Deutsche Pfandbriefbank : 14.05.2024 - Results Q1/2024

Results Q1/24 - Analyst Presentation

14 May 2024

Disclaimer

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Results Q1/24 (IFRS, pbb Group, unaudited) 14 May 2024	2

KEY MESSAGES

Solid start into 2024

Pre-tax profit of € 34 mn, slightly higher than previous year (Q1/23: € 32 mn)

Pre-provision profit of € 81 mn, benefitting from strong NII and realisation income

Risk provisioning remains elevated in line with guidance

Strategic active balance sheet management started

Portfolio remains solid with an avg. LTV of 54%1

100% senior lender, always first ranking

Selective new business with favourable risk/return profile - REF portfolio stable vs. year-end 2023 Slowing NPL dynamic through active NPL management

Already strong liquidity position of € >6 bn further improved

Resilient Pfandbrief market - recent Mortgage Pfandbrief Benchmark tapped by € 100 mn at manageable cost No need to issue Senior Unsecured benchmark in 2024

Retail deposit further increased by € 0.5 bn to € 7.1 bn in Q1/24

1. Based on performing investment loans only

Results Q1/24 (IFRS, pbb Group, unaudited) 14 May 2024	3

AGENDA

1. Highlights Q1/24 and P&L
2. Portfolio Quality
3. • Focus
   • • USA
     • Development
     • Germany
4. Funding
5. Capital & Balance Sheet Management
6. Economic Outlook & Summary
7. Appendix

Results Q1/24 (IFRS, pbb Group, unaudited) 14 May 2024	4

HIGHLIGHTS Q1/24

• Solid PBT of € 34 mn on the back of intact operating trends
• Strong operating income compensates for still elevated level of risk provisioning
• Stable REF portfolio with improving margin
• New business with strong margin uplift
• Strong liquidity position further improved
• Growth of retail deposits and resilient Pfandbrief market
• Well capitalised, significantly above MDA

1. 03/23 excl. interim result, 12/23 incl. full-year result, 03/24 incl. interim result

Strong KPIs despite challenging markets

PBTOperating income

€ 34 mn	€ 146 mn
(Q1/23: € 32 mn; Q4/23: € -1 mn)	(Q1/23: € 119 mn; Q4/23: € 188 mn)

REF PortfolioNew business margin

€ 31.2 bn	~245 bp
(12/23: € 31.1 bn, 03/23: € 29.4 bn)	(2023: ~205 bp, 03/23: ~200 bp)

Liquidity	CET1 ratio
€ >6 bn	15.2%
(03/24)	(12/23: 15.7%, 03/23: 16.6%)1

Results Q1/24 (IFRS, pbb Group, unaudited) 14 May 2024

5

OPERATING & FINANCIAL OVERVIEW

Selective new business at strong margins

REF new business

€ bn (commitments, incl. extensions > 1 yr.)

REF portfolio

• bn (financing volume)

~200 bp

~245 bp

1.0

0.7

• Selective new business volume with focus on risk/return profile
• Strong uplift of gross interest margin

31.131.2

margin business

• REF portfolio stable
• Improved gross portfolio margin

Q1/23Q1/24

12/23

03/24

Funding - retail deposits

• bn

Non-Core portfolio

• bn (financing volume)

	+8%
6.6	7.1

• Growth of retail deposits at favourable costs, well ahead of plan
• Strong liquidity position further improved

-6%

12.411.6

• Optimisation of non-core portfolio ongoing
• Accelerated asset reduction at attractive price levels

12/2303/24

Note: Figures may not add up due to rounding

12/23

03/24

Results Q1/24 (IFRS, pbb Group, unaudited) 14 May 2024	6

OPERATING & FINANCIAL OVERVIEW	Operating trends intact - risk provisioning on
	elevated level, as expected

Operating income

• mn (IFRS)

119

12

107

NII/NCI

Realisation & other income

146

20

126

• NII/NCI up y-o-y, benefitting from portfolio growth and improved gross portfolio margin
• Realisation income up

General admin. expenses

• mn (IFRS)

58

24

34

Personnel Non-personnel

58

23

35

• GAE stable y-o-y
• Inflationary cost pressure successfully mitigated

Q1/23Q1/24

Net income from risk provisioning	Stage 1&2
€ mn (IFRS)	Stage 3

Q1/23Q1/24

Pre-tax profit

• mn (IFRS)

5 -7

-2

-10

-37

• Risk costs at elevated level, as expected
• Still dominated by US loans and German developments

3234

• pbb remains clearly profitable in challenging enviroment
• PBT slightly up y-o-y - in line with expectation and guidance

-47

Q1/23Q1/24

Note: Figures may not add up due to rounding

Q1/23Q1/24

Results Q1/24 (IFRS, pbb Group, unaudited) 14 May 2024	7

OPERATING INCOME

Operating income		NII/NCI			Net other op. income
€ mn (IFRS)						Realisation income	Other
											Income from fair value measurement
										188
															1
												15				146
										40
119													4
						23
						1
		14						134			126
107
			-1		-2						-2								-4
														-3
			Q1/23			Q4/23			Q1/24

Pre-provision profit

• mn (IFRS)

107

81

32

Q1/23

Q4/23

Q1/24

Note: Figures may not add up due to rounding

Pre-provision profit remains strong and well ahead previous year

Net income from realisations

Q1/24: € mn (IFRS)

Prepayment fees

2

Derecognition of

time barred liabilities 4

	11	Asset sales
€ 23 mn	(non-core portfolio)

6

Liability management

• Strong operating income
• • NII benefitting from strategic portfolio growth and improved gross margins y-o-y - slightly down q-o-q due to reduction of non-core portfolio and refinancing costs
  • Net income from realisations mainly driven by optimisation of non-core portfolio and liability management
• Pre-provisionprofit remains strong, supported by
• • stable cost base
  • no expenses for European bank levy in Q1/24

Results Q1/24 (IFRS, pbb Group, unaudited) 14 May 2024	8

RISK COSTS

Net income from risk provisioning

• mn (IFRS)

Stage 1&21

Stage 3

Other2

Risk provisioning on elevated level, but significantly lower vs. Q4/23, as expected

Stage 1&2

Other

UK -1 1

-7	5	-9	1	-10
	-2			-37
		-100	-47
		-108
Q1/23	Q4/23	Q1/24

Challenging market environment reflected in credit risk and interest rate changes

• Stage 1&2: € -10 mn net additions still dominated by US - credit risk changes (€ -15 mn) and macroeconomic impact from interest rate rises (€ -4 mn) partly compensated by release of management overlay
  (€ +9 mn)
• Stage 3: € -37 mn net additions driven by US office and German development

Stage 3

• -10mn

-10

USA

(incl. release of € 9 mn management overlay)

UK -1

-17 Germany

• -37mn

USA -19

1. Incl. provisions in off balance sheet lending business 2. Recoveries from written-off financial assets

Results Q1/24 (IFRS, pbb Group, unaudited) 14 May 2024	9

RISK COSTS

Balance sheet - loss allowances

€ mn		Stage 1
	Stage 2

REF loan loss allowance coverage further strengthened

Stage 1&2

Other Germany

14 15

REF	189 bp
coverage
	589
	134	41
	414

Stage 3

199 bp

623

39

142

442

UK

24

€ 181 mn

USA

(incl. € 22 mn mgmt. overlay)

128

	12/23	03/24
Mgmt.	31	22
overlay

• Further build up of loss allowances - increase of REF coverage by 10 bp to 199 bp
• Stage 1&2: net increase by € 6 mn - additions partly reduced by positive effect from stage 3 transfer
• Release of € 9 mn management overlay for US loans
• Stage 3: net increase by € 28 mn - additions, FX and interest rate effects partly compensated by write-offs

Stage 3	Other	Germany
	26	65

		€ 442 mn
UK	212	139	USA

Results Q1/24 (IFRS, pbb Group, unaudited) 14 May 2024	10