GARCHING (dpa-AFX) - Deutsche Pfandbriefbank suffered a slump in profits in the first quarter. New business and net interest income fell significantly, the commercial real estate financier announced Monday in Garching near Munich. The sharp decline in demand for credit is making life difficult for the institute. CEO Andreas Arndt estimates that the difficult market situation will continue for another two to three years. He expects the situation to stabilize by the end of 2023. The news went down badly on the stock market.

The Pfandbriefbank share lost almost eight percent at times in the morning. Most recently, it was still down around five percent at 8.095 euros, but remained one of the weakest stocks in the SDax small cap index. Compared to the turn of the year, the stock has gained more than ten percent. However, the annual high of 9.88 euros reached at the beginning of March is still some way off.

In the first quarter, Pfandbriefbank earned 27 million euros below the line, a quarter less than a year earlier. Profit before taxes fell almost as sharply to 32 million euros. CEO Arndt nevertheless sees the bank on course to achieve a pre-tax profit of between 170 and 200 million euros this year.

To be sure, the institute set aside significantly less money for loan defaults in the first quarter than a year earlier, shortly after the start of the Russian war of aggression in Ukraine. Unlike many universal banks, however, the financier of commercial real estate did not yet benefit as much from the rise in interest rates.

As a result, net interest income plummeted 13 percent to 106 million euros in the first quarter. Total operating income even slumped by a fifth to 119 million euros. This was also due to meager new business: In the typically weak first quarter, the bank brought in new financing and renewals totaling around one billion euros. A year earlier, the volume had been more than twice as high.

Despite the difficult situation, Arndt believes that Pfandbriefbank is well equipped to benefit from the hoped-for recovery of the market in the coming years. By developing new business areas, the Management Board aims to increase pre-tax profit to more than 300 million euros by 2026. The Board of Management presented the program in March.

For example, the institute wants to enter the real estate sales business and enable the outplacement of risks with banks, insurers and pension funds. In addition, Pfandbriefbank wants to expand its lending volume by 3.5 billion euros to 33 billion euros by 2026, and the overnight and time deposit business is to increase to up to 8 billion euros. In the first three months of 2023, deposits from retail customers grew by around one billion to 5.4 billion euros./stw/mne/jha/