Deutsche Bank says commercial real estate remains under pressure
Bank posted its first loss in four years in the second quarter
It has been contending with fallout from commercial real estate
Pressure in real estate to remain in second half of 2024
By Stefania Spezzati and Tom Sims
LONDON, July 24 (Reuters) -Deutsche Bank DBKGn.DE on Wednesday tempered exepectations for a recovery in the commercial real estate market and said it forecasts further pressure in the second half of the year.
Chief financial officer James von Moltke told journalists that conditions were improving but more slowly than he had anticipated and provisions for commercial real estate in the U.S. will continue to be impacted.
"The recovery I might have expected a couple of months ago hasn’t happened yet," he told analysts in a call.
The German lender pointed to "continued commercial real estate pressure" in the remaining half of the year.
Commercial real estate (CRE), particularly in the United States and Germany, has had a torrid two years as higher interest rates jacked up borrowing costs and the pandemic hammered demand for offices, sending valuations tumbling.
In April, von Moltke told analysts after first quarter results, that the bank was optimistic the downturn was hitting a floor.
Deutsche has among the biggest exposures to CRE among European lenders, although analysts say big banks in general have fairly contained and manageable exposure to the sector.
The bank booked charges tied to loans for 476 million euros in the second quarter, more than analysts had expected (432 million euros), due to the slower recovery in real estate and two unnamed corporate defaults.
In total, the full-year guidance for provision for credit losses was revised to "slightly above 30 basis points", it added from a previous range of 25-30 basis points.
KBW analyst Thomas Hallett said that the increase in provisions was "one of the key focus points" given regulatory concern around leveraged loans." JP Morgan analysts said Deutsche's exposure to real estate should "be watched."
The European Central Bank is pushing German lenders to build up higher reserves against property loan defaults, Bloomberg News reported in June without specifying whether such measures also apply to Deutsche Bank.
Commercial property exposure https://reut.rs/3zKByNR
Top commercial property lenders in Europe https://reut.rs/4cTcQtg
Reporting by Stefania Spezzati and Tom Sims in Frankfurt; editing by Tommy Reggiori Wilkes and Elaine Hardcastle
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