Deutsche Bank 'Encouraged' by Pricing on $1B CRE Loan Sale

Deutsche Bank is deep in the process of selling its $1 billion CRE loan portfolio. Since the financial institution put it on the market in early August, it has received multiple bids.

“And so, in these things, you work through the bids and the bid packages, if you like,” said James von Moltke, president, chief financial officer, and member of Deutsche Bank’s management board, during a fixed income call. “We have marked to the bid levels or where we think we can execute based on the bids.” Moltke explained that the bank has taken €23 million in collateralized loan purchases in the third quarter and a total of €68 of CLPs in the U.S.

“On the CRE portfolio, it was approaching but not quite €1 billion that we put in the market,” Moltke said during the separate earnings call the same day. “Of that, a little bit is sort of approaching 40% with Stage 3, and then the rest, a mix of performing in Stage 2. We were encouraged, frankly, by the pricing that we saw,” Moltke said.

“And given how close the marks on the Stage 3 elements are to our bookings, we see that as encouraging and further evidence of our view that the commercial real estate has at least found a floor and is stabilizing. That transaction, incidentally, I hope we were clear, but we have not closed on that transaction, but we have now booked to where we think it leads us in terms of marks. So that’s overall encouraging.” Stage 3 means non-performing.

As Bloomberg noted, investors have long been questioning Deutsche Bank’s exposure to US developers, especially those in the office market. The bank had CRE exposure of €15 billion in the third quarter. That was down from €16 billion — just over 6%. The bank provisioned €68 million for the asset class, the lowest level over the past 12 months.

Deutsche Bank’s Q3 2024 financial presentation showed a total CRE non-recourse loan portfolio of €37 billion, or 8% of total loans. Of those, €7 billion was deemed a lower risk and included data centers and municipal social housing.

But €30 billion, or 6% of total loans, were considered higher-risk loans with a weighted average loan-to-value of 64%. Of this group, 41% was in office, 10% in hospitality, 14% in residential, 10% in retail and 26% in other.