Big investor in German bank PBB trims stake as real-estate worries swirl

FILE PHOTO: Headquarters of German lender Hypo Real Estate 'Deutsche Pfandbriefbank AG' is pictured in Unterschleissheim·Reuters
Tom Sims and Matthias Inverardi
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By Tom Sims and Matthias Inverardi

FRANKFURT (Reuters) -A top investor in Deutsche Pfandbriefbank (PBB) has cut its stake in the lender as its shares and bonds come under pressure on concerns over its exposure to the U.S. commercial real estate market.

The investor, Germany's RAG Foundation, trimmed its holding to 2.94% from 4.5%, according to a regulatory filing on Friday.

"We are watching developments in the U.S. real estate market very closely," RAG said in a statement to Reuters, though it declined to disclose details of talks with PBB.

The announcement comes a day after the bank sought to reassure investors that it has enough funds to cope with a slump that has cast a shadow over numerous banks that have lent to the sector.

Higher interest rates, refinancing difficulties and lower office occupancy have hit the U.S. commercial real estate sector in recent months, raising concerns about defaults. A renewed selloff in some U.S. regional banking shares this week has reignited fears about which lenders are most exposed.

The uncertainties will "keep the pressure high" on PBB in the short term, analysts with LBBW wrote in a note.

The shares were down 2.1% by late afternoon in Frankfurt, making for a nearly 27% decline so far this year.

The bank's bonds have also sold off.

Its 150-million euro 2027 bond was last around 46.68 cents, little changed on the day, but down from 70.429 early in the week.

PBB, listed on the small-cap SDAX index, is heavily focused on the real estate industry, and on Thursday, in a second unscheduled announcement in two days, said its liquidity was twice the amount required by regulators.

On Wednesday, the bank reported an increase in risk provisions in the fourth quarter and described the environment as "the greatest real estate crisis since the financial crisis".

Citi analysts, which rate PBB a "sell", said the move provided some additional clarity but many details were missing.

Germany's financial regulator BaFin, which last month stepped up its warnings on the property sector, declined to comment on PBB specifically but said it was "keeping an eye" on the overall situation affecting commercial real estate.

(Reporting by Tom Sims; Editing by Rachel More and David Evans, Kirsten Donovan)