AAREAL BANK AG
Aareal Bank continues to enjoy a very solid capital base. Despite a higher portfolio volume and burdens from Covid-19
pandemic effects, the common equity tier 1 (CET1) ratio is comfortable by international standards at 18.8 per cent (31
December 2020: 19.6 per cent). The targeted dividend payments have already been deducted. The total capital ratio stood
at 28.0 per cent (31 December 2019: 29.9 per cent). The CET1 ratio, determined on the basis of the Basel Committee's
final framework - the Basel IV phased-in ratio - was 17.3 per cent (31 December 2019: 17.1 per cent).
Notes on the preliminary income statement for the fourth quarter of 2020
According to the preliminary, unaudited figures, net interest income in the final quarter of 2020 amounted to EUR 139
million (Q4 2019: EUR 130 million), after EUR 128 million in the previous quarter. As expected, this represents a
significant increase, particularly due to portfolio growth and TLTRO effects.
At EUR 9 million, the net derecognition gain fell significantly below the same quarter of the previous year (Q4 2019: EUR
22 million). The result is largely attributable to effects from early loan repayments. The previous year's figure
included positive non-recurring income of around EUR 10 million from adjustments made to the Treasury portfolio.
Loss allowance amounted to EUR 177 million during the fourth quarter (Q4 2019: EUR 35 million) and was thus considerably
higher than in the same quarter of the previous year due to the pandemic as communicated. Net commission income of EUR 66
million slightly exceeded the previous year's figure (Q4 2019: EUR 65 million). Consolidated administrative expenses
amounted to EUR 117 million during the fourth quarter (Q4 2019: EUR 118 million).
On balance, the consolidated operating loss for the fourth quarter amounted to EUR -99 million (Q4 2019: profit of EUR 62
million). Taking EUR 13 million in income from income taxes into account, consolidated net income was EUR -86 million.
After deduction of EUR 3 million in non-controlling interest income, and assumed pro-rata net interest payable on the AT1
bond of EUR 4 million, consolidated net income allocated to ordinary shareholders of Aareal Bank AG amounted to EUR -93
million (Q4 2019: EUR 38 million).
Outlook: Return to profit expected for 2021
Besides the strategic measures and initiatives within the framework of "Aareal Next Level", Aareal Bank Group's focus
in the 2021 financial year will be on coping with the impact of the Covid-19 pandemic in the best way possible -
together with its clients. In this context, it will be crucial how quickly the emerging recovery of the real economy
will gain momentum. Aareal Bank Group continues to anticipate a 'swoosh-shaped' trend and anticipates a marked recovery
during this year and the next.
Based on this assumption and current insights, Aareal Bank Group expects a clearly positive consolidated operating
profit in a range of between EUR 100 million and EUR 175 million for 2021 as a whole (2020: EUR -75 million), despite high
loss allowance. Earnings per share (EpS) is therefore expected to be in the region between EUR 0.70 and EUR 1.50 (2020: EUR
-1.50). Naturally, in the current environment, this forecast is subject to significant uncertainty, especially with
regard to the assumed duration and intensity of the crisis, the pace of recovery and the associated effects on the
clients, as well as prevailing uncertainty concerning regulatory and accounting provisions, and the possibility that
individual loan defaults cannot be reliably predicted. Effects from a potential, selective continuation of accelerated
de-risking activities are not included either.
Income is expected to rise significantly over the previous year. Net interest income is expected to rise to between EUR
550 million and EUR 580 million (2020: EUR 512 million), reflecting the higher (and further growing) loan portfolio. Net
commission income is likely to rise further, thanks in particular to Aareon's growth, to between EUR 250 million and EUR
270 million (2020: EUR 234 million). Based on the assumed 'swoosh' scenario, Aareal Bank forecasts a loss allowance in a
range of between EUR 125 million and EUR 200 million (2020: EUR 344 million). However, this item is subject to considerably
higher uncertainty than usual, due to the Covid-19 pandemic. Administrative expenses should amount to between EUR 520
million and EUR 540 million (2020: EUR 469 million). Besides the non-recurrence of the previous year's cost savings due to
Covid-19, this reflects the planned growth of Aareon and the initiatives launched on the basis of the strategic review.
In the Structured Property Financing segment, a portfolio size of around EUR 29 billion is envisaged by the end of the
year, market conditions permitting and subject to exchange rate fluctuations. Aareal Bank plans new business volume of
EUR 7 billion to EUR 8 billion on this basis. For the Banking & Digital Solutions (previously: Consulting/Services Bank)
segment, Aareal Bank assumes further slight growth in net commission income (2020: EUR 26 million) and expects an average
deposit volume from the housing industry of around EUR 11 billion. Aareon expects a marked increase in sales revenue in
the region of EUR 276 to EUR 280 million for the current year (2020: EUR 258 million). Adjusted EBITDA is likely to further
increase to between EUR 63 million and EUR 65 million (2020: EUR 62 million). This forecast does not include any effects from
future M&A transactions.
Contacts
Sven Korndörffer
Phone: +49 611 348 2306
sven.korndoerffer@aareal-bank.com
Christian Feldbrügge
Phone: +49 611 348 2280
christian.feldbruegge@aareal-bank.com
About Aareal Bank Group:
Aareal Bank Group, headquartered in Wiesbaden, is a leading international property specialist. It provides smart
financings, software products, and digital solutions for the property sector and related industries, and is present
across three continents: Europe, North America and Asia/Pacific. Aareal Bank AG, whose shares are included in Deutsche
Börse's MDAX index, is the Group's parent entity. It manages the various entities organised in the Group's three
business segments: Structured Property Financing, Banking & Digital Solutions, and Aareon. The Structured Property
Financing segment encompasses all of Aareal Bank Group's property financing and funding activities. Here, the Bank
supports its clients in making large-volume commercial property investments. The investment properties mostly comprise
office buildings, hotels, shopping centres, logistics and residential property, as well as student apartments. In the
Banking & Digital Solutions segment, Aareal Bank Group supports businesses from the housing, property management and
energy industries as a digitalisation partner - combining extensive advisory services and product solutions with
traditional corporate banking services and deposit-taking. Its subsidiary Aareon, the leading supplier of ERP software
and digital solutions for the European property sector and their partners, represents the third business segment.
Aareon offers reliable, pioneering solutions in the fields of consulting, software and services to optimise
IT-supported business processes, and to extend business models. The Aareon Smart World digital platform links
businesses from the housing industry and related sectors with customers, staff and business partners, as well as
connecting technical devices in apartments and buildings.
Consolidated Income Statement of Aareal Bank Group
Preliminary results for the financial year 2020
(unaudited, in accordance with IFRSs)
1 Jan - 31 Dec 1 Jan - 31 Dec Change
2020 2019
EUR mn EUR mn %
Net interest income 512 533 -4
Loss allowance 344 90 282
Net commission income 234 229 2
Net derecognition gain or loss 28 64 -56
Net gain or loss from financial instruments (fvpl) -32 1
Net gain or loss from hedge accounting 6 -4 -250
Net gain or loss from investments accounted for using the equity 1 1 0
method
Administrative expenses 469 488 -4
Net other operating income/expenses -11 2
Operating profit -75 248 -130
Income taxes -6 85 -107
Consolidated net income -69 163 -142
Consolidated net income attributable to non-controlling interests 5 2 150
Consolidated net income attributable to shareholders of Aareal Bank -74 161 -146
AG
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank -74 161 -146
AG ^1)
of which: allocated to ordinary shareholders -90 145 -162
of which: allocated to AT1 investors 16 16 (MORE TO FOLLOW) Dow Jones Newswires
February 24, 2021 01:06 ET (06:06 GMT)
