Shares and bonds of German lender Deutsche Pfandbriefbank sank Thursday after S&P Global Ratings downgraded it over its big exposure to commercial real estate, particularly in the U.S. Investors have become [increasingly concerned about loan losses](https://www.wsj.com/livecoverage/stock-market-today-dow-jones-earnings-02-07-2024/card/commercial-real-estate-woes-hit-german-banks-xyJZxMpPmaUXSIS3Pqjn) at the bank, which specializes in lending to property owners. The U.S. represents 15% of the bank's commercial real estate portfolio. + S&P said it expects Deutsche Pfandbriefbank bad-debt charges to increase this year, although the bank should remain profitable.
(Bloomberg) -- For German banks at the forefront of a spreading US commercial property downturn, covered bonds and deposits can offer a lifeline, according to Barclays Plc analysts.Most Read from BloombergA 99% Bond Wipeout Hands Hedge Funds a Harsh Lesson on ChinaUkraine’s Army Chief Replaced After Rift With ZelenskiyEpstein Contacted Staley for Years at Barclays Using Go-Between, Court Filings ClaimCitadel Among Hedge Funds That Got Morgan Stanley’s Block-Trading LeaksXi’s Markets Shakeup Surp
Bonds issued by Deutsche Pfandbriefbank, a small property lender, sold off on concerns it will have to increase provisions to cover for a potential wave of defaults. Deutsche Pfandbriefbank relies heavily on commercial real estate financing for earnings and the U.S. represents 15% of the bank's portfolio in this area, according to S&P. + The yield on a riskier Tier 2 bond from Deutsche Pfandbriefbank surged, briefly topping 11%. + Debt in Aareal Bank, another small property-focused lender, also sold off.