Aareal Bank AG
Aareal Bank Group posts very good results for the financial year 2016 – proposes dividend increase from EUR 1.65 to EUR 2.00 per share
DGAP-News: Aareal Bank AG / Key word(s): Preliminary Results Aareal Bank Group posts very good results for the financial year 2016 – proposes dividend increase from EUR 1.65 to EUR 2.00 per share – Consolidated operating profit of EUR 366 million, following a good fourth quarter (2015: EUR 320 million, adjusted for negative goodwill for the WestImmo acquisition) – Consolidated net income of EUR 234 million (2015 adjusted: EUR 224 million) – New business of EUR 9.2 billion remains on a high level – stable margins, thanks to flexible allocation of new business to attractive markets – Aareon develops on schedule, as expected: profit contribution rises significantly, to EUR 34 million (2015: EUR 27 million) – “Aareal 2020” Group strategy launched successfully – implementation to be expedited during the current year – CEO Hermann J. Merkens: “We are exploiting market opportunities in both our segments, from a position of strength, making significant investments for our future” Wiesbaden, 23 February 2017 – Aareal Bank Group concluded the 2016 financial year with another set of very good results. According to preliminary, unaudited figures, consolidated operating profit of EUR 366 million was up 14.4 per cent from the figure for the previous year, adjusted for negative goodwill (EUR 150 million) from the acquisition of Westdeutsche ImmobilienBank AG (WestImmo) of EUR 320 million. EUR 85 million thereof was generated during the fourth quarter (Q4 2015: EUR 92 million). Full-year consolidated operating profit was thus within the forecast range of between EUR 360 million and EUR 380 million, a range which the Bank had raised most recently in November 2016. The EUR 366 million figure includes a positive non-recurring effect of EUR 28 million – realised in the fourth quarter – due to the successful conclusion of material legal disputes in connection with the former Corealcredit, acquired in 2014. Since this non-recurring effect was offset by a corresponding tax expense of virtually the same amount, this issue had only a marginal impact upon results after taxes. Net interest income was down year-on-year, as expected; this was offset by higher net commission income, lower risk costs, and higher results from non-trading assets. Return on equity before taxes thus increased to 13.2 per cent (2015 adjusted: 12.1 per cent). Consolidated net income after taxes amounted to EUR 234 million, a 4 per cent increase compared to the previous year’s figure of EUR 224 million (adjusted for negative goodwill from the WestImmo acquisition). EUR 41 million thereof, including the tax expense corresponding to the non-recurring effect related to Corealcredit, was generated during the fourth quarter (Q4 2015: EUR 68 million). Consolidated net income allocated to ordinary shareholders stood at EUR 199 million for the full year (2015 adjusted: EUR 189 million), and at EUR 33 million for the final quarter (Q4 2015: EUR 60 million). Aareal Bank wants its shareholders to participate appropriately in these results, which were once again very good. Therefore, the Management Board and the Supervisory Board will propose to the Annual General Meeting of Aareal Bank AG, to be held on 31 May 2017, a 21 per cent increase in the dividend per share, from EUR 1.65 to EUR 2.00. This is equivalent to a distribution ratio of 60 per cent, and fully in line with the dividend policy, communicated in February 2016, according to which the unchanged ordinary dividend payment of approximately 50 per cent of earnings per ordinary share (EPS) will be supplemented by an additional dividend of 10 per cent for the year 2016, rising to between 20 to 30 per cent for the years 2017 and 2018. In accordance with this intention, the Bank continues to envisage a distribution ratio of 70 to 80 per cent for the current year. Hermann J. Merkens, Chairman of the Management Board of Aareal Bank AG, said: “We are very satisfied with the financial year under review. We achieved all of our objectives for the year, even exceeding some of them. Disregarding non-recurring effects, Aareal Bank Group posted its best operating profit to date in 2016, despite the still-challenging environment. Thanks to our pronounced operating profitability and very robust capital base, we are not only well-prepared for any regulatory contingencies. We are also in a position to exploit market opportunities in both our segments, from a position of strength, making significant investments into our future within the scope of the ‘Aareal 2020’ strategy programme.” “Aareal 2020” strategy programme: swift progress in implementation The strategy programme “Aareal 2020 – Adjust. Advance. Achieve”, presented a year ago, was successfully launched in 2016. The programme is designed to safeguard the Group’s strong foundation, given the business environment which will remain very challenging in the future, whilst unlocking new income potential for the Group. Within the framework of “Aareal 2020”, Aareal Bank is determined to unlock additional sources of income in both segments by further developing the business model. In this context, and across all Group entities, opportunities arising from investment in digitalisation will be consistently exploited. At the same time, the Company focuses on optimising processes and structures in order to further enhance its efficiency and flexibility. During the financial year under review, Aareal Bank concluded all preparations for a rapid implementation of the programme on schedule. Initial milestones were already achieved: for instance, Aareal Bank launched a comprehensive realignment of its IT infrastructure, significantly grew its business in the US, pursued the expansion of digital platform offers in the Consulting/Services segment, and initiated cooperations with start-ups in order to swiftly implement its digital agenda. Moreover, the Bank expedited its syndication activities, designed to facilitate more flexible portfolio management, and grew its business along the entire value chain in commercial property financing, in a targeted manner. Forward-looking investments will be stepped up in the current year, for example in the continued expansion of digital solutions. Aareal Bank will also continue to reduce credit portfolios which are no longer within its core business, in line with its strategy. Likewise, the Bank will focus on the continued optimisation of its processes and structures, having concentrated its internal measures on the integration of two major acquisitions during previous years. “Clearly, the year under review has shown that our strategy is working. We will be accelerating the Group’s transformation throughout 2017, even though related forward-looking investments and structural measures might place a burden upon our results. Yet our efforts will pay off over the medium to long term. We will be the leading provider of smart financings, software products, and digital solutions for the property sector and related industries. Once “Aareal 2020″ has been fully implemented, we will be more flexible and more efficient than ever, and we will be sustainably profitable and successful, even in a fundamentally changed market and competitive environment”, Merkens said. 2016 financial year: another set of very good results Net interest income in the 2016 financial year was EUR 701 million, after EUR 781 million in the previous year, and thus within the forecast range. The expected decline in net interest income was largely due to the planned reduction of portfolios which are no longer compatible with the Bank’s strategy. In addition, the previous year’s figure was influenced by very strong effects from early loan repayments, in the amount of EUR 75 million (2015: EUR 41 million). Conversely, Aareal Bank succeeded in keeping margins in the lending business stable, despite the challenging environment. The conservative risk policy which the Bank had maintained over recent years led to an expected decline in allowance for credit losses: at EUR 97 million, it was clearly lower than the previous year’s figure (EUR 128 million) and thus within the communicated range of EUR 80 million to Results from non-trading assets amounted to EUR 67 million (2015: -EUR 17 million), of which Administrative expenses of EUR 547 million were slightly lower year-on-year (2015: All in all, consolidated operating profit for the 2016 financial year totalled EUR 366 million In its Structured Property Financing segment, Aareal Bank Group originated new business of Net interest income in this segment stood at EUR 716 million (2015: EUR 783 million). Apart from the reduction of the non-strategic credit portfolio, lower one-off income from early loan repayments had a negative impact on net interest income. However, the segment succeeded in keeping margins stable, maintaining its conservative risk policy. Operating profit in the Structured Property Financing segment totalled EUR 395 million, a marked increase compared to the previous year’s figure of EUR 343 million (adjusted for negative goodwill from the WestImmo acquisition). Sales revenues in the Consulting/Services segment rose to EUR 206 million in the 2016 financial year (2015: EUR 193 million). The increase reflected a significant increase in sales revenues generated by subsidiary Aareon. Staff expenses of EUR 144 million were higher than the previous year’s level Driven by higher sales revenues, Aareon contributed a markedly higher amount of EUR 34 million to consolidated operating profit (2015: EUR 27 million). As expected, it recorded a strong business development during 2016 in its Germany and International Business divisions. The volume of deposits from the housing industry rose to an average of EUR 9.6 billion in the 2016 financial year (2015: EUR 9.0 billion). The persistently low interest rate environment burdened income generated from the deposit-taking business, and therefore the segment result. Nonetheless, the importance of this business goes way beyond the interest margin generated from the deposits – which is under pressure in the current market environment. Deposits from the housing industry are a strategically important additional source of funding for Aareal Bank. The Consulting/Services segment registered an operating result of -EUR 29 million (2015: Successful funding activities – very robust capital position Aareal Bank Group successfully carried out its funding activities as planned during the 2016 financial year. During the period under review, the Bank succeeded in raising a total of EUR 1.2 billion in medium- and long-term funds on the capital market. The issued volume of unsecured funds amounted to EUR 1.1 billion. Of the aggregate volume, Mortgage Pfandbriefe accounted for Aareal Bank continues to have a very solid capital base. As at 31 December 2016, the Bank’s Tier 1 ratio was 19.9 per cent, which is comfortable on an international level (31/12/2015: 17.2 per cent). Assuming full implementation of Basel III, the Bank’s fully phased-in Common Equity Tier 1 (CET1) ratio would be 15.7 per cent (31/12/2015: 13.1 per cent). Notes on the preliminary Income Statement for the fourth quarter of 2016 According to preliminary, unaudited figures, net interest income in the final quarter of 2016 stood at EUR 169 million (Q4 2015: EUR 198 million). The effects of early loan repayments totalled EUR 9 million in the fourth quarter, compared to EUR 22 million in the same quarter of the previous year. Allowance for credit losses amounted to EUR 33 million (Q4 2015: EUR 42 million) during the fourth quarter, and was thus in line with expectations. Net commission income of EUR 56 million clearly exceeded the previous year’s figure (Q4 2015: EUR 52 million). The aggregate of net trading income/expenses, the net result on hedge accounting, and net result from non-trading assets totalled -EUR 5 million in the last quarter of 2015 after EUR 6 million the year before. Consolidated administrative expenses amounted to EUR 130 million during the fourth quarter On balance, consolidated operating profit for the fourth quarter amounted to EUR 85 million Outlook for 2017: Aareal Bank expects consolidated operating profit to remain strong, in a demanding environment Aareal Bank expects the competitive environment to remain challenging during the current financial year, with a continuation of diverging developments in the key economic regions. The low interest rate environment is likely to persist during 2017. Whilst financial markets participants expect further interest rate increases in the US, as well as a steepening of the yield curve in the euro area, the scope of such changes – and the resulting volatility on the financial markets – remain difficult to predict. In a highly competitive environment, commercial property is likely to remain a sought-after asset class during the current financial year. Aareal Bank will adhere to its selective strategy in originating new business, with active portfolio management, in 2017. As in the previous year, the Bank will expand in growing markets with attractive margins, in a targeted manner. Consolidated net interest income is expected to decline to between EUR 620 million and Against the background of the expected decline in net interest income, Aareal Bank expects good consolidated operating profit in a range between EUR 260 million and EUR 300 million. The Bank expects RoE before taxes of between 9 per cent and 10.5 per cent for the current financial year, with earnings per share between EUR 2.45 and EUR 2.90. Aareal Bank affirms its medium-term target RoE of around 12 per cent before taxes. In the Structured Property Financing segment, the credit portfolio is projected at between Aareal Bank Group Contact: Aareal Bank AG Corporate Communications Sven Korndörffer Phone: +49 611 348 2306 sven.korndoerffer@aareal-bank.com Christian Feldbrügge Phone: +49 611 348 2280 christian.feldbruegge@aareal-bank.com Jorge Person Phone: +49 611 348 3217 jorge.person@aareal-bank.com Alessandro Schwarz Phone: +49 611 348 2923 alessandro.schwarz@aareal-bank.com
23.02.2017 Dissemination of a Corporate News, transmitted by DGAP – a service of EQS Group AG. |
Language: | English |
Company: | Aareal Bank AG |
Paulinenstr. 15 | |
65189 Wiesbaden | |
Germany | |
Phone: | +49 (0)611 348 – 0 |
Fax: | +49 (0)611 348 – 2332 |
E-mail: | aareal@aareal-bank.com |
Internet: | www.aareal-bank.com |
ISIN: | DE0005408116 |
WKN: | 540811 |
Indices: | MDAX |
Listed: | Regulated Market in Frankfurt (Prime Standard); Regulated Unofficial Market in Berlin, Dusseldorf, Hamburg, Munich, Stuttgart, Tradegate Exchange; Stockholm |
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