Aareal Bank : Conference Call on the 2024 Q1 figures, Presentation to the Analyst Conference Call

Conference Call

Q1 2024 results

May 15, 2024

Jochen Klösges (CEO)

Marc Hess (CFO)

Agenda

▪ Financial Performance

▪ Business Development

▪ Funding, Liquidity & Capital

▪ Outlook

▪ Appendix

1

Financial Performance - Highlights

Successful start to 2024 with strong profit increase

Group operating profit of € 103 mn in Q1/24 (Q1/23: € 62 mn)

✓ Strong operating resilience

Bank (SPF + BDS)

Operating profit (EBT) of € 92 mn

fully in line with full year target

of € 250-300 mn

Strong earnings,

Total LLPs of € 86 mn including management overlay of € 56 mn

NPLs substantially reduced by € >500 mn

without further P&L impact

Capital and liquidity positions remain solid

✓ Capital market readiness

Aareon

Profitability significantly increased,

adj. EBITDA of € 40 mn (Q1/23: € 18 mn),

EBT of € 11 mn (Q1/23: € -34 mn)

Strong growth in recurring revenue (+45%),

Recurring revenue 83% of total revenues (Q1/23: 75%)

Meaningful investments in efficiency and M&A (incl. payment transaction JV with the Bank) paying off

Rule-of-40 confirmed,

capital market readiness achieved

2

Financial Performance - Group Profit & Loss

Strong profit increase

	Q1 '23	Q1 '24	∆ Q1
	'24/'23
Profit & loss (€ mn)
Net interest income	222	254	+14%
(NII)
Net commission income (NCI)	72	86	+19%
Admin expenses	199	147	-26%
Other op. income / expenses1)	2	-4
Pre provision profit	97	189	+95%
Loan loss provision incl. FVPL	35	86	+146%
Operating profit (EBT)	62	103	+66%
Profit after tax	42	73	+74%
RoE after tax	6.4%	8.7%

• NII on a high level, having peaked in Q4/23 as expected
• Strong increase in NCI driven by Aareon
• Substantial management overlay reflected in LLP
• Admin expenses down by 26% after significant investments in 2023 and reduced bank levies
  ➢ CIR bank2): 32%
• Pre provision profit of € 189 mn (Q1/23: 97 mn)
  ▫ Thereof bank's3) pre provision profit of € 178 mn
  (Q1/23: € 131 mn) demonstrates strong operating resilience

	1)	Includes Net derecognition gain or loss, net gain or loss from financial instruments (fvpl), net gain or loss from hedge accounting,
		net gain or loss from investments accounted for using the equity method, net other operating income/expenses
3	2)	Segment SPF & BDS, excl. bank levy / deposit guaranty scheme
3)	Segment SPF & BDS

Financial Performance - NII / NCI

1,000

€ mn

NII

268

On a high level, having peaked in Q4/23 as expected

▪ Bank (SPF & BDS)

▫ NII increased by 18% to € 268 mn (Q1/23: € 228 mn)

supported by an increased loan portfolio with good

750

500

250

0

248
240
	14%
	222								254
2023								2024			Q3		Q4
							Q1		Q2

margins and a market leading deposit franchise

in a normalised interest rate environment

▪ Aareon

▫ M&A investments and externalisation of third-party

debt facility decreased NII by € 8 mn to € -14 mn

NCI

400 € mn

300	82
200	76
100	77	19%
0	72		86
	2023		2024	Q3	Q4
		Q1	Q2
	1) LTM = Last Twelve Months

4

Strong increase driven by Aareon

• Aareon
• • NCI increased to € 90 mn (Q1/23: € 67 mn) supported by fees of € 10 mn from payment transaction JV, established with the bank
  • Recurring revenue1) now represents 83% of total revenues (Q1/23: 75%)
• Bank (SPF & BDS)
• • Slightly negative NCI (€ -2 mn) resulting from above mentioned fees paid to JV, established with Aareon

Financial Performance - Admin expenses / LLP

		Admin expenses
700	€ mn
600	159
500
400	144
300	143	-26%
200
100	199		147
0
	2023		2024	Q3	Q4
		Q1	Q2

Down by 26% after significant investments in 2023 and reduced bank levies

Bank1)

• Stable at € 83 mn considering bank levies reduced by € 23 mn
  (Q1/23: € 106 mn incl. € 25 mn bank levies)
• CIR Bank2): 32% (Q1/23: 35%)

Aareon

• Down to € 66 mn incl. € 10 mn of new acquisitions in 2023 (Q1/23: € 96 mn incl. € 34 mn investments into efficiency and M&A)

500

400

300

200

100

0

LLP	LLP driven by management overlay
€ mn	▪ Total LLP of € 86 mn (Q1/23: € 35 mn) includes
	€ 3 mn FVPL (Q1/23: € 3 mn)

179					▫ Thereof € 56 mn management overlay
				(Q1/23: € 21 mn)
					− Stage 1/2: € 29 mn
102					− Stage 3: € 27 mn
128	159%				▪ Loss allowance (B/S): total management overlay
				amounts to € 81 mn, up from € 25 mn as of 12/23
32		83
			▪ Conservative approach with management overlay
2023		2024
	Q3	Q4	recognizing continued uncertainties
	Q1	Q2

1. Segment SPF & BDS
2. Excl. bank levy/deposit guarantee scheme

5

Agenda

▪ Financial Performance

▪ Business Development

▪ Funding, Liquidity & Capital

▪ Outlook

▪ Appendix

6

Segment SPF

Selective new business generation in a challenging market environment with low transaction volume

New business by quarter

1. € bn

1.1

1.0					0.9
0.5	0.2
0.5										0.7
0.6
0.0
				Q1 2023						Q1 2024	1)
						Newly acquired business		Renewals

• Conservative avg. LTV of 45% (2023: 54%)1)
• Avg. margin of 274 bps (2023: 291 bps)
  (FY plan 2024: 260 - 270 bps)1)
• Newly acquired office deals only in Europe, with an average LTV of 45%
• € 0.2 bn green office loans2), additional € 0.5 bn conversions

New business by regionNew business by property type

Europe North: 12%		Germany: > 0%	Residential: 6%

Retail: 17%

North America: 13%

Office: 41%

€ 0.9 bn

€ 0.9 bn

Europe West: 62%

CEE: 13%

Hotel: 36%

1. Newly acquired business only
2. Governed by "Green Finance Framework"

7

Segment SPF

Well diversified portfolio

	REF portfolio
€ bn
35			32.9
				32.1
		30.9	0.4
	30.0		0.3
30		0.4
0.5
27.8
0.6			32.5		31.8
25	29.5	30.5
27.2
20
12/20	12/21	12/22	12/23	03/24
				CREF	others

• Portfolio highly diversified by region and property type, primarily in major global metropolitan areas
• Portfolio-LTV1) of 56% (12/23: 56%)
• Portfolio-YoD1) of 9.8% (12/23: 9.6%)
• Portfolio increased yoy by € 1.4 bn to € 32.1 bn
• FY portfolio target of € 33-34 bn confirmed
• Financing of refurbishments to foster green transition
• Green loan volume of € 5.5 bn (12/23: € 4.8 bn)
• Green property financing portfolio of € 9.5 bn or 30% of total CREF portfolio

CREF portfolio by region

		Asia / Pacific:	(vs. 12/2023)
		5% (5%)
North America:
27% (29%)
		Europe West:
€ 31.8 bn	39% (37%)

Europe North: 5% (5%)

Europe South: 9% (9%)

Germany: 7%	(7%)	CEE: 8%	(8%)

1) Performing CREF-portfolio only (exposure)

CREF portfolio by property type

Residential: 6% (6%)		Others: 1%	(vs. 12/2023)
	(1%)

Retail: 13% (13%)

	Hotel: 37%
€ 31.8 bn	(37%)

Logistics: 15% (15%)

Office: 28% (28%)

8

Segment SPF

Business generation with strict low-risk focus leading to improvements in asset quality metrics

Portfolio-LTV1)

LTV1) by property type

65%

60%

55%

50%

60%

58%

55%

56%

56%

%	12 '20	12 '21	12 '22	12 '23	03 '24
Hotel	62	60	56	54	53
Logistics	56	55	52	55	55
Office	58	58	57	62	62
Retail	61	59	56	58	57

12/20

12/21

12/22

12/23

03/24

Portfolio-YoD1)

12%
10%
8%
6%
								9.6%	9.8%
4%						8.5%
	6.7%	7.1%
2%
0%
	12/20	12/21	12/22			12/23	03/24

1) Performing CREF-portfolio only (exposure)

YoD1) by property type

%	12 '20	12 '21	12 '22	12 '23	03 '24
Hotel	3.0	5.0	9.0	10.6	11.4
Logistics	9.2	8.7	9.0	9.3	9.4
Office	8.1	7.6	6.9	7.5	7.3
Retail	8.8	9.1	9.8	11.3	11.4

9