pbb Deutsche Pfandbriefbank : Dividend pay-out ratio upgrade to at least 75% until FY2019

[dropcap]D[/dropcap]eutsche Pfandbriefbank (pbb) has increased its pay-out ratio from 40% to 50% to a regular dividend of 50% plus a special dividend of 25%, up to 2019 inclusive. In addition, for 2017, pbb wants to distribute net income (after taxes) over and above its original results guidance, in full. This would equate to a total dividend of €1.07 per share and a pay-out ratio of 79%. Profit before taxes was €204m (preliminary, unaudited consolidated figures in accordance with IFRS) for 2017. Profit after taxes for 2017 was €182m, reflecting a markedly lower tax rate. This equates to EPS of €1.35. Results for the 2017 financial year are scheduled for publication on 7 March 2018. We have always argued that the capital ratios of pbb are too high and that excess capital should be given back to shareholders by higher dividends (see update on 3 November 2017). However, we believe that pbb’s management did not want to make it too obvious to the German government, as the former owner, that it had asked for too much shareholders’ funds before the IPO in 2015. We guess that management has now calculated the new CET1 ratio for pbb under “Basel IV” rules fully applied and has come to the conclusion to increase the pay-out ratio.