Deutsche Pfandbriefbank Ag · XETR:PBB
Deutsche Pfandbriefbank — FY2018 Earnings Presentation
56 slides from Deutsche Pfandbriefbank's earnings presentation, Feb 28, 2019
Slide 1: Strong full-year 2018 results with PBT of EUR 215 mn
Strong full-year 2018 results with PBT of EUR 215 mn Analyst Conference 28 February 2019 Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 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 & Dividend 8. Focus & Invest 9. Outlook Appendix Contact details Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 2019
Slide 4: Highlights 2018
Highlights 2018 pbb shows continued good performance – shareholders to participate with extra dividend Financials Strong PBT of € 215 mn with increased NII and stable operating costs New business & portfolio1 New business of € 10.5 bn meets guidance – strategic REF portfolio volume up € +1.9 bn Fund
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 New structure (IFRS9) New structure (IFRS9) Q1 47% 44% 11.6 443 456 216 CIR1 10.5 10.5 412 415 198 199 1
Slide 6: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital & Dividend 8. Focus & Invest 9. Outlook Appendix Contact details Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 2019
Slide 7: Markets: 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 CRE market environment remains highly competitive and challenging, but fundamentals for most continental European markets remain solid − Investment volume remains on elevated level
Slide 8: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital & Dividend 8. Focus & Invest 9. Outlook Appendix Contact details Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 2019
Slide 9: Financials: Strong performance based on continued solid underlying trends
Financials Strong performance based on continued solid underlying trends Income statement (new structure following IFRS 9)1 € mn Q4/17 Q4/18 FY17 FY18 Key drivers Q4/FY 2018: Operating Income 119 121 453 471 NII up +11% y-o-y with strong Q4/18, benefitting from Net interest income 109 116 407 450 re
Slide 10: Financials: NII up 11% y-o-y with strong Q4/18
Financials NII up +11% y-o-y with strong Q4/18 – reduced funding costs and higher avg. strategic financing volume Income from lending business (€ mn) Key drivers Q4/FY 2018: Q4/17 Q4/18 FY17 FY18 NII continued to benefit from solid underlying drivers Net interest income 109 116 407 450 − Funding cos
Slide 11: Financials: Continued low level of risk costs
Financials Continued low level of risk costs despite additions for sub segment UK shopping center Net income from risk provisioning Key drivers Q4/FY 2018: € mn Risk provisioning well below initial planning, driven by the following effects: Q4/17 Q4/18 FY17 FY18 (a) Overall portfolio provisioning st
Slide 12: Financials: Operating costs slightly down y-o-y
Financials Operating costs slightly down y-o-y with expected increase in Q4/18 General & administrative expenses and depreciations € mn Key drivers Q4/FY 2018: Q4/17 Q4/18 FY17 FY18 GAE slightly down y-o-y (-3%) – increase in Q4/18 as expected General admin. expenses -58 -57 -199 -193 − Personnel ex
Slide 13: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital & Dividend 8. Focus & Invest 9. Outlook Appendix Contact details Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 2019
Slide 14: REF: Strong new business origination
New business & segment reporting REF: Strong new business origination while maintaining selective and risk conservative approach – financing volume up +8% y-o-y REF new business 2017 2018 € bn 10.7 REF: Income statement (IFRS, € mn) Q4/175 Q4/18 FY175 FY18 9.5 9.5 Operating income 97 101 368 391 Tot
Slide 15: PIF: High competition continues to weigh on new business
New business & segment reporting PIF: High competition continues to weigh on new business volume and margins PIF new business 2017 2018 € bn 1.0 PIF: Income statement (IFRS, € mn) Q4/173 Q4/18 FY173 FY18 1.0 0.9 Operating income 5 15 26 38 Total volume (€ bn) 0.9 1.0 Q4 0.5 0.3 thereof: Net interest
Slide 16: VP: Run-down of non-strategic Value Portfolio continued
New business & segment reporting VP: Run-down of non-strategic Value Portfolio continued in line with strategy € bn VP: Income statement (IFRS, € mn) Q4/172 Q4/18 FY172 FY18 Operating income 15 3 53 37 -5% thereof: Net interest income 12 11 37 39 Net income from realisations -1 - - - 13.8 13.4 13.1
Slide 17: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital & Dividend 8. Focus & Invest 9. Outlook Appendix Contact details Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 2019
Slide 18: Portfolio: Conservative business and risk strategy continued
Portfolio Conservative business and risk strategy continued – 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) 12/17 12/18 Non-investment grade1 55% Investment
Slide 19: Portfolio: Non-performing loans at historically low level
Portfolio Non-performing loans continue to be at historically low level – moderate additions in 2018 Non-performing loans Workout1 Key drivers Q4/FY 2018: € mn (EaD, Basel III) Restructuring2 Only small portfolio of non-performing loans (NPL) 0.7% with NPL ratio5 of 0.6% 0.6% − In Q4/18 reduction of
Slide 20: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital & Dividend 8. Focus & Invest 9. Outlook Appendix Contact details Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 2019
Slide 21: Funding: Funding costs significantly reduced y-o-y
Funding Funding costs significantly reduced y-o-y –investor base continuous to grow with FX Pfandbriefe and “new” senior preferred bonds successfully issued New long-term funding1 € bn Pfandbriefe 12M/17: € 6.1 bn2 12M/18: € 5.2 bn3 Mortgage Pfandbrief Benchmarks: € 750 mn 5y, € 500 mn 6y, € 500 mn
Slide 22: Funding: Senior unsecured spreads are widening
Funding Senior unsecured spreads are widening 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 2.0 Sen. Unsec. 1.1 1.2 1.1 0.8 0.9 >0.1 1.0 0.7 0.5 0.9 0.8 0.3 0.1 0.3 0.4 2017 2018 Q4/17 Q1/18 Q2/18
Slide 23: Funding: Expected average spread level for new funding in 2019
Funding pbb expects average spread level for new funding below maturities in 2019 New issuance spread development – Unsecured New issuance spread development – Mortgage Pfandbrief Avg. spread vs. 3m Euribor, bp Avg. spread vs. 3m Euribor, bp 111 bp € 2.6 bn 6.5 y Weighted avg. 22 bp € 1.9 bn 16 bp 9
Slide 24: Funding: Significant MREL buffer
Funding Significant MREL buffer allows for focus on Senior Preferred issues with higher rating and lower spreads (in % of RWA, fully phased-in) 2019 Requirements Available MREL Rundown (MREL based on YE2016) (31/12/18) (31/12/18)3 ~68%5 Senior Preferred: − Expected to be the prevailing senior produc
Slide 25: Funding: Optimization of funding structure
Funding pbb aims to mitigate recent spread increase through optimization of funding structure Funding structure %-share (outstanding nominal volume, 31/12/2018) Key messages Well diversified funding base – Pfandbrief is the main funding instrument ECB Other1 pbb direkt Significant MREL buffer allows
Slide 26: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital & Dividend 8. Focus & Invest 9. Outlook Appendix Contact details Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 2019
Slide 27: Capital: 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 (fully-loaded) € bn (IFRS) % (IFRS) Strong new business / Positive strat. portfolio growth Ambition LGD changes in % 12
Slide 28: Regulatory requirements: Challenges for banks and capital
Regulatory requirements Challenges for banks and capital Basel III: Capital ratios % (IFRS) Ongoing process SREP (2019) Mid-term targets TRIM 9.85%1 Finalisation in 2019 expected CET 1 >12.5% 18.5% Tier 1 >16% 20.5% Calibration of risk parameters Total Consideration of every defaulted loans, not jus
Slide 29: Dividend 2019
Dividend 2019 Shareholders to participate from continued strong performance – management intends to propose dividend of € 1.00 (Payout ratio of 81%1) Profit attributable to shareholders Dividend proposal 2018 € mn (IFRS) -17% Dividend strategy: 50% regular dividend + 25% 215 supplementary dividend f
Slide 30: Agenda
Agenda 1. Highlights 2. Markets 3. Financials 4. New Business & Segment Reporting 5. Portfolio Profile 6. Funding 7. Capital & Dividend 8. Focus & Invest 9. Outlook Appendix Contact details Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 2019
Slide 31: Focus & Invest: Strategic initiatives
Focus & Invest Pushing forward strategic initiatives to strengthen market position and support profitability Reorganisation of PIF business Change of PIF strategy from „Growth“ to „Hold“ as consequence of high competition, few opportunities and low margins Focus on business in France (operated from
Slide 32: Digital transformation strategy
Digital transformation strategy Digitalisation as an integral concept in pbb Clients Efficiency Income sources 1 Short to mid- term value added in core process Focus on clients and efficiency 2 Digital Transformation 2 Develop business model and Develop new products • Evaluation of cooperation in in
Slide 33: Agenda
Agenda 1. Highlights & Markets 2. Financials 3. New Business & Segment Reporting 4. Portfolio Profile 5. Funding 6. Capital & Dividend 7. Focus & Invest 8. Outlook Appendix Contact details Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 2019 3
Slide 34: Outlook 2019: pbb well positioned to manage challenges ahead
Outlook 2019 pbb well positioned to manage challenges ahead Strategy / risk Challenges approach Reduction in property valuations expected, especially in certain Conservative lending Changes in economic and market segments like retail criteria and intensive interest environment Negative effects on LG
Slide 35: Outlook 2019
Outlook 2019 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) Avg. gross
Slide 36: Appendix
Appendix Annual Results 2018 (IFRS, pbb Group, audited, approval from the Supervisory Board pending), 28 February 2019 36
Slide 37: Income statement: New structure
Income statement New structure based on internationally common disclosure – changes increase transparency of financial reporting Major changes: A. Depreciations for non financial assets in „GAE“ and „net other operating income“ are allocated to „net results from write-downs and write-ups on non-fina
Slide 38: Financial reporting: Change in definition of key ratios
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 39: Key figures pbb Group
Key figures pbb Group Income statement Q1/17 Q2/17 Q3/17 Q4/17 2017 Q1/18 Q2/18 Q3/18 Q4/18 2018 (€ mn) Net interest income 97 99 102 109 407 107 113 114 116 450 Net fee and commission income 3 2 1 2 8 1 2 1 2 6 Net income from fair value measurement -2 2 -4 -1 -5 0 4 -2 -11 -9 Net income from reali
Slide 40: Key figures pbb Group FY17 vs. FY18
Key figures pbb Group FY17 vs. FY18 Income statement REF PIF VP C&A pbb Group (€ mn) 2017 2018 2017 2018 2017 2018 2017 2018 2017 2018 Net interest income 334 372 30 34 37 39 6 5 407 450 Net fee and commission income 9 6 0 1 -1 -1 0 0 8 6 Net income from fair value 0 -8 -2 -2 -3 1 0 0 -5 -9 measurem
Slide 41: Key figures Real Estate Finance (REF)
Key figures Real Estate Finance (REF) Income statement (€ mn) Q1/173 Q2/173 Q3/173 Q4/173 20173 Q1/18 Q2/18 Q3/18 Q4/18 2018 Net interest income 81 82 84 87 334 89 94 93 96 372 Net fee and commission income 3 2 2 2 9 1 2 2 1 6 Net income from fair value measurement - 2 -2 - - - -4 -1 -3 -8 Net incom
Slide 42: Key figures Public Investment Finance (PIF)
Key figures Public Investment Finance (PIF) Income statement (€ mn) Q1/173 Q2/173 Q3/173 Q4/173 20173 Q1/18 Q2/18 Q3/18 Q4/18 2018 Net interest income 7 7 8 8 30 8 8 10 8 34 Net fee and commission income - - - - - - - - 1 1 Net income from fair value measurement -1 - - -1 -2 - -1 -1 - -2 Net income
Slide 43: Key figures Value Portfolio (VP)
Key figures Value Portfolio (VP) Income statement (€ mn) Q1/173 Q2/173 Q3/173 Q4/173 20173 Q1/18 Q2/18 Q3/18 Q4/18 2018 Net interest income 8 8 9 12 37 8 10 10 11 39 Net fee and commission income - - -1 - -1 - - -1 - -1 Net income from fair value measurement -1 - -2 - -3 - 9 - -8 1 Net income from r
Slide 44: Balance sheet
Balance sheet Specialist lender with attractive German Pfandbrief as major funding instrument Balance sheet IFRS, € bn Assets 31/12/18 01/01/18 Liabilities & equity 31/12/18 01/01/18 Financial assets at fair value through P&L 1.7 1.7 Financial liabilities at fair value through P&L 0.9 1.0 thereof th
Slide 45: Portfolio: Total portfolio
Portfolio Total portfolio € bn (EaD, Basel III) Regions 31/12/2017 / Total: € 57.5 bn 31/12/2018 / Total: € 58.1 bn Hungary 1% Other Europe 5% Other Europe 6% Hungary <1% Finland 1% Other Rest of World 3% Other Rest of World 3% Finland 1% Czech Republic 1% Czech Republic 1% USA 2% USA 3% Sweden 3% S
Slide 46: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) € bn (EaD, Basel III) Regions Property types 31/12/2017: € 28.3 bn 31/12/2018: € 29.9 bn 31/12/2017: € 28.3 bn 31/12/2018: € 29.9 bn Czech Republic 1% Hungary 1% Hungary <1% Mixed use 2% Other 3% Austria 2% Other Europe 5% Czech Republic 1% Other Europe 8% Mixed u
Slide 47: Portfolio: Real Estate Finance (REF)
Portfolio Real Estate Finance (REF) Regions 31/12/2017 / Total: € 28.3 bn € bn (EaD, Basel III) 31/12/2018 / Total: € 29.9 bn 13.9 14.2 4.7 4.3 3.4 3.7 1.9 1.6 1.2 1.4 1.3 0.9 0.5 0.5 1.1 1.5 0.4 0.4 0.2 0.4 0.2 0.4 0.2 0.1 <0.1 0.1 Germany UK France Sweden Poland USA Austria Czech Finland Spain Hun
Slide 48: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2017: € 7.9 bn 31/12/2018: € 7.6 bn 31/12/2017: € 7.9 bn 31/12/2018: € 7.6 bn Infrastructure Sweden 1% Sweden 1% Infrastructure Corporation 1% Finance <1% Other Europe 4% Other Europe 4% Corporatio
Slide 49: Portfolio: Public Investment Finance (PIF)
Portfolio Public Investment Finance (PIF) Regions 31/12/2017 / Total: € 7.9 bn € bn (EaD, Basel III) 31/12/2018 / Total: € 7.6 bn 3.9 3.5 1.9 1.7 1.5 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 50: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) € bn (EaD, Basel III) Regions Borrower classification1 31/12/2017: € 17.0 bn 31/12/2018: € 16.3 bn 31/12/2017: € 17.0 bn 31/12/2018: € 16.3 bn Finland <1% Finland <1% Czech Rep. <1% Other Other Rest Czech Rep. <1% Other Other Rest Financial Financial Hungary 1% Europe
Slide 51: Portfolio: Value Portfolio (VP)
Portfolio Value Portfolio (VP) Regions 31/12/2017 / Total: € 17.0 bn € bn (EaD, Basel III) 31/12/2018 / Total: € 16.3 bn 5.6 5.6 4.8 4.4 2.0 2.0 1.2 1.2 1.2 1.0 1.1 1.0 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 52: Portfolio: Consolidation & Adjustments (C&A)
Portfolio Consolidation & Adjustments (C&A) € bn (EaD, Basel III) Regions Borrower classification2 31/12/2017: € 4.3 bn 31/12/2018: € 4.3 bn 31/12/2017: € 4.3 bn 31/12/2018: € 4.3 bn Other Rest of World Other Rest of World Financial Corporation <1% Financial Corporation <1% Germany1 Germany1 Institu
Slide 53: 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 54: 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 55: 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 56: 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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