AAREAL BANK AG
DGAP-News: Aareal Bank AG
/ Key word(s): Quarter Results/9 Month figures
Aareal Bank Group posts a solid result for the third quarter - Consolidated operating profit of EUR 64 million for the third quarter (Q2 2019: EUR 61 million; Q3 2018: EUR 70 million) - Net interest income stable at EUR 134 million, in spite of the extreme low interest rate environment - further increase in net commission income thanks to revenue growth at IT subsidiary Aareon - Strong new business in the Structured Property Financing segment - Higher loss allowance due to accelerated de-risking - Annual guidance specified: consolidated operating profit expected at the lower end of the EUR 240 million to EUR 280 million communicated range - Chairman of the Management Board, Hermann J. Merkens: "A key reason for Aareal Bank Group's robustness is our unique structure - with two successful segments that we purposefully develop in line with our strategy"
Wiesbaden, 12 November 2019 - Aareal Bank Group continued with its positive business development in the third quarter of the current year. In what continues to be a challenging market and competitive environment, consolidated operating profit reached EUR 64 million after EUR 70 million in the third quarter of the previous year and EUR 61 million in each of the two previous quarters. Aareal Bank Group's consolidated operating profit for the first nine months of 2019 has therefore totalled EUR 186 million; taking the costs for integrating former Düsseldorfer Hypothekenbank (DHB) into account, the figure was roughly in line with the previous year (9m 2018: EUR 199 million). Consolidated net income allocated to ordinary shareholders of Aareal Bank amounted to EUR 35 million for the third quarter (Q3 2018: EUR 41 million), and EUR 107 million for the first nine months of the year (9m 2018: EUR 117 million). Earnings per share amounted to EUR 0.60 for the third quarter and EUR 1.80 for the first nine months (Q3 2018: EUR 0.70; 9m 2018: EUR 1.97). At EUR 134 million in the third quarter (Q3 2018: EUR 131 million), net interest income remained stable on a level with the previous quarters, despite the extremely low interest rate environment. Third-quarter loss allowance was EUR 27 million, compared to EUR 23 million in the previous quarter, and EUR 14 million in the same quarter of the previous year. The higher figure is predominantly attributable to the announced acceleratedde-risking, which accounted for approximately EUR 20 million in the third quarter alone. Aareal Bank's motivations for this include the Bank's determination to reduce its portfolio of non-performing loans (NPLs) - especially in Italy - as announced. The NPL volume in the third quarter fell by around EUR 350 million, or around 20 per cent, compared to the preceding quarter. Net commission income continued to develop favourably. At EUR 54 million in the third quarter, it exceeded the comparative figure for the previous year, as it had done in the first two quarters of this year. This once again reflects the positive performance of the IT subsidiary Aareon, which was able to increase its sales revenue considerably in the third quarter. Sales revenue in the traditional ERP business increased by 5 % year-on-year during the first nine months, while the business with digital products and solutions continued to prove very dynamic - as expected - with an increase of 21 %. Aareon also continued to consistently drive its strategic growth initiative forward in the quarter under review, with market entries in Switzerland and Austria, an extended range of offerings within the scope of the newly-developed, integrated "Aareon Smart Platform" and, as announced, commencement of the investment programme for tapping new digital growth opportunities. CEO Hermann J. Merkens explained: "We are maintaining our very solid performance this year. Once again, we have demonstrated the robustness of our business in a challenging environment. A key reason for this is Aareal Bank Group's unique structure, with two successful segments that we purposefully develop in line with our strategy. As an integral component of the Group, Aareon plays a significant role thanks to its excellent growth prospects and the cross-relationships with our banking business at numerous levels. Against this background, we continue to have no intention of selling a majority stake in our subsidiary, nor do we plan a full disposal - in line with the strategy we have pursued to date. Rather, we are concentrating instead on successfully implementing the growth programme for Aareon, which was presented in May, and - in our role as responsible owners - to use all sensible options to allow Aareon to realise its full potential in the interest of our shareholders. Structured Property Financing segment: strong new business, margins remain above the full-year target Aareal Bank continued to originate strong new business during the third quarter in its Structured Property Financing segment, whilst maintaining its conservative lending policy. The volume of new business reached EUR 2.8 billion and was thus significantly higher than in the same quarter of the previous year (Q3 2018: EUR 1.9 billion). The new business activities were focused on Europe. After nine months, new business totalled EUR 6.0 billion, in line with the previous year's level (EUR 6.1 billion). New business volume for the current year is expected at the upper end of the EUR 7 billion to EUR 8 billion communicated range. Thanks to the strong new business, at EUR 28 billion the portfolio volume as at 30 September 2019 was at the upper end of the EUR 26 to EUR 28 billion range targeted for the year 2019 as a whole. At around 195 basis points, the average gross margin on newly-originated business (excluding currency effects) for the first nine months of the year continued to exceed the projected full-year range of 180 to 190 basis points. Consulting/Services segment: Aareon continues to post significant growth in sales revenue Operating profit in the Consulting/Services segment totalled EUR -10 million in the third quarter of 2019 (Q3 2018: EUR -7 million). Subsidiary Aareon's profit contribution was stable, at EUR 7 million (Q3 2018: EUR 7 million), despite the investment in growth. Its contribution for the first nine months was therefore EUR 24 million (9m 2018: EUR 21 million). Aareon's sales revenue rose by 7 per cent to EUR 60 million in the third quarter (Q3 2018: EUR 56 million), and by 8 per cent to EUR 182 million in the first nine months of the year (9m 2018: EUR 168 million). Digital products recorded the highest growth rates this year so far, with a 21 per cent increase in sales over the same period of the previous year. Averaging EUR 10.6 billion, the volume of deposits from the housing industry remained at a high level during the third quarter of 2019 (2018 average: EUR 10.4 billion). The persistently low interest rate environment continued to burden 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. Comfortable funding situation and a solid capital base Aareal Bank continued to be very well-funded during the third quarter of 2019, maintaining its long-term funding inventory at a comfortable level. No new Mortgage Pfandbrief issues or benchmark bonds were placed in the third quarter, as Aareal Bank had already taken advantage of the good market conditions in the first half-year, thereby largely meeting its funding requirements for the full year. Aareal Bank continues to have a very solid capital base. As at 30 September 2019, the Bank's Common Equity Tier 1 (CET 1) ratio was 17.1 %, which is comfortable on an international level, and the Total Capital Ratio was 26.7 %. 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 12.6 %. Notes to Group financial performance Net interest income for the third quarter of 2019 was EUR 134 million (Q3 2018: EUR 131 million). It therefore totalled EUR 403 million (9m 2018: EUR 400 million) for the first nine months of the financial year. Loss allowance amounted to EUR 27 million for the third quarter (Q3 2018: EUR 14 million) and EUR 55 million for the first nine months (9m 2018: EUR 33 million). Net commission income increased over the same period of the previous year, to EUR 54 million (Q3 2018: EUR 51 million), driven once again by Aareon's strong performance. Net commission income totalled EUR 164 million for the first nine months of the financial year, a significant increase on the same period last year (9m 2018: EUR 152 million). Net derecognition gain amounted to EUR 15 million for the third quarter (Q3 2018: EUR 5 million) and EUR 42 million for the first nine months of the year (9m 2018: EUR 16 million). In particular, this reflected adjustments to the Treasury portfolio (in connection with de-risking and the integration of DHB) as well as market-driven effects from early loan repayments. The net gain or loss from financial instruments (fvpl) and from hedge accounting totalled EUR 2 million (Q3 2018: EUR 1 million). The net figure for the first nine months of the year was EUR 1 million (9m 2018: EUR -3 million), and resulted largely from the measurement changes of other derivatives (fvpl) used to hedge interest rate and currency risks. Consolidated administrative expenses totalled EUR 114 million for the third quarter (Q3 2018: EUR 107 million) and EUR 370 million for the first nine months of the year (9m 2018: EUR 344 million). The increase - which was in line with expectations - was attributable in particular to the running costs and integration expenses incurred in conjunction with the integration of former Düsseldorfer Hypothekenbank, as well as to Aareon's business expansion. Consolidated operating profit totalled EUR 64 million for the quarter under review (Q3 2018: EUR 70 million). Taking into consideration tax expenses of EUR 24 million and non-controlling interest income of EUR 1 million, consolidated net income attributable to shareholders of Aareal Bank AG amounted to EUR 39 million (Q3 2018: EUR 45 million). Assuming the pro-rata temporis accrual of net interest payable on the AT1 bond, consolidated net income allocated to ordinary shareholders amounted to EUR 35 million (Q3 2018: EUR 41million). Aareal Bank Group's consolidated operating profit for the first nine months of the financial year totalled EUR 186 million (9m 2018: EUR 199 million). Taking tax deductions of EUR 65 million into account and after deducting EUR 2 million in non-controlling interest income, and assumed pro-rata net interest payable on the AT1 bond of EUR 12 million, consolidated net income allocated to ordinary shareholders of Aareal Bank AG amounted to EUR 107 million (9m 2018: EUR 117 million). Group targets specified for the 2019 financial year Following the solid performance overall in the first three quarters - and in spite of additional burdens from the extreme low interest rate environment - Aareal Bank Group continues to expect net interest income (excluding the net derecognition gain) in a range of EUR 530 million to EUR 560 million for the full year 2019. Aareal Bank has actively pursued the accelerated de-risking announced with the presentation of second-quarter results, recognising loss allowance of around EUR 30 million in this respect. Accordingly, the anticipated range for full-year loss allowance has been increased to between EUR 80 million and EUR 110 million. At the same time, Aareal Bank now expects a net derecognition gain of EUR 40 million to EUR 60 million, which is about EUR 20 million higher than the original estimate. Net commission income, which continues to gain importance for the Group due to the strategic expansion of business in the Consulting/Services segment, is anticipated to rise further year-on-year, to between EUR 225 million and EUR 245 million. Administrative expenses - including Aareon's additional investments for accelerated growth, as well as costs for the integration of Düsseldorfer Hypothekenbank (DHB), which has now been concluded - are expected to range between EUR 470 million and EUR 510 million, in line with the previous guidance. Despite the burdens from accelerated de-risking and further deterioration in the interest rate environment (which were not accounted for in the original guidance), Aareal Bank continues to anticipate consolidated operating profit for the current year in the communicated range between EUR 240 million and EUR 260 million, albeit at the lower end of this range. Accordingly, RoE before taxes and earnings per share (EpS) are likely to be at the lower end of the communicated ranges of 8.5% to 10% and of around EUR 2.40 to EUR 2.80. Opportunities for further accelerated de-risking will be assessed if they emerge, additional burdens cannot be excluded. Overall, Aareal Bank Group's property financing portfolio in the Structured Financing Segment is expected to range in size between EUR 26 billion and EUR 28 billion, subject to exchange rate fluctuations. From today's perspective, the volume of new business is likely to be at the upper end of the EUR 7 billion to EUR 8 billion communicated range. Aareal Bank continues to expect its IT subsidiary Aareon to contribute approximately EUR 35 million to consolidated operating profit, taking strategic investments for accelerated growth into account. Excluding strategic investments, the contribution is anticipated at around EUR 41 million. Note to editors: the Interim Financial Information as at 30 September 2019 is available at www.aareal-bank.com/financial-reports. Aareal Bank Group Aareal Bank Group - Key Indicators
1) The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis.
1) The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis.
Consolidated income statement for the third quarter of 2019
1) The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis.
Segment results for the first nine months of 2019
1) As of this reporting year, interest from housing industry deposits is shown in net interest income of the Consulting/Services segment (previously included in net commission income). The previous year's figures were adjusted accordingly.
1) As of this reporting year, interest from housing industry deposits is shown in net interest income of the Consulting/Services segment (previously included in net commission income). The previous year's figures were adjusted accordingly. Contact: Aareal Bank AG Corporate Communications Sven Korndörffer Phone: +49 611 348 2306 sven.korndoerffer@aareal-bank.com Christian Feldbrügge Phone: +49 611 348 2280 christian.feldbruegge@aareal-bank.com
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| 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 |
| EQS News ID: | 910299 |
| End of News | DGAP News Service |
910299 12.11.2019
