GARCHING (dpa-AFX) - The real estate crisis is leaving ever deeper marks on Deutsche Pfandbriefbank's balance sheet. The Management Board significantly increased risk provisions for impending loan defaults at the end of 2023, as the financier of commercial real estate surprisingly announced on Wednesday in Garching near Munich. The outgoing CEO Andreas Arndt had already slashed his profit expectations for 2023 in the fall. According to the preliminary figures that have now been published, the bank even ended up at the lower end of this target range.

The Pfandbriefbank share price fell by around six percent around midday, but recovered after the news. After returning to the profit zone, it was last down by around 0.6 percent in the afternoon. Since the turn of the year, the SDax-listed share has lost around a fifth - a large part of this since Monday. The prices of Pfandbriefbank bonds also came under pressure.

In the fourth quarter alone, Pfandbriefbank set aside more than 100 million euros for bad loans, a similar amount to the previous nine months. For the year as a whole, risk provisions amounted to between 210 and 215 million euros, according to the press release. The bank specializes in financing commercial real estate. These include office buildings, shopping centers and hotels.

Despite the increased risk provisioning, Arndt expects a pre-tax profit of 90 million euros for the past year according to preliminary figures. After the bank had earned 91 million euros before taxes in the first nine months, the fourth quarter may even have seen a small loss.

At the end of December, its common equity tier 1 ratio was above its own requirement level of 14 percent, the bank emphasized in the press release. The liquidity ratio was 212 percent, which is more than twice as high as required by the supervisory authorities. The bank intends to publish its final business figures as planned on March 7.

In November, Arndt had already almost halved his forecast for pre-tax profit from 170 to 200 million euros to 90 to 110 million euros. At that time, loans for office real estate in the USA had already cost the bank dearly. The CEO had already announced additional risk provisions for the fourth quarter.

According to Arndt, there were nine cases of problematic office properties in the USA by the fall. He cited an immense decline in the value of the properties as the reason for this. The institute had recorded a 24 percent drop in value on the properties financed there within the previous twelve months. In cases where write-downs were made in the fall, the manager even put the loss in value at 40 percent. According to Arndt's statement at the time, the situation in Europe was nowhere near as bad.

Arndt has not yet issued a forecast for 2024. The manager will soon be handing over the CEO position to his successor Kay Wolf, who comes from Deutsche Bank. In November, Arndt assumed that Pfandbriefbank would return to its usual profit levels in the current year. By 2026, pre-tax profit is even expected to rise to more than 300 million euros./stw/tav/he