AAREAL BANK AG
DGAP-News: Aareal Bank AG / Key word(s): Quarter Results Aareal Bank Group maintains positive business development during the second quarter, affirms earnings forecast for the full year 2018 - Second-quarter consolidated operating profit of EUR 62 million within expectations; previous year's figure (Q2 2017: EUR 109 million) strongly influenced by non-recurring effects - previous quarter: EUR 67 million - Full-year consolidated operating profit still expected in a range between EUR 260 million and EUR 300 million - Stabilisation of net interest income, at a solid level, continues as announced - slight quarter-on-quarter increase to EUR 136 million; derecognition gain remains at a low level - Administrative expenses of EUR 109 million below the previous quarter and Q2 2017 - Strong new business of EUR 2.7 billion for the first half of the year in the Structured Property Financing segment clearly exceeded the previous year's figure Wiesbaden, 14 August 2018 - Aareal Bank Group maintained its positive business development during the second quarter of 2018, and thus remains on course to achieve full-year earnings target. In a market and competitive environment that continued to be challenging, the Group once again generated solid consolidated operating profit which, at EUR 62 million, was fully in line with expectations. Consolidated operating profit for the same quarter of the previous year (EUR 109 million) had included a positive one-off effect of EUR 50 million arising from the reversal of provisions at a subsidiary. The corresponding figure for the first quarter of 2018 was EUR 67 million. Aareal Bank Group's consolidated operating profit for the first six months of the current financial year thus totalled EUR 129 million (H1 2017: EUR 180 million, including said one-off effect). Consolidated net income allocated to ordinary shareholders of Aareal Bank amounted to EUR 37 million for the second quarter (Q2 2017: EUR 62 million), and EUR 76 million for the first half of the year (H1 2017: EUR 100 million). Earnings per share amounted to EUR 0.62 for the second quarter and EUR 1.27 for the first half of 2018 (Q2 2017: EUR 1.05; H1 2017: EUR 1.68). Strong evidence of Aareal Bank Group's continued robust operating performance was to be found in the development of net interest income, which increased during the second quarter for the first time since an extended phase of planned decreases, reflecting the scheduled reduction of non-strategic portfolios from the acquisitions of Corealcredit and WestImmo. Net interest income totalled EUR 136 million in the second quarter, compared to EUR 133 million in the first quarter of 2018 and EUR 151 million in the second quarter of 2017. Net interest income including gains on derecognition[1] (which must be reported separately in accordance with IFRS 9) amounted to EUR 141 million: at EUR 5 million, the derecognition gain remained at a low level, as in the first quarter. As with the slight increase in the credit portfolio, this is in line with Aareal Bank's announcement that it will stabilise its aggregate credit portfolio - and hence, net interest income - at a solid level during the current year. Loss allowance for the second quarter amounted to EUR 19 million (Q2 2017: EUR 25 million). Aareal Bank continues to forecast loss allowance for the full year in a range of EUR 50 million to EUR 80 million, which is markedly lower than in the previous year. Net commission income improved to EUR 51 million (Q2 2017: EUR 49 million), which was mainly due to higher sales revenue at Aareon. This means that net commission income continues to gain importance for Aareal Bank Group - as set out in its "Aareal 2020" programme for the future. Consolidated administrative expenses amounted to EUR 109 million during the second quarter (Q2 2017: EUR 129 million). For the first half of 2018, the figure thus markedly decreased year-on-year: from EUR 268 million to EUR 237 million. Amongst others, this reflects the efficiency-enhancing measures adopted within the scope of "Aareal 2020". "We are satisfied with our overall performance during the second quarter. Our operating performance continues to be robust, and we are making good progress with the transformation we have initiated with 'Aareal 2020'. At the mid-year point, we therefore remain on track not only to meet our earnings target for the current year, but also our medium- to long-term strategic goals", said CEO Hermann J. Merkens. Structured Property Financing segment: strong new business, higher credit portfolio In the Structured Property Financing segment, Aareal Bank - whilst maintaining its conservative lending policy - posted a significant increase in new business, to EUR 2.7 billion (Q2 2017: EUR 2.0 billion). New business volume for the first six months of the year totalled EUR 4.2 billion, compared to EUR 3.8 billion in the same period of the previous year. Thanks to the strong performance in new business, aggregate portfolio volume as at 30 June 2018 rose to EUR 26.5 billion (Q1 2018: EUR 25.9 billion), despite the continued reduction of non-strategic credit portfolios. The volume is thus in the middle of the target corridor of between EUR 25 billion and EUR 28 billion for the current year. The average gross margin for newly-originated loans (after currency hedging costs) of 171 basis points for the second quarter was lower than in the previous quarter (approximately 220 basis points); this was as expected, and reflected a lower portion of business generated in North America. Looking at projections for the year as a whole, however, gross margins achieved remain in line with the plan, and on a good level. Consulting/Services segment: Aareon's sales revenue keeps growing - deposit volumes in the banking business remain at a high level Operating profit in the Consulting/Services segment of EUR -8 million during the quarter under review was in line with the previous quarter (Q1 2018: EUR -8 million; Q2 2017: EUR -6 million). Subsidiary Aareon AG generated operating profit of EUR 8 million during the quarter under review, which was in line with the same quarter of the previous year. Aareon's profit contribution for the first half of the year was EUR 14 million (H1 2017: EUR 15 million); the figure was burdened by non-recurring cost increases as well as delays affecting two major projects. Aareon's sales revenue increased to EUR 57 million in the second quarter of 2018 (Q2 2017: EUR 55 million). The volume of deposits in the segment's banking business averaged EUR 10.5 billion during the quarter under review (Q1 2018: EUR 10.2 billion), thus remaining at a high level. The persistently low interest rate environment burdened income generated from the deposit-taking business, and therefore the segment result. Nonetheless, the importance of this business goes way beyond the interest margin generated from deposits - which is under pressure in the current market environment. Deposits from the housing industry are a strategically important additional source of funding for Aareal Bank. Sound funding situation, continued strong capitalisation Aareal Bank Group has remained very solidly funded throughout the first half of the 2018 financial year. Total long-term funding as at 30 June 2018 amounted to EUR 21.0 billion (31 December 2017: EUR 22.8 billion), comprising Pfandbrief issues as well as senior unsecured and subordinated issues. Aareal Bank Group very successfully raised EUR 0.7 billion on the capital markets during the first half of 2018, including a EUR 0.5 billion benchmark Mortgage Pfandbrief issue with a term of 6.3 years. The remaining EUR 0.2 billion was accounted for by senior unsecured issues. Aareal Bank continues to have a very solid capital base. As at 30 June 2018, the Bank's Common Equity Tier 1 (CET1) ratio was 19.9 %, which is comfortable on an international level. Its Total Capital Ratio was 31.3 %. The CET1 ratio determined on the basis of the Basel Committee's final framework - the estimated so-called 'Basel IV' ratio, which is relevant for capital planning - was 13.5 %. Notes to Group financial performance Net interest income for the second quarter of 2018 was EUR 136 million (Q2 2017: EUR 151 million). The year-on-year decline was attributable to the portfolio reduction in the previous year, particularly due to the planned reduction of WestImmo and Corealcredit portfolios. Gains from derecognition declined to EUR 5 million (Q2 2017: EUR 7 million), due to lower effects from early loan repayments. Net interest income including derecognition gains or losses totalled EUR 280 million for the first six months of the financial year (H1 2017: EUR 322 million). Loss allowance of EUR 19 million was lower than the previous year's figure (Q2 2017: EUR 25 million); the total figure for the first half-year was thus also EUR 19 million (H1 2017:€EUR 27 million). Net commission income of EUR 51 million exceeded the previous year's figure (Q2 2017: EUR 49 million), bringing net commission income for the first half of the year to EUR 101 million (H1 2017: EUR 97 million). The increase was due, in particular, to higher sales revenue posted by Aareon. The net loss from financial instruments (fvpl[2]) and on hedge accounting in the aggregate amount of EUR -5 million (Q2 2017: EUR 1 million) mainly resulted from exchange rate fluctuations. The total figure for the first half-year was EUR -4 million (H1 2017:€EUR -3 million). Consolidated administrative expenses declined to EUR 109 million for the second quarter (Q2 2017: EUR 129 million) and to EUR 237 million for the first half of the year (H1 2017: EUR 268 million). Factors contributing to this expected decrease in administrative expenses included lower running costs due to the efficiency-enhancing measures adopted within the scope of "Aareal 2020". Net other operating income/expenses amounted to EUR 3 million; the figure for the same quarter of the previous year (Q2 2017: EUR 55 million) included a positive one-off effect of EUR 50 million arising from the reversal of provisions through profit or loss at a subsidiary. The total figure for the first half-year was EUR 8 million (H1 2017:€EUR 59 million). On balance, consolidated operating profit for the second quarter amounted to EUR 62 million. Taking tax deductions of EUR 21 million into account, consolidated net income was EUR 41 million. Assuming the pro rata temporis accrual of net interest payments on the AT1 bond (EUR 4 million), consolidated net income allocated to ordinary shareholders stood at EUR 37 million (Q2 2017: EUR 62 million). Aareal Bank Group's consolidated operating profit for the first six months of the financial year totalled EUR 129 million (H1 2017: EUR 180 million). After deduction of EUR 44 million in taxes and EUR 1 million in non-controlling interest income, and assuming pro-rata net interest payable on the AT1 bond (EUR 8 million), consolidated net income allocated to ordinary shareholders of Aareal Bank AG amounted to EUR 76 million (H1 2017: EUR 100 million). Outlook for 2018: full-year earnings forecast affirmed Following a solid performance during the first half of 2018, Aareal Bank Group affirms its full-year forecasts for key indicators: consolidated net interest income (including derecognition gains or losses reported separately, in accordance with IFRS 9) is projected between EUR 570 million and EUR 610 million. Loss allowance is expected in a range between EUR 50 million and EUR 80 million, which is significantly lower than in the previous year. A further increase in net commission income is projected, in a range between EUR 215 million and EUR 235 million. Administrative expenses are expected to decline to between EUR 470 million and EUR 500 million. Against this background, Aareal Bank expects consolidated operating profit for the current year to be in a range between EUR 260 million and EUR 300 million. The Bank expects RoE before taxes of between 9.5 per cent and 11.0 per cent for the current financial year, with earnings per share between EUR 2.60 and EUR 3.00. Aareal Bank affirms its medium-term target RoE of around 12 per cent before taxes.
Aareal Bank will continue the reduction of non-strategic portfolios in the Structured Property Financing segment during 2018. At the same time, its core credit portfolio is planned to grow: overall, subject to exchange rate fluctuations, the aggregate credit portfolio is expected to range between EUR 25 billion and EUR 28 billion. The Bank targets new business between EUR 7 billion and EUR 8 billion for the current year, with a continued focus on the high-margin US market. In the Consulting/Services segment, Aareal Bank expects its IT subsidiary Aareon to contribute a markedly higher amount, of approximately EUR 37 million to EUR 38 million, to consolidated operating profit - slightly below its original expectation of approximately EUR 40 million, on account of non-recurring burdens from two projects. Aareal Bank Group affirms its positive medium-term outlook for Aareon's results. Note to editors: The full interim report for the second quarter of 2018 is available on http://www.aareal-bank.com/en/financialreports. Aareal Bank Group
14.08.2018 Dissemination of a Corporate News, transmitted by DGAP - a service of EQS Group AG. |
| Language: | English |
| Company: | Aareal Bank AG |
| Paulinenstr. 15 | |
| 65189 Wiesbaden | |
| Germany | |
| Phone: | +49 (0)611 348 - 0 |
| Fax: | +49 (0)611 348 - 2332 |
| E-mail: | aareal@aareal-bank.com |
| Internet: | www.aareal-bank.com |
| ISIN: | DE0005408116 |
| WKN: | 540811 |
| Indices: | MDAX |
| Listed: | Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Munich, Stuttgart, Tradegate Exchange; Stockholm |
| End of News | DGAP News Service |
713795 14.08.2018
