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.
In recent days, banks in the USA, 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.
German house prices declined by 9.9% during the April-to-June period of this year compared to the same period in 2022, marking the steepest drop since records began in 2000, official data showed on Friday.
According to the Federal Statistical Office (Destatis), property prices in Germany hit a record high in the second quarter of 2022.
The agency highlighted that the decrease was especially pronounced in Germany’s biggest cities. Compared with the previous three months, prices reportedly declined by 1.5%, less than in the two preceding quarters.
In the period January to March 2023, property prices saw a quarter-on-quarter decrease of 2.9%. In the final quarter of 2022, the decline totaled 5.1%.
The country’s construction sector has been severely hit by an unprecedented monetary-tightening campaign launched by the European Central Bank in response to raging inflation, and by uncertainty over new energy regulations.
Earlier this month, Germany-based real estate multinational Vonovia warned that the country’s construction sector, crucial for the EU’s biggest economy, was on the brink of collapse, putting the overall economy in jeopardy.
The sector, which had enjoyed a prolonged boom in the era of ultra-low borrowing costs, makes up 12% of Germany’s GDP and employs a million workers.
In April, Destatis issued gloomy projections for the construction sector, saying that the number of construction permits had been steadily declining since May 2022 and has been dropping by 10% each month from October 2022.
RT. com / ABC Flash Point News 2024.
Europe is going down thanks to the NATO proxy war in Ukraine and connected sanctions against Russia.
I did reply to you but it was removed then I was sent a scam email which I forwarded to UK authorities and got a reply .
The link was a Spanish ECO organization so I contacted them saying an employee is using your organization for gain –this is the usual Modus Operandi (MO ) when a website is attacked that the USA/UK doesn’t like and wants to shut up a poster.
Europe still doesn’t realize their”ally”, the USA is totally destroying them without using one bullet. First, by convincing them to take in refugees from the wars in the middle east, Africa, and now Ukraine. Then going along with the sanctions on Russia, which only hurt Europeans helped the USA. The elite politicians of Europe will be richly rewarded while the people watch as their countries become unrecognizable. Most already are.
Once German economy goes the whole EU goes as Germany is the engine of Europe.
You got that right G1075.
Germany is done Russia is the future. Russia is great and free, Germany is an US slave boy.
Danish Natural Gas, I think you are right. Russia has redefined itself, hooking up with BRICS11, partnering up with China and the rest of Asia. The US has lost its momentum while Russia has regained it. There is a huge power shift taking place in the world, with America losing many allies. Can it get worse? Yes, it can get much worse!
Yes Jamie , it can get worse –WW3 and Russia has done this under the heaviest sanctions short of war that the world has seen .