German property bank PBB to shun new US business, citing Trump volatility

By Tom Sims and Alexander Hübner

FRANKFURT (Reuters) - Deutsche Pfandbriefbank, one of Germany's top property financiers, said it would not take on new business in the United States, in a major strategic shift, as it considered the country too volatile under President Donald Trump.

The lender, also known as PBB, said it would evaluate "all options" for its existing U.S. business, without elaborating. The U.S. is PBB's second biggest market, making up 14% of its loan portfolio.

CEO Kay Wolf pointed to "inconsistent" actions of the new U.S. administration that he said would drive up the risk of inflation and keep volatility high.

"This volatility is poison for the business activity of long-term property financing, it is poison for investors, it is also poison for banks, and that is why we are looking at these options," Wolf told journalists on Wednesday.

Wolf said that there had been a significant change in the operating environment for real estate, prompting the latest shift in strategy.

The announcement followed a wave of bad news for the bank, which dates back to the 1860s and was bailed out by the government in the 2009 financial crisis.

Last year, the lender navigated what it called the "greatest real estate crisis" since then. As profitability shrivelled, short sellers bet against the bank, while its bonds also came under pressure after its credit rating was downgraded to a notch above the so-called "junk" bracket.

PBB reported a 17% drop in first-quarter net profit on Wednesday to 24 million euros ($26.9 million), compared with 29 million euros a year earlier. It also said it would review the timing of a planned share buyback.

Provisions for loan losses fell to 26 million euros from 47 million euros a year earlier.

Shares were trading 2.1% lower in Frankfurt at 1030 GMT, but have gained 19% since the start of the year.

The lender has previously said it would reduce its exposure to the U.S. property market and focus less on office buildings as it tries to restore profitability.

U.S. commercial real estate has come under particular pressure due to high office vacancy rates, falling property prices after interest rate hikes, and greater flexibility to work remotely.

($1 = 0.8937 euros)

(Reporting by Tom Sims; Editing by Ludwig Burger and Rachna Uppal)