Steve Goldstein
Deutsche Bank, one of the banks with the largest exposure to U.S. commercial real estate, reported high levels of credit loss provisions for the second consecutive quarter but said they would start to decrease gradually.
Deutsche Bank (DB) reported a provision for U.S. commercial real estate credit losses of 121 million euros ($130 million), following 123 million euros in the fourth quarter. A year earlier, Deutsche Bank had booked a provision of just 35 million euros in the sector.
Deutsche Bank estimated that the average loan-to-value ratio (LTV) for its roughly 7 billion euros of office loans in the U.S. has stabilized at 81%.
The company said refinancing remains a major risk, especially for loans with low debt service ratios and collateral values that fall when extensions expire.
Of the 485 million euros of provisions booked from the third quarter of 2022 onwards, the majority were office-related.
But Deutsche Bank expects a gradual improvement in its commercial real estate division in the second half of the year, and executives have said the provisioning cycle will die out naturally.
The guidance, given during an earnings conference call, sent its Frankfurt-listed shares (XE:DBK) up 6% after an early drop.
Deutsche Bank reported an overall strong first quarter, with profits up 10% to 1.45 billion euros and revenues up 1% to 7.78 billion euros, both slightly above analyst expectations, with the gains coming from investment banking and asset management.
Deutsche Bank also reiterated its guidance for 2024 and 2025.
-Steve Goldstein
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04-25-24 0837ET
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