Pbb expects over €10b of new lending in 2015

Pbb Deutsche Pfandbriefbank expects new business in 2015 to ‘slightly exceed’ the already all-time-high of €10.2 bn reported in 2014, management board member Bernhard Scholz said at a press conference at MIPIM.

The German commercial property lender saw new business rise by 24% last year to €10.2 bn from €8.2 bn a year earlier, with real estate finance representing the bulk of new activity or a total of €9 bn.

Germany was the bank's most important market for real estate finance, accounting for 46% of new business. France came in second (19%), followed by the UK (15%), Central and Eastern Europe (8%) and the Nordic countries (7%).

The bank recently carried out its first lending deal in Spain which accounted for 4% of new business last year. ‘Spain is a strategic market for us. We have a sustainable exposure and we want to increase it again this year. Unfortunately we are not the only ones looking to be active in this market. Competition is strong and is resulting in pressure on margins rather than an increase in loan-to-value levels.,’ Scholz said.

As margins continue to fall across Europe, the German bank expects to take on more alternative type of financings in 2015 to ensure its margins remain above 200 bps across its property portfolio, Scholz added.

‘We are seeing cut-throat competition in some markets so it is natural for us to go into more alternative asset classes and to follow our clients to places which are more profitable for them and for us. We are active in secondary markets and with redevelopments but we tend to be very selective. We also expect an increase in business related to German residential development which provides higher margins and should increase our average returns. Nevertheless, development will remain below 10% of our portfolio.’

Privatisation under way
Commenting on the launch of pbb's privatisation announced last month, Scholz said the market is ‘as good as it can get’ for the sale. ‘We requested expressions of interest on February 17 and we plan to sign the sale by the end of the year,’ he noted.

Parent group Hypo Real Estate Holding (HRE) announced earlier this year that it was officially launching the sale of pbb through either a disposal or an initial public offering.

HRE hired Citigroup and Deutsche Bank as financial advisers for the sales process and is preparing a potential IPO as an alternative option.

Pbb is 100% owned by HRE which, in turn, is fully owned by SoFFin, the Financial Market Stabilisation Fund set up by the German government following the collapse of Lehman Brothers in September 2008 to stabilise the German banking industry.

The German government nationalised Hypo Real Estate in the aftermath of Lehman Brothers' collapse and the real estate lender received a €10 bn capital injection as well as €145 bn in liquidity guarantees under the condition it would sell pbb at a future date.