Aareal Bank : Analyst Conference - preliminary 2023 results, Presentation to the Analyst Conference on 29 February 2024

Conference Call

Preliminary Results 2023

29 February 2024

Jochen Klösges (CEO)

Marc Hess (CFO)

Agenda

▪ Strategic Achievements in 2023

▪ Financial Performance

▪ Business Development

▪ Funding, Liquidity & Capital

▪ Outlook

▪ Appendix

1

Strategic Achievements 2023

Strong underlying performance at both the Bank and Aareon

✓ Strong operating resilience

Bank (SPF + BDS)

Operating profit of € 221 mn close to target and prior year

Strong earnings power compensating

provisions from US office

Significant investments

in NPL reduction

"Prepared for solution"

Solid capital position

further improved

✓ Capital market readiness

Aareon

Strong increase in sales revenue (12%) and adj. EBITDA (33%)

"Rule-of-40"

already achieved

Third party debt facility

established

Significant investments in

efficiency and M&A

(EBT: € -72 mn)

Group operating profit at € 149 mn, despite

significant add-on investments and comprehensive provisioning

2

Note: All 2023 figures preliminary and unaudited

Strategic Achievements 2023

Long standing partnership strengthened to (i) deepen and expand Aareal's deposit franchise and (ii) build up "Aareon Pay" business

Key benefits

• Deepen deposit franchise by tapping additional growth potential in Aareon's German client base
• Explore opportunities to expand deposit franchise in Aareon's European client base
• Establish an integrated software and payments house
  - Continue expanding the "Aareon Pay" proposition
• Accelerated R&D and innovation in residential payment solutions
• Continue to cross-sell software products into
  Aareal Bank's client base
• Strengthened and focused one-stop shop for banking, payments and software solutions with clear accountability

Customers	▪ Aareal Bank remains dedicated long-term banking
partner to the institutional housing industry

Aareal and Aareon

strengthen long term

partnership with Aareon

becoming majority shareholder in First Financial

Target:

Increase combined business in banking service and software products

3

Note: All 2023 figures preliminary and unaudited

Agenda

▪ Strategic Achievements in 2023

▪ Financial Performance

▪ Business Development

▪ Funding, Liquidity & Capital

▪ Outlook

▪ Appendix

4

Financial Performance

Strong underlying performance at both Bank and Aareon

Bank Profit

Bank Earnings

Power

Bank Capital

Pre tax pofit (€ mn)		258
242		221
2022		2023 Target	2023 Prelim.
Pre-provision profit (€ mn)	x2.6	731
438
283
2021	2022	2023 Prelim
CET1 Ratio (%)	19.3%		19.4%

2022	2023 Prelim

• Profit close to original target despite active NPL management and unbundling of Aareon
• Pre-provisionprofit development demonstrates strongly improved operating resilience
• Strong capital ratios slightly increased

Software

Investment

Software

Operational

Performance

	Aareon Investments into efficiency and M&A (€ mn)
									96
35
			2023 Target				2023 Prelim.
	Aareon adj. EBITDA (€ mn)	x2	160-1701)

75	100
2022	2023 Prelim	2024 Target

• Opportunities taken to execute Aareon investment plan ahead of schedule
• Positive run-rate impact of € ~20 mn from efficiency measures taken in 2023
• Investments drive significant improvement in profitability

1) Incl. positive contribution from long-term partnership agreement with Bank

5

Note: All 2023 figures preliminary and unaudited

Financial Performance - Bank

Profit close to prior year despite active NPL management

Bank operating profit

400	€ mn
350						250 - 3001)
300	242	258	231
			221
250
200				-10
150
100
50
0
	2022	2023	2023	Aareon's	2023	2024
		internal	adj.	third-party		target
		target		debt facility

Development pre-provision profit2)

800	€ mn		731
600		> x2	195
		438	202
400
283
200			203
0			131
	2021	2022	2023
		Q1	Q2	Q3	Q4

1. Incl. impact from long-term partnership agreement with Aareon
2. Provision incl. LLP and LLP (FVPL)

6

• Strong operating performance, increasing operating resilience further demonstrated with pre-provision profit > x2 vs. 2021
• Strong income development
• 1. Compensates substantial US office LLPs
  2. Active NPL management:
  3. • Significant reduction of € ~500 mn legacy NPLs in 2023
     • € ~500 mn US office loans prepared for solution in 2023 with execution Q1 2024

• Outlook 2024:
  Operating profit target for the bank of € 250 - 300 mn

Loan loss provisions2)

800 € mn

600			510
		19	others
			37	S1/S2 + Overlay
400			115	Swift NPL reduction
200	169	199
65	339	US office
0		134	Russia
	2021	2022	2023

Note: All 2023 figures preliminary and unaudited

Financial Performance - Aareon

Further investments drive significant improvement in profitability

Sales revenue

500	€ mn			440 - 4601)
400			344
		308
300	269
200
	2021	2022	2023	2024 target

		Adj. EBITDA
200	€ mn			160 - 1701)
150
		100
		75
100	67
50
0
	2021	2022	2023	2024 target
			EBT

100	€	mn
	~501)

50 ~25

0	-35
-50	-61
-100	-96	-72

2023 target		Investments	2023	2024
pre adjusted		Budget		Add-on		target

1) Incl. positive contribution from long-term partnership agreement with Bank

7

With an adj. EBITDA of € 100 mn and sales revenue of € 344 mn 2023 targets achieved

• 2023 characterized by M&A activities and significant investments into operational efficiency
• On top of the originally announced investments
  of € 35 mn an additional € 61 mn was invested into efficiency measures and M&A incl. refinancing
• • Foundation for strong profit performance in 2024
• Based on current run rate, high visibility towards adj. EBITDA in a range of € 160 - 170 mn in 2024, translates into an increase in EBT of € ~120 mn to ~50 mn (adj. EBITDAC to increase from € 75 mn to € 140 - 150 mn in 2024)

Note: All 2023 figures preliminary and unaudited

Financial Performance - Group Profit & Loss

Strong underlying performance thanks to diversified business model

	Q4 '22	Q4 '23	FY '22	FY '23	∆ FY
Profit & loss (€ mn)	'23/'22
Net interest income	188	268	702	978	39%
(NII)
Net commission income	78	82	277	307	11%
(NCI)
Loan loss provision	22	179	192	441	130%
(LLP)
Admin expenses	148	159	571	645	13%
Other op. income /	-14	-18	23	-50	n/a
expenses1)
Operating profit (EBT)	82	-6	239	149	-38%
Profit after tax	53	-52	153	48	-66%

• NII up by 39% supported diversified business model with market leading deposit franchise and loan margins above plan
• Aareon and BDS continued to grow NCI successfully
• Substantial LLP of € 510 mn (incl. € 69 mn FVPL) due to headwinds from US office markets and comprehensive LLP strategy (incl. preparing for solution)
• Increase in admin expenses dominated by significant investments into Aareon of € 96 mn while bank remained on a stable level (CIR Bank2): 32%)
• Strong operating performance allowed an increase in investments spent vs. budget by € 126 mn:

€ mn	Plan	Add-on	Spent
Aareon	35	61	96
Swift NPL	60	55	115
reduction
Third-party debt	0	10	10
facility Aareon
Total	95	126	221

• Depreciation of DTA in connection with takeover by Atlantic BidCo

8

1) Includes Net derecognition gain or loss, Net gain or loss from financial instruments (fvpl), Net gain or loss from hedge accounting, Net gain or loss from investments accounted for using the equity method, Net other operating income/expenses

2) Segment SPF & BDS, excl. bank levy / deposit guaranty scheme

Note: All 2023 figures preliminary and unaudited

Agenda

▪ Strategic Achievements in 2023

▪ Financial Performance

▪ Business Development

▪ Funding, Liquidity & Capital

▪ Outlook

▪ Appendix

9