Press Information
Aareal Bank continues its growth path
- New business generated in the Structured Property Financing segment up 37.2%, to € 5.9 billion
- Marked increase in results contributed by the Consulting/Services segment
- No exposure to the US sub-prime market
Wiesbaden, 13 August 2007 - Aareal Bank Group consolidated net income after minority interest was up 74.5%, to € 89 million for the first six months of 2007 (H1 2006: € 51 million). These results are attributable to continuous enhancements to operating performance during the course of the year, and to non-recurring effects. The return on equity after taxes increased to 16.8% for the first half of 2007 (H1 2006: 10.5%).
The bank posted significant growth in its Structured Property Financing segment, where new business was up 37.2%, to € 5.9 billion in the period under review (H1 2006: € 4.3 billion). International markets accounted for roughly 90% of new business, with the remaining 10% generated in the German market.
“We were successful in continuing to raise the international profile of our Structured Property Financing segment”, explains Dr. Wolf Schumacher, Chairman of the Management Board of Aareal Bank: “This enabled us to strongly boost new business. At the same time, the Consulting/Services segment posted a marked improvement in profitability, reflecting the success of our sales efforts and the progress made to enhance efficiency and cut costs", Schumacher adds.
Commenting on the current turbulence in the US property markets, Schumacher emphasises that “the bank has no direct or indirect exposure to the sub-prime market.”
Results of operations
Net interest income was up by € 2 million during the period under review, to € 202 million. Provision for loan losses of € 44 million for the first half of 2007were unchanged compared to the same period of the previous year; the figure is in line with the € 80 to 90 million range projected for the year 2007 as a whole.
Net commission income was € 73 million in the first six months, down € 3 million from the same period of the previous year. It should be noted that the € 76 million recorded for the first half of 2006 included € 7 million in non-recurring income from an asset sale by a fund managed by the bank’s Deutsche Structured Finance subsidiary. Adjusted for this one-off item, net commission income was up 5.8%.
The result from non-trading assets amounted to € 26 million after € 24 million in the same period of the previous year. Both the figure for the current year and the previous year’s figure include non-recurring income items; adjusted for these effects, the result from non-trading assets for the first half of 2007 was € 18 million (H1 2006 adjusted: € 24 million).
The results from companies accounted for at equity include € 5 million in results for the 2006 financial year, attributable to our stake in Immobilien Scout GmbH.
Planned investments in the expansion of Aareal Bank’s international business, accompanied at the same time by strict cost management, resulted in a slight increase in administrative expenditure, to € 180 million during the first half of 2007 (H1 2006: € 179 million).
Net other operating income and expenses rose from -€ 3 million in the corresponding period of the previous year to € 37 million in the first half of 2007. In addition to a compensation payment of € 37 million received from DEPFA in the first quarter of 2007, the net figure also includes a € 2 million profit from the interest held in Interhotel Group.
Aareal Bank’s operating profit increased by 67.1%, to € 132 million (H1 2006: € 79 million). Adjusted for non-recurring effects, operating profit in the first half of 2006 and 2007 amounted to € 70 million and € 87 million respectively. This corresponds to an increase of 24.3%.
Loan portfolio under management further diversified
The total volume of the loan portfolio under management was € 23.1 billion at the end of June 2007, corresponding to an increase of 1.6% from the year-end 2006. The very strong new business momentum also permitted Aareal Bank to further diversify the regional structure of its portfolio: the bank reduced its German business by 7.1% to € 7.9 billion, in a targeted manner, and expanded the international business by 6.8% to € 15.3 billion. The international share now accounts for around two-thirds of the overall portfolio.
Capital market refinancing expanded
Aareal Bank further expanded its refinancing activities on the capital markets, growing its investor base both nationally and internationally. Aareal Bank raised more than € 3.6 billion in long-term funds during the first half of 2007, comprising € 500 million in public bearer bonds issued, € 450 million in bearer instruments, and € 1.6 billion in registered securities. Moreover, Aareal Bank placed its second jumbo Pfandbrief, issued at the end of March 2007 with a volume of € 1 billion; 40% of allocated orders were attributable to international investors from
12 countries.
Consulting / Services set for profitable growth
In its Consulting/Services segment, Aareal Bank benefited from restructuring measures initiated in the previous year: operating profit showed a marked increase, from € 4 million in the corresponding period of the previous year to € 19 million in the first half of 2007. In the IT solutions business, the bank’s wholly-owned subsidiary Aareon AG further extended its market position as a leading consultancy and IT systems house for the property management sector during the first half of the year. 50 companies in German now use the SAP-based Blue Eagle system offered by Aareon.
Outlook
“Aareal Bank’s results posted for the first half of 2007 provide the basis for continued profitable and organic growth”, Dr. Schumacher explains, adding that the bank is set to “consistently implement its growth strategy throughout the second half of 2007.” Aareal Bank affirmed its full-year projections for both business segments: the bank is targeting a return on equity after taxes in excess of 13% for the current financial year. This projection is based on new business of around € 10 billion in the Structured Property Financing segment. In the Consulting/Services segment, a profit contribution of € 22 million to € 28 million before taxes is projected.