Frankfurt – Germany’s Helaba, a major state-owned lender, is bracing for a dip in profits as it navigates a challenging economic landscape and continues to grapple with a significant portfolio of troubled real estate loans. The bank, formally known as Landesbank Hessen-Thüringen, reported a 4.8% decline in gross profit to €731 million for 2025 and a 2.3% decrease in net profit to €514 million. Looking ahead, CEO Thomas Groß anticipates further headwinds, forecasting a gross profit between €600 and €700 million for 2026, citing substantial investments in IT and artificial intelligence, coupled with a slowing global economy impacted by geopolitical instability, including the ongoing conflict in Ukraine.
Despite these near-term challenges, Groß reaffirmed the bank’s mid-term target of exceeding €1 billion in pre-tax profit by 2030. This ambition hinges on a successful digital transformation and a strategic shift away from riskier asset classes. The bank’s performance places it behind larger competitors like Bayern LB and LBBW, which reported pre-tax profits of €1.4 billion and €1.3 billion respectively in 2025, according to the bank’s recent earnings report. Nord LB, a smaller Landesbank, recorded a pre-tax profit of around €0.5 billion.
Helaba’s struggles are largely tied to its real estate exposure. The bank’s project financing arm, OFB, incurred a double-digit million euro loss in 2025. Although the real estate loan portfolio, representing approximately 16% of the bank’s total €230 billion in loans, contributed nearly €200 million to pre-tax profit, it remains a source of concern. The non-performing loan (NPL) ratio, indicating borrowers failing to meet repayment obligations, stood at a high 9.4%, whereas the bank reduced its risk provisions from €158 million to €98 million.
Proactive Approach to Troubled Real Estate Assets
Helaba has taken a proactive approach to addressing its troubled real estate assets, implementing what Chief Risk Officer Tamara Weiss described as a “tabula rasa” – a clean slate – strategy in its real estate credit portfolio. Speaking at a press conference, Weiss explained that the bank moved early to recognize and address potential losses as property prices began to decline. While residential property prices have begun to stabilize and even increase in some areas, the commercial real estate market, particularly office spaces impacted by the rise of remote operate, remains challenging.
The bank has actively reduced its exposure to real estate, shrinking its portfolio from €34.2 billion in 2025 to €31.7 billion. Financing commitments for office properties have decreased by over €2 billion. The most significant challenges remain in the United States, particularly in Washington D.C., where a downturn is expected to persist, according to Helaba officials.
Shifting Focus to Corporate Lending and Infrastructure
Helaba is strategically pivoting away from real estate and towards corporate lending, with a particular focus on public sector clients like municipal utilities. CEO Groß noted that state investment programs designed to improve infrastructure – particularly in energy and water supply – are beginning to materialize, albeit slowly. The bank aims to provide direct lending to these clients, supporting critical infrastructure projects. Germany’s Federal Ministry of Finance oversees many of these investment programs.
The bank has avoided the growing market for private credit funds – where investors first contribute capital that is then lent to companies – citing caution due to the rapid expansion of the sector. Groß pointed to recent liquidity issues at several U.S.-based private credit funds, where investors have faced difficulties withdrawing their funds, as a reason for this cautious approach.
European Focus and the Debate Over Deposit Insurance
Groß emphasized Helaba’s strong European focus, stating that 90% of its business is conducted within the continent. He argued that, given the current global geopolitical climate, “more Europe” is needed. He also revisited a previous proposal for a European Deposit Insurance Scheme (EDIS), a move that previously met with resistance from within the German savings banks association. Groß stated that the responsibility for EDIS now rests with Brussels, referring to the European Commission.
Looking ahead, Helaba is prioritizing growth opportunities driven by investments in artificial intelligence. The bank reports initial efficiency gains from these investments, impacting all areas of the business, from customer service to accounting. Helaba has also become the first banking partner of Schwarz Digits, the digitalization arm of the Schwarz Group (which owns Lidl and Kaufland), aiming to strengthen digital sovereignty and uphold European data protection and security standards.
Investing in the Future: AI and Digital Partnerships
The partnership with Schwarz Digits, announced in December 2025, is a key component of Helaba’s digital strategy. The collaboration aims to develop solutions that enhance data security and align with European regulations. This move underscores the bank’s commitment to innovation and its desire to remain competitive in a rapidly evolving financial landscape.
Helaba’s path forward will depend on its ability to navigate the ongoing economic uncertainties, manage its real estate exposure effectively, and capitalize on new growth opportunities in corporate lending and digital innovation. The bank’s commitment to a European focus and its strategic partnerships will be crucial in achieving its long-term goals.
Disclaimer: This article provides information for general knowledge and informational purposes only, and does not constitute financial advice. Readers should consult with a qualified financial advisor before making any investment decisions.
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