Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — Q1 2019 Earnings Presentation
49 slides from Deutsche Pfandbriefbank's earnings presentation, May 13, 2019
Slide 1: Results Q1/19 Analyst Call
pbb posts stable result for Q1/19 with PBT of EUR 48 mn Results Q1/19 Analyst Call 13 May 2019 Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 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 regis
Slide 3: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Focus & Invest 9. Summary & Outlook Appendix Contact details Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 2019 3
Slide 4: Highlights Q1/19
Highlights Q1/19 Good performance in Q1/19 benefits from increase in strategic REF financing volume Stable PBT of € 48 mn y-o-y – increase in NII compensates lower income from Financials realisations while risk provisions and GAE are moderately up Solid new business of € 2.0 bn (€ 1.8 bn Q1/18) – RE
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 Q4 58 57 Q4 111 4.7 115 Q3 49 48 2.4 Q3 103 2.1 2.
Slide 6: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Focus & Invest 9. Summary & Outlook Appendix Contact details Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 2019 6
Slide 7: CRE market environment remains highly competitive and challenging
Markets CRE market environment remains highly competitive and challenging – pbb cautious in UK and on retail properties European CRE Investment volume Office vacancy CRE market environment remains highly competitive 90,00 (€ bn) 300 25 in % – fundamentals for most continental European 80,00 70,00 25
Slide 8: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Focus & Invest 9. Summary & Outlook Appendix Contact details Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 2019 8
Slide 9: Q1/19 shows strong performance based on continued solid underlying trends
Financials Q1/19 shows strong performance based on continued solid underlying trends Income statement € mn Q1/18 Q4/18 Q1/19 Key drivers Q1/19: Operating Income 112 121 119 NII up +8% y-o-y due to reduced funding costs and Net interest income 107 116 116 higher avg. strategic financing volume Net fe
Slide 10: NII up 8% y-o-y
Financials NII up 8% y-o-y – reduced funding costs and higher avg. strategic financing volume Income from lending business (€ mn) Key drivers Q1/19: Q1/18 Q4/18 Q1/19 NII up 8% y-o-y – benefitting from Net interest income 107 116 116 − reduced funding costs y-o-y due to new funding at spreads below
Slide 11: Continued low level of risk costs
Financials Continued low level of risk costs – slight increase as expected Net income from risk provisioning Key drivers Q1/19: € mn Net additions of provisions in stage 1 and 2 of € -1 mn in Q1/19 (Q1/18: € +1 mn) due to adjusted PD and macro- Q1/18 Q4/18 Q1/19 economic parameters; no provisioning
Slide 12: Operating costs stable y-o-y
Financials Operating costs stable y-o-y – increase expected going forward General & administrative expenses and depreciations € mn Key drivers Q1/19: Q1/18 Q4/18 Q1/19 GAE almost stable y-o-y (€ 46 mn; Q1/18: € 44 mn), in line with expectations General admin. expenses -44 -57 -46 − Personnel expense
Slide 13: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Focus & Invest 9. Summary & Outlook Appendix Contact details Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 2019 13
Slide 14: Solid new business volume, lower gross margins
New business Solid new business volume – lower gross margins, due to regional and product mix in REF new business New business – REF & PIF REF new business € bn (commitments, incl. extensions >1 yr) Q1/18 2018 Q1/19 10.7 € bn 9.5 Total volume (€ bn) 1.7 9.5 1.9 11.6 Q4 3.8 10.5 thereof: 0.2 2.2 0.2
Slide 15: Segment performance with strong NII and low risk and operating costs
Segment reporting Segment performance with strong NII and low risk and operating costs REF PIF Value Portfolio Income statement (IFRS, € mn) Q1/18 Q4/18 Q1/19 Q1/18 Q4/18 Q1/19 Q1/18 Q4/18 Q1/19 Operating income 96 101 100 7 15 10 7 3 8 thereof: Net interest income 89 96 97 8 8 9 8 11 9 Net income f
Slide 16: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Focus & Invest 9. Summary & Outlook Appendix Contact details Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 2019 16
Slide 17: High portfolio quality with 95% investment grade
Portfolio High portfolio quality with 95% investment grade and avg. LTV of 55% REF Portfolio: Avg. weighted LTVs Total portfolio: Internal ratings (EL classes) % (commitments)2 € bn (EaD, Basel III) 12/18 03/19 Non-investment grade1 55% 55% Investment grade1 54% 29.9 30.9 7.6 7.7 16.3 16.3 4.3 4.9 5
Slide 18: Non-performing loans remain at historically low level
Portfolio Non-performing loans remain at historically low level Non-performing loans Workout1 Key drivers Q1/19: € mn (EaD, Basel III) Restructuring2 Only small portfolio of non-performing loans (NPL) with NPL ratio4 of 0.6% 0.6% 0.6% − Reduction of German NPL-Exposure due to NPL ratio 0.4% repaymen
Slide 19: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Focus & Invest 9. Summary & Outlook Appendix Contact details Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 2019 19
Slide 20: Strong Funding in Q1 – senior preferred established
Funding Strong Funding in Q1 – “new” product senior preferred successfully established New long-term funding1 € bn Pfandbriefe Q1/18: € 2.0 bn Q1/19: € 2.7 bn Mortgage Pfandbrief Benchmarks: € 500 mn 5y in January and three taps of € 100 mn each in Q1/19 Spread -4 0 49 16 21 78 Public Sector Pfandbr
Slide 21: Senior unsecured spreads widened in 2018
Funding Senior unsecured spreads widened in 2018 Spread development of pbb Senior Non-Preferred Benchmarks vs iTraxx Bank Senior (Spread in bp vs. 6m Euribor) New long-term funding HyPfe € bn1 Öpfe Sen. Unsec. 2.7 2.0 1.2 1.1 1.2 1.1 0.9 0.3 >0.1 1.0 0.8 0.7 1.2 0.9 0.4 0.1 0.3 Q1/18 Q2/18 Q3/18 Q4/
Slide 22: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Focus & Invest 9. Summary & Outlook Appendix Contact details Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 2019 22
Slide 23: Capitalisation remains strong
Capital Capitalisation remains strong – adequate buffers, essential for regulatory changes, operational stability and strategic flexibility Basel III: RWA Basel III: Capital ratios € bn (IFRS) % (IFRS) Ambition in % 03/181 12/182 03/193 levels 14.6 CET 1 18.8 18.5 18.8 ≥12.5 14.2 14.3 Tier 1 18.8 20
Slide 24: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital 8. Focus & Invest 9. Summary & Outlook Appendix Contact details Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 2019 24
Slide 25: Strategic initiatives strengthen market position and support profitability
Focus & Invest Strategic initiatives strengthen market position and support profitability funded by freed-up resources Reorganisation of PIF business completed Change of PIF strategy from „Growth“ to „Hold“ Focus on business in France (operated from Paris) and ECA-business (operated from London) onl
Slide 26: Agenda
Agenda 1. Highlights & Markets 2. Financials 3. New Business & Segment Reporting 4. Portfolio Profile 5. Funding 6. Capital 7. Focus & Invest 8. Summary & Outlook Appendix Contact details Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 2019 26
Slide 27: Summary & Outlook: Good start into 2019
Summary & Outlook Good start into 2019 pbb well on track – good start into 2019 Focus & Invest Focus: − Further centralisation of functions almost finalized − Reorganization PIF completed Invest: − Several digitalisation initiatives ongoing − Capveriant with progress in Germany and start in France −
Slide 28: Appendix
Appendix Results Q1/19 (IFRS, pbb Group, unaudited), 13 May 2019 28
Slide 29: Outlook 2019 Guidance
Outlook 2019 Guidance Operating trends 2017 2018 Guidance 2019 Real Estate Finance (REF) New business volume1 (EUR bn) 10.7 9.5 EUR 8.5-9.5 bn Avg. gross margin (bp) >155 ~155 Slightly lower Financing volume (EUR bn) 24.9 26.8 Moderate increase (strategic portfolio) Public Investment Finance (PIF) A
Slide 30: Key figures pbb Group
Key figures pbb Group Income statement 2017 Q1/18 Q2/18 Q3/18 Q4/18 2018 Q1/19 (€ mn) Net interest income 407 107 113 114 116 450 116 Net fee and commission income 8 1 2 1 2 6 1 Net income from fair value measurement -5 0 4 -2 -11 -9 -2 Net income from realisations 45 9 6 8 9 32 6 Net income from he
Slide 31: Key figures pbb Group Q1/18 vs. Q1/19
Key figures pbb Group Q1/18 vs. Q1/19 Income statement REF PIF VP C&A pbb Group (€ mn) Q1/19 Q1/19 Q1/19 Q1/19 Q1/19 Q1/18 Q1/18 Q1/18 Q1/18 Q1/18 Net interest income 89 97 8 9 8 9 2 1 107 116 Net fee and commission income 1 1 0 0 0 0 0 0 1 1 Net income from fair value 0 0 0 0 0 -2 0 0 0 -2 measurem
Slide 32: Key figures Real Estate Finance (REF)
Key figures Real Estate Finance (REF) Income statement (€ mn) 20173 Q1/18 Q2/18 Q3/18 Q4/18 2018 Q1/19 Net interest income 334 89 94 93 96 372 97 Net fee and commission income 9 1 2 2 1 6 1 Net income from fair value measurement - - -4 -1 -3 -8 - Net income from realisations 45 8 6 9 4 27 4 Net inco
Slide 33: Key figures Public Investment Finance (PIF)
Key figures Public Investment Finance (PIF) Income statement (€ mn) 20173 Q1/18 Q2/18 Q3/18 Q4/18 2018 Q1/19 Net interest income 30 8 8 10 8 34 9 Net fee and commission income - - - - 1 1 - Net income from fair value measurement -2 - -1 -1 - -2 - Net income from realisations - - - - 5 5 1 Net income
Slide 34: Key figures Value Portfolio (VP)
Key figures Value Portfolio (VP) Income statement (€ mn) 20173 Q1/18 Q2/18 Q3/18 Q4/18 2018 Q1/19 Net interest income 37 8 10 10 11 39 9 Net fee and commission income -1 - - -1 - -1 - Net income from fair value measurement -3 - 9 - -8 1 -2 Net income from realisations - 1 - -1 - - 1 Net income from
Slide 35: Balance sheet
Balance sheet Specialist lender with attractive German Pfandbrief as major funding instrument Balance sheet IFRS, € bn Assets 31/03/19 31/12/18 Liabilities & equity 31/03/19 31/12/18 Financial assets at fair value through P&L 1.4 1.7 Financial liabilities at fair value through P&L 1.0 0.9 thereof th
Slide 36: Portfolio: Total portfolio
Portfolio Total portfolio € bn (EaD, Basel III) Regions 31/12/2018 / Total: € 58.1 bn 31/03/2019 / Total: € 59.8 bn Hungary <1% Other Europe 6% Hungary <1% Other Europe 6% Czech Republic 1% Czech Republic 1% Other Rest of World 3% Other Rest of World 3% Finland 1% Finland 1% Sweden 2% Sweden 2% Pola
Slide 37: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) € bn (EaD, Basel III) Regions Property types 31/12/2018: € 29.9 bn 31/03/2019: € 30.9 bn 31/12/2018: € 29.9 bn 31/03/2019: € 30.9 bn Hungary <1% Hungary <1% Czech Republic 1% Other Europe 8% Czech Republic 1% Other Europe 8% Mixed use 2% Other 3% Mixed use 2% Othe
Slide 38: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) Regions 31/12/2018 / Total: € 29.9 bn € bn (EaD, Basel III) 31/03/2019 / Total: € 30.9 bn 14.9 14.2 4.3 4.4 3.7 3.6 1.9 2.1 1.3 1.3 1.5 1.4 1.2 1.3 0.5 0.5 0.4 0.4 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 39: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2018: € 7.6 bn 31/03/2019: € 7.7 bn 31/12/2018: € 7.6 bn 31/03/2019: € 7.7 bn Infrastructure Sweden 1% Sweden 1% Corporation 1% Finance <1% Corporation 2% Other Europe 4% Other Europe 3% Supranatio
Slide 40: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) Regions 31/12/2018 / Total: € 7.6 bn € bn (EaD, Basel III) 31/03/2019 / Total: € 7.7 bn 3.9 3.9 1.7 1.6 1.0 1.1 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 41: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2018: € 16.3 bn 31/03/2019: € 16.3 bn 31/12/2018: € 16.3 bn 31/03/2019: € 16.3 bn Finland <1% Finland <1% Financial Czech Rep. <1% Other Other Rest Czech Rep. <1% Other Other Rest Financial Europe of World In
Slide 42: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) Regions 31/12/2018 / Total: € 16.3 bn € bn (EaD, Basel III) 31/03/2019 / Total: € 16.3 bn 5.6 5.7 4.4 4.4 2.0 2.0 1.2 1.2 1.0 1.0 1.0 0.9 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 Europe Rest of Wo
Slide 43: Portfolio: Consolidation & Adjustments (C&A)
Portfolio Consolidation & Adjustments (C&A) € bn (EaD, Basel III) Regions Borrower classification2 31/12/2018: € 4.3 bn 31/03/2019: € 4.9 bn 31/12/2018: € 4.3 bn 31/03/2019: € 4.9 bn Other Rest of World Other Rest of World Corporation <1% Financial Corporation <1% Germany1 Financial Institution Othe
Slide 44: Significant MREL buffer allows for focus on Senior Preferred issuance
Funding Significant MREL buffer allows for focus on Senior Preferred issuance (in % of RWA, fully phased-in) Key messages 2019 Requirements Available MREL Rundown Senior Preferred: (MREL based on YE2016) (31/12/18) (31/12/18)3 − Expected to be the prevailing ~68%5 senior product in the near-term − S
Slide 45: 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 46: 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 Debt3 BBB- Subordinated Debt BB+ Pfandbrief ratings Moody’s Public Sector Pfandbrief Aa1 Mortgage
Slide 47: Change in definition of key ratios and segment allocation in 2018
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 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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