Deutsche Pfandbriefbank (pbb) remains under pressure in view of the slump on the US real estate market.

The real estate financier had to write off more than 100 million euros on bad loans in the first half of the year, as it announced in Garching near Munich on Wednesday. This was five times as much as a year ago, but only half as much as in the second half of 2023, at the height of the real estate crisis. CEO Kay Wolf is now hoping that the situation will calm down in the second half of the year when interest rates in the USA fall. The market for commercial real estate will then enter "calmer waters". Then the excessive risk provisioning will also fall, said Wolf.

"The bank is profitable, but not profitable enough", Wolf summarized the first half of the year. Pre-tax profit fell by 42 percent to 47 million euros, and in the second quarter it was even three quarters down on the previous year. This frightened the shareholders: pbb shares fell by 2.7 percent to EUR 4.86.

Loans on US office properties in particular are shaky, but project financing in Germany is also difficult. In the USA, four further loans worth 243 million euros became non-performing, and pbb worked off three bad loans worth 162 million euros. In May, it sold a EUR 900 million package of loans in the UK to the investor Blackstone. The credit volume in the project business was reduced by 700 million euros to 3.2 billion euros in the first half of the year.

New business was recently curbed considerably. In the first half of the year, pbb granted or extended only EUR 1.9 (2.5) billion in loans, albeit at significantly better margins. By the end of the year, it will be at the lower end of its own expectations at six billion euros. Wolf confirmed that earnings before taxes this year would be significantly higher than the EUR 90 million to which they had fallen in 2023.

The bank must broaden its earnings base and make more of its real estate expertise, said the CEO. The manager, who joined from Deutsche Bank in the spring, will explain how at a capital market day in October.

(Report by Alexander Hübner, edited by Ralf Banser. If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).