German’s PBB bank Q2 earnings drop by 74%

Deutsche Pfandbriefbank (PBB) bank, a leading property financier in Germany, reported a significant decline in second-quarter profit by 74% and an increase in risk provisions as it continues to face challenges in the real estate sector.

For the quarter, PBB’s profit fell to 11 million euros ($12.09 million) from 42 million euros a year earlier. Provisions for loan losses surged to 56 million euros, up from 19 million euros in the same period last year.

The bank noted that the commercial property market, which has been turbulent and contributed to its current difficulties, is expected to stabilise in the latter half of 2024.

In recent years, PBB has heavily invested in the U.S. market by providing commercial real estate loans. However, the industry has faced significant challenges due to high office vacancies and declining property values, driven by rising interest rates and a shift towards remote work since the pandemic.

However, loans likely to default in the US rose by 13 per cent from the previous quarter, largely due to problematic loans related to office properties in Chicago and the US West Coast.

Earlier this year, PBB faced credit rating downgrades and saw its shares and bonds decline sharply amid growing concerns about a broadening property crisis.

Attribution: Reuters

Subediting: M. S. Salama