Germany facing ‘greatest real estate crisis’ in 15 years – bank

Deutsche Pfandbriefbank has become the latest lender to put away more provisions for its commercial property loan book

Deutsche Pfandbriefbank, a German bank focused on commercial real estate, has become the latest lender in the country to report having put aside more provisions for its loan portfolio amid what it calls the worst decline in commercial property values since the global financial crisis.

The bank, known as PBB, reported this week having increased provisions in the fourth quarter, saying in a statement that it had set aside €215 million ($231.7 million) for bad loans due to “persistent weakness of the real estate markets.” It added, however, that despite this step, “PBB remains profitable thanks to its financial strength – even in the greatest real estate crisis since the financial crisis.”

The bank’s shares dropped more than 3% on Friday and are down 27% so far this year and 40% in the past six months. On Thursday, it sought to reassure investors that it had enough cash and highly liquid assets on its balance sheet to operate for six months without new funding from investors.

Concerns about the health of bank balance sheets have been growing since Germany’s biggest lender, Deutsche Bank, announced last week that it had allocated €123 million during the fourth quarter of last year to absorb potential defaults on its US commercial real estate loans. That’s more than quadruple the amount it put aside during the same period in 2022.

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In recent days, banks in the US, Japan and Switzerland have also reported mounting losses on lending to the troubled commercial property sector. The warnings come almost a year after a crisis that saw three US regional lenders collapse and resulted in the emergency takeover of troubled Credit Suisse by rival UBS. On Tuesday, US Treasury Secretary Janet Yellen told lawmakers she had concerns about the exposure of some banks to commercial real estate.

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