Deutsche Pfandbriefbank (pbb), a German lender, experienced a significant downturn in its stock performance, marking its worst day in half a year.
This decline came after the bank announced a downward revision of its full-year profit forecast and the suspension of a special dividend payout.
The bank disclosed that it anticipates annual pre-tax earnings in the range of 90-110 million euros ($96-117 million), a stark reduction from its previous guidance of 170-200 million euros.
This drastic adjustment was attributed to the prolonged weakness observed in the commercial real estate sector.
As of 0942 GMT on Wednesday, pbb’s shares plummeted by 11.8%, making them the laggards in Germany’s small-cap index (.SDAXI).
CEO Andreas Arndt expressed his concerns, stating, “We do not expect the real estate market to stabilise until the first half of 2024.”
He further elaborated that the price discovery process was taking significantly longer than initially anticipated, indicating a challenging road ahead.
In response to the adverse conditions in the real estate market, the bank declared its decision to forgo the payment of a special dividend for the year 2023.
This marked a departure from its previous practice of distributing special dividends. The bank justified this move by citing the “challenging situation” within the real estate sector, as detailed in an official statement.
Despite this change in dividend policy, pbb clarified that it would uphold its commitment to an overall dividend.
The bank intends to make this determination and communicate it to stakeholders when it releases its full-year results.
The downgrade in profit expectations and the suspension of the special dividend sent shockwaves through the financial markets, causing a sharp decline in the bank’s stock price.
Pbb’s challenges are emblematic of the ongoing difficulties faced by financial institutions due to the enduring weakness in the commercial real estate sector, and it remains to be seen how the bank will navigate this challenging landscape in the coming years.