European real estate lender Deutsche Pfandbriefbank (pbb) plans to gradually reduce its exposure to offices as part of efforts to become a more diversified and profitable bank.
While commercial real estate finance remains its core business, Pbb said it would also seek to increase its asset management activities and develop additional services for institutional CRE investors. Pbb is aiming for around 10% of revenue to come from commissions by 2027.
To achieve these goals, the bank will invest in efficiency measures and optimise its core business. It expects a significant increase in return on tangible equity (RoTE) to around 8% by 2027.
Pbb's CEO, Kay Wolf, said: ‘We have held our own well as a bank in the challenging market of the past two years. Nevertheless, we want to better equip ourselves for future cycles by broadening our business model. It is therefore only logical that we increasingly make our expertise in real estate financing available to institutional investors along the value chain in the future, thereby developing additional commission-based business. In addition, we plan to further optimise our core business by focusing more strongly on promising and high-growth asset classes in new business.’
Marcus Schulte, CFO of Pbb, added: ‘By adjusting our business model, we want to significantly improve the earnings profile of our bank. We plan to strengthen our profitability step by step and thus create added value for our shareholders.’
Pbb's strategy for 2027 will focus on expanding into new, promising asset classes within commercial real estate financing and prioritising high-growth segments. This division will be known as RE Finance Solutions. It will also develop a substantial commission-based business called RE Investment Solutions. Additionally, it will improve operational efficiency, adapting the current platform through increased use of technology and AI.
While the overall size of Pbb's financing portfolio is expected to remain relatively stable, its composition will undergo significant changes. The bank will focus on asset classes that align with high-growth market trends, such as data centres, student housing and housing for the aging population. Additionally, pbb plans to expand its business in the logistics, hotel, and retail sectors while reducing its focus on office and residential properties.
The German lender will concentrate more on European markets, especially in Continental Europe. While the US remains important, the bank will adopt a more targeted approach regarding regions and clients.
The bank’s asset management arm, Pbb Invest, is currently seeking investors for a debt fund and is also developing an equity product, with plans to actively market both products in the coming year. Additionally, the bank is considering acquisitions to reach assets under management between €4 bn and €6 bn by 2027.
