(Bloomberg) — With weeks to go before stepping down as chief executive officer of Deutsche Pfandbriefbank AG, Andreas Arndt is facing a reckoning.
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Investors have been fretting over the firm’s loans to US commercial real estate since it cut its profit forecast in November. A hedge fund that only a year ago owned its stock is now betting against it. Things came to a head last week, when its bonds and shares slumped to record lows, after rising defaults in the US property market hit two lenders in New York and Tokyo, sparking contagion fears.
To calm investors, the 65 year-old Arndt issued a statement saying PBB would still post a profit for last year, despite what the company billed as “the greatest real estate crisis since the financial crisis.” The shares plunged 5.7%.
The market jitters have put PBB, whose predecessor was bailed out in the financial crisis, at the center of concerns that troubles in the US property market are spreading to Europe. Operating from a suburb of Munich, Arndt has racked up an exposure worth roughly $5 billion to US property borrowers since the German government sold much of its stake in his little-known firm. Now the former Deutsche Bank AG executive faces his biggest test as he seeks to salvage his legacy.
Arndt declined to comment through a spokesperson.
PBB isn’t alone in taking hits from the real estate upheaval. Bonds of Aareal Bank AG and LBBW, which acquired a Berlin-based lender in 2022 with large exposure…