Aareal Bank : Regulatory Disclosure Report for H1 2022 of Aareal Bank Group (NSFR correction dated 20 September 2022)

Regulatory Disclosure Report for H1 2022

of Aareal Bank Group

Regulatory Disclosure Report for H1 2022

1. Preface
2. Overview of Regulatory Key Metrics

1. Regulatory Capital

7 Composition of regulatory own funds

14 Reconciliation of regulatory own funds to balance sheet in the audited financial statements

16 Risk-weighted assets and capital requirements

1. Countercyclical Buffer
2. Credit Risks and Quantitative Information on Credit Risk Mitigation
3. Credit quality of exposures

1. Exposures subject to a general payment moratorium
2. Credit risk mitigation

1. Credit Risk Standard Approach

1. Advanced IRB Approach (AIRBA)

1. Counterparty Credit Risk

1. Liquidity Risk

44 Liquidity Coverage Ratio

46 Net Stable Funding Ratio (NSFR)

1. Interest Rate Risk in the Banking Book

1. Leverage Ratio

1. Imprint

Regulatory Disclosure Report for H1 2022

Preface

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Preface

Aareal Bank Group is classified as a significant institution within the scope of the Single Supervisory

Mechanism (SSM) and is therefore subject to direct supervision by the European Central Bank (ECB).

In March 2021, the European Commission published the Commission Implementing Regulation (EU) 2021/637 for the disclosure of the information referred to in Titles II and III of Part Eight of Regulation (EU) No 575/2013 (Capital Requirements Regulation - "CRR"). These substantiate the revised disclosure requirements to be applied from 28 June 2021.

Due to its consolidated total assets of more than € 30 billion, Aareal Bank Group is classified as a large institution in accordance with Article 4 no 146 lit. d) of the CRR. The scope of the information that has to be disclosed on a half-yearly basis is therefore based on the requirements of Article 433a (1) lit. b) and c) of the CRR.

Due to the use of the waiver option (section 2a (1) sentence 1 of the German Banking Act (Kreditwesen- gesetz - "KWG") in conjunction with Article 7 (3) of the CRR), Aareal Bank complies with the requirements of parts 2, 3, 4, 6, 7 and 8 of the CRR at a Group level. Aareal Bank AG, whose registered office is in Wiesbaden, Germany, is the parent institution of the Group (LEI code EZKODONU5TYHW4PP1R34).

The details we have published in this disclosure report are based on both the Credit Risk Standard

­Approach (CRSA) and the Advanced IRB Approach (Advanced Internal Ratings-Based Approach - AIRBA).

Minor differences may occur regarding the figures stated, due to rounding.

As the equivalent value of derivatives and the related counterparty credit risk for the purpose of regu­ latory reporting are determined exclusively according to the standardised approach for measuring counter- party credit risk (SA-CCR) (Article 274 et seqq. of the CRR), disclosure of table EU CCR7 (RWA flow statements of credit risk exposures, the counterparty credit risks of which are measured taking the internal model method into consideration) is not required.

Similarly, as the Bank does not use internal models for the calculation of own funds requirements for market risk, the table EU MR2-B (RWA flow statements of market risk under the internal model approach) is not disclosed either.

Aareal Bank does not apply the transitional provisions, pursuant to Article 473a of the CRR, to mitigate the impact of the introduction of IFRS 9 on regulatory capital requirements. Accordingly, the obligation to provide additional disclosures (as specified in detail in EBA guidelines EBA/GL/2018/01) is waived.

Since the ECB does not classify Aareal Bank Group as a Global Systemically Important Institution (G-SII) on the basis of Delegated Regulation (EU) 1222/2014, the disclosure requirements pursuant to Article 437a of the CRR ("Disclosure of own funds and eligible liabilities") do not apply.

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Overview of Regulatory Key Metrics

Regulatory Disclosure Report for H1 2022

Overview of Regulatory Key Metrics

The table EU KM1 provides an overview of the regulatory key metrics in accordance with Article 447 of the CRR. The overview also includes the additional regulatory capital as required by the Supervisory Review and Evaluation Process (SREP).

EU KM1: Key metrics

			a		b		c		d		e
			30 Jun 2022		31 Mar 2022		31 Dec 2021		30 Sep 2021		30 Jun 2021
€ mn
	Available own funds
1	Common Equity Tier 1 (CET1) capital	2,579	2,240	2,322	2,225	2,298
2	Tier 1 (T1) capital	2,879	2,540	2,622	2,525	2,598
3	Own funds	3,208	2,906	3,016	2,945	3,048
	Risk-weighted exposure amounts
4	Risk-weighted exposure amounts
	(Risk-weighted assets, RWAs)	10,094	10,767	10,446	10,803	11,981
	Capital ratios (as a percentage of risk-weighted
	exposure amount)
5	Common Equity Tier 1 ratio (CET1 ratio)	25.55	20.81	22.23	20.59	19.18
6	Tier 1 ratio (T1 ratio)	28.52	23.59	25.10	23.37	21.69
7	Total capital ratio (TC ratio)	31.78	26.99	28.87	27.26	25.44
	Additional own funds requirements to address risks
	other than the risk of excessive leverage
	(as a percentage of risk-weighted exposure amount)
EU 7a	Additional own funds requirements to address risks other
	than the risk of excessive leverage	2.75	2.75	2.25	2.25	2.25
EU 7b	of which: to be made up of CET1 capital	1.55	1.55	1.27	1.27	1.27
EU 7c	of which: to be made up of Tier 1 capital	2.07	2.07	1.69	1.69	1.69
EU 7d	Total SREP own funds requirements	10.75	10.75	10.25	10.25	10.25
	Combined buffer and overall capital requirement
	(as a percentage of risk-weighted exposure amount)
8	Capital conservation buffer	2.50	2.50	2.50	2.50	2.50
EU 8a	Conservation buffer due to macro-prudential or systemic
	risk identified at the level of a Member State	-		-		-		-		-
9	Institution specific countercyclical capital buffer	0.01	0.00	0.01	0.01	0.01
EU 9a	Systemic risk buffer	-		-		-		-		-
10	Global Systemically Important Institution buffer	-		-		-		-		-
EU 10a	Other Systemically Important Institution buffer	-		-		-		-		-
11	Combined buffer requirement	2.51	2.50	2.51	2.51	2.51
EU 11a	Overall capital requirements	13.26	13.25	12.76	12.76	12.76
12	CET1 available after meeting the total SREP own funds
	requirements	19.50	14.76	16.46	14.83	13.42
	Leverage ratio
13	Total exposure measure	48,802	48,047	47,724	45,803	45,607
14	Leverage Ratio (%)	5.90	5.29	5.49	5.51	5.70
										>

Regulatory Disclosure Report for H1 2022

Overview of Regulatory Key Metrics

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			a		b		c		d		e
			30 Jun 2022		31 Mar 2022		31 Dec 2021		30 Sep 2021		30 Jun 2021
€ mn
	Additional own funds requirements to address
	the risk of excessive leverage
	(as a percentage of total exposure measure)
EU 14a	Additional own funds requirements to address the risk
	of excessive leverage	-		-		-		-		-
EU 14b	of which: to be made up of CET1 capital	-		-		-		-		-
EU 14c	Total SREP leverage ratio requirements	3.00	3.00	3.00	3.00	3.00
	Leverage ratio buffer and overall leverage ratio require-
	ment (as a percentage of total exposure measure)
EU 14d	Leverage ratio buffer requirement	-		-		-		-		-
EU 14e	Overall leverage ratio requirement	3.00	3.00	3.00	3.00	3.00
	Liquidity Coverage Ratio
15	Total high-quality liquid assets (HQLA)
	(weighted value - average)	6,750	6,775	6,643	6,695	7,035
EU 16a	Cash outflows - total weighted value	3,634	3,287	3,080	3,020	3,045
EU 16b Cash inflows - total weighted value	672	549	472	450	447
16	Total net cash outflows (adjusted value)	2,961	2,740	2,607	2,570	2,598
17	Liquidity coverage ratio (LCR) (%)	231.23	248.54	255.42	261.15	271.66
	Net Stable Funding Ratio1)
18	Total available stable funding	35,166	32,273	33,011	34,997	34,414
19	Total required stable funding	30,901	27,523	27,064	29,807	29,667
20	NSFR (%)	113.80	117.26	121.98	117.41	116.00

1. A previous version of the reporting forms underlying table EU LIQ2 omitted € 3 million in additional value adjustments to assets and liabilities carried at fair value (prudent valuation), both in terms of available and required stable funding. ASF and RSF items were adjusted on 20 Sep- tember 2022, with no resulting change in the NSFR.

Development of key metrics

Capital ratios and RWA

Compared to the previous disclosure date of 31 March 2022, the capital ratios (CET1, T1 and

TC ratios) improved, due to the decline in RWAs by € 673 million and an increase in regulatory capital (€ +302 million).

Besides the mismatch between disbursements and taking into account eligible collateral pursuant to the CRR, the decline in RWAs with a simultaneous increase in new business in the Structured Property Financing segment was mostly driven by quality improvements in the existing commercial property ­finance portfolio. In addition, the non-performing loan portfolio was further reduced.

The increase in regulatory capital was largely due to a € 339 million increase in CET1 capital, which ­itself was primarily driven by a change in the OCI (€ -104 million). In accordance with the Investment Agreement entered into with Atlantic BidCo GmbH, there are no plans to distribute any dividends for the 2021 financial­ year. This led to a € 96 million increase of retained earnings recognised in the CET1 capital. Moreover, loss allowance recorded during the course of the year was not deducted, but already taken into account in CET1 capital through the inclusion of the interim result.