Deutsche Pfandbriefbank Too Small to Survive, Too Big to Fail

PBB, as it’s known, has a balance sheet worth about €49 billion, ncluding $27 billion of European real estate exposure and €5 billion of loans to the US property market.

Its market capitalization, though, is an ultra skinny €605 million - yes, million, after a near 50% drop in its share price during the past year. 

Nervousness about the lender's profitability and possible losses has seen its market value fall to 20% of its book value this week, from 52% in early 2022. 

That’s unsustainable if funding becomes unavailable.

The firm is both too small to survive in its current form, but also too big to fail given the repercussions if it were to cross over the regulatory point of non-viability.

It's vulnerable to a loss of confidence from investors, depositors, regulators and credit rating companies. 

Several event-risk hedge funds have short positions in its debt and equity.  

Marcus Ashworth Bloomberg 9 February 2024

Bonds of Deutsche Pfandbriefbank tumbled deeper into distressed territory 

after S&P Global Ratings downgraded the German lender, citing its high exposure to the beleaguered US commercial property market. 

Shares fell as much as 12% to a record low.

The ratings firm revised its rating for the issuer to BBB-, one level above junk.

Bloomberg 15 February 2024

Germany’s Office Property Slump Accelerates With Record Drop

Prices for office buildings tumbled 13% in the fourth quarter


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