Pbb reports Q2 rise in average margins

Average gross margins across pbb Deutsche Pfandbriefbank’s new real estate lending increased to around 170 basis points during the second quarter of 2017, up from 160bps the previous quarter.

The Q2 increase, however, did not offset the 2.94 percent overall drop in average gross margins to 165bps in the first half of the year, compared with the same time a year ago. The average loan-to-value ratio for new commitments fell to 60 percent in H1 2017, from 63 percent year-on-year.

In its latest update, the German bank said it originated €4.5 billion in new property loans in H1 2017, which means that volumes remained stable year-on-year.

Germany accounted for about half of this new lending business, followed by the UK at 13 percent, the US at 11 percent, Central and Eastern Europe at 10 percent and France at 9 percent.

In line with German peers, pbb has increased lending activity in the US over the past 12 months.

In August last year, the bank said it would make a fresh push into the US market – which is understood to provide higher-margin business than Germany. Pbb said at the time that its focus would be on syndications, with the east coast cities of New York, Washington DC and Boston on its radar.

The bank’s new business in public investment finance amounted to about €500 million from January to June, up from €200 million in H1 2016.

Pbb’s aims for total lending volumes in new business between €10.5 billion and €12.5 billion for 2017. With €5 billion of newly originated loans in H1, including public investment finance, the bank has already reached 50 percent of the lower end of the guidance.

“We expect H2 2017 to be stronger than the first half of the year,” said a spokesman for pbb.

During Q2, pbb recorded an increase in pre-tax profit of about 30 percent, to €56 million, compared with €42 million reached in Q2 2016.
The bank also exceeded the H1 2016 figure by 18.39 percent, with €103 million pre-tax profit reached in H1 2017. This performance was driven by a positive development of net interest and commission income, which totalled €105 million in Q2 and €211 million in the first half of the year.

“Relatively stable margins in our client business and reduced funding costs produced a positive performance for net interest and commission income in the first half of the year. Against this background, pbb is well on track,” said Andreas Arndt, pbb CEO.

“Material challenges that pbb – as with the industry as a whole – continues to face are the competitive situation and fiercer regulation, inciting higher costs and risk-weighted assets,” Arndt added.