Wiesbaden (ots) –
– First-quarter consolidated operating profit of EUR 43 million
– Core Tier 1 ratio of 11.6 per cent as at 31 March 2012
– Full-year outlook affirmed
Aareal Bank Group retained its positive business development
during the first quarter of 2012, in a market environment that
continued to be difficult. Consolidated operating profit amounted to
EUR 43 million in the first three months of the financial year – only
slightly below the strong figures posted for the first as well as the
last quarter of 2011 (EUR 47 million each). Consolidated net income
was EUR 21 million, compared to EUR 24 million in the previous
quarter, and the same amount in the first quarter of the previous
„The first three months of the 2012 financial year once again
presented a great challenge to Aareal Bank Group and the banking
sector as a whole. This relates to a macro-economic environment that
continues to be shaped by uncertainty concerning economic growth as
well as the situation on the financial and capital markets, which
continues to be burdened by the European debt crisis. The uncertain
political framework and cumulative effects of forthcoming changes to
the regulatory environment, which have not yet been clarified,
present further challenges. Against this background, we are very
satisfied with our performance during the first quarter: in our view,
this once again confirms the robustness of our business model“, said
Dr Wolf Schumacher, Chairman of the Management Board.
As announced, Aareal Bank responded to the challenging environment
by pursuing a cautious liquidity and investment strategy – which
burdened net interest income during the period under review. Thanks
to the bank’s conservative business policy over the past several
years, allowance for credit losses was once again lower than in the
same quarter of the previous year (which was already very low), thus
remaining at a clearly manageable level. Aareal Bank was very
successful in its funding activities, thereby preserving its good
The bank adopted a cautious stance with regard to new business,
and concentrated on renewals. „We affirm our target for new business
of EUR 4.5 billion to EUR 5.5 billion for the full year 2012, and
will exploit opportunities in new lending business more vigorously
during the remainder of the year“, Schumacher emphasised.
Structured Property Financing segment: Aareal Bank maintains its
focus on quality and returns
Consolidated operating profit in the Structured Property Financing
segment amounted to EUR 40 million, after EUR 43 million the year
before; the figure for the fourth quarter of 2011 was EUR 39 million.
Net interest income was EUR 121 million, compared to EUR 125
million in the first quarter of the previous year. The figure was
burdened, in particular, by the bank’s cautious liquidity and
investment strategy, as announced.
Allowance for credit losses for the first quarter of 2012 amounted
to EUR 12 million (Q1 2011: EUR 18 million). It was therefore
significantly lower than the pro rata forecast range of EUR 110 to
140 million for the financial year, but within the range the bank had
Net commission income of EUR 4 million (Q1 2011: EUR -5 million)
included running costs of EUR 3 million (Q1 2011: EUR 9 million) for
the bonds guaranteed by the German Financial Markets Stabilisation
Fund (SoFFin); the remaining bond matured in the first quarter of
In its new business, Aareal Bank continued to pursue a selective
approach that is oriented strictly on quality, return and risk. New
business originated during the first quarter totalled EUR 0.5 billion
(Q1 2011: EUR 1.4 billion).
Consulting/Services segment: volume of deposits increased further
Operating profit in the Consulting/Services segment totalled EUR 3
million during the first quarter (Q1 2011: EUR 4 million).
Aareon AG’s business activities developed on schedule during the
period, with sales revenues in line with the previous year. The
company was able to continue the success story of its Wodis Sigma
product line. A total of 380 property companies have already opted
for Wodis Sigma to date. Responding to the strong market demand,
Aareon has further invested in expanding its advisory and support
capacities for this product line. Development in Aareon’s
international business was also positive.
Banking operations in the segment continued to be defined by two
developments in the first quarter. On the one hand, the prevailing
low interest rate environment burdened margins in the deposit-taking
business. Against this background, the development in the deposit
volumes from institutional housing industry clients was all the more
positive. Aareal Bank further improved on the already high average
level of EUR 4.9 billion in the previous quarter, to EUR 5.0 billion.
Comprehensive market coverage, the extensive range of products and
services and many years of experience as the lead bank to the German
institutional housing industry are all key factors that have
contributed to the bank’s success.
Refinancing activities: very successful issuance
Aareal Bank raised a total of EUR 2.0 billion in long-term funds
on the capital market during the first quarter. This comprises
Mortgage Pfandbriefe in the amount of EUR 1.0 billion as well as
unsecured refinancing of EUR 1.0 billion. Aareal Bank’s outstanding
reputation as a regular issuer was evident in the success of two
benchmark issues placed during the first quarter: the bank opened the
German Pfandbrief market in January, with a four-year, EUR 500
million Mortgage Pfandbrief issue. In addition, the bank successfully
placed a EUR 500 million senior unsecured bearer bond with a
three-year term on the capital market.
The remaining SoFFin-guaranteed notes still outstanding matured,
and were redeemed at the end of March. Aareal Bank therefore no
longer uses any SoFFin guarantees: the guarantee fees will therefore
no longer apply as of the second quarter. Following the full return
of the issuance guarantees extended by SoFFin, EUR 300 million of the
silent participation is what remains of the original commitment of
EUR 525 million by SoFFin to Aareal Bank, which the bank continues to
Aareal Bank believes that its capital ratios not only meet the
forthcoming demanding requirements of the Basel III regime, but they
are also excellent by industry standards. As at 31 March 2012 the
Tier 1 ratio was 16.6 per cent, which is comfortable on an
international level. The core Tier 1 ratio was 11.6 per cent. Aareal
Bank therefore remains very solidly financed.
Notes to Group financial performance
Net interest income in the first quarter was EUR 129 million after
EUR 134 million in the same period of the previous year. As mentioned
earlier, the cautious liquidity and investment strategy burdened net
Allowance for credit losses during the first quarter of 2012
amounted to EUR 12 million (Q1 2011: EUR 18 million).
Net commission income of EUR 40 million (Q1 2011: EUR 30 million)
reflected running costs of EUR 3 million (Q1 2011: EUR 9 million) for
the bonds guaranteed by SoFFin that were still outstanding in 2012.
Net trading income/expenses and the net result on hedge accounting
of EUR -26 million resulted largely from the measurement of
derivatives used to hedge interest rate and currency risk.
At EUR 91 million, administrative expenses were unchanged
Consolidated operating profit for the first three months of 2012
thus totalled EUR 43 million (Q1 2011: EUR 47 million). Taking into
consideration taxes of EUR 12 million and non-controlling interest
income of EUR 5 million, net income attributable to shareholders of
Aareal Bank AG amounted to EUR 26 million. After deduction of net
interest payable on the SoFFin silent participation, consolidated net
income stood at EUR 21 million.
Outlook: full-year forecasts affirmed
The Management Board continues to expect the uncertain environment
to persist for the entire banking sector during the current year. In
the wake of the still-unresolved sovereign debt crisis, Aareal Bank
believes financial markets will remain volatile during the current
year, and therefore expects the risks in the financial system to
persist. Economic development will continue to face significant risks
and uncertainties. The uncertain political framework and cumulative
effects of the forthcoming changes to the regulatory environment
(which have not yet been clarified) present further challenges.
Against this background, Aareal Bank affirms its forecasts already
communicated for the full year 2012. Reflecting the cautious
liquidity and investment strategy, net interest income is expected to
decline considerably compared to 2011, whilst a significant increase
in net commission income is anticipated in 2012, particularly since
the charges pertaining to the SoFFin-guaranteed notes will no longer
apply. The Management Board continues to forecast allowance for
credit losses in a range of EUR 110 million to EUR 140 million, which
is unchanged from last year. As in previous years, the bank cannot
rule out additional allowances for unexpected credit losses in 2012.
It anticipates a marked reduction in administrative expenses, due to
the cost-cutting measures that resulted in charges last year.
All in all, the Management Board continues to see good potential
for achieving consolidated net income that is only slightly below
last year’s very good result.
„We are cautious business people that take the uncertain economic
framework into account. Nevertheless, our considerable flexibility
will allow us to consistently take advantage of available
opportunities. Overall, we are in an excellent position to further
exploit our very good market position, in a changing competitive
environment“, Schumacher explained.
Note to editors:
The full interim report for the first quarter of 2012 is available
Aareal Bank AG is one of the leading international specialist
property banks. The Aareal Bank share is included in Deutsche Börse’s
mid-cap MDAX index. Aareal Bank operates on three continents:
leveraging its successful European business model, the bank has
established similar platforms in North America and in the
Asia-Pacific region. It provides property financing solutions in more
than 20 countries.
Aareal Bank AG
phone: +49 611 348 2306
phone: +49 611 348 2280
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