3/195 Q4/195 20195 Q1/20 Net interest income 30 34 9 9 9 10 37 9 Net fee and commission income - 1 - - - - - - Net income from fair value measurement -2 -2 - -1 - -1 -2 -1 Net income from realisations - 5
Slide 41: Key figures Value Portfolio (VP)
Key figures Value Portfolio (VP) Income statement (€ mn) 20173 2018 Q1/194,5 Q2/195 Q3/195 Q4/195 20195 Q1/20 Net interest income 37 39 8 7 6 8 29 8 Net fee and commission income -1 -1 - - - -1 -1 - Net income from fair value measurement -3 1 -2 1 5 -1 3 -12 Net income from realisations - - - -1 - -
Slide 42: Balance sheet
Balance sheet Specialist lender with attractive German Pfandbrief as major funding instrument Balance sheet IFRS, € bn Assets 31/03/20 31/12/19 Liabilities & equity 31/03/20 31/12/19 Financial assets at fair value through P&L 1.4 1.3 Financial liabilities at fair value through P&L 0.8 0.8 thereof th
Slide 43: Portfolio: Total portfolio
Portfolio Total portfolio € bn (EaD, Basel III) Regions 31/12/2019 / Total: € 55.5 bn 31/03/2020 / Total: € 55.5 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 3% Finland 1% Finland 1% 2% 3% Sweden 2% 5% Swede
Slide 44: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) € bn (EaD, Basel III) Regions Property types 31/12/2019: € 29.8 bn 31/03/2020: € 29.4 bn 31/12/2019: € 29.8 bn 31/03/2020: € 29.4 bn Mixed use 2% Mixed use 1% Czech Republic 1% Other Europe Czech Republic 1% Other Europe Other 3% Hotel 5% Other 3% Hotel 5% Austria
Slide 45: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) Regions 31/12/2019 / Total: € 29.8 bn € bn (EaD, Basel III) 31/03/2020 / Total: € 29.4 bn 14.8 14.5 3.5 3.4 3.2 3.2 2.8 2.7 1.3 1.3 0.9 0.9 1.4 1.6 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 46: REF portfolio: Special focus: Retail
REF portfolio Special focus: Retail REF portfolio: Property types Retail: Countries 31/03/2020: € 29.4 bn (EaD, Basel III) 31/03/2020: € 4.8 bn (EaD, Basel III) Structural changes to overall retail segment (e.g. e-Commerce, Brexit) resulted in USA 3% Hotel Others 4% Spain 3% foresighted reduction
Slide 47: REF portfolio: Special focus: Hotel
REF portfolio Special focus: Hotel REF portfolio: Property types Hotel: Countries 31/03/2020: € 29.4 bn (EaD, Basel III) 31/03/2020: € 1.4 bn (EaD, Basel III) Industrial/ Focus on business hotels in metropolitan Others 4% Austria 5% regions of Logistics Benelux Residential Germany – Frankfurt, H
Slide 48: REF portfolio: Special focus: Developments
REF portfolio Special focus: Developments REF portfolio: Loan types Developments: Countries 31/03/2020: € 29.4 bn (EaD, Basel III) 31/03/2020: € 4.6 bn (EaD, Basel III) Portfolio share of 16% with focus on Office (53%) and Residential (23%) mainly in Germany (79%) and France (12%) Others < 1% Deri
Slide 49: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2019: € 7.1 bn 31/03/2020: € 7.1 bn 31/12/2019: € 7.1 bn 31/03/2020: € 7.1 bn Sweden Infrastructure Infrastructure Sweden 1% Other Europe 3% Corporation 2% Finance 1% Corporation 2% Finance 1% Othe
Slide 50: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) Regions 31/12/2019 / Total: € 7.1 bn € bn (EaD, Basel III) 31/03/2020 / Total: € 7.1 bn 3.7 3.7 1.5 1.5 1.0 1.0 0.3 0.3 0.2 0.2 0.3 0.2 0.1 0.1 <0.1 0.0 0.1 0.1 France Germany Spain Austria UK Finland Sweden Other Europe Other Rest of World Borrower classifi
Slide 51: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2019: € 15.6 bn 31/03/2020: € 15.7 bn 31/12/2019: € 15.6 bn 31/03/2020: € 15.7 bn Financial Financial Finland <1% Czech Rep. <1% Other Other Rest Other Other Rest Institution Supranational 4% Institution Supr
Slide 52: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) Regions 31/12/2019 / Total: € 15.6 bn € bn (EaD, Basel III) 31/03/2020 / Total: € 15.7 bn 5.9 6.0 4.2 4.2 1.9 2.0 0.9 0.9 0.7 0.7 0.8 0.8 0.9 0.9 0.2 0.2 0.1 0.0 <0.1 0.0 <0.1 <0.1 Austria Germany Italy Spain France Poland Hungary Czech Finland Other Europe Rest of Wor
Slide 53: Portfolio: Consolidation & Adjustments (C&A)
Portfolio Consolidation & Adjustments (C&A) € bn (EaD, Basel III) Regions Borrower classification2 31/12/2019: € 2.9 bn 31/03/2020: € 3.3 bn 31/12/2019: € 2.9 bn 31/03/2020: € 3.3 bn Other Rest of World Germany1 Other Rest of World Supra Corporation <1% Supra Corporation <1% Germany1 13% Other Europ
Slide 54: Ambition level for Own Funds and Eligible Liabilities of more than 8% TLOF
Funding Ambition level for Own Funds and Eligible Liabilities of more than 8 % TLOF (in € as of 31/03/2020)1 Composition of MREL2 Liabilities Rundown (31/03/2020) (31/03/2020) € ~ 15,6 bn Substantial buffer for Senior Preferred (SP) investors due to high volume of capital instruments and Senior No
Slide 55: 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 56: Definition of key ratios
Financial reporting Definition of key ratios General admin. Expenses + Net income from write-downs Calculation method of CIR: 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
Slide 57: 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 58: 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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