Deutsche Pfandbriefbank privatisation process kicks off

The formal process to privatise Deutsche Pfandbriefbank has begun with its owners appointing investment banks Citigroup and Deutsche Bank.

Both a sale and an initial public offering are to be explored. The European Commission requires the bank to be privatised by the end of 2015 as part of a bailout of its parent Hypo Real Estate in 2009.

Andreas Arndt, the bank’s co-chief executive and chief financial officer, said: “We are embarking upon re-privatisation, against the background of a very positive performance over recent years, solid results for 2014, and an outstanding position on the credit and capital markets.”

Dr Günther Bräunig, chairman of the supervisory board of Hypo Real Estate, added: “Over the last [few] years pbb has consistently laid the foundations allowing to pursue the re-privatisation. We are confident that the project will be successfully concluded during the course of this year.”

The bank has been looking to bolster its book over the past two years as the real estate market has improved in order to make it a more attractive proposition to potential purchasers. As part of its announcement Deutsche Pfandbriefbank revealed it had written a record €10.2bn of new business in 2014, a 24% increase on the previous year and that its portfolio “continued to grow at good margins”.

The full results will be published on 9 March.

Profits are also ahead of expectations, totalling €170m for the year, more than 20% ahead of its forecast of €140m. However, return on equity at the time of the bank’s last published results, for 2013, was only 4.9%, considerably below the 8% target by the time of sale.

Co-chief executive Thomas Köntgen said: “Once again, strong new business is evidence of an excellent position in our European core markets. We have generated attractive margins in a highly competitive environment, maintaining or even boosting our market share whilst consistently adhering to our conservative approach to risk.”

Expressions of interest in the tender for the business are due in by the end of this month, on 27 February.