DePfa: Few Surprises, Positive For Spreads

DePfa (PBBGR: BBB-) 1Q24 results contain few surprises and, whilst non-performers continue to grow, the rate of new additions has halved again this quarter. We take this as a positive – a good lateral for Aareal (and, less so, Commerzbank) both reporting tomorrow. Spreads have stabilised in the last month and these results underpin that, we feel.

• Key credit metrics: CET1 is down 50bp from Dec-23 (at 15.2%) but still above management’s target (of 14%). Loan losses are down meaningfully on the prior three quarters and the balance sheet has shrunk 2-4% in the period, driven by the non-core portfolio. Positively, non-performers are only marginally (7%) higher in the period driven by two US office loans and one German development.
• Balance sheet flows: new business in CRE is lower y/y (EUR0.7bn vs. 1.0bn) but at meaningfully better margins (~245bp vs. ~200bp) and retail deposit funding is up 8% in the quarter. Slides include the term “capital markets funding needs for 2024 largely covered” with no need seen to issue senior unsecured benchmark this year.
• Guidance: appears unchanged from three months ago (which is generally a positive) and continues to look for loan losses lower than FY23 this year.

Conf call is 1000 (London time) at https://cdn.acs-solution.de/s/c8801c7e-0a77-4805-9268-115dd54d1345/