Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — 18th German Corporate Conference, UniCredit / Kepler Cheuvreux 2019
25 slides from Deutsche Pfandbriefbank's conference presentation, Jan 23, 2019
Slide 1: Company Presentation, 18th German Corporate Conference
Company Presentation 18th German Corporate Conference UniCredit / Kepler Cheuvreux 23 January 2019 Andreas Arndt, CEO/CFO Company Presentation, 18th German Corporate Conference, 23 January 2019 (pbb Group, IFRS, unaudited)
Slide 2: Business Model & Strategy
Business Model & Strategy pbb is a leading commercial real estate lender with a complementary public investment finance business FUNDING LENDING Stable and well diversified Specialised on-balance sheet Core business segments funding base lender − Real Estate Finance (REF) − Pfandbrief (leading issue
Slide 3: Promised and delivered: 2018 looks like another successful year
Promised and delivered 2018 looks like another successful year 2018 2019 Strong performance in 9M/18 pbb prepared to tackle challenges in 2019 NII stronger than expected due to Market environment and competitive reduced funding costs dynamics in CRE finance expected to LLPs and GAE below plan become
Slide 4: Overview 9M 2018: New business with continuous focus on risk conservative positioning
Overview 9M 2018 New business with continuous focus on risk conservative positioning New business volume € bn (commitments, incl. extensions >1 yr) Target 2018: 11.6 10.0 - 11.0 10.5 4.2 3.7 2.0 2.4 2.1 Q4 1.8 2.6 Q3 2.0 Q2 2.9 2.4 1.8 Q1 2016 2017 9M/18 Solid track record despite highly competitive
Slide 5: Markets: CRE market environment remains highly competitive and challenging
Markets CRE market environment remains highly competitive and challenging – pbb maintains selective approach European CRE investment volume € bn 278 260 264 248 238 227 170 Q3/18: 176 126 126 133 115 78 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Despite ongoing political uncert
Slide 6: Overview 9M 2018: Strategic portfolio constantly increasing
Overview 9M 2018 Strategic portfolio constantly increasing Portfolio € bn (financing volumes) 67% 70% 71% Share of strategic portfolio 47.3 45.7 45.7 15.8 13.8 13.4 7.4 7.0 6.6 Strategic Value Portfolio portfolio 24.1 24.9 25.7 Public Investment Finance Real Estate Finance 2016 2017 9M/18 REF main s
Slide 7: Overview 9M 2018: Strong performance
Overview 9M 2018 Strong performance Pre-tax profit € mn (IFRS) 11.1% ROE b.t. 7.3% 7.6%1 301 55 Target 2018: 204 205-215 Incl. € +132 mn extraordinary 159 50 49 Q4 HETA gain 51 Q3 56 74 42 Q2 45 47 48 Q1 2016 2017 9M/18 PBT guidance 2018 raised from € 150-170 mn to € 205-215 mn − NII stronger than e
Slide 8: Overview 9M 2018: Solid development of net interest income
Overview 9M 2018 Solid development of net interest income despite competitive market environment Net interest income € mn New structure (IFRS9) 443 412 415 122 111 338 Q4 115 110 115 Q3 99 103 Q2 94 105 101 115 Q1 104 106 100 108 2016 2017 2017 9M/18 Drivers of strong NII development − pbb managed t
Slide 9: Overview 9M 2018: Operating cost development reflects strict cost management
Overview 9M 2018 Operating cost development reflects strict cost management General & administrative expenses1 € mn New structure (IFRS9) 47% 42% CIR2 216 198 199 61 Q4 51 58 136 Q3 53 53 49 48 Q2 49 52 47 44 Q1 45 50 45 44 2016 2017 2017 9M/18 Slight cost increase expected in Q4/18 and going forwar
Slide 10: Overview 9M 2018: Risk provisioning reflects risk conservative business approach
Overview 9M 2018 Risk provisioning reflects risk conservative business approach and local market developments Net income from risk provisioning € mn (IFRS) New structure (IFRS9) -1 -6 -10 -10 2016 2017 2017 9M/18 3 stage logic of IFRS 9 leads to provisioning without payment default and at earlier po
Slide 11: Structural challenges: Increasing yields lead to changes in valuations
Structural challenges Increasing yields lead to changes in valuations Prime yields – Office % 7 Future challenges for risk costs 6 Macroeconomic environment & geopolitical 5 risks Valuation, liquidity & rate levels 4 Project cash flows 3 2005 2010 2015 Q3/18 Prime capital values – Office € thousands
Slide 12: Structural challenges: Small portfolio of non-performing loans
Structural challenges Small portfolio of non-performing loans with NPL ratio of only 0.7% and almost no workout loans Non-performing loans € mn (EaD, Basel III) 0.7% 0.6 NPL ratio 0.4% 388 383 33 Netherlands 83 65 248 Spain 115 44 Italy 73 286 CEE 190 Germany 131 UK 12/16 12/17 09/18 pbb shows low N
Slide 13: Structural challenges: Changing market development requires continuous adaption
Structural challenges Changing market development requires continuous adaption of business approach – pbb maintains strong anchor in Germany Real Estate Finance (REF) Portfolio (EaD, Basel III) 31.12.2017: € 28.3 bn 30.09.2018: € 28.7 bn USA 3% Other Europe Other Europe USA 6% Nordics 6% 6% 7% Nordi
Slide 14: Structural challenges: Markets on focus
Structural challenges Markets on focus Risk approach / strategy Macroeconomic risk increased after 15/01/19 UK & Brexit Critical focus on UK retail Cautious on UK Long-term view on CRE markets (prime locations, low LTV) Italian public sector exposure (nominal: € 1.6 bn) largely booked Italy & spread
Slide 15: Structural challenges: High portfolio quality with 95% investment grade
Structural challenges High portfolio quality with 95% investment grade and avg. LTV of 54% Total portfolio: Internal ratings (EL classes)1 REF Portfolio: Avg. weighted LTVs as of 30/09/18; € bn (EaD, Basel III) as of 30/09/18; % (commitments; EAD, Basel III)2 Total portfolio Ø 54% 28.7 7.5 16.4 5.0
Slide 16: Structural challenges: Optimization of funding structure
Structural challenges pbb aims to mitigate recent spread increase through optimization of funding structure Spread development of pbb Senior Unsecured Benchmarks vs. iTraxx Bank Senior (Spread vs. 6m Euribor) 160 Pfandbrief Funding 140 − Mortgage and Public Pfandbriefe ITRAXX Unsecured Funding 120 −
Slide 17: Structural challenges: One of the largest Pfandbrief issuers
Structural challenges Funding: pbb one of the largest Pfandbrief issuers – broad range of funding instruments in different currencies New long-term funding1 Private placements € bn Benchmark issuances 9M/17: € 5.8 bn 9M/18: € 4.7 bn Spread Spread (Ø, bp)2 17 11 77 (Ø, bp)2 3 0 46 Tenor Tenor 5.8 6.2
Slide 18: Structural challenges: Significant MREL buffer
Structural challenges Significant MREL buffer allows for focus on senior preferred issues 2018 Requirements Available MREL Rundown (MREL based on YE2016) (30/09/18) (30/09/18)3 ~78%5 All numbers in % of RWA, fully phased-in Senior Non-Preferred ~51% Debt >1Y ~23% ~17% <29% ~12% MREL1 26.9% 0.2% Othe
Slide 19: Capital, dividend and RWA-challenges: Strong capital ratios
Capital, dividend and RWA-challenges Strong capital ratios provides strategic advantage Basel III: Capital ratios (fully-loaded)1 30/09/18: % (IFRS) SREP (2018) 9.95%2 CET 1 >12.5% 19.7% Tier 1 >16% 21.9% Total 16-18% 26.7% capital Leverage >3.5% 5.3% SREP (2018) ratio Mid-term ambition levels 13.45
Slide 20: Capital, dividend and RWA-challenges: Sufficient buffer for regulatory changes
Capital, dividend and RWA-challenges Sufficient buffer for regulatory changes ahead Basel III: RWA 19.5% 19.7% 30/09/18: € bn (IFRS) CET 1-ratio 17.7% incl. approx. € +2 bn RWA from ECB harmonisation ? 13.1 14.5 13.5 12/16 12/17 09/18 2022e-2027e Adequate buffers, essential for regulatory changes, o
Slide 21: Capital, dividend and RWA-challenges: Attractive dividend yield
Capital, dividend and RWA-challenges pbb provides attractive dividend yield with 75% pay-out until 2019 Dividend strategy (payout ratio1) Dividend payment (payout ratio1 / abs.) 79% 75% 72% 4% 25% 22% 25% 50%2 40-50% 50% 50% 50% 2015-2016 2017-2019 2015 2016 2017 DPS 0.43 € 1.05 € 1.07 € Div. Yield3
Slide 22: Challenges: Focus and Invest
Challenges Focus and Invest – pushing forward strategic initiatives to strengthen market position and support profitability Reorganisation of business segment PIF – optimization of business Focus approach, organisational setup and headcount Centralisation of functions Further expansion of US busines
Slide 23: Our DNA: Why to invest in pbb?
Our DNA Why to invest in pbb? High asset quality Conservative, sustainable business approach based on strict risk standards Strong operating track record Strong capital base, providing adequate buffer for challenges ahead Attractive dividend yield and valuation Cautiously expanding and investing Com
Slide 24: 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
Slide 25: 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
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