US real estate market divides German banks
The planned withdrawal from the US real estate financing market has pushed Deutsche Pfandbriefbank deep into the red in the first half of the year. „Total expenses amount to 314 million euros,“ said CEO Kay Wolf in a conversation with journalists when presenting the quarterly figures. This will lead to a loss of 249 million euros in the first half of the year. Wolf emphasized at the same time that the bank could easily shoulder both this one-time expense and the announced acquisition of the Deutsche Investment Group.
The US farewell is not providing the Pfandbriefbank with any tailwind on the stock market. On Wednesday, the stock market reacted with a price drop to the revaluation of the assets there. The share price of the specialist bank for commercial real estate financing fell by more than 5% to around 5 euros by midday. This means that the share is now trading below the level it was at in mid-May, when the board announced that it would examine all options for its US business with an open mind.
Helaba and Aareal remain on board
The response to the real estate crisis in the US is dividing banks in Germany. In contrast to Deutsche Pfandbriefbank, the majority of institutions are sticking with the market, which, although it entails higher risks than business in Europe, promises better returns.
Helaba and Aareal Bank have different areas of focus in the United States, but show no signs of withdrawing. Aareal Bank had already announced in May that it would continue to underwrite new business in the US market as a real estate financier.
„US markets difficult to predict“
BayernLB also shows no signs of pulling out. At the end of last year, the Landesbank held commercial real estate worth 28 billion euros. Of this, 5% was largely unchanged in the US. Jamestown, a provider of US real estate funds, had already predicted positive market development under the new administration in February.
The Pfandbriefbank CEO acknowledged that non-performing US loans are currently stable. However, he added: „In our view, the US markets remain difficult to predict.“ He cited three disadvantages of the bank's exposure there compared to its exposure in Europe. The risk profile of the Pfandbriefbank portfolio in the US is considerably higher. Although it only accounts for 12% of the total portfolio, it represents around 45% of non-performing loans. The capital commitment is 1.7 times higher than that of comparable European Pfandbriefbank financing. Thirdly, profitability is clearly negative. The adjusted return for 2024 is stated as -13%.
