MUNICH (dpa-AFX) - Deutsche Pfandbriefbank expects a prolonged crisis in the real estate markets following a slump in new business. CEO Andreas Arndt now expects significantly less new business in the current year, but still sees the bank on track for its targeted pre-tax profit of between 170 and 200 million euros. In addition, the Board of Management is getting serious with its savings program announced in the spring: by 2026, around 130 of the last 800 full-time positions are to be eliminated. The news was met with a slide in the share price on the stock exchange.

By early afternoon, the bank's shares had lost almost six percent to 7.16 euros, making it the second-largest loser in the SDax small cap index. This wiped out the gains made since the turn of the year.

The fact that new business in commercial real estate financing is extremely weak was evident at Pfandbriefbank in the first half of the year. With 2.5 billion euros, the volume of new business was significantly below the 4.3 billion from the first half of the previous year, as the institution announced on Thursday morning in Munich.

As a result, bank CEO Arndt is now making up his mind about achieving a volume of 9 to 10 billion euros in the current year as initially planned. Instead, he is now targeting only 6.5 to 8 billion. In terms of profit development, however, he sees the bank on track, having earned 81 million before taxes in the first six months. That is still almost a quarter less than a year earlier.

The crisis in the real estate markets is sharper and also drags on longer than assumed at the beginning of the year, the bank now announced. A cautious recovery of the real estate markets is not expected until the first quarter of 2024 at the earliest.

In the second quarter, Pfandbriefbank posted a pre-tax profit of 49 million euros, around a quarter less than a year earlier. This was also due to increased provisions for possible loan defaults: the institution put 19 million euros into risk provisioning. In the same period of the previous year, the figure was only one million. The bottom line was a profit of 42 million euros, around 24 percent less than a year earlier.

As early as March, the Management Board had set itself the target of significantly increasing profits in the coming years. By 2026, pre-tax profit should rise to more than 300 million euros. In addition, less than 45 percent of earnings should then be eaten up by costs. Last year, the figure was 45.6 percent, and for 2023, management had announced an increase to more than 50 percent in March.

Of the savings now planned, 60 percent are expected to come from a reduction in non-personnel costs and 40 percent from a reduction in personnel costs. The job cuts planned over the next three years include about 15 percent of full-time positions in gross terms./stw/zb/he