Kepler Cheuvreux
20th German Corporate Conference
January 20, 2021 Marc Hess, CFO
Aareal Bank leaves the pandemic year 2020 firmly behind with extensive loss allowance and looks ahead with confidence (1/2)
Environment
- Recent pandemic development massively worse than expected in Q3
- Extended and further tightened global lockdown measures
- Continuously anticipating a marked economic recovery to occur in the current year, as soon as global vaccination campaigns start to take effect
- Anticipate a clearly positive operating profit for 2021
Comprehensively taking account of the recent intensification of the pandemic
▪ All loans for which liquidity support measures (payment deferrals and liquidity facilities) classified as stage 2
- In addition, stage 3 allowance has been raised in individual cases
- Expect consolidated operating loss in a € double-digit mn amount for FY 2020
2
Note: All 2020 figures preliminary and unaudited
Aareal Bank leaves the pandemic year 2020 firmly behind with extensive loss allowance and looks ahead with confidence (2/2)
Intention to resume dividend payments1
- Based on strong capitalisation, plan to offer the prospect of a total dividend payout of € 1.50 per share1,2 in two steps in 2021 for FY 2020 resuming track record as a reliable dividend payer. The intended payout totalling approx. € 90 mn will be taken into account as a deduction from regulatory capital as at 31 December 2020
- Dividend distribution in compliance with ECB guidance of approx. € 0.35 - 0.40 per share1 in H1 / 2021 plus additional distribution of approx. € 1.10 - 1.15 per share1,2 in Q4 in 2021, if at that time requirements are met
- Attractive shareholder renumeration addressing investors' demand for cash distributions in current lowest for longer rate environment
- Envisaged total dividend per share equivalent to dividend yield of ~7%, based on XETRA closing price as of 18. January 20212 of € 21.50
Strategic review: significant increase in results envisaged by 2023 | ||
▪ Adjustments to be made within the "Aareal Next Level" strategic framework in order to be able to fully exploit | ||
the opportunities arising from changes induced by Covid-19, and to retain successful performance in the future | ||
▪ Envisages consolidated operating profit in the range of € 300 mn, to be achieved already in 20233 | ||
▪ This translates into a RoE after taxes of ~8%4, in line with CoE; this applies to the Aareal Bank Group and to | ||
the Bank (excluding Aareon) | ||
1) | Subject to the preparation and audit of the financial statements and the regulatory authority's approval for inclusion of profits, the Management Board plans to submit a | |
corresponding proposal for the appropriation of profits to the ordinary Annual General Meeting in May 2021 | ||
2) Provided that regulatory requirements concerning uncertainty surrounding the Covid-19 crisis will have been fulfilled at that time | ||
3) | Excluding any potential acquisitions, and subject to the Covid-19 crisis being fully overcome by then. | |
4) | 15% CET 1 ratio (Basel IV, phase-in, revised IRBA) exceeding the market average as a reference; | |
3 | excluding any potential acquisitions; subject to the Covid 19 crisis being fully overcome by then |
Note: All 2020 figures preliminary and unaudited
Aareal enters into first stage evolution of "Aareal Next Level"
360 degree strategic review - preliminary key findings
Aareal Next Level | Key levers | |||
1. | Continue to pursue risk-conscious, organic expansion of financing business, as already expedited | |||
ACTIVATE! | ||||
in the fourth quarter of 2020, with a target volume of around € 30 billion by the end of 2022 | ||||
Structured Property | 2. | Additional optimisation of funding mix and capital structure to further enhance inherent profitability | ||
Financing | ||||
ELEVATE! | 3. | Use the opportunities - which will increase with the conclusion of the unbundling exercise - for | ||
expanding product range, and entering into further partnerships, with a particular focus on | ||||
Consulting / Services | strengthening commission-based business | |||
Bank | ||||
4. | Stronger profit momentum through the implementation of the Value Creation Plan for Aareon, | |||
ACCELERATE! | ||||
which is currently being prepared together with partner Advent | ||||
▪ With Arthur, Aareon executed already the first transaction of its M&A roadmap since Advent | ||||
Aareon | ||||
closing | ||||
Organisation | 5. | Further efficiency measures in organisation, of processes and infrastructure with one of the | ||
objectives being SPF target CIR of ~40% | ||||
On top: free capital retained for additional M&A e.g. in Aareon
4
Note: All 2020 figures preliminary and unaudited
Excerpt from Analyst Conference Call Q3 2020 results
November 12, 2020
Marc Hess, CFO - Christof Winkelmann, CMO
Agenda
- Asset Quality
- Segments
- Group results Q3 2020
- Capital, B/S, Funding/Liquidity
- Appendix
6
Asset quality
7
Asset quality
Actively managing Covid-19 implications, precautionary model based risks provisioning (management overlays)
Covid-19 implications
- Pre-crisis:Sound portfolio quality with low LTVs and strong cash flows
- Contacted 90%+ of our clients during the first three weeks following mid-march'sCovid-19 related- and vastly implemented global restrictions
- Debt service
- During the crisis, the portfolio has benefitted of significant equity contributions by our clients
- Normal loan servicing by large part of our clients
- Governmental programs are providing additional support to the real estate sector
- So far, reasonable monetary support from our side (€ 80 mn amortisation, € 107 mn liquidity lines / interest suspensions), representing an increase <1% in our CREF exposure
- In majority of cases, borrowers and the bank are both participating in bridging cashflow needs
- This is in part possible, as clients have build up significant cash reserves during the last cycle
- Property values
- External appraisals successively undertaken. Impact so far in line with current assumptions, reflected in management overlays, with limited effect on overall portfolio LTV
- Overlays are anticipating possible changes in property values going forward
- Especially assets in good locations in metropole areas are trading at or around their pre Covid-19 valuations and in parts above the same
Uncertainties continue and further LTV changes are possible, however
they are expected to stay below the level of ~70% at the onset of the WFC in 2008
8
Commercial real estate finance portfolio (CREF)
€ 26.1 bn highly diversified
Portfolio by region | Portfolio by property type | |||||||||
(vs. 12/2019) | Asia / Pacific: | (vs. 12/2019) | Residential:1) | Others: 1% (1%) | ||||||
3% (3%) | 4%(5%) | |||||||||
Logistic: | 10% | |||||||||
North America: | (8%) | |||||||||
30% (30%) | Europe West: | Hotel: 33% | ||||||||
33% (35%) | (33%) | |||||||||
Retail: 23% | ||||||||||
Europe North: | Germany: 12% | (24%) | ||||||||
5% (5%) | ||||||||||
(12%) | ||||||||||
Europe East: | Europe South: | Office: 29% (29%) | ||||||||
6% (3%) | 11% | (12%) | ||||||||
Estimated LTV by YE 20203) | Portfolio by LTV ranges2) |
7.000 | 2007 / 2008 | (vs. 12/2019) | 60-80%: 3%(4%) | > 80%: 1% (>0%) | |||||||||||
6.000 | Current Ø | ||||||||||||||
Ø LTV pre-WFC | |||||||||||||||
5.000 | |||||||||||||||
LTV: 57% | |||||||||||||||
4.000 | Est. Ø | ||||||||||||||
3.000 | LTV | ||||||||||||||
2.000 | |||||||||||||||
1.000 | |||||||||||||||
0 | -510-1015-1520 | -2025 | -2530 | -3035 | -3540-4045-4550-5055 | -5560 | -6065 | -6570 | -7075-7580-8085-8590-9095 | 100-95 | 105-100 | 110-105 | 110> | ||
0-5 | < 60%: 96% (96%) | ||||||||||||||
Current | Estimated |
- Incl. Student housing (UK & Australia only)
- Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
- Acc. to our market value development expectations
9
Commercial real estate finance portfolio (CREF) by country
€ 26.1 bn highly diversified
CREF portfolio (€ mn)
8.000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6.656 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
€ 26.1 bn (12/2019: € 25.9 bn) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6.000 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
3.797 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4.000 | 2.992 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2.447 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1.699 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1.097 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2.000 | 1.269 | 1.263 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
753 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
1.145 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
741 | 502 | 406 | 358 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
325 | 305 | 300 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
US | UK | DE | FR | IT | CA | ES NL | SE | PL | FI | CZ | BE | AT | MV | CH others | |||||||||||||||||||||||||||||||||||||||||||||||||||||
LTV1)
100%
80% | Ø LTV: 57% (12/2019: 57%) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
69% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
62% | 64% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
63% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
62% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
58% | 55% | 55% | 55% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
52% | 55% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
53% | 55% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
57% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
60% | 52% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
44% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
49% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
40% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
20% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
US | UK | DE | FR | IT | CA | ES | NL | SE | PL | FI | CZ | BE | AT | MV | CH | others | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
YoD2) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
16% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Ø YoD: 6.7% (12/2019: 8.9%) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
12% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
9,4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8,7% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8,4% | 8,2% | 8,8% | 7,9% | 7,4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6,8% | 7,5% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6,7% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8% | 6,2% | 6,4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
6,5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,7% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4,3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
4% | 3,1% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
US | UK | DE | FR | IT | CA | ES | NL | SE | PL | FI | CZ | BE | AT | MV | CH | others | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
- Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
- Performing CREF-portfolio only, based on 12-months forward looking estimate (see also page 86 definitions)
10
Commercial real estate finance portfolio (CREF) by property types
€ 26.1 bn highly diversified
CREF portfolio (€ mn) | ||||||||||||||||||||||||||||||||||||||||||||||||
10.000 | ||||||||||||||||||||||||||||||||||||||||||||||||
8.642 | ||||||||||||||||||||||||||||||||||||||||||||||||
€ 26.1 bn (12/2019: € 25.9 bn) | ||||||||||||||||||||||||||||||||||||||||||||||||
7.630 | ||||||||||||||||||||||||||||||||||||||||||||||||
8.000 | ||||||||||||||||||||||||||||||||||||||||||||||||
5.853 | ||||||||||||||||||||||||||||||||||||||||||||||||
6.000 | ||||||||||||||||||||||||||||||||||||||||||||||||
2.508 | ||||||||||||||||||||||||||||||||||||||||||||||||
4.000 | ||||||||||||||||||||||||||||||||||||||||||||||||
1.093 | ||||||||||||||||||||||||||||||||||||||||||||||||
2.000 | 327 | |||||||||||||||||||||||||||||||||||||||||||||||
0 | ||||||||||||||||||||||||||||||||||||||||||||||||
Hotel | Office | Retail | Logistic | Residential | Others: | |||||||||||||||||||||||||||||||||||||||||||
LTV1) | ||||||||||||||||||||||||||||||||||||||||||||||||
100% | Ø LTV: 57% (12/2019: 57%) | |||||||||||||||||||||||||||||||||||||||||||||||
80% | ||||||||||||||||||||||||||||||||||||||||||||||||
59% | ||||||||||||||||||||||||||||||||||||||||||||||||
56% | 58% | 57% | 51% | 49% | ||||||||||||||||||||||||||||||||||||||||||||
60% | ||||||||||||||||||||||||||||||||||||||||||||||||
40% | ||||||||||||||||||||||||||||||||||||||||||||||||
20% | ||||||||||||||||||||||||||||||||||||||||||||||||
0% | ||||||||||||||||||||||||||||||||||||||||||||||||
Hotel | Office | Retail | Logistic | Residential | Others | |||||||||||||||||||||||||||||||||||||||||||
YoD2) | ||||||||||||||||||||||||||||||||||||||||||||||||
15% | Ø YoD: 6.7% (12/2019: 8.9%) | |||||||||||||||||||||||||||||||||||||||||||||||
9,7% | ||||||||||||||||||||||||||||||||||||||||||||||||
10,2% | ||||||||||||||||||||||||||||||||||||||||||||||||
9,0% | ||||||||||||||||||||||||||||||||||||||||||||||||
10% | 8,4% | |||||||||||||||||||||||||||||||||||||||||||||||
8,0% | ||||||||||||||||||||||||||||||||||||||||||||||||
5% | 3,6% | |||||||||||||||||||||||||||||||||||||||||||||||
0% | ||||||||||||||||||||||||||||||||||||||||||||||||
Hotel | Office | Retail | Logistic | Residential | Others | |||||||||||||||||||||||||||||||||||||||||||
- Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
- Performing CREF-portfolio only, based on 12-months forward looking estimate (see also page 86 definitions)
11
Our Hotel financing business
Experienced team, solid portfolio
▪ 20 years of dedicated Hotel financing | ||
▪ Team members recruited from hotel related industries | ||
(i.e. Operators, Managers, Valuers and hotel equity investments) | ||
▪ Gradual increase in hotel lending since 2000, decreasing leverage levels over time with growing | ||
History | differentiation via USPs and recognition in the industry with increasing client base globally | |
(initiative started in 2000; by 12/2008 € 3.7 bn loan book with an average LTV of 68%; | ||
by 12/2019: € 8.6 bn loan book with LTV an average LTV of 56%) | ||
▪ 06/2001: Securitisation of an European and American Hotel portfolio ("Global Hotel One") | ||
€ 1.1 bn, maturity 5 years, no defaults, despite 9/11 in NYC | ||
▪ Successfully accompanied our hotel finance portfolio through the GFC | ||
12
Our Hotel financing business
Key facts
Total portfolio exposure | EUR 8.6 bn | |
▪ | Portfolio deals | 45% |
▪ | Single asset deals | 55% |
Number of countries | 19 | |
Number of hotels | 236 hotels | |
Average exposure per hotel | EUR 36 mn | |
Number of loans | 94 | |
Average exposure per loan | EUR 90 mn | |
Total number of hotel rooms | 58,241 rooms | |
Exposure per hotel room | EUR 150,000 | |
13
Our Hotel financing business
Key findings
The Aareal hotel portfolio is:
- Well diversified by 236 hotels in 19 countries
- Well balanced in terms of brand and hotel category
- Well backed by i.a. sound public companies, sovereign wealth funds and HNWI who have shown their financial commitment to the assets throughout this crisis
- Conservatively leveraged with sufficient buffer for value decreases caused by the current crisis
- Of the top 15 loans (all are loans above € 150 mn, of which 12 are portfolio financings), only 6 were provided with additional liquidity since March. Overall, 35% (~ € 3 bn) of our hotel exposure has received liquidity support since the beginning of the year.
- The sum of all hotel loan support financed so far represents approximately 1.4% of the total hotel portfolio size.
- 45% portfolio deals vs. 55% single assets deals (portfolio deals are all cross collateralised to the extend legally permissible)
14
Asset quality: Hotel Portfolio
Hotel portfolio well positioned to master Covid-19 crisis
Hotel Portfolio by region | Yield on debt | |||||||||||||||||||||||||||||||||||||
(vs. 12/2019) | Asia / Pacific: | 15% | (vs. Ø 12/2019: 9.6%) | Ø YoD: 3.6% | ||||||||||||||||||||||||||||||||||
4% | (4%) | (9.6%) | (9.2%) | (9.5%) | (9.7%) | (11.9%) | (8.8%) | (19.4%) | ||||||||||||||||||||||||||||||
North America: | 10% | |||||||||||||||||||||||||||||||||||||
38% (38%) | 6,9% | |||||||||||||||||||||||||||||||||||||
5% | 4,2% | 4,4% | 3,9% | 4,1% | 4,5% | |||||||||||||||||||||||||||||||||
€ 8.6 bn | Europe West: | 2,5% | ||||||||||||||||||||||||||||||||||||
Europe North: | 46% (46%) | 0% | ||||||||||||||||||||||||||||||||||||
1% (1%) | ||||||||||||||||||||||||||||||||||||||
Europe East: | ||||||||||||||||||||||||||||||||||||||
1% (1%) | ||||||||||||||||||||||||||||||||||||||
Europe South: | Germany: 8% | (8%) | ||||||||||||||||||||||||||||||||||||
2% (2%) | ||||||||||||||||||||||||||||||||||||||
Estimated LTV by YE 20201,2) | Hotel by category3) |
2.500 | Midscale: 4% | Economy: 1% | ||||||||||||
2.000 | 2007 / 2008 | Upper Midscale: 11% | Luxury: 14% | |||||||||||
Current Ø | Ø LTV pre-WFC | |||||||||||||
1.500 | LTV: 56% | |||||||||||||
1.000 | Est. | € 8.6 bn | ||||||||||||
Ø LTV | ||||||||||||||
500 | Upscale: | Upper | ||||||||||||
40% | ||||||||||||||
Upscale: 30% | ||||||||||||||
0 | ||||||||||||||
0-5 | 5-1010-1515-20 | 20-25 | 25-30 | 30-35 | 35-4040-4545-5050-55 | 55-60 | 60-65 | 65-7070-7575-8080-8585-90 | 90-95 | 95-100 | 100-105 | 105-110 | > 110 | |
Current | Estimated |
- Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
- Acc. to our market value development expectations
- Acc. to STR classification
15
Our Hotel financing business
Market developments
▪ "Travel" industry is one of the largest industries / employers globally
▪ 10 years of booming economies allowed hotel owners to build up substantial reserves and buffers, which they are willing to re-invest
▪ Cost of carry is significantly lower than in 2008, where the average 3M Euribor was approximately ~ 4.5%, compared to the 2020 YtD avg. 3M Euribor of ~ -0.4%
▪ Limited transaction volumes in markets for hotel assets, indicating ▫ No overwhelming distress of owners / banks
Markets | ▫ No markable increase in NPL transactions to date |
▫ Current loan parameters are on a more conservative level than at the onset of the GFC | |
▫ Borrowers for the largest part are looking through the cycle and are seeing positive equity | |
value in their assets | |
▫ Measures taken by governments globally further increase market liquidity | |
▫ No foreseeable increase of interest rates | |
(quite the contrary: Central Banks signaled willingness to further lower interest rates, | |
if needed) | |
16
Our Hotel financing business
Expectations and examples
Expectations
A picture is worth a thousand words…
- Catch up effect for business related travel expected to be significant, as is pent up demand for personal travel
- In the interim, people will learn to live and travel with Covid-19 and not against it
- Final resolution with accepted treatment / vaccine
- Currently, Resort Hotels and drive-to-destinations far better, while China is a possible projection on how hotels will fare, as Covid-19 is under control
- With our profound know-how and well-established network in hospitality industry, we are expecting to apply our expertise and USPs to generate attractive risk / return through the cycle
17
Segments
18
Segment: Structure Property Financing
New business with low LTVs and significantly above planned margins
New business by quarter | ▪ Newly acquired business in Q3: |
7.000 | € mn | 2,799 | 6,085 | ▫ Margins of ~220 bp above plan (180-190 bps) | |||||||
▫ Strong Ø LTV of 57% | |||||||||||
6.000 | 235 | ||||||||||
5.000 | 1.437 | ▫ Increased focus on logistics | |||||||||
1,504 | 4,154 | ||||||||||
4.000 | 2.564 | ▪ Portfolio size picking up despite FX effects | |||||||||
2,734 | 532 | 1.106 | |||||||||
1,321 | ▪ Further portfolio increase in Q4 expected to upper end | ||||||||||
969 | |||||||||||
3.000 | |||||||||||
879 | |||||||||||
332 | 4.583 | of guided range (€ 26 - 28 bn); | |||||||||
2.000 | |||||||||||
1,333 | 989 | ||||||||||
812 | 1.530 | 3221 | 2654 | 3.048 | TLTRO-bonus collection therewith likely | ||||||
1.000 | 243 | ||||||||||
323 | 1.090 | 1333 | ▪ | Using market opportunities through the cycle by applying | |||||||
812 | |||||||||||
0 | 489 | 1) | |||||||||
Q1 '19 | Q1 '20 | Q2 '19 | Q2 '20 | Q3 '19 | Q3 '20 | 9M '19 | 9M '20 | expertise and USPs | |||
Newly acquired business | Renewals |
Q3-new business by region | Q3-new business by property type | REF portfolio development | |
(vs. 12/2019) | Asia / | (vs. 12/2019)Hotel: | 4% (24%) | Others: 0% | 29 | € bn | Target range (€ 26 - 28 bn) | |||||
Pacific: 9% | Europe West: | (>0%) | ||||||||||
(5%) | ||||||||||||
29% (32%) | Residential: 10% | |||||||||||
North | Office: 37% | 28 | ||||||||||
(3%) | ||||||||||||
(50%) | ||||||||||||
America: | ||||||||||||
23% | Retail: 16% | 27 | ||||||||||
(39%) | ||||||||||||
(13%) | ||||||||||||
Europe | 26 | 27,4 | ||||||||||
North: 3% (2%) | Europe East: | 26,7 | 26,7 | |||||||||
26,4 | 26,3 | |||||||||||
Germany: | 27% (7%) | 25 | 26,1 | |||||||||
3% (11%) | ||||||||||||
Europe South: 6% (8%) | Logistic: 33% | 24 | ||||||||||
(10%) | ||||||||||||
12/'17 | 12/'18 | 12/'19 | 03/'20 | 06/'20 | 09/'20 | |||||||
19
Segment: Consulting/Services Bank
Housing industry deposits proven stable, Ytd NCI increased
Split of deposits by type
2015 | Q3 2020 | ||||||
7% | 13% | >0% | 19% | ||||
€ 9.0 bn | 20% | € 11.0 bn | |||||
63% | 18% | ||||||
60% | |||||||
Rental guarantee deposits | Maintenance reserve | ||||||
Sight deposits | Other term deposits | ||||||
€ mn | Q3 '19 | Q4 '19 | Q1 '20 | Q2 '20 | Q3 '20 | ||
Net interest income | -4 | -5 | 10 | 10 | 9 | ||
Net commission income | 7 | 6 | 5 | 7 | 6 | ||
Admin expenses | 20 | 16 | 18 | 17 | 15 | ||
Net other operating income | 0 | 1 | 0 | 0 | 0 | ||
Operating profit | -17 | -14 | -3 | 0 | 0 | ||
- Stable deposit volume of € 11 bn
- Structure further improved, sticky rental guarantee deposits grown above € 2 bn
-
Q3 NII at € 9 mn / 9M '20 at € 29 mn (Q3 '19: € -4 mn / 9M '19: € -10 mn)
Improvement in current year mainly due to adjusted modelling and transfer pricing, reflecting value of housing industry deposits as stable funding source - Due to higher short term interest rates and Covid-19 related underspend segment FY-EBT now expected even better than revised guidance of ~ € -10 mn (original guidance ~ € -20 mn)
- Unlocking further business opportunities, e.g. joint-venture with ista ("objego")
20
Segment: Aareon
Continued Covid-19 resiliency, limited adj. EBITDA impact confirmed
P&L Aareon segment - | ∆ Q3 | ∆ 9M | ||||||
Industry format1) | Q3'19 | 9M'19 | Q1'20 | Q2'20 | Q3'20 | 9M'20 | ||
'20/'19 | '20/'19 | |||||||
€ mn | ||||||||
Sales revenue | 60 | 182 | 64 | 61 | 63 | 188 | 5% | 4% |
▪ Thereof ERP | 48 | 146 | 49 | 47 | 49 | 144 | 1% | -1% |
▪ Thereof Digital | 12 | 35 | 15 | 15 | 14 | 44 | 20% | 25% |
Costs2) | -47 | -140 | -50 | -51 | -50 | -152 | 7% | 8% |
▪ Thereof material | -11 | -32 | -11 | -12 | -10 | -34 | -2% | 7% |
EBITDA | 13 | 41 | 14 | 10 | 13 | 36 | -1% | -12% |
New products / | -1 | -1 | -1 | -2 | -2 | -4 | >100% | >100% |
Inorganic3) | ||||||||
One offs | 0 | 0 | 0 | 0 | 0 | 0 | ||
Adj. EBITDA | 14 | 42 | 15 | 12 | 14 | 41 | 6% | -3% |
EBITDA | 13 | 41 | 14 | 10 | 13 | 36 | -1% | -12% |
D&A / Financial result | -6 | -17 | -7 | -7 | -6 | -20 | 9% | 12% |
EBT / Operating profit | 7 | 24 | 7 | 3 | 6 | 17 | -9% | -29% |
- Sales revenues increased by € 6 mn to
€ 188 mn (+4%); Q2 was the quarter most affected by Covid-19 whereas catch-up becomes visible in Q3 - Costs: Steadfast on investments supporting Aareon's growth strategy which is in line with 2020 run rate - driven by increasing FTE numbers and additional investments
-
As of now, Aareon continues to assess this crisis from a business point of view as a singular event and still expects an adjusted
EBITDA effect in FY 20 of approx. € -10 mn - Adj. EBITDA as well as adj. EBITDA margin virtually stable at € 41 mn (PY: € 42 mn) and 22% (PY: 23%) respectively - growing digital business compensated lower consulting revenues due to Covid-19 crisis
- Outlook 2025:
Development of value creation plan with goal to become a "Rule of 40" company
- Calculation refers to unrounded numbers
- Incl. capitalised software and other income
- New Products consist of e.g. Virtual Assistant, Aareon Smart Platform, etc., Inorganic bundles Venture (e.g. Ophigo)
21 | and M&A activities, include investments in new product developments |
Segment: Aareon
YTD: Recurring revenue providing stability, growth in digital continues
Sales revenue development
ERP revenue in € mn | Total sales revenue1): | Digital revenue in € mn | |||
ERP revenue1): | Digital revenue(): | ||||
4% | |||||
-1% | +25% | ||||
252 | |||||
51 | 188 | ||||
182 | |||||
35 | 44 | ||||
122 | 126 | ||||
23 | 201 | 30 | |||
59 | 146 | 64 | 144 | ||
15 | |||||
12 | 99 | 96 | |||
47 | 49 |
- Aareon total sales revenue increased by 4% yoy, mainly driven by Digital and Consulting
- Digital grew by 25% yoy, based on higher penetration with existing digital products and CalCon
- ERP decreased by -1% yoy because of lower Consulting due to Covid-19
- Consulting utilisation rate: ~60% (previous years ~70%) still relatively high thanks to green (digitalised) consulting
Q1 2019 | H1 2019 | 9M 2019 | FY 2019 | Q1 2020 | H1 2020 | 9M 2020 |
Q3: Share of recurring revenue (LTM)2)
66%
Recurring revenue
- Represents growth rate from 9M '19 to 9M '20 (based on unrounded numbers)
- LTM: Last twelve months
22
-
The recurring revenues share (LTM) of 66%
(2019: 64%) at high level and has steadily been growing throughout the quarters - Increasing assurance of revenues independent from circumstances another pillar of becoming a "Rule of 40" company
- The trend in the customer base to buy into SaaS based ERP- and digital solution is ongoing, additionally the demand for outsourcing services is high as well
Group results Q3 2020
23
Q3 results 2020
Positive operating profit despite Covid-19 impacts, growing NII & NCI
€ mn | Q3 '19 | Q4 '19 | Q1 '20 | Q2 '20 | Q3 '20 | Q3 2020-Comments |
Net interest income | 134 | 130 | 123 | 122 | 128 | Positive impacts from TLTRO participation and |
increased portfolio | ||||||
Derecognition result | 15 | 22 | 7 | 9 | 3 | Effects from early repayments |
Loss allowance | 27 | 35 | 58 | 48 | 61 | Above last years' level due to Covid-19 impact |
Net commission income | 54 | 65 | 57 | 54 | 57 | Above last years' level driven by Aareon's growth |
FV- /hedge-result | 2 | -4 | 11 | -16 | -2 | |
Admin expenses | 114 | 118 | 129 | 109 | 114 | Flat despite Aareon growth |
Others | 0 | 2 | 0 | -10 | 0 | |
Operating profit (EBT) | 64 | 62 | 11 | 2 | 11 | Positive operating profit despite Covid-19 impacts, |
growing NII & NCI | ||||||
Income taxes | 24 | 20 | 4 | -7 | 10 | FY tax ratio above 50% expected due to expenses |
non effective for tax purposes | ||||||
Minorities | 1 | 0 | 1 | 0 | 1 | |
Additional € ~180 mn from Aareon minority sale | ||||||
Consolidated net income | 39 | 42 | 6 | 9 | 0 | will be shown in Q4 directly in equity position under |
allocated to shareholders | IFRS consolidated financial statements (unlike in | |||||
HGB financial statements) | ||||||
Earnings per share1) (€) | 0.60 | 0.62 | 0.04 | 0.07 | -0.05 |
1) After AT1 accrual
24
Net interest income (NII)
Positive impacts from TLTRO participation and increased portfolio
150 € mn
125
100
75
134 | 130 | 123 | 122 | 128 |
50
25
0
Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 |
- Positive TLTRO effect (bonus) of ~ € 4 mn
- Portfolio increase (€ 26.7 bn) by strong new business supporting NII despite weakened USD
-
YE-portfoliosize in the upper end of guided range expected (€ 26 - 28 bn);
TLTRO-bonus collection therewith likely
25
Loss allowance (LLP) / Others
Above last years' level due to Covid-19 impact
P/L position: LLP | Covid-19 related P/L effects with respect to asset valuation | |||||||||||||||
75 | ||||||||||||||||
€ mn | Covid-19 related | € mn | 9M 2020 | management | ||||||||||||
(9M/20: 111) | 61 | |||||||||||||||
58 | > | overlays | ||||||||||||||
50 | 48 | others | ||||||||||||||
30 | ||||||||||||||||
25 | 50 | 31 | 65 | € 138 mn | 73 | |||||||||||
27 | 35 | 31 | ||||||||||||||
17 | ||||||||||||||||
8 | ||||||||||||||||
0 | ||||||||||||||||
Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 | ||||||||||||
9M LLP amounts to € 167 mn, thereof
-
€ 57 mn management overlay
(Q1: € 17 mn, Q2: € 20 mn, Q3: € 20 mn) - € 51 mn Stage 1/2 including but not limited to Covid-19
(Q1: € 15 mn, Q2: € 11 mn, Q3: € 25 mn)
Stage 1/2 related LLP stock increased throughout the crises by 108% to € 79 mn
- Covid-19effect (with respect to asset valuation) of € 138 mn in 9M (Q3: € 32 mn) reflected in the following P/L positions:
- LLP: € 111 mn (Q3: € 30 mn)
thereof management overlays: € 57 mn (Q3: € 20 mn) - Fvpl: € 14 mn (Q3: € 1 mn)
thereof management overlays: € 16 mn (Q3: € 3 mn) - Other expenses: € 13 mn (Q3: € 0 mn)
- LLP: € 111 mn (Q3: € 30 mn)
26
Defaulted exposure
NPL portfolio further decreased
Development of defaulted exposure | Defaulted exposure by country (€ mn) | ||||
€ mn | % defaulted (vs. 12/2019) | USA: 55 (0) | Others: 31 (45) | ||
exposure ratio | |||||
2.500 | 9,0% | Poland: 59 | ||||||
(64) | ||||||||
7,3% | Spain: 104 | |||||||
6,9% | 6,9% | (41) | ||||||
2.000 | 6,3% | |||||||
Italy: 503 | ||||||||
1.929 | France: 112 | |||||||
(642) | ||||||||
1.721 | 1.873 | 6,0% | (111) | |||||
1.500 | ||||||||
1.664 | ||||||||
4,2% | 4,3% | UK: 165 (182) | ||||||
3,9% | ||||||||
1.000 | 1.111 | ▪ | Successful accelerated de-risking activities | |||||
1.085 | 1.029 | 3,0% | ||||||
▪ Additional outflow of several smaller and inflow of | ||||||||
500 | two new NPLs | |||||||
➢ Net NPL reduction in Q3 of € 82 mn | ||||||||
0 | 0,0% | ▪ Opportunities for further accelerated de-risking | ||||||
will be assessed if they emerge |
Defaulted exposure / Total CREF portfolio
Defaulted exposure
27
Net commission income
Above last years' level driven by Aareon's growth
80
70
60
50
40
30
20
10
0
- mn
65 | ||||||||||||
54 | 57 | 54 | 57 | |||||||||
Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 |
- Aareon's NCI contribution increased
- Growth in digital solutions continuous
- Recovery in Consulting business
- High share of recurring revenues providing earnings stability even in times of Covid-19 crisis
- C/S Bank segment increased NCI YtD
28
Admin expenses
Flat despite Aareon growth
- € mn
118 | 129 | |||
114 | 109 | 114 | ||
50 | ||||
25
0
Q3 2019 | Q4 2019 | Q1 2020 | Q2 2020 | Q3 2020 |
29
- Q3 admin expenses kept on previous years' level
- 9M 2020 figure (€ 352 mn) significantly reduced despite Aareon growth (9M 2019 € 370 mn, incl. € 11 mn DHB Integration)
- Q1 including € 18 mn European bank levy and ESF
- Aareon
- Q3 2020: € 46 mn (Q3 2019: € 43 mn)
- 9M 2020: € 138 mn (9M 2019: € 127 mn)
Capital, B/S, Funding/Liquidity
30
Capital
Solid capital ratios
B3 / B41) RWA2) | ||||
20 | € bn | Basel 4 | ||
Basel 3 | ||||
15 | 16,6 | |||
16,4 | ||||
10 | 11,3 | |||
11,2 | ||||
5 | ||||
0 | ||||
31.12.2019 | 30.09.2020 | 31.12.2019 | 30.09.2020 |
- Portfolio growth & first Covid-19 effects triggered Q3 RWA increase. CRR2 Quick-Fix overcompensate B3 RWA increase
- RWA increase in Q4 expected (e.g. portfolio growth, Covid-19 effects). B4 RWA less exposed to Covid-19 volatility due to floor
- Capital gain (~€ 180 mn) from sale of Aareon minority share will positively impact Q4 capital ratios (B3: ~150bps / B4: ~110bps)
- Significant CET1, AT1 and T2 buffers; optimisation potential in review
- T1-Leverageratio at 6.0% despite TLTRO participation
- Remaining regulatory uncertainties (models, ICAAP,
ILAAP, B4 etc.): modelled RWA's may further inflate
B3 capital ratio3)
35% | ||||||||
29.9% | 30.3% | |||||||
30% | ||||||||
7,6% | T2 | 7,2% | ||||||
25% | ||||||||
2,7% | AT1 | 2,7% | ||||||
20% | ||||||||
15% | ||||||||
20,4% | ||||||||
10% | 19,6% | CET 1 | ||||||
5% | ||||||||
0% | ||||||||
31.12.2019 | 30.09.2020 | |||||||
B4 CET 1 ratio1) | |
15% | |
10% | |
13,5% | 13,9% |
5% | |
0% | |
31.12.2019 | 30.09.2020 |
- Underlying RWA estimate, given a 72.5 % output floor based on the final Basel Committee framework dated 7 December 2017, calculation subject to outstanding EU implementation as well as the implementation of further regulatory requirements
- Ratings not yet reflecting potential changes from management overlays
- When calculating own funds as at 30 Sep. 2020, interim profits were taken into account, deducting the pro-rata dividend in line with the
31 | dividend policy, and incorporating the pro-rata accrual of net interest payable on the AT1 bond. Moreover, the expected relevant impact |
of the TRIM exercise on commercial property financings, and of the SREP recommendations concerning the NPL inventory as well as |
the ECB's NPL guidelines for exposures newly classified as NPLs, were taken into account for determining regulatory indicators.
B/S structure according to IFRS
As at 30.09.2020: € 44.5 bn (31.12.2019: € 41.1 bn)
50
45
40
35
30
25
20
15
10
5
0
- bn
5.7 (2.8) Money Market | 8.6 (3.6) Money Market |
8.8 (8.8) | |
Treasury portfolio | 10.2 (9.7) |
of which cover pools | Deposits from housing |
industry clients | |
26.1 (25.9) Commercial real estate
finance portfolio | 22.8 (24.8) | |||||
Long-term funds | ||||||
and equity | ||||||
of which | ||||||
▪ 19.0 (20.9) | ||||||
Long-term funds | ||||||
− 11.6 (13.4) PB | ||||||
− 7.4 ( 7.5) SU | ||||||
▪ 1.2 (1.3) | ||||||
Subordinated capital | ||||||
▪ 2.6 (2.6) | ||||||
Shareholders' equity | ||||||
3.9 (3.6) Other assets1) | ||||||
2.9 (3.0) Other liabilities | ||||||
Assets | Liabilities & equity |
- Well balanced B/S structure
- Temporary significant increase of total assets due to participation in ECBs' TLTRO (> € 4 bn) currently reflected in money market positions
1) Other assets includes € 0.4 bn private client portfolio and WIB's € 0.3 bn public sector loans
32
Funding / Liquidity
Diversified funding sources and distribution channels
€
Deposits: | Deposits: | Senior | Pfandbriefe | |||
Housing industry customers | Inst. customers | unsecured | ||||
3.4 (4.1) Other assets2) |
- Sustainable and strong housing industry deposit base being part of well diversified funding mix
- Successful capital market transactions during the first 9 months:
- More than 40 senior unsecured private placements with a volume of € 600 mn
- September: € 500 mn senior preferred benchmark (6.5Y, MS +95bps)
- October: € 500 mn Pfandbrief benchmark (6Y, MS+1bp)
- Expected Q4 portfolio growth already funded
- Liquidity ratios significantly over fulfilled:
- NSFR > 100%
- LCR >> 100%
33
Treasury portfolio
€ 7.3 bn (2019: € 7.3 bn) of high quality and highly liquid assets
by rating1) | by asset class | ||||||||
(vs. 12/2019) | BBB: 12% | < BBB / no | (vs. 12/2019) | Covered Bonds / | |||||
rating: > 0% | |||||||||
(14%) | |||||||||
(>0%) | Financials: 2% | ||||||||
(3%) | |||||||||
A: 6% | |||||||||
(8%) |
- 36%
(38%)
Public Sector | |
AA: 46% | Debtors: 98% |
(97%) | |
(40%) | |
As at 30.09.2020 - all figures are nominal amounts 1) Composite Rating
34
Asset quality
35
Development commercial real estate finance portfolio
By region
- mn
100% | 492 | 1.528 | 1.073 | 246 | 420 | 770 | ||||||||||
277 | 579 | |||||||||||||||
90% | 2.789 | 3.779 | ||||||||||||||
2.951 | ||||||||||||||||
2.532 | ||||||||||||||||
7.429 | ||||||||||||||||
7.925 | ||||||||||||||||
80% | ||||||||||||||||
1.791 | 2.939 | 2.790 | ||||||||||||||
70% | ||||||||||||||||
4.671 | 2.872 | 2.354 | 1.286 | |||||||||||||
1.510 | ||||||||||||||||
1.566 | ||||||||||||||||
60% | ||||||||||||||||
1.312 | ||||||||||||||||
4.180 | 3.945 | |||||||||||||||
50% | 4.070 | 2.962 | ||||||||||||||
15.783 | ||||||||||||||||
40% | ||||||||||||||||
4.913 | 7.453 | |||||||||||||||
30% | 15.193 | 8.599 | 8.582 | |||||||||||||
20% | ||||||||||||||||
4.804 | ||||||||||||||||
10% | 3.905 | 3.152 | 2.992 | |||||||||||||
0% | ||||||||||||||||
1998 | 2003 | 2008 | 2013 | 2018 | Q3 2020 | |||||||||||
36
Asia / Pacific
North
America
Europe East Europe North
Europe
South
Europe
West
Germany
Development commercial real estate finance portfolio
By property type
- mn
100% | 2.249 | 1.592 | 528 | 630 | 327 | |||||||||
2.068 | 2.584 | 1.956 | 2.508 | |||||||||||
90% | ||||||||||||||
1.032 | ||||||||||||||
892 | 2.147 | |||||||||||||
80% | 1.764 | 2.987 | ||||||||||||
3.671 | 5.327 | 8.032 | 8.583 | |||||||||||
2.562 | ||||||||||||||
70% | ||||||||||||||
4.103 | ||||||||||||||
60% | ||||||||||||||
6.212 | 4.796 | |||||||||||||
6.385 | ||||||||||||||
50% | ||||||||||||||
6.612 | 5.853 | |||||||||||||
40% | ||||||||||||||
7.718 | ||||||||||||||
30% | ||||||||||||||
10.681 | 7.762 | |||||||||||||
11.252 | 7.374 | |||||||||||||
20% | 7.630 | |||||||||||||
10% | ||||||||||||||
3.538 | 2.121 | |||||||||||||
0% | 1.792 | 1.152 | ||||||||||||
1998 | 2003 | 2008 | 2013 | 2018 | Q3 2020 | |||||||||
37
others
Logistic
Hotel
Retail
Office
Residential
Western Europe (ex Germany) CREF portfolio
Total volume outstanding as at 30.09.2020: € 8.6 bn
by product type | by property type | ||||||||
Developments:<1% | Residential:1) | Others: 1% | |||||||
2% |
Logistic: 6%
Retail: 19%
Hotel: 47%
Investment | ||||||||
finance: 99% | Office: 25% | |||||||
by performance | by LTV ranges2) | |||||||
NPLs | 60-80%: 2% | >80%: > 0% | ||||||
3% |
Performing | < 60%: 98% |
97% |
- Incl. Student housing (UK & Australia only)
- Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
38
Spotlight: UK CREF portfolio
€ 3.8 bn (~15% of total CREF-portfolio)
Total portfolio by property type
(vs. 12/2019) | Office: 7% | Student housing: 6% | |
(4%) | |||
(8%) | |||
Logistic: 8%
(8%)
Hotel: 49%
(47%)
Retail: 30% (33%)
Average LTV by property type1)
(vs. Ø 12/2019: 57%) | Ø LTV: 57% | |||||||||||||||
100% | ||||||||||||||||
80% | 68% | |||||||||||||||
57% | 55% | |||||||||||||||
52% | 55% | |||||||||||||||
60% | ||||||||||||||||
40% | ||||||||||||||||
20% | ||||||||||||||||
0% | ||||||||||||||||
Hotel | Retail | Logistic | Office | Student | ||||||||||||
housing |
Yield on debt1)
11,0% | 9,9% | ||||
10,0% | 9,6% | 9,7% | 9,6% | ||
10,0% | |||||
9,0% | 9,7% | 9,9% | 9,9% | 9,3% | |
8,0% |
7,0% | 6,7% |
6,0% 2011 2012 2013 2014 2015 2016 2017 2018 2019 Q3
'20
Comments (vs. 2019)
- Performing:
- Investment finance only, no developments
- ~ 60% of total portfolio in Greater London area, emphasising on hotels
- € 155 mn with LTV > 60%
- Avg. LTV on same level as total CREF-portfolio
- Significant drop in YoD due to high hotel share of portfolio strongly effected by Covid-19
- Defaulted exposure: € 165 mn (€ 182 mn)
1) Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
39
German CREF portfolio
Total volume outstanding as at 30.09.2020: € 3.0 bn
by product type | by property type | |||||||
Others: 2% | ||||||||
Others: 1% | ||||||||
Logistic: 12% | ||||||||
Retail: 27% | ||||||||
Residential: | ||||||||
17% | ||||||||
Investment | Hotel: 23% | |||||||
finance: 99% | Office: 19% | |||||||
by performance | by LTV ranges1) | |||||||
NPLs | 60-80%: 3% | > 80%:>0% | ||||||
1% |
Performing | < 60%: 97% |
99% |
1) Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
40
Southern Europe CREF portfolio
Total volume outstanding as at 30.09.2020: € 3.0 bn
by product type | by property type | ||||||||||
Develop- | Others: 1% | Others: 13% | |||||||||
ments: 7% | Residential: 2% | ||||||||||
Hotel: 2% | |||||||||||
Office: | 21% | Retail: 40% | |||||||||
Investment | |||||||||||
finance: 92% | |||||||||||
Logistic: 22% | |||||||||||
by performance | by LTV ranges1) | ||||||||||
60-80%: 5% | > 80%:> 0% | ||||||||||
NPLs
21%
Performing | |
79% | < 60%: 95% |
1) Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
41
Spotlight: Italian CREF portfolio (€ 1.7 bn)
Successful de-risking led to further significant NPL reduction
Italian Portfolio by property type | Italian Portfolio by LTV ranges1) | ||||
(vs. 12/2019) | Volume: € 1.7 bn (vs. 12/2019) | 60-80%: 5% | > 80%: >0% Ø LTV: 58% | ||
Others: 15% | (3%) | (>0%) | |||
(16%) | |||||
Hotel: 2% | Retail: 40% | ||||
(3%) | (35%) |
Office: 21% (27%)
< 60%: 95%
Logistics: 22%(97%) (19%)
Average LTV / YoD by property type1)
100% | Ø LTV: 58% | Ø YoD: 8.2%20% | ||||||||||||
19,2% | ||||||||||||||
75% | 62% | 58% | 16,9% | 15% | ||||||||||
52% | 51% | |||||||||||||
50% | 48% | 10% | ||||||||||||
9,6% | ||||||||||||||
25% | 7,6% | 6,7% | 5% | |||||||||||
0% | 0% | |||||||||||||
Retail | Office | Logistics | Hotel | Others | ||||||||||
Comments
- LTV: € 14 mn > 70% / € 7 mn > 80% / € 2 mn > 90%
- Defaulted exposure: € 503 mn as at 30.09.2020
- Further de-risking in 07/2020 led to an additional reduction of the Italian NPL portfolio close to € 500 mn
1) Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
42
Eastern Europe CREF portfolio
Total volume outstanding as at 30.09.2020: € 1.5 bn
by product typeby property type
Developments: 2% | Hotel: 6% |
Retail: 20% |
Investment | Office: 25% | Logistic: 49% | ||||
finance: 98% | ||||||
by performance | by LTV ranges1) | |||||
NPLs | 60-80%: 5% | > 80%:<1% | ||||
4% |
Performing | < 60%: 94% |
96% |
1) Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
43
Northern Europe CREF portfolio
Total volume outstanding as at 30.09.2020: € 1.3 bn
by product type | by property type | |||||
Others: 2% | Hotel: 6% | |||||
Logistic: 23% | ||||||
Retail: 39% |
Investment | |||
finance: 98% | |||
Office: 32% | |||
by performance | by LTV ranges1) |
60-80%: 4% | > 80%: 1% | |
Performing
100% | < 60%: 95% |
1) Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
44
North America CREF portfolio
Total volume outstanding as at 30.09.2020: € 7.9 bn
by product type | by property type | |
Residential: 2% | ||
Retail: 13% |
Office: 44%
Hotel: 41% | |||||||
Investment | |||||||
finance: 100% | |||||||
by performance | by LTV ranges1) | ||||||
NPLs | 60-80%: 6% | > 80%:>0% | |||||
1% | |||||||
Performing | < 60%: 94% |
99% |
1) Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
45
Asia / Pacific CREF portfolio
Total volume outstanding as at 30.09.2020: € 0.8 bn
by product type | by property type | |
Logistics 8%
Office: 11%
Hotel: 40%
Retail: 15% | |||
Investment | |||
finance 100% | |||
Residentail: 1) | |||
26% | |||
by performance | by LTV ranges2) | ||
60-80%: 1% |
Performing | < 60%: 99% |
100% |
- Incl. Student housing (UK & Australia only)
- Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020
46
Commercial real estate finance portfolio1) (CREF)
Conservative risk parameters
Total CREF exposure by LTV1) | Portfolio risk matrix | |||||||||||||||||||||||||||||
7.000 | € | LTV | ||||||||||||||||||||||||||||
Exposure | 70% bis 75% | 75% bis 80% | 80% bis 85% | 85% bis 90% | 90% bis 95% | 95% bis 100% über 100% | ||||||||||||||||||||||||
6.000 | € | Portfolio | 100% | 250 | 132 | 71 | ||||||||||||||||||||||||
4.000 | € | distribution | Probability | 95% | ||||||||||||||||||||||||||
85% | ||||||||||||||||||||||||||||||
5.000 | € | with low | ||||||||||||||||||||||||||||
90% | ||||||||||||||||||||||||||||||
variance | ||||||||||||||||||||||||||||||
3.000 | € | 80% | ||||||||||||||||||||||||||||
2.000 | € | 75% | ||||||||||||||||||||||||||||
70% | ||||||||||||||||||||||||||||||
1.000 | € | 60% | ||||||||||||||||||||||||||||
0 | € | 40% | ||||||||||||||||||||||||||||
10% | 15% | 20% | 25% | 30% | 35% | 40% | 45% | 50% | 55% | 60% | 65% | 70% | 75% | 80% | 85% | 90% | 95% | 100% | 105% | 110% | 110% | |||||||||
5% | 20% | |||||||||||||||||||||||||||||
Current Ø LTV | 2007 / 2008 | > | ||||||||||||||||||||||||||||
of 57% | Ø LTV WFC |
Density
Current average LTV of 57% Layered LTVs:
- > 70% LTV exposure: € 250 mn
- > 80% LTV exposure: € 132 mn
▪ > 90% LTV exposure: € 71 mn
- High portfolio concentration at 57% LTV
- Fairly small tail risk
1) Performing CREF-portfolio only, LTV / YoD pre Covid-19, exposure (excl. commitments) as at 31.03.2020
47
Accelerated de-risking
Italian exposure, FY2018-2020
€ bn | |||||||||||||||||
5 | |||||||||||||||||
62,50% | |||||||||||||||||
4.0 | |||||||||||||||||
4 | |||||||||||||||||
2.7 | 2.5 | ||||||||||||||||
3 | |||||||||||||||||
Public sector | |||||||||||||||||
2 | |||||||||||||||||
CREF non perf. | |||||||||||||||||
1 | |||||||||||||||||
CREF performing | |||||||||||||||||
0 | Other assets | ||||||||||||||||
31.12.2018 | 31.12.2019 | 31.07.2020 |
Accelerated de-risking
- Program with focus on Italian portfolio, continued in Q4 with Italian credit risk further down by approx. € 0.6 bn (thereof € 0.3 bn NPL, € 0.3 bn single borrower risk)
- Total effect from accelerated de-risking of approx. € 1.2 bn1) Italian credit risk in 2019
- P&L burden 2019 of approx. € 50 mn
(€ ~15 mn in Q4)
Non performing loans, H1 2019 - H1 2020 | NPL reduction | |||||||||
2 | € bn | ▪ In H2 2019 total NPL volume down by approx. 40% | ||||||||
1.9 | ▪ Italian NPL also down by approx. 40% in 2019 | |||||||||
(incl. a foreclosed Italian asset of approx. € 90 mn | ||||||||||
1.1 | 0.9 | taken on own book for future development, | ||||||||
not part of acc. de-risking) | ||||||||||
1 | Italy | |||||||||
Other countries | ||||||||||
0 | ||||||||||
30.06.2019 | 31.12.2019 | 31.07.2020 | ||||||||
- Thereof € 350 mn NPL (in FY 2019, of which € 310 mn in H2 2019), € 350 mn single borrower risk, € 410 mn BTPs, € 80 mn NPL provisioned for future reduction
48
Commercial real estate finance portfolio (CREF) Dimension of (theoretical) Stage migration effects have benefit from successful de-riskingexecuted in 2019 and Covid-19related provisions already considered in Q1/20 LLP
Stage 1 (1Y EL)
Stage 2 (LEL)
Stage 3a (model-based)
B | ||
A | ||
YE 18 Q1 20 | YE 18 Q1 20 | YE 18 Q1 20 |
What: | IFRS 9 Stage 2 maximum shift, LLP dimension |
depending on rating development | |
How: | A Modelling an (unrealistic) theoretical case |
of 100% loan volume migrating from Stage 1 to Stage 2
- Additional shift of 1-2 rating classes
Impact: | Recognition in P/L |
Dimension: Q1 2020: ~ € 100 mn additional Stage 2 LLPs YE 2018: ~ € 150 mn additional Stage 2/3a LLPs
- Dimension of (theoretical) Stage migration effects have benefit from successful de-risking executed in 2019 and Covid-19 related provisions already considered in Q1/2020 LLP
49
Segments
50
Aareon segment
Dimension products / markets and M&A activities / other cooperations
Progress on the development of products, markets and M&A activities / other cooperations
Products/Markets
M&A activities / other cooperations
- Launch of Wodis Yuneo - user centric approach and based on newest technology (intelligent tools and analytics components. Routine tasks, for example, can be automated and errors avoided using certain algorithms, optimized user interface, high flexibility due to web-based technology). First customers decided for Wodis Yuneo
- Neela AI based Virtual Assistant: Start of roll-out
- Venture OFI Group with platform Ophigo used by first customers. Two other ventures (ecaria and Refurbio) created and start to build-up the business model
- Online event Aareon Live "Pioneering Spirit" with about 1,600 registered participants. First presentation of the new ERP product generation Wodis Yuneo in Germany, prominent key notes, further product information as well as online exhibition
- CalCon integration project on track - product integrated in Aareon Smart World and sales synchronized as well as internal process set up; communications intensified.
- M&A activity to expand inorganically and drive digital product capabilities according to communicated growth case - extensive market screening for potential targets and numerous opportunities have been identified which are systematically pursued and modelled within a value creation plan
- Success will lead to upside potential
51
Accelerate growth and value creation by partnership with Advent
52
This landmark transaction delivers on one of the key pillars of "Aareal Next Level"
Structured Property Financing (SPF)
Commercial real estate financing solutions across 3 continents: Europe, North American and Asia/Pacific
Diverse property types
- Hotels, logistics, offices, retail, residential and student housing
- Additional industry experts in hotels, logistics and retail properties
Investment finance
- Single asset, portfolio, value add
-
Portfolio size: c.€ 26 bn; average
LTV: 57%
"Activate"
Consulting/Service (C/S) Bank
Integrated payment transaction system for the housing industry (market-leading) and the utility sector
Financial solutions
- Payment processing provider
- Deposit bank
Software solutions
- Intelligent solutions to improve connectivity and efficiency for bank and non-bank customers
- Average deposit volume of € 11.0 bn in Q3 2020
"Elevate"
Aareon
European leader for real estate software, 60+ years in the market serving c.3k customers and 10m+ units with 40 locations in DACH, Netherlands, France, Nordics and UK
Mission-critical ERP and broad set of modular Digital Solutions built on a cloud-enabled PaaS platform
Sustainable and resilient business model with strong downside protection delivers decades of consistent profitable growth
Experienced leadership team combining deep software expertise
and longstanding real estate
experience with a strong M&A roll-up
track-record
"Accelerate"
53
Ideally positioned to drive consolidation in the fragmented real estate ecosystem by further stepping up M&A activity
Ideally positioned to | Track record of successful M&A | |
drive industry consolidation | execution and integration | |
Accelerated M&A add-on strategy
with support of Advent
2020 | |
Track record | 2017 |
"We have done it | |
before" | |
2015 | |
Scale and footprint | 2013 |
"We are the natural | |
consolidator" | 2012 |
Unique ability to | 2010 |
unlock synergies | |
"We can make these | 2008 |
deals work" | |
2007 | |
Supportive | |
shareholders | |
"We have the | 2006 |
resources" | |
2000 |
54 Note: (1) Acquisition of 51%, with remaining 49% acquired in July 2014
real estate Businesses
(1)
AIPG
System Team
Housing
Great home for businesses
+
Customer and
market footprint
+
Ability to unlock further
synergies
+
Considerable
M&A fire power
Important milestone on the path to implementing "Aareal Next Level"
1 | Keep structured property financing on track | ||||
▪ Leverage on expanded origination, structuring and exit opportunities - | |||||
flexibly "play the matrix" (countries, asset classes, structures) | |||||
Structured | ▪ Expand servicing and digitisation opportunities | ||||
property | ACTIVATE! | ▪ De-risk balance sheet and flexibility where appropriate | |||
financing | ▪ Protect the group's backbone and retain "best in class position" | ||||
▪ Contribute to mega-trend ESG by focusing on high-quality, long lasting value | |||||
property financing | |||||
2 | Leverage and grow our housing and adjacent industries business | ||||
- Elevate product range by utilising deep understanding of customer processes
Housing & | and infrastructure… | |
▪ …by further expanding product suite with a focus on fee income | ||
adjacent | ELEVATE! | |
▪ Take opportunities of joint business model developments with customers and | ||
industries | ||
other market players (e.g. "objego"; joint-venture with ista) |
- Support affordable housing through our cost-efficient payment solutions
3 | As an integral part of our strategy strengthen Aareon's position as the leading software company for the | ||
European real estate industry over time and become a company with a strong independent value proposition | |||
▪ Continue execution of already announced organic growth strategy to double | ||
EBITDA in the mid-term… | ||
Aareon | ACCELERATE! | ▪ …particularly by expanding our digital solutions portfolio organically |
▪ On top: accelerate through additional M&A activities - if and when opportunities | ||
arise | ||
▪ Further invest in digital ecosystems relating sectors to meet today's challenges | ||
(e.g. virtual assistance, digitalised maintenance, mobile services) |
55
Strategic milestone: Aareal Bank enters into a long-term partnership with Advent to accelerate growth and value creation of Aareon
Advent acquires 30% of Aareon
- 30% minority stake in Aareon will be acquired by Advent at an attractive Enterprise value of
- ~960 mn1
- Corresponding equity value of €~860 mn1 of which Aareal Bank will receive net cash proceeds of
- ~260 mn as of closing
- Additionally Advent granted an earn-out component of up to € 50 mn dependent on certain performance conditions
- Closing of the transaction is subject to customary conditions, primarily related to anti-trust approvals, and is anticipated to take place in the fourth quarter of 2020
Financial effects on Aareal Bank Group
- Expected realisation (as of closing) of a significant, P&L neutral, capital gain of € ~180 mn after taking into account minority interest in equity, transaction costs and taxation on capital gain
- CET1 capital to be strengthened accordingly
- Upfront capital gain significantly outweighs minor EPS dilution (FY 2020: ~0.05 EUR2)
- EPS effect to be compensated over time by significantly raised Aareon ambition level and reinvestment of proceeds
The transaction takes advantage of the very favourable market environment for resilient software-centric businesses
56 | 1) on a 100% basis |
2) expected EPS effect for the time period of 31.03.2020 until 31.12.2020 | |
Rationale for the transaction: Aareal Bank and Advent to jointly support Aareon on its way to "Next Level"
Unlock
potential
Value
creation
Roll-up
M&A
strategy
Strategic
support
Financial
support
- Create a platform for Aareon to achieve its full potential
- Become Europe's undisputed software leader facilitating the digitalisation of the real estate industry
- Leverage the strategic advantages offered by digitalisation to contribute to a more sustainable economic growth
- Cornerstones of a value creation plan have been agreed upon; updated business plan to be defined and presented over the coming months
- Core elements: Boost organic growth, drive operational excellence and execute M&A
- Support and enhance existing M&A roadmap and significantly step up M&A activity
- Drive consolidation in a fragmented ecosystem
- Benefit from Advent's extensive network, transaction execution and sector expertise
- Advent to be represented in Aareon's Supervisory Board
- Advisory Board to support Aareon Management with industry and functional expertise with a view to achieve mutually agreed visions
- Utilise Aareon's significant debt capacity for M&A
- Further equity contribution from Aareal Bank and Advent on a pro rata basis as required
- Support by Advent with debt, equity and capital markets expertise
Ambition level: Become a "Rule
of 40" software company
today by 2025
Annual
revenue
growth
- 30% >40%
EBITDA margin
"Rule of 40": Sum of Aareon's
annual revenue growth and
EBITDA margin will at least
reach 40 per cent
57
Partnering with Advent will enable Aareal Bank and Aareon to even stronger support our clients
Aareon is ideally positioned to help its clients with the challenges and opportunities that come with the rapid digitisation of the real estate industry - Covid-19 seen as a catalyst for digitisation
Continued R&D investment will allow Aareon to underpin its role as a digital pioneer in the real estate industry by expanding its suite of innovative products and digital solutions for our clients
As the natural consolidator and a great home for acquired businesses, Aareon will bring the best products and solutions in the ecosystem to our clients
As Aareal Bank will remain the majority shareholder committed to Aareon's long-term performance, the existing synergies between the parent and subsidiary will be preserved - in the interests of both
institutions' clients
58
Value crystallisation today and strengthen the upsides for the future boost shareholder value
Value crystallisation today | ▪ Crystallise Aareon's current value in a very favourable market environment for |
resilient software-centric businesses for Aareal Bank | |
▪ Realise an attractive capital gain as of closing, hence… | |
▪ …significant increase of our regulatory capital |
Upsides for the future
Use of proceeds
- Achieve higher value contribution to our shareholders in a partnership by…
- further accelerating Aareon's EBITDA and revenue growth beyond promised 2025 levels
- multiple re-rating of Aareon as a "Rule of 40" company
- Minor EPS effect on Aareal Bank Group level to be compensated over time by significantly raised Aareon ambition level
- Unlock additional growth potential as promised in "Aareal Next Level":
▪ | Pursue value-enhancing sustainable opportunities in both segments | See |
of the Bank's business | next | |
▪ | Further support Aareon's M&A roadmap with strong new partner | page |
- Enhance flexibility regarding capital management actions
59
Additional boost by investing the proceeds value-enhancing
Proceeds of the transaction
Investing in our business…
By doing so
create
sustainable value
for Aareal Bank and hence our shareholders…
…leading to
Increased optionality regarding value-enhancing opportunities, if and
when they arise
Advanced flexibility regarding potential capital management actions
60
Aareal Bank and Aareon have 60+ years of shared history and look forward to an exciting future with Advent
Foundation & spin-off | Positioning & growth | Market leader | Accelerated growth |
1957-2002 | 2002-2020 | Today | Tomorrow |
Data processing centre of
Aareal Bank's predecessor company develops into an IT services group
Development of GES, the
precursor ERP solution
Spin-off of IT services
group into an independent
subsidiary
Formation and renaming of
property specialist bank
Aareal Bank
IT services group renamed as
Aareon AG
Transition from IT services
to software and growth delivered via a 3-phase model:
1 | Drive ERP adoption | |
and international | ||
expansion | ||
2 | Develop "ERP- | |
near" digital |
solutions | ||
Accelerate growth | ||
3 | via increased R&D | |
spending and | ||
opportunistic M&A | ||
Resulting in uninterrupted
revenue growth
No.1 European ERP | Develop, agree and execute a | ||||||||
provider to the real estate | joint value creation plan | ||||||||
industry | |||||||||
Boost | |||||||||
Sustainable client base with | |||||||||
organic growth | |||||||||
10m+ units under | |||||||||
management | Step up | ||||||||
M&A activity | |||||||||
400k+ tenants using Aareon | |||||||||
CRM portals & apps | Drive | ||||||||
operational excellence | |||||||||
Digital products successfully | |||||||||
"Rule of 40" | |||||||||
established | |||||||||
by 2025 | |||||||||
Pan-European geographic | |||||||||
footprint | |||||||||
61
Capital, B/S, Funding/Liquidity
62
SREP (CET 1) requirements
Demonstrating conservative and sustainable business model
B3 CET1 ratio vs. SREP (CET1) requirements | ||||
25% | ▪ Capital ratios significant above SREP requirements | |||
▪ B3 CET1 buffer translates into > € 1.3 bn | ||||
20.4% | ▪ | P2R relief by using possibility of partially fulfilling | ||
20% | requirements with AT1 and T2 capital | |||
▪ Total capital requirement 2020 (Overall Capital | ||||
Requirement (OCR)) amounts to 12.8% compared | ||||
15% | >> x2 | to 30.3% total capital ratio | ||
▪ All ratios already include TRIM effects as well as | ||||
prudential provisioning | ||||
9.26% | ||||
10% | 0.01% | 8.28% | ||
2,50% | 0.01% | |||
2,50% | ||||
5% | 2,25% | 1,27% | ||
Countercyclical Buffer | ||||
4,50% | 4,50% | Capital Conservation Buffer | ||
Pillar 2 Requirement | ||||
0% | Pillar 1 Requirement | |||
30.09.2020 | SREP 2020 | SREP 2020 | ||
B3 CET1 ratio | incl. P2R relief | |||
63 |
The way ahead
64
We take a strategic approach to sustainability management
Action areas key to securing the Company's long-term success - as identified in regularly updated materiality analysis
External recognition
Strong performance in
ESG ratings with
ambition to further
improve
- We are fostering the transition in Real Estate - to a more sustainable, digitised and connected future
- Our intensified effort will make ESG an even more integral part of our DNA and a driver of value enhancement for all our stakeholders
65
Next Steps in our ESG Journey
Strengthening ESG as an integral part of our DNA by refining our strategy and setting ambitious goals and targets
Ongoing | ||
Strategy | Define sustainability | |
Development & | ||
targets for management | ||
Implementation | compensation schemes | |
By next year | By 2022 & Beyond |
Quantitative sustainability measures and targets for long-term compensation schemes in place
Selected Examples (Action Areas + Measures)
Ongoing | ||||
▪ Frequent employee surveys and disclosure | Employee satis- | |||
Attractive Employer | ▪ External recognition of human capital management | |||
faction score | ||||
[Fair Pay Certification, Logib-D (08/2020), Top Employer (13th, 2019)] | ||||
By next year | ||||
Green Offering | ▪ ESG product offering e.g. lending, funding | No. of products | ||
Establish | Expand | |||
By 2022 | |||
Transparency | ▪ Transparency at portfolio level on selected ESG aspects [80%] | ||
▪ For more than 50% of our portfolio Green Building Certificates1), | Full ESG transparency |
Energy Performance Certificates or both are in place
1) DGNB, BREEAM, HQE, LEED
66
Dividend Policy
67
Aareal Next Level
Our Dividend Policy - Confirmed despite significant regulatory burdens
Payout ratio of up to 80% confirmed
Significant book value per share growth incl. dividend
60 €
Base
Dividend
+
Supplementary
Dividend
- We intend to distribute approx. 50% of the earnings per ordinary share (EpS) as base dividend
- In addition, we plan to distribute supplementary dividends of up to 20-30% of the EpS under the following prerequisites:
- No material deterioration of the environment (with longer-term and sustainably negative effects)
- Nor attractive investment opportunities neither positive growth environment
52 | 53 | |
50 | 49 | |
47 | ||
44 |
4037
32
30
20
10
0
2013 | 2014 | 2015 | 2016 | 2017 | 2018 | 2019 |
- Attractive dividend policy and significant book value growth creating sustainable value for Aareal and hence our shareholders
68
Regulation
69
Economic ICAAP the next focus on the regulatory agenda - our reading and take away
House of ICAAP
according to ECB ICAAP Guidelines
Maintaining capital
adequacy on an ongoing basis
over the medium term from 2 complementary
internal perspectives
1 Economic ICAAP on SSM priority list 2020 |
▪ Ongoing discussions regarding interpretation of requirements |
▪ Different methods currently used throughout Europe to |
estimate future volatility (scenario based vs. VAR models) |
▪ ICAAP Guidelines published end of 2018 are very |
conservative regarding holding period and confidential |
interval |
Regulatory capital ratios
Normative internal perspective
- Ongoing fulfilment of all relevant regulatory requirements and external constraints
- Medium-termprojections for at least three years:
- Ensure the ongoing fulfillment of OCR plus P2G in the baseline, and TSCR in adverse scenarios
- Takes into account all material risks (not limited to Pillar 1 risks)
- Considers upcoming changes in the legal / regulatory / accounting framework
- Adequate and consistent internal methods to quantifying impacts on Pillar 1 ratios
- Additional management buffers determined by the institutions
Economic ICAAP
Economic internal perspective
- Risks that may cause economic losses are covered by internal capital1)
- Capital adequacy concept based on economic value considerations (e.g. net present value approach)
- Internal definition of capital
- Point-in-timerisk qualification of the current situation feeding into medium-term assessment covering future developments
- Adequate and consistent internal risk quantification methods
- Internal indicators, thresholds and management buffers.
▪ ECB aims for future harmonization (equal to TRIM?) |
and potential tightening |
2 AT1 with normative triggers will no longer be eligible under Economic ICAAP:
Regulatory capital ratios: Future treatment appears to be more generous, although decisions will be taken on a case by case basis
- P2R could be partly covered by AT1 (and/or T2) Economic ICAAP: Future requirements will be tightened
- AT1 with normative triggers not accountable any more (see ECB feedback statement; question 208)
- Interim grandfathering of existing AT1 (issued, cut off date?) not decided yet, but unlikely from our point of view
- AT1 in the economic ICAAP, currently and presumably in future no alternative instruments (beside CET1) available to fulfil ECB requirements (economic triggers instead of normative)
- Economic ICAAP to become the new capital constraint for European banks?
- Different risk categories regarding regulatory capital ratios and economic ICAAP
70
AT1: ADI of Aareal Bank AG
71
Interest payments and ADI of Aareal Bank AG
Available Distributable Items (as of end of the relevant year)
31.12. 31.12. 31.12. 31.12. 31.12.
2015 | 2016 | 2017 | 2018 | 2019 |
€ mn |
Net Retained Profit | 99 | 122 | 147 | 126 | 120 | |
▪ | Net income | 99 | 122 | 147 | 126 | 120 |
▪ | Profit carried forward from previous year | - | - | - | - | - |
▪ | Net income attribution to revenue reserves | - | - | - | - | - |
+ | Other revenue reserves after net income attribution | 720 | 720 | 720 | 720 | 720 |
= | Total dividend potential before amount blocked1) | 819 | 842 | 870 | 846 | 840 |
./. Dividend amount blocked under section 268 (8) | 287 | 235 | 283 | 268 | 314 | |
of the German Commercial Code | ||||||
./. Dividend amount blocked under section 253 (6) | - | 28 | 35 | 42 | 40 | |
of the German Commercial Code | ||||||
= | Available Distributable Items1) | 532 | 579 | 552 | 536 | 486 |
+ | Increase by aggregated amount of interest expenses relating to | 46 | 46 | 32 | 24 | 23 |
Distributions on Tier 1 Instruments1) | ||||||
= | Amount referred to in the relevant paragraphs of the terms and | |||||
conditions of the respective Notes as being available to cover Interest | 578 | 625 | 584 | 560 | 509 | |
Payments on the Notes and Distributions on other Tier 1 Instruments1) | ||||||
1) Unaudited figures for information purposes only | ||||||
72 |
Group results Q3 2020
73
Aareal Bank Group
Results Q3 2020
01.07.- | 01.07.- | Change | ||||
30.09.2020 | 30.09.2019 | |||||
€ mn | € mn | |||||
Profit and loss account | ||||||
Net interest income | 128 | 134 | -4% | |||
Loss allowance | 61 | 27 | 126% | |||
Net commission income | 57 | 54 | 6% | |||
Net derecognition gain or loss | 3 | 15 | -80% | |||
Net gain or loss from financial instruments (fvpl) | -4 | 5 | -180% | |||
Net gain or loss on hedge accounting | 2 | -3 | -167% | |||
Net gain or loss from investments accounted for using the equity method | 0 | 0 | 0% | |||
Administrative expenses | 114 | 114 | 0% | |||
Net other operating income / expenses | 0 | 0 | 0% | |||
Operating Profit | 11 | 64 | -83% | |||
Income taxes | 10 | 24 | -58% | |||
Consolidated net income | 1 | 40 | -98% | |||
Consolidated net income attributable to non-controlling interests | 1 | 1 | 0% | |||
Consolidated net income attributable to shareholders of Aareal Bank AG | 0 | 39 | -100% | |||
Earnings per share (EpS) | ||||||
Consolidated net income attributable to shareholders of Aareal Bank AG1) | 0 | 39 | -100% | |||
of which: allocated to ordinary shareholders | -4 | 35 | -111% | |||
of which: allocated to AT1 investors | 4 | 4 | ||||
Earnings per ordinary share (in €)2) | -0.05 | 0.60 | -108% | |||
Earnings per ordinary AT1 unit (in €)3) | 0.04 | 0.04 |
- The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis.
- Earnings per ordinary share are determined by dividing the earnings allocated to ordinary shareholders of Aareal Bank AG by the
weighted average of ordinary shares outstanding during the financial year (59,857,221 shares). Basic earnings per ordinary share correspond to diluted earnings per ordinary share.
74 3) Earnings per AT1 unit (based on 100,000,000 AT1 units with a notional amount of 3 € each) are determined by dividing the earnings allocated to AT1 investors by the weighted average of AT1 units outstanding during the financial year. Earnings per AT1 unit (basic) correspond to (diluted) earnings per AT1 unit.
Aareal Bank Group
Results Q3 2020 by segments
Structured | A | |||||||||||||
Consulting / | a | Consolidation/ | Aareal Bank | |||||||||||
Property | Aareon | |||||||||||||
Services Bank | r | Reconciliation | Group | |||||||||||
Financing | ||||||||||||||
e | ||||||||||||||
01.07.- | 01.07.- | 01.07.- | 01.07.- | 01.07.- | 01.07.- | 01.07.- | 01.07.- | 01.07.- | 01.07.- | |||||
30.09. | 30.09. | 30.09. | 30.09. | 30.09. | 30.09. | 30.09. | 30.09. | 30.09. | 30.09. | |||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||
€ mn | ||||||||||||||
Net interest income | 119 | 138 | 9 | -4 | 0 | 0 | 0 | 0 | 128 | 134 | ||||
Loss allowance | 61 | 27 | 0 | 0 | 61 | 27 | ||||||||
Net commission income | 1 | 2 | 6 | 7 | 53 | 49 | -3 | -4 | 57 | 54 | ||||
Net derecognition gain or loss | 3 | 15 | 3 | 15 | ||||||||||
Net gain or loss from financial instruments (fvpl) | -4 | 5 | 0 | -4 | 5 | |||||||||
Net gain or loss on hedge accounting | 2 | -3 | 2 | -3 | ||||||||||
Net gain or loss from investments | 0 | 0 | 0 | 0 | ||||||||||
accounted for using the equity method | ||||||||||||||
Administrative expenses | 56 | 55 | 15 | 20 | 46 | 43 | -3 | -4 | 114 | 114 | ||||
Net other operating income / expenses | 0 | -1 | 0 | 0 | 0 | 1 | 0 | 0 | 0 | 0 | ||||
Operating profit | 4 | 74 | 0 | -17 | 7 | 7 | 0 | 0 | 11 | 64 | ||||
Income taxes | 9 | 27 | -1 | -6 | 2 | 3 | 10 | 24 | ||||||
Consolidated net income | -5 | 47 | 1 | -11 | 5 | 4 | 0 | 0 | 1 | 40 | ||||
Allocation of results | ||||||||||||||
Cons. net income attributable to non-controlling | 0 | 0 | 0 | 0 | 1 | 1 | 1 | 1 | ||||||
interests | ||||||||||||||
Cons. net income attributable to shareholders of | -5 | 47 | 1 | -11 | 4 | 3 | 0 | 0 | 0 | 39 | ||||
Aareal Bank AG | ||||||||||||||
75
Aareal Bank Group
Results 9M 2020
01.01.- | 01.01.- | Change | ||||
30.09.2020 | 30.09.2019 | |||||
€ mn | € mn | |||||
Profit and loss account | ||||||
Net interest income | 373 | 403 | -7% | |||
Loss allowance | 167 | 55 | 204% | |||
Net commission income | 168 | 164 | 2% | |||
Net derecognition gain or loss | 19 | 42 | -55% | |||
Net gain or loss from financial instruments (fvpl) | -11 | 5 | -320% | |||
Net gain or loss on hedge accounting | 4 | -4 | -200% | |||
Net gain or loss from investments accounted for using the equity method | 0 | 0 | 0% | |||
Administrative expenses | 352 | 370 | -5% | |||
Net other operating income / expenses | -10 | 1 | ||||
Operating Profit | 24 | 186 | -87% | |||
Income taxes | 7 | 65 | -89% | |||
Consolidated net income | 17 | 121 | -86% | |||
Consolidated net income attributable to non-controlling interests | 2 | 2 | 0% | |||
Consolidated net income attributable to shareholders of Aareal Bank AG | 15 | 119 | -87% | |||
Earnings per share (EpS) | ||||||
Consolidated net income attributable to shareholders of Aareal Bank AG1) | 15 | 119 | -87% | |||
of which: allocated to ordinary shareholders | 3 | 107 | -97% | |||
of which: allocated to AT1 investors | 12 | 12 | ||||
Earnings per ordinary share (in €)2) | 0.06 | 1.80 | -97% | |||
Earnings per ordinary AT1 unit (in €)3) | 0.12 | 0.12 |
1) | The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis. |
2) | Earnings per ordinary share are determined by dividing the earnings allocated to ordinary shareholders of Aareal Bank AG by the |
weighted average of ordinary shares outstanding during the financial year (59,857,221 shares). Basic earnings per ordinary share | |
76 3) | correspond to diluted earnings per ordinary share. |
Earnings per AT1 unit (based on 100,000,000 AT1 units with a notional amount of 3 € each) are determined by dividing the earnings |
allocated to AT1 investors by the weighted average of AT1 units outstanding during the financial year. Earnings per AT1 unit (basic) correspond to (diluted) earnings per AT1 unit.
Aareal Bank Group
Results 9M 2020 by segments
Structured | A | |||||||||||||
Consulting / | a | Consolidation/ | Aareal Bank | |||||||||||
Property | Aareon | |||||||||||||
Services Bank | r | Reconciliation | Group | |||||||||||
Financing | ||||||||||||||
e | ||||||||||||||
01.01.- | 01.01- | 01.01.- | 01.01- | 01.01.- | 01.01- | 01.01.- | 01.01- | 01.01.- | 01.01- | |||||
30.09. | 30.09. | 30.09. | 30.09. | 30.09. | 30.09. | 30.09. | 30.09. | 30.09. | 30.09. | |||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | |||||
€ mn | ||||||||||||||
Net interest income | 345 | 414 | 29 | -10 | -1 | -1 | 0 | 0 | 373 | 403 | ||||
Loss allowance | 167 | 55 | 0 | 0 | 167 | 55 | ||||||||
Net commission income | 4 | 6 | 18 | 17 | 155 | 150 | -9 | -9 | 168 | 164 | ||||
Net derecognition gain or loss | 19 | 42 | 19 | 42 | ||||||||||
Net gain or loss from financial instruments (fvpl) | -11 | 5 | 0 | 0 | -11 | 5 | ||||||||
Net gain or loss on hedge accounting | 4 | -4 | 4 | -4 | ||||||||||
Net gain or loss from investments | 0 | 0 | 0 | 0 | ||||||||||
accounted for using the equity method | ||||||||||||||
Administrative expenses | 173 | 195 | 50 | 57 | 138 | 127 | -9 | -9 | 352 | 370 | ||||
Net other operating income / expenses | -11 | 0 | 0 | -1 | 1 | 2 | 0 | 0 | -10 | 1 | ||||
Operating profit | 10 | 213 | -3 | -51 | 17 | 24 | 0 | 0 | 24 | 186 | ||||
Income taxes | 4 | 74 | -2 | -17 | 5 | 8 | 7 | 65 | ||||||
Consolidated net income | 6 | 139 | -1 | -34 | 12 | 16 | 0 | 0 | 17 | 121 | ||||
Allocation of results | ||||||||||||||
Cons. net income attributable to non-controlling | 0 | 0 | 0 | 0 | 2 | 2 | 2 | 2 | ||||||
interests | ||||||||||||||
Cons. net income attributable to shareholders of | 6 | 139 | -1 | -34 | 10 | 14 | 0 | 0 | 15 | 119 | ||||
Aareal Bank AG | ||||||||||||||
77
Aareal Bank Group
Results - quarter by quarter
Structured Property | Consulting / Services | Aareon | Consolidation / | Aareal Bank Group | |||||||||||||||||||||||||||
Financing | Bank | Reconciliation | |||||||||||||||||||||||||||||
Q3 | Q2 | Q1 | Q4 | Q3 | Q3 | Q2 | Q1 | Q4 | Q3 | Q3 | Q2 | Q1 | Q4 | Q3 | Q3 | Q2 | Q1 | Q4 | Q3 | Q3 | Q2 | Q1 | Q4 | Q3 | |||||||
2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | 2020 | 2019 | ||||||||||||||||||||||
€ mn | |||||||||||||||||||||||||||||||
Net interest income | 119 | 113 | 113 | 135 | 138 | 9 | 10 | 10 | -5 | -4 | 0 | -1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 128 | 122 | 123 | 130 | 134 | ||||||
Loss allow ance | 61 | 48 | 58 | 35 | 27 | 0 | 0 | 0 | 0 | 0 | 0 | 61 | 48 | 58 | 35 | 27 | |||||||||||||||
Net commission income | 1 | 1 | 2 | 4 | 2 | 6 | 7 | 5 | 6 | 7 | 53 | 49 | 53 | 58 | 49 | -3 | -3 | -3 | -3 | -4 | 57 | 54 | 57 | 65 | 54 | ||||||
Net derecognition | 3 | 9 | 7 | 22 | 15 | 3 | 9 | 7 | 22 | 15 | |||||||||||||||||||||
gain or loss | |||||||||||||||||||||||||||||||
Net gain / loss from fin. | -4 | -17 | 10 | -4 | 5 | 0 | 0 | 0 | 0 | 0 | -4 | -17 | 10 | -4 | 5 | ||||||||||||||||
instruments (fvpl) | |||||||||||||||||||||||||||||||
Net gain or loss on | 2 | 1 | 1 | 0 | -3 | 2 | 1 | 1 | 0 | -3 | |||||||||||||||||||||
hedge accounting | |||||||||||||||||||||||||||||||
Net gain / loss from | |||||||||||||||||||||||||||||||
investments acc. for | 1 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 0 | ||||||||||||||||||||
using the equity method | |||||||||||||||||||||||||||||||
Administrative | 56 | 49 68 | 59 | 55 | 15 | 17 | 18 | 16 | 20 | 46 | 46 | 46 | 46 | 43 | -3 | -3 | -3 | -3 | -4 | 114 | 109 | 129 | 118 | 114 | |||||||
expenses | |||||||||||||||||||||||||||||||
Net other operating | 0 | -11 | 0 | -1 | -1 | 0 | 0 | 0 | 1 | 0 | 0 | 1 | 0 | 1 | 1 | 0 | 0 | 0 | 0 | 0 | 0 | -10 | 0 | 1 | 0 | ||||||
income / expenses | |||||||||||||||||||||||||||||||
Operating profit | 4 | -1 | 7 | 63 | 74 | 0 | 0 | -3 | -14 | -17 | 7 | 3 | 7 | 13 | 7 | 0 | 0 | 0 | 0 | 0 | 11 | 2 | 11 | 62 | 64 | ||||||
Income taxes | 9 | -8 | 3 | 21 | 27 | -1 | 0 | -1 | -4 | -6 | 2 | 1 | 2 | 3 | 3 | 10 | -7 | 4 | 20 | 24 | |||||||||||
Consolidated net | -5 | 7 | 4 | 42 | 47 | 1 | 0 | -2 | -10 | -11 | 5 | 2 | 5 | 10 | 4 | 0 | 0 | 0 | 0 | 0 | 1 | 9 | 7 | 42 | 40 | ||||||
income | |||||||||||||||||||||||||||||||
Cons. net income | |||||||||||||||||||||||||||||||
attributable to non- | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 0 | 1 | 0 | 1 | 0 | 1 | 1 | 0 | 1 | 0 | 1 | |||||||||||
controlling interests | |||||||||||||||||||||||||||||||
Cons. net income | |||||||||||||||||||||||||||||||
attributable to ARL | -5 | 7 | 4 | 42 | 47 | 1 | 0 | -2 | -10 | -11 | 4 | 2 | 4 | 10 | 3 | 0 | 0 | 0 | 0 | 0 | 0 | 9 | 6 | 42 | 39 | ||||||
shareholders |
78
Definitions and contacts
79
Definitions
New Business | = | Newly acquired business + renewals | ||||||
Common Equity | CET 1 | |||||||
= | ||||||||
Tier 1 ratio | Risk weighted assets | |||||||
Operating profit/income ./. loss attributable to non-controlling interests ./. AT1 coupon | ||||||||
Pre tax RoE | = | |||||||
Average IFRS equity excl. non-controlling interests, AT1 and dividends | ||||||||
Admin expenses | ||||||||
CIR | = | |||||||
Net income | ||||||||
net interest income + net commission income + net result on hedge accounting + net trading income + results from non-trading | ||||||||
Net income | = | |||||||
assets + results from investments accounted for at equity + results from investment properties + net other operating income | ||||||||
Net stable funding | Available stable funding | |||||||
= | ||||||||
ratio | Required stable funding | |||||||
Liquidity coverage | Total stock of high quality liquid assets | |||||||
= | ||||||||
ratio | Net cash outflows under stress | |||||||
operating profit ./. income taxes ./. income/loss attributable to non controlling interests ./. net AT1 coupon | ||||||||
Earnings per share | = | |||||||
Number of ordinary shares | ||||||||
NOI x 100 (Net operating income, based on 12-months forward looking estimate) | ||||||||
Yield on Debt | = | |||||||
Outstanding incl. prior/pari-passu loans (without developments) | ||||||||
CREF-portfolio | = | Commercial real estate finance portfolio excl. private client business and WIB's public sector loans | ||||||
CREF-portfolio | = | Real estate finance portfolio incl. private client business and WIB's public sector loans | ||||||
NPL-ratio | = | Defaulted exposure acc. CRR (excl. exposure in cure period) / Total CREF Portfolio | ||||||
80
Note: All 2020 figures preliminary and unaudited
Contacts
Jürgen Junginger
Managing Director Investor Relations Phone: +49 611 348 2636 juergen.junginger@aareal-bank.com
Sebastian Götzken
Director Investor Relations
Phone: +49 611 348 3337 sebastian.goetzken@aareal-bank.com
Carsten Schäfer
Director Investor Relations
Phone: +49 611 348 3616 carsten.schaefer@aareal-bank.com
Karin Desczka
Manager Investor Relations Phone: +49 611 348 3009 karin.desczka@aareal-bank.com
Julia Taeschner
Group Sustainability Officer
Director Investor Relations
Phone: +49 611 348 3424 julia.taeschner@aareal-bank.com
Daniela Thyssen
Manager Sustainability Management Phone: +49 611 348 3554 daniela.thyssen@aareal-bank.com
Leonie Eichhorn | Robin Weyrich |
Sustainability Management | Sustainability Management |
Phone: +49 611 348 3433 | Phone: +49 611 348 2335 |
leonie.eichhorn@aareal-bank.com | robin.weyrich@aareal-bank.com |
81
Disclaimer
© 2021 Aareal Bank AG. All rights reserved.
This document has been prepared by Aareal Bank AG, exclusively for the purposes of a corporate presentation by Aareal Bank AG. The presentation is intended for professional and institutional customers only.
It must not be modified or disclosed to third parties without the explicit permission of Aareal Bank AG. Any persons who may come into possession of this information and these documents must inform themselves of the relevant legal provisions applicable to the receipt and disclosure of such information, and must comply with such provisions. This presentation may not be distributed in or into any jurisdiction where such distribution would be restricted by law.
This presentation is provided for general information purposes only. It does not constitute an offer to enter into a contract on the provision of advisory services or an offer to purchase securities. Aareal Bank AG has merely compiled the information on which this document is based from sources considered to be reliable - without, however, having verified it. The securities of Aareal Bank AG are not registered in the United States of America and may not be offered or sold except under an exemption from, or pursuant to, registration under the United States Securities Act of 1933, as amended. Therefore, Aareal Bank AG does not give any warranty, and makes no representation as to the completeness or correctness of any information or opinion contained herein. Aareal Bank AG accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this presentation. The securities of Aareal Bank AG are not registered in the United States of America and may not be offered or sold except under an exemption from, or pursuant to, registration under the United States Securities Act of 1933, as amended.
This presentation may contain forward-looking statements of future expectations and other forward-looking statements or trend information that are based on current plans, views and/or assumptions and subject to known and unknown risks and uncertainties, most of them being difficult to predict and generally beyond Aareal Bank AG's control. This could lead to material differences between the actual future results, performance and/or events and those expressed or implied by such statements.
Aareal Bank AG assumes no obligation to update any forward-looking statement or any other information contained herein.
82
Thank you.
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Aareal Bank AG published this content on 19 January 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 20 January 2021 08:35:04 UTC