Deutsche Pfandbriefbank (PBB) has virtually equalled last year’s annual European real estate loan tally by the third quarter mark, closing €4.6bn compared to 2012’s €4.9bn, as the government-owned bank continues on a trajectory of bulking up its loan book to boost profitability to attract buyers.
PBB, which must be re-privatised by the end of 2015, is seeking to increase profitability and improve on its stubbornly low return on equity (RoE) ratio to appeal to potential acquirers of the re-stabilised European real estate and public finance lender.
Over the first nine months of this year, PBB has also virtually equaled last year’s annual pre-tax profit level with €122m, compared to €124m for the full year 2012. Back in October, during the week of EXPO, PBB announced a raised outlook for its pre-tax profit to an estimated minimum of €150m.
A circa €150m pre-tax profit haul would be the bank’s largest since 2011 when PBB recorded €188m.
This year, PBB has sought to take advantage of the improved macro picture within many of the European core markets – Germany, UK, France, Nordic countries as well as certain Central and Eastern European (CEE) countries – to ramp up its lending ambitions this year, in an effort to book build to increase profitability.
Already by the end of the third quarter mark, PBB has closed €4.6bn of European property loans across 85 deals, including €2.4bn in Germany; €695m across CEE; €554m in France; €529m in UK and €339m across Nordic countries. PBB closed €1.8bn of property loans over the third quarter.
While this is six deals greater than the entire 79 deals closed last year, the aggregate volume this year so far is still €300m below 2012’s annual total. With a traditional end-of-year flurry of deal closures in the fourth quarter, PBB could now surpass 2011’s €6.3bn annual tally.
“Expected negative effects incurred during the third quarter, as a result of adjusting the valuation of derivatives to changed market conventions, and higher expenditure related to the termination of servicing for FMS Wertmanagement were more than compensated for by a gain from the sale of a restructured property,” explained PBB in a press statement this morning.
However, the outlook for PBB’s RoE seemingly remains as per the last update in August in the bank’s six-month interim results, in which PBB re-affirmed its guidance for the full 2013 post-tax RoE as still “in line with the corresponding previous year figure, 2.1%”.
PBB admits this figure in the low 2% range needs to grow around four-fold by the time of re-privatisation in two years’ time. The improved second half-year performance could yet reveal a superior full year RoE that its initial March forecast, but much left still needs to be achieved through profitable bookbuilding, and operating cost reductions.
Manuela Better, CEO of pbb Deutsche Pfandbriefbank, said: “Deutsche Pfandbriefbank continues to progress well. We also anticipate strong new business in the fourth quarter. Having discontinued the servicing function for the FMS Wertmanagement portfolio – which we serviced successfully for the last three years – we now focus exclusively on our core business as a specialist lender for real estate finance and public investment finance.”
Already in the fourth quarter, PBB has closed several European property loans, including:
- a 50% share in a five-year €188m senior facility with Helaba to SEGRO European Logistics Partnership (SELP), a joint venture set up by SEGRO and Public Sector Pension Investment Board (PSP), for its acquisition of the seed assets in Poland and Czech Republic.
- Separately, a €100m five-year term secured facility to SELP to acquire nine grade A logistics properties in Germany, Belgium and The Netherlands from SEGRO to the joint venture partnership portfolio, comprised of €85m in acquisition finance for the assets and adjacent land bank while €15m is available to refinance future development costs.