Anyone who bought shares in Deutsche Pfandbriefbank on 26 February can count themselves lucky, because the share price has risen by more than half since then. However, long term shareholders are still likely to groan bitterly, since they are still sitting on considerable losses. Even after the share price runup in recent months, the specialist bank for commercial property financing is still only trading at around 5.40 euros per share, the same level as during the corona crisis. Compared to the share price record in February 2020, it has fallen by around two thirds.

But that's not all. Shareholders will have to forego a dividend for 2023. This is a hard blow for a company that has positioned itself as a dividend stock. So what's next for Deutsche Pfandbriefbank?

The signs are pointing to a change in strategy. Top management has been reorganised. Kay Wolf, who was recruited externally, has been CEO since March. Marcus Schulte, who has been with the bank since 2017, took over the finance department last December. The markets can expect some details in the autumn. The Management Board will set out its new strategy at a Capital Markets Day, which is expected to take place in the second week of October.

From a shareholder perspective, the share price performance over the past four years raises the question of whether Pfandbriefbank is too one-sidedly dependent on property financing – and is therefore taking on too much risk at a time when property values are falling.

At least the share price performance reflects this concern. The coronavirus crisis and the associated home office trend pushed the valuation down from 15 to around 5 euros per share within three months in 2020, and shareholders suffered a similar blow as the US property crisis worsened at the start of this year.

Markus Kienle, CEO of Schutzgemeinschaft der Kapitalanleger, expressed his dissatisfaction at the Annual General Meeting. He asked why Deutsche Pfandbriefbank had been hit so hard by the property crisis, saying "is there a cluster risk in office property?“

Now it can be a double-edged sword to complain about price price falls when pure business models are suffering from a weakness in the sector. Elsewhere, the capital markets often complain that conglomerates lag behind their specialised competitors during strong market phases – Siemens is a prime example of this in Germany.

Deutsche Pfandbriefbank, on the other hand, argues that its core business is much more stable than the activities of many of its competitors. Wolf never tires of emphasising that it concentrates on the first-ranking part of a financing. At the same time, however, the CEO also sees the need to position the bank more broadly: „Above all, we need to use our excellent property expertise to diversify our income much more strongly.“

The first approach is that the bank is building up the Real Estate Investment Management division, as has been planned for some time. It offers property investment products with sustainable features for professional investors. Providers such as KGAL or Patrizia will be competitors. For the first two funds, Pfandbriefbank is cooperating with Universal Investment and Hauck Aufhäuser Lampe. However, it is considering acquiring its own capital management company licence. An acquisition is not ruled out. The bank holds only 35% of Eco Estate, founded with Groß & Partner as a consultancy firm for sustainability. In contrast, other sources of income are drying up. The areas of public sector financing and the Value Portfolio, which are summarised in a unit outside of the core business, are in run down mode. The financing volume still totalled 11.6 billion euros at the end of March. The portfolio does not meet management's profitability requirements.

Wolf is committed to balance sheet management, and the 900 million euro Non Performing Loan portfolio sale to Blackstone is evidence of this commitment. However, it is unclear why Pfandbriefbank does not see any opportunities in a segment where Blackstone is making major investments.

Wolf is also improving refinancing conditions with a series of bond buybacks.

In the short term, however, the Pfandbriefbank share price is directly linked to the performance of the property market. The signals are becoming better. „On a positive note, there are signs that investor sentiment is improving,“ Wolf said recently.