Citi double-cuts Deutsche Pfandbriefbank on earnings risks, prefers Aareal

Aareal Bank AG

17/11/2021 07:26

** Citi double-cuts Deutsche Pfandbriefbank (PBB)  PBBG.DE 
to "sell" from "buy" as it sees downside risks in the German
bank's earnings
    ** Instead, the broker prefers PBB's rival Aareal Bank
 ARLG.DE , whose "buy" rating it retains
    ** While the broker says that PBB has greater surplus
capital and offers higher yield, it fears that "yield alone may
no longer be enough" given already high all-in yields in the
European bank sector
    ** In particular, Citi sees PBB's greater reliance on
targeted longer-term refinancing operations and its limited
potential for earnings growth as inhibiting factors
    ** It also notes that "consensus estimates on PBB look
optimistic" compared to its own, which sees the company up to
14% lower on earnings
    ** In contrast, the broker sees Aareal's dividend yields at
a lower rate, but offering "far greater earnings growth" than
PBB
    ** Out of 8 analysts that cover PBB, five rate the stock
"strong buy" or "buy", two rate "hold" and one rates the stock
"strong sell"

 (Reporting by Alexander Kloss)
 ((alexander.kloss@thomsonreuters.com))