Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — Q3 2019 Earnings Presentation
48 slides from Deutsche Pfandbriefbank's earnings presentation, Nov 11, 2019
Slide 1: PBT at € 187 mn after nine months - full-year guidance increased
PBT at € 187 mn after nine months - full-year guidance increased to € 205-215 mn Results Q3/9M 2019 Analyst Call 11 November 2019 Results Q3/9M 2019 (IFRS, pbb Group, unaudited), 11 November 2019
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 Q3/9M 2019 (IFRS, pbb Group, unaudited), 11 November 2019 3
Slide 4: Highlights 9M/19
Highlights 9M/19 Strong operating performance continued with PBT of € 187 mn after nine months – full-year guidance increased to € 205-215 mn Strong PBT of € 70 mn in Q3/19 (Q3/18: € 49 mn) results in € 187 mn for 9M/19 (+9% y-o-y; 9M/18: € 171 mn) NII remains on high level due to reduced fundin
Slide 5: Highlights: Operating and financial overview
Highlights Operating and financial overview New business Q4 Net interest and commission income General and admin. expenses € bn (commitments, incl. extensions >1 yr) Q3 € mn (IFRS) € mn (IFRS) Q2 47% 44% 42% Q1 CIR1 11.6 456 199 193 10.5 415 4.2 118 345 Q4 58 57 Q4 111 141 4.7 7.2 115 113 Q3 49 48 2
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 Q3/9M 2019 (IFRS, pbb Group, unaudited), 11 November 2019 6
Slide 7: Low interest rate environment continues to support and prolong CRE cycle
Markets Low interest rate environment continues to support and prolong CRE cycle – slowing economic growth and individual market developments urge some caution European CRE Investment volume (€ bn) Office vacancy in % Despite recent declines, European and US CRE 90 300 25 investment volume remain
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 Q3/9M 2019 (IFRS, pbb Group, unaudited), 11 November 2019 8
Slide 9: Strong operating performance continued
Financials Strong operating performance continued Income statement € mn Q3/18 Q3/19 9M/18 9M/19 Key drivers Q3/9M 2019: Operating Income 119 133 350 371 NII up +2% y-o-y due to reduced funding costs and Net interest income 114 112 334 341 supported by increased avg. REF financing volume Net fee an
Slide 10: NII driven by reduced funding costs and higher avg. REF financing volume
Financials NII driven by reduced funding costs and supported by increased avg. REF financing volume – significantly higher prepayment fees Income from lending business (€ mn) Key drivers Q3/9M 2019: Q3/18 Q3/19 9M/18 9M/19 NII up +2% y-o-y Net interest income 114 112 334 341 Avg. REF financing v
Slide 11: Risk provisioning in line with expectations, stable y-o-y
Financials Risk provisioning in line with expectations, stable y-o-y – additions for UK shopping centres in Q3 resulting from valuation adjustments Net income from risk provisioning Key drivers Q3/9M 2019: € mn Risk provisioning continues to be driven by two counterbalancing effects: Q3/18 Q3/19 9
Slide 12: Operating costs slightly up y-o-y, driven by regulatory projects and IT costs
Financials Operating costs slightly up y-o-y, mainly driven by regulatory projects and IT costs – increase expected in Q4 General & administrative expenses and depreciations € mn Key drivers Q3/9M 2019: Q3/18 Q3/19 9M/18 9M/19 GAE slightly up y-o-y (€ 141mn; 9M/18: € 136 mn), in line with expectat
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 Q3/9M 2019 (IFRS, pbb Group, unaudited), 11 November 2019 13
Slide 14: New business: REF new business volume remains solid
New business REF new business volume remains solid at € 2.5 bn in Q3, resulting in a total volume of € 6.9 bn in 9M/19 – avg. REF gross interest margin further up to >150bp in 9M/19 REF New business REF new business € bn (commitments, incl. extensions >1 yr) 9M/18 2018 9M/19 Total volume (€ bn) 5.5
Slide 15: Segment performance in line with strategic approach
Segment reporting Segment performance in line with strategic approach REF PIF Value Portfolio Income statement (IFRS, € mn) Q3/18 Q3/19 9M/18 9M/19 Q3/18 Q3/19 9M/18 9M/19 Q3/18 Q3/19 9M/18 9M/19 Operating income 101 109 290 316 9 11 23 26 8 11 34 25 thereof: Net interest income 93 95 276 287 10 9 2
Slide 16: 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 Q3/9M 2019 (IFRS, pbb Group, unaudited), 11 November 2019 16
Slide 17: Stable high portfolio quality with 95% investment grade and avg. LTV of 54%
Portfolio Stable high portfolio quality with 95% investment grade and avg. LTV of 54% REF Portfolio: Avg. weighted LTVs Total portfolio: Internal ratings (EL classes) % (commitments)2 € bn (EaD, Basel III) 06/19 09/19 Non-investment grade1 Investment grade1 54% 54% 54% 54% 30.6 30.7 7.6 7.6 15.9 16.
Slide 18: Non-performing loans up in Q3, but remaining at low level
Portfolio Non-performing loans up in Q3, but remaining at low level Non-performing loans Workout1 Key drivers Q3/9M 2019: € mn (EaD, Basel III) Restructuring2 NPLs up by € 190 mn in Q3 due to addition of two 0.7% cases 0.6% 0.6% 0.3% One UK shopping centre with LTV impairment; NPL ratio no econo
Slide 19: 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 Q3/9M 2019 (IFRS, pbb Group, unaudited), 11 November 2019 19
Slide 20: Strong new funding activities with high share of foreign currencies
Funding Strong new funding activities with high share of foreign currencies – even though avg. funding spreads increased y-o-y, spread level is still below maturities New long-term funding1 Pfandbriefe € bn Mortgage Pfandbrief Benchmarks: € 500 mn 5y in January, 9M/18: € 4.2 bn4 9M/19: € 5.5 bn fo
Slide 21: Senior unsecured spreads back on lower level, after widening in 2018
Funding Senior unsecured spreads back on lower level, after widening in 2018 New long-term funding HyPfe € bn1 Öpfe Sen. Unsec. 2.7 1.2 1.5 1.3 1.2 1.1 0.3 0.1 0.9 Spread development of pbb Senior Non-Preferred Benchmarks vs iTraxx Bank Senior 1.0 0.7 1.2 1.2 0.4 0.6 (Spread in bp vs. 6m Euribor) 0.
Slide 22: 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 Q3/9M 2019 (IFRS, pbb Group, unaudited), 11 November 2019 22
Slide 23: Capitalisation remains strong, providing adequate buffer
Capital Capitalisation remains strong, providing adequate buffer for expected regulatory changes Basel III: RWA Basel III: Capital ratios € bn (IFRS) % (IFRS) Ambition in % 09/181 12/182 06/193 09/193 14.6 levels 14.3 CET 1 19.7 18.5 19.4 18.3 ≥12.5 13.5 13.6 Tier 1 21.9 20.5 21.6 20.4 ≥16 Own funds
Slide 24: Pro-forma calculation on expected regulatory changes in line with guidance
Capital Pro-forma calculation on expected regulatory changes in line with guidance RWA Pro-forma calculation on expected regulatory changes: € bn (IFRS) Pro-forma calculation includes effects on RWA from risk models/ECB Basel III Pro-forma TRIM, EBA Guidelines and Basel IV incl. expected regulator
Slide 25: 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 Q3/9M 2019 (IFRS, pbb Group, unaudited), 11 November 2019 25
Slide 26: Summary & Outlook
Summary & Outlook pbb with continued strong operating performance – full-year PBT guidance increased to € 205-215 mn Strong operating performance continued in Q3/19 New business remains solid with positive margin development in 2019 – not least because of selective approach Strong financial pe
Slide 27: Appendix
Appendix Results Q3/9M 2019 (IFRS, pbb Group, unaudited), 11 November 2019 27
Slide 28: Full-year PBT guidance 2019 increased to € 205-215 mn
Outlook 2019 Full-year PBT guidance 2019 increased to € 205-215 mn Operating trends 2017 2018 Guidance 2019 Adjusted guidance (11/19) Real Estate Finance (REF) New business volume1 (€ bn) 10.7 9.5 € 8.5-9.5 bn Avg. gross margin (bp) >155 ~155 Slightly lower Stable Financing volume (€ bn) 24.9 26.8 M
Slide 29: Key figures pbb Group
Key figures pbb Group Income statement (€ mn) 2017 Q1/18 Q2/18 Q3/18 9M/18 2018 Q1/19 Q2/19 Q3/19 9M/19 Net interest income 407 107 113 114 334 450 116 113 112 341 Net fee and commission income 8 1 2 1 4 6 1 2 1 4 Net income from fair value measurement -5 - 4 -2 2 -9 -2 -5 5 -2 Net income from reali
Slide 30: Key figures pbb Group 9M/18 vs. 9M/19
Key figures pbb Group 9M/18 vs. 9M/19 Income statement REF PIF VP C&A pbb Group (€ mn) 9M/19 9M/19 9M/19 9M/19 9M/19 9M/18 9M/18 9M/18 9M/18 9M/18 Net interest income 276 287 26 26 28 24 4 4 334 341 Net fee and commission income 5 5 - - -1 -1 - - 4 4 Net income from fair value -5 -5 -2 -1 9 4 - - 2
Slide 31: Key figures Real Estate Finance (REF)
Key figures Real Estate Finance (REF) Income statement (€ mn) 20173 Q1/18 Q2/18 Q3/18 9M/18 2018 Q1/194 Q2/19 Q3/19 9M/19 Net interest income 334 89 94 93 276 372 97 95 95 287 Net fee and commission income 9 1 2 2 5 6 1 2 2 5 Net income from fair value measurement - - -4 -1 -5 -8 - -5 - -5 Net incom
Slide 32: Key figures Public Investment Finance (PIF)
Key figures Public Investment Finance (PIF) Income statement (€ mn) 20173 Q1/18 Q2/18 Q3/18 9M/18 2018 Q1/194 Q2/19 Q3/19 9M/19 Net interest income 30 8 8 10 26 34 9 8 9 26 Net fee and commission income - - - - 0 1 - - - - Net income from fair value measurement -2 - -1 -1 -2 -2 - -1 - -1 Net income
Slide 33: Key figures Value Portfolio (VP)
Key figures Value Portfolio (VP) Income statement (€ mn) 20173 Q1/18 Q2/18 Q3/18 9M/18 2018 Q1/194 Q2/19 Q3/19 9M/19 Net interest income 37 8 10 10 28 39 9 9 6 24 Net fee and commission income -1 - - -1 -1 -1 - - -1 -1 Net income from fair value measurement -3 - 9 0 9 1 -2 1 5 4 Net income from real
Slide 34: Balance sheet
Balance sheet Specialist lender with attractive German Pfandbrief as major funding instrument Balance sheet IFRS, € bn Assets 30/09/19 31/12/18 Liabilities & equity 30/09/19 31/12/18 Financial assets at fair value through P&L 1.5 1.7 Financial liabilities at fair value through P&0 1.0 0.9 thereof th
Slide 35: Portfolio: Total portfolio
Portfolio Total portfolio € bn (EaD, Basel III) Regions 31/12/2018 / Total: € 58.1 bn 30/09/2019 / Total: € 58.5 bn Hungary <1% Other Europe 5% Hungary <1% Other Europe 6% Czech Republic 1% Czech Republic 1% Other Rest of World 3% Other Rest of World 2% Finland 1% Finland 1% Sweden 2% Sweden 2% Pola
Slide 36: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) € bn (EaD, Basel III) Regions Property types 31/12/2018: € 29.9 bn 30/09/2019: € 30.7 bn 31/12/2018: € 29.9 bn 30/09/2019: € 30.7 bn Czech Republic 1% Other Europe Mixed use 2% Other 3% Mixed use 2% Other 3% Czech Republic 1% Other Europe Austria 2% Hotel 5% Hotel
Slide 37: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) Regions 31/12/2018 / Total: € 29.9 bn € bn (EaD, Basel III) 30/09/2019 / Total: € 30.7 bn 14.9 14.2 4.3 3.8 3.7 3.5 2.7 1.9 1.3 1.4 1.5 1.5 1.2 1.1 0.5 0.5 0.4 0.3 0.4 0.4 0.4 0.4 0.1 0.1 0.1 0.1 Germany UK France USA Poland Sweden Austria Czech Finland Spain Hung
Slide 38: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2018: € 7.6 bn 30/09/2019: € 7.6 bn 31/12/2018: € 7.6 bn 30/09/2019: € 7.6 bn Infrastructure Sweden 1% Sweden 1% Corporation 1% Finance <1% Corporation 2% Infrastructure Other Europe 4% Other Europ
Slide 39: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) Regions 31/12/2018 / Total: € 7.6 bn € bn (EaD, Basel III) 30/09/2019 / Total: € 7.6 bn 3.9 3.9 1.7 1.6 1.0 1.0 0.3 0.3 0.2 0.2 0.1 0.1 0.3 0.3 0.1 0.1 <0.1 <0.1 France Germany Spain Austria UK Finland Sweden Other Europe Other Rest of World Borrower classif
Slide 40: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2018: € 16.3 bn 30/09/2019: € 16.4 bn 31/12/2018: € 16.3 bn 30/09/2019: € 16.4 bn Finland <1% Finland <1% Financial Czech Rep. <1% Other Other Rest Czech Rep. <1% Other Other Rest Financial Institution Hungar
Slide 41: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) Regions 31/12/2018 / Total: € 16.3 bn € bn (EaD, Basel III) 30/09/2019 / Total: € 16.4 bn 6.2 5.6 4.4 4.4 2.0 2.1 1.2 0.9 1.0 0.8 1.0 0.9 0.7 0.8 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 Europe Rest of Wo
Slide 42: Portfolio: Consolidation & Adjustments (C&A)
Portfolio Consolidation & Adjustments (C&A) € bn (EaD, Basel III) Regions Borrower classification2 31/12/2018: € 4.3 bn 30/09/2019: € 3.9 bn 31/12/2018: € 4.3 bn 30/09/2019: € 3.9 bn Corporation <1% Financial Corporation <1% Other Rest of World Other Rest of World Financial Germany1 Institution Germ
Slide 43: Funding: Ambition level for Own Funds and Eligible Liabilities of more than 8% TLOF
Funding Ambition level for Own Funds and Eligible Liabilites of more than 8 % TLOF (in € as of 30/09/2019) Composition of MREL1 Liabilities Rundown (30/09/2019) (30/09/2019) € ~ 14 bn Substantial buffer for Senior Preferred (SP) investors due to high volume of capital instruments and Senior Non- S
Slide 44: 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 45: Mandated Ratings
Mandated Ratings Bank ratings S&P Long-term A- Outlook/Trend Negative Short-term A-2 Stand-alone rating1 bbb Long Term Debt Ratings “Preferred” senior unsecured Debt2 A- “Non-preferred” senior unsecured Debt 3 BBB- Subordinated Debt BB+ Pfandbrief ratings Moody’s Public Sector Pfandbrief Aa1 Mortgag
Slide 46: Financial reporting: Change in definition of key ratios and segment allocation
Financial reporting Change in definition of key ratios and segment allocation in 2018 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 47: 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 48: 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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