German property and public investment lender Deutsche Pfandbriefbank (PBB) will press on with a stock market debut planned for July 16 in the face of market turbulence, its co-chief executive said on Wednesday. "Despite Greece and other issues, the current market environment is relatively stable," Andreas Arndt said on Wednesday. Stock markets were still at high valuations compared to two or three years ago, he said.
A sell-off in Chinese equities has added to global investors wariness as the debt crisis in Greece drags on. Germany's bluechip DAX stock index has gained 34 percent over the last two years but lost 4.65 percent over the last month.
PBB earlier this month delayed its IPO preparations, citing high market volatility after a showdown between Greece and its international lenders. Unlike most other IPO hopefuls it has now opted to continue with listing plans. The stock market volatility index has spiked to around 30, some 10 points higher than where bankers say it is difficult to succeed with an initial public offering (IPO). PBB is owned by nationalised lender Hypo Real Estate (HRE), which needs to sell its subsidiary by the end of the year as a condition of European Commission approval of its state bailout
of the lender in the financial crisis. HRE received a 10 billion euro ($11 billion) capital injection as well as 145 billion in liquidity guarantees, and has since worked to cut costs and shift unwanted assets into a bad bank. Of the total bailout money, 1.3 billion euros remains in PBB after one billion euros was paid back on Monday. Germany's financial market stabilisation agency FMSA - the government's ownership vehicle for the lender - will avoid losses if it sells shares in the IPO within the planned price range of 10.75-12.75 euros. Such a range would give the bank an equity value of 1.45-1.7 billion euros.
The price range also values PBB at 0.56-0.66 times its 2.6 billion euro book value, a significant discount to the 0.8 times book value that peer Aareal trades at. PBB's discount partly results from a so-called IPO discount investors usually demand for buying shares of a previously unlisted company, and partly from the fact that PBB has higher refinancing costs than some peers. The bank also operates in the highly competitive German market and continues to work off a large portfolio of unwanted assets.
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