Real estate crisis „devours“ around the world, as I read in an important article. The article even raises the question of whether the real estate crisis will be as bad as the last one in 2007/2008. You will surely remember: In the wake of the real estate crisis, the financial markets also collapsed. At the beginning of 2008, the DAX almost remained at its normal level despite the crisis. Then, by the beginning of March 2009, prices crashed by over 50% overall.

The question will be: Is such a scenario threatening us, is it also threatening you? And what role could, for example, the mortgage bank play in this?

Basics of the crisis in the international real estate business Real estate is a much more unstable business than most comments suggest. Large markets are financed with loans that need to be paid off. The utilization of real estate, especially in the commercial sector, the demand for real estate and their prices, as well as the interest burden, dictate the ups and downs, which are often underestimated. Unlike stocks, real estate is not traded publicly every day. However, prices still fluctuate.

Now, the market in China has been ringing alarm bells for a long time due to credit financing. The large corporation China Evergrande is even being liquidated – ordered by a court in Hong Kong. Another property developer is already being spectacularly tried in court for failing to repay a loan worth millions.

In the USA, the situation is also worrying. We read and hear almost daily that the market for commercial real estate has collapsed. The data is actually reflected in the market. Because an index from Swiss UBS shows alarming signals for other locations. The „Global Real Estate Bubble Index“ measures the overvaluation, i.e. the difference between real estate prices and „true values“. The warning signals are pronounced in Frankfurt, Munich, Hong Kong, and Miami, as well as in Zurich or Tokyo. We must assume that banks are also dependent on their respective loans.

PBB and Aareal Bank downgraded in rating Banks such as PBB or Aareal Bank have also felt the impact directly. The rating agency S&P has downgraded their creditworthiness, which is not just a marketing problem. With lower ratings, the costs in the financial market increase due to the higher risk premiums that banks have to pay when raising their own funds. Even more serious may be the increasing requirements for risk provisioning. Such banks must therefore make higher provisions.

This also applies to pbb. However, the mortgage bank does not become poorer per se as a result. The reported profits may turn out to be lower than expected because the money has been set aside as risk provisioning. Ultimately, the ratios within the balance sheet have changed – without the overall situation being significantly exacerbated.

Overall, I would not trust all banks to make the right decisions – in this case, however, pbb has been massively punished on the market from my point of view. Pretending everything is fine doesn’t help – but panic is also not the right advisor.

The P/E ratio is still in the single digits – this is only a positive indicator.

pbb: Real estate crisis yes – panic no – WKN: 801900 – ISIN: DE0008019001 Source: https://aktienscreener.com/