The German Pfandbrief Bank (pbb) reacts drastically to the past crisis year under its new chief, Kay Wolf. By 2027, the share of offices in the loan portfolio is set to significantly decrease, while financing for data centers, hotels, and senior living facilities will be massively expanded. At the same time, the bank is curbing its loss-making U.S. business and reducing its dependence on interest income, which means the previous medium-term profit target set by predecessor Andreas Arndt is being abandoned.

These strategic changes dealt a hard blow to the stock market on Thursday morning: The pbb share temporarily lost almost seven percent and closed at 5.69 euros, which corresponds to a decline of around eight percent since the beginning of the year. In February, the price had already plunged below four euros, and today the share is traded at only half the price it was five years ago.

Kay Wolf announced at the Capital Markets Day that the pre-tax profit target of 300 million euros would not be achieved by 2027, although his predecessor Arndt had already set this target for 2026. Last year, the bank had to contend with significant loan defaults due to the slump in the commercial real estate market, particularly in the USA.

To make Deutsche Pfandbriefbank safer and more profitable, the share of office financing will be reduced from over 50 to under 40 percent of the loan portfolio. Loans for rental housing will be less of a focus, while the emphasis remains on retail and logistics. Wolf is placing more emphasis on loans for data centers, senior living facilities, assisted living, and hotels, which are considered more profitable and have higher growth potential. "We already have the necessary expertise in-house for this," Wolf emphasized.

Another key focus is on reducing the US business from 15 to less than 10 percent of the loan volume, with a focus on the East Coast. Existing loans on the West Coast are to be gradually reduced without indicating a fire sale. Additionally, the bank aims to expand its commission business by managing mortgage loans for investors. This is expected to account for around ten percent of the bank's total revenue by 2027.

CFO Marcus Schulte expects a pre-tax profit of over 200 million euros but under 300 million euros by 2027. At the same time, the return on tangible equity is expected to rise from less than three to about eight percent. Cost reductions totaling 45 million euros, along with additional savings in the double-digit million range, are intended to bring the cost-to-income ratio below 45 percent.

Additionally, Deutsche Pfandbriefbank announced an increase in the dividend to 90 cents per share for 2024 and share buybacks of up to two billion euros for 2025. These measures aim to provide added value to shareholders and ensure the financial stability of the bank.