DePfa Conf Call: Cause For Comfort

DePfa (PBBGR: BBB-) conf call should be taken positively by credit investors, we feel. Funding is improving, capital appears better under incoming rules and, finally, non-performers are showing an improved trajectory. This is far from a low-risk situation but recent spread tightening is nicely underpinned here, we feel.

• Funding outlook: mgmt reiterated that no senior unsecured is needed across the year (consistent with the message at FY23 results). It’s also notable that the bank’s Pfandbrief spreads are almost back down to the lows of pre-NYCB (Jan-24). Management of the retail deposit book also looks relatively positive.
• Capital looks better than expected: mgmt indicated a Basel IV figure for CET1 for the first time (16.3% pro-forma) which is something of a positive, being 110bp than current levels.
• Non-performers are growing, simply much more slowly than in late-2023 and, importantly, the EADs (exposures at default) appear to be mechanistically higher as the bank’s gone through a wide-ranging revaluation exercise.