Deutsche Pfandbriefbank is withdrawing from the USA: realignment planned!

Deutsche Pfandbriefbank is withdrawing from the USA: realignment planned!

Deutsche Pfandbriefbank (PBB) is facing a fundamental change in its corporate strategy. The bank, which was founded in 2009 from the remnants of Hypo Real Estate, plans to concentrate on business in Europe in the future and to completely end its involvement in the US commercial real estate market. According to iz.de, the review of the US business has already been completed.

PBB CEO Andreas Arndt faces challenges. After the bank was forced to lower its profit forecast in November, PBB's situation has worsened further, particularly among investors who are increasingly concerned about the bank's high exposure to the US commercial real estate market. A hedge fund has even started betting against PBB stock. Last week, PBB bonds and stocks hit record lows, driven by rising defaults in the US real estate market, as reported by finanzmarktwelt.de.

Withdrawal from the US market

PBB has made massive loans of around $5 billion to U.S. real estate borrowers in recent years, with over half of those loans going to office buildings. This strategy is proving increasingly problematic, especially given the pressure that the European Central Bank (ECB) is putting on banks to better manage risks in the real estate sector. PBB received the highest increase in capital requirements from the ECB, a circumstance that further increases the financial challenges.

The expansion policy in the US market, which began in 2018 with the opening of an office in New York, is viewed by critics as flawed. Activist investors such as Petrus Advisers are voicing concerns about PBB's late involvement in the US office market. In addition, PBB is often associated with the insolvent Signa Holding, which further increases concerns about the bank's stability.

Growth plans in Europe

In the face of these challenges, PBB plans to generate growth by purchasing an investment manager. This measure could be part of a broader strategy to secure the bank's future profitability. Nevertheless, it remains to be seen how the decisions regarding US business and the signals given to the market will affect the company's direction.

The ongoing difficulties in the real estate market forced PBB to increase its time deposits until 2023. At the same time, however, the bank faces challenges in refinancing in the unsecured wholesale market. The PBB share has lost 62.4 percent from summer 2022 to today, while the DAX rose by 20 percent in the same period.

Arndt recently announced that PBB wanted to report a profit for the past year despite the significant challenges affecting the real estate sector. The dividend decision is expected to be announced along with fourth-quarter results on March 7. PBB must now show that it is taking the right steps to successfully shape its future in the European market.