Brexit caution drives down pbb’s UK lending

The German bank has posted an overall 24% year-on-year drop in new business as it maintains a ‘selective stance’ in financing markets.

Pbb Deutsche Pfandbriefbank’s new lending in the UK has decreased due to the bank’s cautious approach following the country’s decision to leave the EU.

The UK share of the German bank’s new lending dropped to 10 percent in the first half of 2018, from 13 percent reported at the end of 2017, which compares with 18 percent reported in 2016.

“We have adopted a more selective stance in the UK, given the uncertainty brought about by Brexit,” the bank said previously in its full-year 2017 report. Pbb also noted at the time it would continue to be selective when it comes to financing property during 2018.

In its latest financial update, the German bank said new lending totalled €3.8 billion by the end of June this year, which is 24 percent down year-on-year. The drop is linked to the bank’s “selective stance” in financing markets amid “strong” competition, it said.

Average gross margins also dropped to 160 basis points, from 165bps over the same time a year ago.

While around 50 percent of new real estate business was originated in its domestic market, US financings accounted for 13 percent of new business, up from 11 percent in H1 2017. The bank resumed activities in the US during the second half of 2016, with the aim to expand beyond its core European market. “We are opening up a new market which, due to its size, transparency and liquidly, is perfectly suited to pbb,” the bank said in this 2017 annual report.

Pbb recorded an 18 percent increase in pre-tax profit to €122 million, compared with €103 million in the first quarter of 2016. It is aiming for pre-tax profit of between €175 million and €195 million for the full-year 2018.

“With good net interest income and low risk cost, operating performance provided the basis for good results for the first half of 2018, which additionally benefited from non-recurring income,” the bank’s CEO Andreas Arndt said.