Pbb increases lending to €2bn in Q3

Pbb Deutsche Pfandbriefbank (pbb) has recorded a slight increase in new business during the third quarter of 2016, with €2 billion of lending, up from €1.8 billion in the second quarter.

The Q3 total includes new loans and extensions to existing loans of more than a year. Lending included €1.8 billion of commercial real estate finance, of which around comprised loan extensions.

Across the first nine months of the year, new business totalled €6.7 billion, down from €8.9 billion in the same period in 2015. The bank said that it reflected its “selective stance” on originating new business.

Germany accounted for 49 percent of Q3’s lending, followed by 17 percent in the UK, with around 10 percent each in France and Germany. The bank also concluded its first US deal since it announced its re-entry into the market earlier this year, with a circa $70 million loan.

Average gross margins on new business stood at around 170 basis points, in line with the previous year’s level. The average loan-to-value ratio (LTV) was 62 percent, compared to 63 percent in the first nine months of 2015.

The bank posted €159 million of pre-tax profit for Q3 2016, up from €53 million in the same period in 2015. The latest quarter’s profit included €132 million in income from previously impaired receivables from Austrian nationalised band bank Heta Asset Resolution, against which pbb said it has recognised €15 million in provisions and expenses as a precautionary measure.

Adjusted pre-tax profit stood at €42 million, unchanged from Q2 2016. For the first nine months of the year, pbb made pre-tax profit of €246 million, up significantly from €165 million in the same period during 2015, which was largely due to income from Heta receivables.

As a result, the bank raised its forecasts for 2016, with pre-tax profit expected to be between €280 million and €290 million. Excluding net extraordinary effects, pbb expects pre-tax operating profit to be around €170 million.

Looking forward to 2017, the bank expects pre-tax profit of between €150 million and €170 million, “assuming a largely stable development” of its core European portfolio and expanding business in the US. The focus encompasses increased risk costs, the bank said.

Pbb said that it intends to use 2017 to implement “certain strategic decisions”, including initiatives to further diversify its business in line with its risk standards, as seen already with the re-entry to the US. It added that it wants to devise measures to enable it to reduce risk-weighted assets, against the background of regulatory changes.

“The stable development of adjusted pre-tax profit and the slight increase in new business are evidence of pbb’s operative strength – in a market environment that remains very challenging indeed,” said Andreas Arndt, CEO of pbb Deutsche Pfandbriefbank.

“Looking ahead to 2017, the biggest challenge – besides ever-intensifying competition and the low interest rate environment – will be the dynamically-changing regulatory environment,” Arndt added.