Publication date: 09-11-2025
Deutsche Pfandbriefbank AG (pbb) is a German specialist bank focusing on lending to the real-estate and public-sector markets in Europe. It is publicly listed on the Frankfurt Stock Exchange (ticker: PBB) and has no majority owner, with most shares held by institutional investors. The bank is one of the few in Europe whose business is built mainly around Pfandbriefe — German covered bonds backed by loans with high-quality collateral that have historically provided very stable funding even in downturns.
The bank’s activities are split into two main areas. Commercial real estate (CRE) makes up about 85% of its total portfolio and includes loans for offices, logistics buildings, residential properties, and retail or hotel assets. Public investment finance (PIF) represents the remainder and covers lending to municipalities and public institutions, mainly in Germany and other EU countries. CRE is the key source of profit, while PIF adds stability and regulatory liquidity benefits.
Within the real-estate book, Germany is the largest market (≈ 45%), followed by France (12%), Central and Eastern Europe (10%), the Nordics (6%), and the U.K. (6%). The portfolio remains concentrated in office properties (≈ 50%), balanced by logistics (18%) and residential (17%). Average loan-to-value ratios are in the mid-50% range, providing a solid collateral buffer against potential declines in property values.
Image: Vendo Park retail park property in Poland financed by the bank
During 2025 pbb completed a full exit from the U.S. market, which had been a source of losses and uncertainty. U.S. loans accounted for about 13% of the group portfolio but nearly 45% of non-performing assets. Their sale and run-off caused a temporary loss in 2025 (notably in Q2), yet this one-off clean-up reduced future risk and freed capital for new lending in Europe. The bank’s capital position remained strong, with CET1 ≈ 15,3%, comfortably above regulatory minimums.
To make earnings less dependent on cyclical property lending, pbb is diversifying into asset management. It agreed to acquire Deutsche Investment Group (DIG), a German real-estate manager with about €3 bn of assets under management. Once integrated in 2026, DIG should lift the share of fee-based income to >10% by 2027. This adds a more predictable revenue stream and gives pbb access to new clients such as pension funds and savings banks.
The bank’s funding model is another structural strength. Around 51% of liabilities come from covered bonds (37% mortgage Pfandbriefe and 14% public-sector Pfandbriefe), supported by 18% retail term deposits and about 18% senior and capital instruments. This mix gives pbb a reliable and cost-efficient source of long-term funding and reduces dependence on wholesale markets. S&P rates the bank's unsecured debt at BBB- (stable), citing strong capitalization and adequate liquidity.
Looking ahead, management targets a return to sustainable profitability from 2026 with Return on Tangible Equity (RoTE) ≈ 8% by 2027. Risk costs in the core European portfolio are expected to normalize to about 0,25–0,30% of loans as property valuations stabilize and interest-rate pressures ease. The overall business is becoming smaller but safer — focused on Europe, backed by secured lending, and complemented by a modest fee business.
The 5% senior preferred bond due February 2027 ranks among the bank’s most secure unsecured instruments. Senior preferred notes stand above subordinated or hybrid debt but below covered bonds in repayment priority.
For investors, the case is exposure to a conservatively run European lender that has completed its restructuring and is now positioned for stable, moderate returns. While near-term profits are still modest, long-term fundamentals — high capital ratios, strong collateral coverage, and predictable funding — support ongoing coupon payments.
as of 30.06.2025 EUR bn
| Column 1 | Column 2 | Column 3 | Column 4 | Column 5 | Column 6 |
|---|---|---|---|---|---|
| Assets | 42,3 | Net interest income, LTM | 0,43 | Tier1 capital ratio | 15,3 % |
| Loan portfolio | 33 | Net Interest Margin, LTM | 1,1 % | Return on Equity, LTM | neg |
| Equity | 3,1 | Net income, LTM | -0,18 | Cost/Income | 50 % |
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