Our Corporate History
After the First World War, Germany was suffering from significant uncertainty in the wake of a serious economic crisis. Inflation reached unprecedented dimensions and housing construction largely ground to a halt due to the destruction of private assets. As a consequence, there was a catastrophic housing shortage at that time.
The foundation of the Deutsche Wohnstätten Bank AG by Prussian Wohnungsfürsorgegesellschaften (housing assistance companies), Preußische Landespfandbriefanstalt and a number of companies in other German States took place in Berlin exactly during this period. The housing assistance companies were intended to create homes for repatriates and war refugees in order to effectively combat the prevailing need for housing.
Deutsche Bau- und Wohnstätten-Bank AG was entered into the commercial register on 20 October 1923, and was renamed Deutsche Bau- und Bodenbank AG (Bau- und Bodenbank for short) three years later.
Two main factors were behind the successful development of the Bank during the years following its foundation: Firstly, it was assigned the responsibility of trust business activities for housing construction finance by the German Reich. Secondly, the Bank stepped in to provide advance and bridging finance for housing construction projects. These loans finance a construction project until long-term finance can be used.
The Bank's bridging loan business initially remained the central focus of its activities during the National Socialist regime, as the housing shortage in Germany remained high. However, the booming arms industry increasingly dominated housing construction objectives, as new armament centres meant that there was a need for accommodation for their many workers.
In the area of settlement policy, Bau- und Bodenbank AG served as a tool in National Socialist policy, however, without getting involved in these policies itself. After inspecting the sources available today, Bau- und Bodenbank was not directly involved in the National Socialist crimes of the Holocaust.
Despite the politically opportune business activities, the Bank was plunged into an existential crisis during that time. The government was increasingly withdrawing from housing construction due to growing military production volumes, even imposing a freeze on civil construction.
Bau- and Bodenbank was suffering from the effects of the destructive war, as did the whole continent. Many employees were missing and several branches were damaged or totally destroyed.
While the branches in the Eastern zone occupied by the Soviets were closed, the seven branches located in the Western zones occupied by the Americans and the British were soon able to resume their business activities. However, they were cut off from the headquarters in Berlin and the influence of the Management Board and Supervisory Board.
It was not until the currency reform in 1948 that the Bank had the opportunity to overcome the consequences of this disintegration. The relocation regulation enabled Bau- und Bodenbank to take up residence in Frankfurt am Main in addition to its Berlin headquarters, thereby creating a base in the new currency area, and to legally and commercially reconsolidate branches located in the Federal Republic. At the end of 1949, the Bank fully resumed its business activities.
Deutsche Bau- und Bodenbank benefited from the years of economic upturn, particularly in terms of bridging finance for home loan and savings contracts. Initially, it was the only bank on the market to offer this type of finance. From 1950 to 1967, the Bau- und Bodenbank's loan commitments amounted to DM 7.6 billion in total.
In order to process the extensive trust business on an even more cost-effective and efficient basis, Bau- und Bodenbank set up a data centre in Mainz which commenced operations in 1957. Bau- und Bodenbank AG thus was the first bank in Germany to own an electronic information system which offered centralised, external data processing to housing industry companies – a revolutionary concept at that time that created a new line of business for the Bank.
At the start of 1979, the Federal Republic of Germany transferred its entire participating interest in the share capital of Deutsche Bau- und Bodenbank AG to Deutsche Pfandbriefanstalt (DePfa). Deutsche Pfandbriefanstalt had already acquired the participating interest held by the state of North Rhine-Westphalia in Deutsche Bau- und Bodenbank.
Bau- und Bodenbank altered its structure fundamentally in the 1980s once it formed part of Deutsche Pfandbriefanstalt. Whereas 90% of the Bank's business was still attributable to construction stage loans with property developers and public sector housing corporations in the 1970s, this figure had fallen to just 25% of total receivables by 1988. By contrast, the retail and private client business was stepped up.
The opening of the borders when the Berlin Wall came down in 1989 of course created new areas of operation and business opportunities for Bau- und Bodenbank. The Bank concluded contracts with municipal housing corporations and issued large loans for clients in the new Federal states at an early point.
In 1989, DePfa firstly was converted into a public limited company. The IPO and associated broad placement of shares took place in 1991. With total assets of DM 64 billion, the Bank – which had now been renamed Deutsche Pfandbrief- und Hypothekenbank AG – was Germany's largest mortgage bank at that time.
A range of subsidiaries was founded or acquired during the late 1980s and the 1990s in order to be able to provide property services across Germany as the lead bank for the housing industry.
These associated companies strategically strengthened both the IT division and property management at both banks. The Bank's IT Services Department was spun off in 1997 as an independent subsidiary called BauBoden Systemhaus GmbH. Two years later, this became a group with a holding structure, which began to expand abroad – today known as Aareon AG.
In March 1991, Deutsche Pfandbrief- und Hypothekenbank AG admitted it shares for trading for the first time on various German stock exchanges while the government sold its interest. At the start of the nineties the Group expanded its then new commercial financing line of business in order to broaden its strategic base beyond private property financing.
The energetic international expansion subsequently went hand in hand with a new structure for the Group. In 1999, DePfa Deutsche Pfandbriefbank AG transferred all of its property-related operations to Deutsche Bau- und Bodenbank AG, which had been integrated into the Group since 1979.
The Bank's two core competencies in the field of property were defined in the Property Financing segment – which was increasingly focusing on commercial property – and the Services segment.
The shareholders voted in favour of the strategic realignment of the DePfa Group at an extraordinary General Meeting held on 15 October 2001. This realignment aimed at creating two independent corporations with different business models. This process of separation that was carried out over several stages resulted in the formation of the property specialist DePfa Bank AG BauBoden based in Wiesbaden, which was renamed Aareal Bank AG, and DEPFA BANK plc, a public finance bank based in Dublin, with subsidiaries including the Germany-based DePfa Deutsche Pfandbriefbank AG.
Aareal Bank initially offered financial, asset management, advisory and IT services for national and international investors in the commercial property segment and for clients from the institutional housing industry.
Although Aareal Bank was broadly positioned thanks to this market strategy, the risks that came into being in the 1990s due to factors including extensive financings in the construction of housing in the new federal states noticeably impacted the Bank's balance sheet between 2002 and 2005 in an increasingly difficult market environment.
In order to reconsolidate Aareal Bank's position as a leading international property specialist and to secure this in the long term, Chairman of the Management Board Dr Wolf Schumacher, who was in charge from 2005 to 2015, introduced a realignment of the Bank. There was a significant increase in the volume of new business in commercial property finance, while the amount of non-performing loans was cut considerably and the organisation was streamlined.
Above all, Aareal Bank Group's main aim was making its business model more focused, and from then on it concentrated on the "Structured Property Financing" and "Consulting/Services" segments as a bank with a medium-sized structure. In the process, Aareal Bank gained extensive expertise in the hotel, shopping centre, logistics facility as well as office property markets and expanded its business activities across the three continents of Europe, North America and Asia. This boosted the diversification of the Bank's credit portfolio in terms of regions and property types and reduced the dependency on regional developments and property cycles. The segment "Consulting/Services” was established as a strong second pillar. In this field, Aareal Bank has been the lead bank for the German institutional housing industry for more than 50 years. Aareal Bank generates a stable level of deposits via the services offered – e.g. payment transaction solutions – without having to maintain an expensive network of branch offices. These deposits form a stable source of funding for the Bank.
This business model proved to be extremely robust, even during the financial crisis that affected the global financial markets from 2008.
The economic and financial market crisis has permanently changed the environment for the banking sector as a whole and, with that, the general conditions in which it operates. Today banks are operating in the “new normal”. Due to complex regulatory changes the capital and liquidity requirements for banks for example were raised significantly. Furthermore, interest rates are at a historically low level.
Aareal Bank has faced these major challenges and coped very well with them so far. Impressive evidence of that are the acquisitions of Corealcredit Bank and of Westdeutsche ImmobilienBank that were financed with own funds as well as the record result achieved in the 2015 financial year. Due to its strategic direction and its robust capital and refinancing situation, Aareal Bank has a very strong foundation that in the long term will allow it to operate successfully in the “new normal”.