Shares in newly-floated pbb Deutsche Pfandbriefbank started trading today at €11.45 each, a 6.5% premium over the €10.75 issue price.
Hypo Real Estate (HRE), pbb’s owner, along with the syndicate banks and Germany’s Federal Agency for Financial Market Stabilisation, had set the offer price yesterday at €10.75 each.
HRE placed 107,580,245 shares, including 6,589,289 shares in an over-allotment or Greenshoe option, which allows those shares to be issued if demand is high. HRE will hold 20% of pbb’s share capital if all the over-allotment shares are issued in full.
The total value of shares placed was €1.156bn. The €10.75 offer price was cautious, at the lowest end of the price range announced last week, but the shares were placed at a time of nervousness in European capital markets as the Greek bailout crisis dominated headlines.
Almost all of the shares were allotted to institutional investors.
“The strong investor interest we have seen affirms our conservative business model,” said Andreas Arndt, pbb’s co-chief executive and chief financial officer. “We want to continue boosting pbb’s profitability over the next few years, thus continuing the success story of the past years.”
pbb increased its real estate finance portfolio by 8% to €23.5bn in the first three months of 2015 compared to the end of last year but its return on equity has been disappointing.
Commercial real estate finance accounted for €2.7bn of its total new business of €2.8bn. The bank recorded an increase in pre-tax profit to €51m for Q1 2015, up from €38m for the same period last year.
The total market capitalisation of the firm, including HRE’s shareholding, is about €1.5bn.
Thomas Köntgen, pbb’s co-chief executive and treasurer, said: “pbb is a strong financing partner to the real estate sector as well as for public-sector infrastructure projects. We believe pbb is very well positioned for a sustained positive development.”
Citigroup Global Markets and Deutsche Bank were joint global coordinators and joint bookrunners. JP Morgan Securities, Commerzbank and Joh. Berenberg, Gossler & Co. KG acted as additional bookrunners.