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Deutsche Pfandbriefbank revises profit projection amidst US commercial real estate woes

EditorAmbhini Aishwarya
Published 08-11-2023, 03:10 pm
© Reuters.

Deutsche Pfandbriefbank (PBB) has announced a significant downward revision of its yearly pretax profit forecast due to the deteriorating U.S. commercial real estate market. The bank's shares plummeted by 14% following a grim profit warning and the disclosure of increased risk provisions.

PBB initially predicted a pretax profit range of €170-€200 million for the year, but this has now been revised to €90-€110 million (EUR1 = USD1.0667). This change comes as the U.S. commercial real estate landscape faces considerable challenges, with tenant preferences shifting away from central business districts. As a result, approximately 5-10% of U.S. office properties financed by PBB have been reclassified as B-locations.

The bank also reported significant drops in property values tied to its loan portfolio. Non-performing loans saw an average decrease of 41% in property values, while performing loans experienced a 24% dip. Amidst this financial turbulence, PBB also decided to eliminate its special dividend.

InvestingPro Insights

According to InvestingPro data, Deutsche Pfandbriefbank (PBB) has an adjusted market cap of $833.83 million, with a low P/E ratio of 5.32, indicating that the company is currently trading at a low earnings multiple. The bank's revenue for the last twelve months as of Q2 2023 was $515.06 million, reflecting a decline of 7.27% and aligning with InvestingPro's tip that PBB's revenue has been declining at an accelerating rate.

InvestingPro also highlights that PBB's stock price movements are quite volatile, with a 1-year price total return of -24.82% as of the end of 2023. This is in line with the bank's recent significant downward revision of its yearly pretax profit forecast.

Two pertinent InvestingPro Tips for PBB are that the company is quickly burning through cash and may be forced to cut dividends due to poor earnings and cash flow. This aligns with the recent news of PBB eliminating its special dividend amidst financial turbulence.

For additional insights and tips on PBB and other companies, consider exploring InvestingPro's product that includes more than 12 tips specific to each company.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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