Pbb Deutsche Pfandbriefbank unveiled a record year for new real estate lending in 2015, writing €10.4 billion of new business and predicting a similar level in 2016.
The German pfandbriefbank increased its real estate finance business by 16 percent year on year with the number of transactions rising from 161 to 180.
Germany remains its largest market, accounting for 47 percent of new business, followed by the UK with 18 percent, France and the Nordic countries each on 10 percent, and Central & Eastern Europe with 7 percent. The figures include extensions to existing loans of more than one year.
The average loan-to-value ratio for new commitments was shaved by 1 percent, to 63 percent.
New business volumes have more than doubled over the last three years and in a sign of confidence in real estate markets, this year, pbb said, “are expected to remain at the high levels seen in 2015”.
Consolidated pre-tax profit was up 12 percent to €195 million and after tax, due to a high level of deferred tax income, was €230 million. The bank is paying its first dividend since flotation last year, of €0.43 per share which is a payout ratio of about 50 percent and at the upper end of what had been planned.
However, pbb’s return on equity before tax of 6.2 percent was lower than some of its German listed real estate banking competitors. Aareal, which reported its full year results on 25 Feb, achieved a return on equity of 12.1 percent before tax. Aareal is targeting a dividend payout ratio of 80 percent.
Pbb is also feeling the effects of tougher banking regulation. It said that profits would be impacted in Q1 2016 by accounting for the banking levy in that period. “For the year 2016, pbb anticipates pre-tax profit slightly below the good figure achieved in the previous year (€195 million)”, the results statement said.
Furthermore, although average gross lending margins were maintained during 2015, the average figure was lower than previous years’ levels. For new loans, the average gross margin in 2015 was around 170 bps; in 2014 it was 200 bps and in 2013, 225 bps.
Partly to try to improve margins, Thomas Köntgen, pbb’s co-CEO and Treasurer, said: “We want to continue leveraging our structuring expertise for more complex – and hence, higher-margin – financings, without higher risk exposure. In addition, we plan to make careful adjustments to our product and country mix, to reflect a changing business environment, in line with our risk strategy”.
Like other German banks, pbb also intends to step up debt distribution. “We want to generate additional income through a stronger focus on the syndication business, and on partial placements of financings”, Köntgen added.
The bank’s €10.4 billion of origination last year makes it one of the largest European lenders on real estate. Last year ING originated €13 billion while Aareal lent €9.6 billion on property.
Including €1.6 billion of new loans written by its public investment finance business, pbb’s total new business last year was €12 billion.