Aareal Bank AG
Aareal Bank Group remains on course, following solid start into the new year (news with additional features)
DGAP-News: Aareal Bank AG / Key word(s): Quarter Results/Interim Report Aareal Bank Group remains on course, following solid start into the new year – First-quarter consolidated operating profit of EUR 71 million (Q1 2016: EUR 87 million) fully in line with expectations – Very robust net interest income, thanks to continued strong margins – year-on-year decline primarily due to the continued reduction of WestImmo and Corealcredit portfolios – Strong new business originated in the Structured Property Financing segment – very low allowance for credit losses – Further growth in net commission income, thanks to good performance at Aareon – Increased full-year outlook affirmed: Aareal Bank anticipates consolidated operating profit of between EUR 310 million and EUR 350 million – CEO Hermann J. Merkens: “We are consistently pursuing our strategic priorities, making good progress.”
Net interest income for the first quarter was EUR 164 million (Q1 2016: EUR 180 million). Thanks to Aareal Bank’s flexibility in allocating new business, good margins generated during the first months of 2017 also had a favourable impact on the net figure. Driven primarily by the continued positive development at Aareon, which grew its international business in particular and successfully expanded its range of new digital solutions from Aareon Smart World, net commission income rose to EUR 48 million (Q1 2016: EUR 46 million). Allowance for credit losses of EUR 2 million was unchanged year-on-year, thus remaining at an extraordinarily low level. The Bank continues to anticipate a decrease in full-year allowance for credit losses, to a range between EUR 75 million and EUR 100 million. Administrative expenses of EUR 139 million remained below the previous year’s figure (Q1 2016: EUR 146 million), as anticipated, largely due to lower integration and running costs at Westdeutsche ImmobilienBank (“WestImmo”), acquired in 2015. New business originated in the Structured Property Financing segment doubled year-on-year, to EUR 1.8 billion (Q1 2016: EUR 0.9 billion). At EUR 1.2 billion, the high level of newly-originated loans benefited from the business pipeline of the previous quarter to some extent. Aareal Bank continued to adhere to its selective new business policy geared towards high-margin markets – such as the US – during the first months of 2017. Aareal Bank Group maintains its new business target of between EUR 7 billion and EUR 8 billion for the 2017 financial year. “Aareal Bank Group remains on course in the 2017 financial year. We are consistently pursuing the priorities defined in our “Aareal 2020″ strategy, in both business segments, and making very good progress. Following the solid start into the current financial year, we remain confident that we will achieve our targets for 2017 and beyond”, said Hermann J. Merkens, Chairman of the Management Board. Structured Property Financing segment: focus on the US business In its Structured Property Financing segment, Aareal Bank Group generated operating profit of EUR 77 million (Q1 2016: EUR 96 million). In a persistently competitive business environment, and in a challenging general macroeconomic framework, Aareal Bank opened the 2017 financial year by originating markedly higher new business of EUR 1.8 billion (Q1 2016: EUR 0.9 billion), of which newly-originated loans accounted for approximately 69 per cent. In line with the Bank’s growth strategy for business in North America, approximately 46 per cent of new business (and around 60 per cent of newly-originated loans) were extended in the United States, Aareal Bank’s strategically most important growth market. The share of North American exposures in the overall credit portfolio rose to 24 per cent. Consulting/Services segment: Aareon continues to develop on schedule – volume of deposits remains stable, on a high level Operating profit in the Consulting/Services segment totalled EUR -6 million during the first quarter of 2017 (Q1 2016: EUR -9 million). Subsidiary Aareon AG developed on schedule, its EUR 7 million profit contribution was in line with the corresponding quarter of the previous year. The volume of deposits from the housing industry averaged EUR 10.2 billion during the quarter under review (Q4 2016: EUR 10.0 billion) and was in line with our medium-term target level of around EUR 10 billion. The persistently low interest rate environment continued to burden income generated from the deposit-taking business, and therefore the segment result, at the outset of the financial year. 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. Comfortable funding situation, and strong capitalisation Aareal Bank remained very solidly funded during the first quarter of 2017, maintaining its long-term funding inventory at a high level. It raised a total of EUR 0.9 billion on the capital markets during the first quarter: especially worth noting was the very successful placement of a benchmark EUR 0.5 billion Mortgage Pfandbrief on the international capital markets. Aareal Bank remains very well capitalised. As at 31 March 2017, the Bank’s Tier 1 ratio was 19.2 per cent, which is comfortable also on an international level. Assuming full implementation of Basel III, the Bank’s fully phased-in Common Equity Tier 1 (CET1) ratio would be 16.2 per cent. Notes to Group financial performance Net interest income of EUR 164 million was in line with projections (Q1 2016: EUR 180 million); The decrease in comparison to the same period of the previous year was largely attributable to the continued reduction of WestImmo and Corealcredit portfolios. Reflecting seasonal effects, allowance for credit losses of EUR 2 million was very low, as in the corresponding quarter of the previous year (Q1 2016: EUR 2 million). Net commission income increased to EUR 48 million (Q1 2016: EUR 46 million), driven by Aareon in particular. The aggregate of net trading income/expenses, the net result on hedge accounting, and net result from non-trading assets totalled EUR -4 million during the quarter under review. Administrative expenses of EUR 139 million were lower year-on-year (Q1 2016: EUR 146 million), as expected – largely due to lower integration and running costs at WestImmo, acquired in 2015. Consolidated operating profit totalled EUR 71 million for the quarter under review (Q1 2016: EUR 87 million). Taking tax deductions of EUR 24 million into account, consolidated net income was EUR 47 million. After deduction of EUR 5 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 38 million (Q1 2016: EUR 51 million). Outlook for 2017 affirmed The macroeconomic environment in the spring of 2017 remains characterised by significant uncertainty. Intense competition as well as pressure to adjust to regulatory changes are expected to continue unabated. Strategically, Aareal Bank Group will focus on further expediting investments for the future during the current year – continuing to expand its range of digital solutions, for example. At the same time, and in line with its strategy, the Bank will continue to reduce WestImmo and Corealcredit portfolios. In addition, the Bank is concentrating on the further optimisation of processes and structures, having focused on the integration of its two major acquisitions during the course of the previous years. As announced, this will also place a burden on results. Nonetheless, Aareal Bank currently continues to see good opportunities to achieve consolidated operating profit for the current year of between EUR 310 million and EUR 350 million, including a positive non-recurring effect in the amount of EUR 50 million, to be recognised in the second quarter, from a subsidiary’s reversal of provisions against income. Earnings per share (EpS) are projected in a range between EUR 2.85 and EUR 3.30. RoE before taxes for the current year is anticipated between 11 per cent and 12.5 per cent; when adjusted for the non-recurring effect mentioned above, the range is between 9 per cent and 10.5 per cent. Aareal Bank Group affirms its medium-term target RoE of at around 12 per cent before taxes. Consolidated net interest income is expected at between EUR 620 million and EUR 660 million, Aareal Bank forecasts allowance for credit losses to fall to a range between EUR 75 million and EUR 100 million for 2017. Net commission income is projected to be in a range between EUR 195 million and EUR 210 million, slightly above the previous year’s level. Administrative expenses are expected to fall, to a range between EUR 470 million and EUR 510 million, in spite of expected charges for optimising processes and structures, project costs and substantial forward-looking investments, such as for realigning the Bank’s IT infrastructure. New business of between EUR 7 billion and EUR 8 billion is targeted for the Structured Property Financing segment. In the Consulting/Services segment, Aareal Bank expects its IT subsidiary Aareon to contribute between EUR 34 million and EUR 35 million to results before taxes. Note to editors: The full interim report for the first quarter of 2017 is available on www.aareal-bank.com/financialreports.
Additional features: Document: http://n.eqs.com/c/fncls.ssp?u=EQIOVMGVGX Document title: 20170511_Press release.pdf
11.05.2017 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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