Aareal Bank Group Q Results. Third Quarter 2016 FIXED INCOME PRESENTATION

Transcription

1 Aareal Bank Group Q Results Third Quarter 2016 FIXED INCOME PRESENTATION

2 Agenda Highlights General environment Aareal Bank Group Overview Group results Q at a glance Segment performance Group results Q B/S structure, capital & funding position Asset quality Outlook 2016 Appendix Definitions and Contacts 2

3 Highlights Q FY-outlook for operating profit and new business raised Key facts and figures at a glance Successful development Q3 operating profit: 74 mn (9M: 281 mn) Q3 new business: 1.6 bn (9M: 6.0 bn) FY-new business target raised to 8 bn - 9 bn Aareon sales and EBIT increased as planned (YtD) Implementation of Aareal 2020 on track FY-operating profit target raised to 360 mn mn, including expected positive one-off effect ( 28 mn) in Q

4 General environment US-recovery still on track but lower than expected, Europe with moderate growth, China s growth rate is slowing down Brexit causes political and economic uncertainties, ongoing geopolitical risks and tensions e.g. in Russia and Turkey Diverging monetary policies between ECB and FED: but no major weakening of the EUR expected ECB has broadened QE, further steps possible: enormous impact on capital markets - risking asset bubbles and therefore risks from LTVs partly based on extreme low cap rates High liquidity on property market, but decreasing transaction volumes in 9M 2016 (vs. 9M 2015). Some markets positive: e.g. the Netherlands, or almost stable e.g. France, Germany very strong in Q Stable to moderately increasing property values and rents in most European countries as well as in North America Intensive competition for commercial real estate financing, European and US margins bottoming out Uncertainties about regulatory requirements, especially regarding Basel IV Main takeaways Main focus for new business in markets with attractive risk/return profile like North America In Turkey and Russia only renewals; still prepared to finance in the UK Partly tightened requirements for new business regarding LTV Regulatory projects still in progress 4

5 Aareal Bank Group Overview

6 Business segments Aareal Bank Group Structured Property Financing Consulting / Services for the property industry International presence and business activities on three continents in Europe, Northamerica and Asia Market-leading integrated payment transaction system for the housing, commercial property and energy sector Industry experts for hotel, logistics and office properties as well as shopping centers Market-leading IT systems for the management of residential and commercial property in Europe International real estate financing in more than 20 countries Around 7 million units under management in the key market Germany Total portfolio: 28,4 billion International presence: France, the Netherlands, UK and Scandinavia 6

7 Structured Property Financing Aareal Bank AG Focus on senior lending Cash-flow driven collateralised business with focus on first-ranking mortgage loans Typical products, for example: Single asset investment finance Portfolio finance (local or cross-border) In-depth know-how in local markets and special properties Local expertise at our locations Additional industry expertise at the head offices International experience with employees from over 25 nations 7

8 Aareal Bank Group Consulting / Services Aareon Group IT Services Market-leading European IT-system house for the management of residential and commercial property portfolios Highly automated ERP systems : license and SaaS solutions Comprehensive range of integrated services and consulting Key client base: large size property owners / managers ~ 60 % market share in German key market: >2,500 customers with ~7 mn units under management in Germany International presence: F, NL, UK, SWE and NOR Aareal Bank Transaction banking Market-leading integrated payment transaction systems for the institutional housing industry in Germany Key client base: large size property owners / managers and utility companies Key market: Germany ~ 100 mn transactions p.a. Deposit volume Q3 2016: Ø 9.5 bn, strategically important as an additional source of funding Transaction volume: ~ 50 bn p.a. 8

9 North America Europe Asia Structured Property Financing Structured Property Financing Structured Property Financing Consulting / Services Aareal Bank, Real Estate Structured Finance: Brussels, Copenhagen, Dublin, Istanbul, London, Madrid, Moscow, New York, Paris, Rome, Shanghai, Singapore, Stockholm, Warsaw, Wiesbaden Aareal Valuation GmbH: Wiesbaden Aareal Estate AG: Wiesbaden Aareal Bank, Institutional Housing Unit: Berlin, Essen, Hamburg, Leipzig, Munich, Stuttgart, Wiesbaden Aareon AG: Berlin, Coventry, Dortmund, Emmen, Enschede, Erfurt, Gorinchem, Gothenburg, Hamburg, Hilversum, Hückelhoven, Karlskrona, Leipzig, Lund, Mainz, Meudon-la- Forêt, Munich, Nantes, Norrtalje, Orléans, Oslo, Piteå, Southampton, Stockholm, Stuttgart, Swansea, Toulouse Deutsche Bau- und Grundstücks-AG: Berlin, Bonn, Moscow, Munich Aareal First Financial Solutions AG: Mainz 9

10 Aareal s ownership structure Successful placement underlines confidence in ARL New ownership structure (since ) 100% Public float Aareal Bank AG Listed in the German MDAX 59,857,221 outstanding shares 100% free float Approximately 2,600 employees Balance Sheet: 50.5 bln. Aareal Holding successfully completed the placement of its 28.9% stake Aareal Bank shares worth 545 mn Priced at a small discount of 4.6% to the previous close The books were covered within 1 hour post launch - final orderbook was multiple times oversubscribed The transaction saw high quality demand particularly from the UK, Germany and USA Stock performance since 01. Jan

11 Aareal Bank Ratings *) Long-term BBB+ stable Long-term Issuer Rating Baa1 stable Short-term F2 Short-term Issuer Rating P-2 Viability Rating bbb+ Long-term Bank Deposits A3 stable Subordinated Debt (T2) BBB Baseline Credit Assessment baa3 Additional Tier 1 BB- Mortgage Pfandbriefe AAA stable Mortgage Pfandbriefe Aaa stable Public sector Pfandbriefe AAA stable 11 *) Moody`s Rating since

12 Group results Q at a glance

13 Q at a glance Another strong quarter Q Q Q Q Q Comments mn Net interest income (excl. unplanned effects from early repayments) 175 (171) 177 (175) 180 (180) 198 (183) 214 (192) NII reflects Robust margins declining Portfolio 32 mn effects from early repayments (9M) Allow. for credit losses In line with full year target Net commission income Aareon on track Admin expenses mn one-offs from integration as well as from project / investment costs Operating profit Another strong quarter Earnings per share [ ]

14 Structured property financing New business FY-target raised New business in Q by region 1) North America 32% Europe North 3% Europe South 7% P&L SPF Segment Q3 16 Q2 16 Q1 16 Q4 15 Q3 15 mn Net interest income Loan loss provision Net commission income Net result from trading / non-trading / hedge acc. Germany 7% Europe West 36% Europe East 15% Admin expenses Others Operating profit mn New business origination 1,753 3, , Q1 '16 Q1 '15 Q2 '16 Q2 '15 Q3 '16 Q3 '15 9M '16 9M '15 Newly acquired business Renewals New business plan adjusted to 8-9 bn to achieve targeted year-end core-portfolio size (lower end of bn) 636 1, Long term target portfolio to be likely at the lower end of the given range, strengthening off-balance lending in line with Aareal , Gross margins 2) in Q of around 270 bps ( bps after FX) 32 mn effects from early repayments (9M) 6, Closing Aqvatrium / Fatburen in April 2016 with a positive 61 mn effect 6, ) Incl. renewals 2) Newly acquired business

15 Consulting / Services Aareon on track, above previous year-level P&L C/S Segment Q3 16 Q2 16 Q1 16 Q4 15 Q3 15 mn Sales revenue Own work capitalised Changes in inventory Other operating income Cost of material purchased Staff expenses D, A, impairment losses Results at equity acc. investm Other operating expenses Results from interest and similar Operating profit Aareon sales revenues ( 49 mn vs. 42 mn in Q3 2015) again above previous year level and in line with full year target Migration ERP-system GES / Wodis Sigma according to plan Digitisation: Further development of Aareon Smart World according to plan Digital platform development on track Sales of digital add-on products across countries intensified Co-operation with PropTech start-ups Deposit volume from housing industry of Ø 9.5 bn on a high level ( 9.5 bn Ø in Q2 2016) Deposit margins further burden segment result due to low-interest environment Housing industry deposits generate a stable funding base, crisis-proven 15

16 Consulting / Services Aareon above previous year-level and in line with full year target Aareon Group mn 15 Operating profit 11 mn 0 Consulting / Services Operating profit Q Q Q Q Q Deposit taking business / other activities mn Operating profit 0-15 Q Q Q Q Q Q Q Q Q Q

17 Net interest income Robust margins declining NCA mn Q Q Q Q Q Gross margins 1) in Q of around 270 bps ( bps after FX) NII effected by run down of non core assets as planned 32 mn effects from early repayments (9M) Core CRE portfolio: 25.5 mn (06/2016: 26.8 mn) NII Consulting / Services still burdened by interest rate environment Aareal Bank already fulfils future NSFR / LCR requirements Even with the core portfolio size closer to the lower end of the originally guided range: in line to achieve NII-target 17 NII effects from early repayments 2) NII NCA (linear approximation) NII Core NII C/S 1) Newly acquired business 2) Additional effects exceeding originally planned repayments

18 Allowance for credit losses (LLP) In line with full year target 60 mn No additional NPL s in Italian portfolio Q Q Q Q Q

19 Net commission income Aareon above previous year level mn Aareon sales supporting FY-EBIT target Q with expected seasonal summer dip Q with seasonal effects First time consolidation of Aareon s new acquisitions in Q (phi-consulting, Square DMS) Q Q Q Q Q

20 Admin expenses Lower integration costs in Q3 mn 175 Q3 figures include mn one-offs from integration as well as from project / investment costs Q2 figures include mn one-offs from integration as well as from project / investment costs 100 Q1 figures include mn for the European bank levy for the fiscal year mn one-offs from integrations as well as from project / investment costs Operating admin expenses for Aareon s new acquisitions phi-consulting and Square DMS (since Q4 2015) 0 Q Q Q Q Q

21 B/S structure, capital & funding position

22 RWA development Successful run down of NCA bn ,3 1, ,6 1,3 2, ,5 1,3 2, ,5 1,6 4, ,4 0,4 1,7 1,7 3,5 3, ,5 1,7 3, ,4 1,7 2,7 Decreasing RWA from NCA reduction Operational risk already based on standardised approach RWA from Financials already close to CRSA-level ,8 11,9 11,6 11,5 11,1 11,3 11,1 10, Q4 13 Q2 14 Q4 14 Q2 15 Q4 15 Q1 16 Q2 16 Q3 16 Market risk Operational risk Credit risk non core business Credit risk core business 22

23 Capital ratios Strong development 25% 20% 15% 16.4% 3,6% 19.5% 3,2% 5,0% 20.6% ~20% 3,9% ~4,4% 5,1% 2,2% 21.7% 21.0% 6,8% 6,1% 2,0% 1,8% 22.1% 6,6% 1,9% Regulatory uncertainties buffered by very strong capital ratios Instruments assumed to mature until 2018 (planning period) are excluded from the fully phased ratios Bail-in capital ratio (acc. to our definition): above 8% T1-Leverage ratio as at : 5.1% (fully phased) 10% 4,8% 5% 8,1% 11,3% 11,6% 13,4% 12,9% 13,1% 13,6% 0% German GAAP (phased-in) 1) As at , published ) IFRS (fully phased) Tier 2 (T2) Additional Tier 1 (AT1) Common Equity Tier 1 (CET1) 23

24 Asset- / Liability structure according to IFRS As at : 50.5 bn ( : 51.9) Conservative balance sheet with structural over borrowed position Average maturity of long term funding > average maturity of RSF loans 60 bn (3.0) Interbank 4.8 (4.8) Customer deposits 1.4 (1.0) Interbank institutional clients 11.6 (12.1) Treasury portfolio of which cover pools 28.4 (30.9) Real estate structured finance loan book 9.2 (8.4) Customer deposits housing industry 30.6 (33.4) Long-term funds and equity (5.9) Other assets 1) Assets 1) Other assets includes 1.2 bn private client portfolio and WIB s 0.7 bn public sector loans 4.5 (4.3) Other liabilities Liabilities & equity

25 Asset- / Liability structure according to IFRS As at : 50.5 bn ( : 50.9 bn) Conservative balance sheet with structural over borrowed position Average maturity of long term funding > average maturity of RSF loans 60 bn (2.7) Interbank 4.8 (4.8) Customer deposits 1.4 (1.2) Interbank 11.6 (11.9) Treasury portfolio institutional clients 9.2 (8.8) Customer deposits housing industry of which cover pools 28.4 (30.3) Real estate structured finance loan book 30.6 (31.5) Long-term funds and equity (6.0) Other assets 1) Assets 1) Other assets includes 1.2 bn private client portfolio and WIB s 0.7 bn public sector loans 4.5 (4.6) Other liabilities Liabilities & equity

26 Net stable funding- / liquidity coverage ratio Sound liquidity position despite WestImmo takeover Liabilities & equity bn NSFR NSFR 1, , Aareal Bank already fulfils future requirements NSFR > 1.0 LCR >> 1.0 Basel III and CRR require adherence of specific liquidity ratios starting end , , As intended, additional funding requirements from acquisition of WestImmo covered by NSFR surplus , , , , Assets Net stable funding ratio (ARL) Net stable funding ratio (ARL incl. WIB) 26

27 Refinancing situation 9M 2016 Successful funding activities bn 1,4 1,2 Funding 1,2 Total funding of 1.2 bn in 9M 2016: mainly senior unsecured ( 1.1 bn) Low Pfandbrief issuance due to acquisition of WestImmo Backbone of capital market funding is a loyal, granular, domestic private placement investor base 1,0 Hold-to-maturity investors: over 600 Ticket size: 10 mn - 50 mn 0,8 0,6 1,1 0,4 0,2 0,0 0,1 Pfand- CB Senior SU Total briefe unsecured 27

28 Refinancing situation Diversified funding sources and distribution channels bn Private placements: Senior unsecured Wholesale funding: Senior unsecured Private placements: Pfandbriefe Wholesale funding: Pfandbriefe Deposits: Institutional customers Deposits: Housing industry customers 28 Aareal Bank has clearly reduced its dependency on wholesale funding 2002 long term wholesale funding accounted for 47% of overall funding volumes by , this share has fallen below 30% (or even below 10% without Pfandbriefe) As at

29 Capital Markets benchmark activities Pfandbriefe / Senior unsecured / Subordinated benchmark transactions USD 500,000,000 Hypothekenpfandbrief 4 Years Maturity ISIN: XS Lead Managers Citi, Credit Suisse, Goldman Sachs, LBBW 2015 EUR 300,000,000 Additional Tier % Perpetual nc 5 years First call date ISIN: DE000A1TNDK2 Lead Managers BNP, Deutsche Bank, HSBC 2014 EUR 500,000,000 Hypothekenpfandbrief 3 Years Maturity ISIN: DE000AAR0181 Lead Managers Commerzbank, LBBW, NordLB, SocGen, Unicredit 2014 EUR 300,000,000 Tier % 12nc7 Maturity /26 ISIN: DE000A1TNC94 Lead Managers BNP, Deutsche Bank, HSBC 2014 EUR 500,000,000 Senior Unsecured 5 Years FIXED Maturity ISIN: DE000A1TNC78 Lead Managers Deka Bank, DZ Bank, HSBC 2014 EUR 500,000,000 Hypothekenpfandbrief EUR 500,000,000 Hypothekenpfandbrief GBP 200,000,000 Hypothekenpfandbrief EUR 625,000,000 Hypothekenpfandbrief 5 Years Maturity ISIN: DE000AAR Years Maturity ISIN: DE000AAR Years FRN Maturity ISIN: XS Years Maturity ISIN: DE000AAR0157 Lead Managers Deka Bank, DZ Bank, HSBC, LBBW, Unicredit Lead Managers BNP, Deutsche Bank, DZ Bank, HSBC, LBBW Lead Managers BNP Paribas, Deutsche Bank, HSBC Lead Managers BNP, Commerzbank, DZ Bank, NordLB, UniCredit Note: All 2015 figures preliminary and unaudited

30 Asset quality

31 Property finance portfolio 1) 28.4 bn highly diversified and sound Portfolio by region Portfolio by property type North America: 21% Europe North: 6% Asia: 1% Europe West: 33% Residential: 8% Logistics: 7% Others: 3% Office: 35% Europe East: 9% Hotel: 22% Europe South: 15% Germany: 15% Retail: 25% Portfolio by product type Portfolio by LTV ranges 2) Developments: 3% Other: 1% 60-80%: 5% > 80%: 2% Investment finance: 96% < 60%: 93% 1) CRE business only, private client business ( 1.2 bn) and WIB s public sector loans ( 0.7 bn) not included 2) Performing business only, exposure as at

32 Property finance portfolio 1) Portfolio details Total property finance portfolio by country ( mn) US DE GB IT FR NL ES PL SE TR RU DK BE FI CH CA others LTV by country 2) 120% 100% 80% 60% 40% 63% 61% 57% 73% 54% 60% 61% 58% 55% 50% 63% 104% 57% 87% 49% Ø LTV: 61% 57% 53% 20% 32 0% US DE GB IT FR NL ES PL SE TR RU DK BE FI CH CA others 1) CRE business only, private client business ( 1.2 bn) and WIB s public finance ( 0.7 bn) not included 2) Performing business only, exposure as at

33 Spotlight: UK property finance portfolio 3.6 bn (~13% of total portfolio) Total portfolio by property type Logistics: 2% 100% Average LTV by property type 1) Ø LTV: 57% 80% Office: 23% Hotel: 43% 60% 40% 54% 59% 58% 55% 20% Retail: 32% 0% Hotel Retail Office Logistics Yield on debt 1) 11,0% Performing: 10,5% 10,0% 9,5% 9,0% 8,5% 8,0% 9,0% 9,9% 10,0% 9,7% 9,9% 9,6% 9,9% 9,7% ~ 100 properties financed, no developments ~ 55% of total portfolio in Greater London area, emphasising on hotels 120 mn with an LTV > 60% Theoretical stress on property values (-20%): would lead to portfolio LTV of approx. 71% NPL: 12 mn Comments 1) Performing business only 33

34 Spotlight: Italian property finance portfolio 3.2 bn (~11% of total portfolio) Hotel: 7% Logistics: 8% Total portfolio by property type Others: 11% Retail: 30% 100% 80% 60% 40% Average LTV by property type 1) Ø LTV: 73% 87% 90% 68% 75% 67% 50% Residential: 17% Office: 27% 20% 0% Retail Office Resi. Log. Hotel Others 9,3% 8,5% Yield on debt 1) 10% Performing: 9% 8% 7% 6% 8,2% 8,5% 8,2% 7,6% 7,5% 7,6% Comments ~ 225 properties financed, < 10% developments > 50% of total portfolio in Greater Rome or Milan area 437 mn with an LTV > 60% Theoretical stress on property values (-20%): would lead to portfolio LTV of approx. 92% NPL: 832 mn (further details on slide 32) 1) Performing business only 34

35 Spotlight: Turkey property finance portfolio 0.6 bn (~2% of total portfolio) Total portfolio by property type Average LTV by property type 1) Ø LTV: 50% Logistics: 3% 100% 80% 60% 47% 55% 55% Retail: 41% Hotel: 56% 40% 20% 0% Hotel Retail Logistics Yield on debt 1) 25% Performing: 20% 15% 10% 5% 17,3% 15,5% 15,3% 20,1% 14,6% 16,4% 15,1% 12,9% Comments 12 properties financed: 7 hotels, 3 retail, 2 logistics, no developments > 70% of total portfolio in Istanbul / Antalya 3 mn with an LTV > 60% Theoretical stress on property values (-20%): would lead to portfolio LTV of approx. 63% NPL: 93 mn, 2 deals (hotel, retail) 1) Performing business only 35

36 Property finance portfolio Stable NPLs over lower portfolio NPL and NPL-ratio (since ) bn 4,0 10,7% 12% 3,0 8,5% 9% North America 2,0 1,0 2,8% 1,5% 1,9% 3,2% 3,4% 3,7% 3,5% 3,6% 3,4% 4,4% 4,9% 6% 3% Europe East Europe North Europe South Europe West Germany NPL/Total Portfolio 0,0 0 0% 36

37 Property finance portfolio NPL exposure fully covered including collaterals NPL- and LLP development ( mn) ,385 1, Coverage ratio specific allowance 32% 31% Coverage ratio including portfolio allowance 41% 40% NPL exposure Portfolio allowance Specific allowance Collaterals 37

38 Spotlight Italy Italian NPL: clear going forward strategy Total NPL portfolio: 1,385 mn Italian NPL by status Turkey: 93 Finland: 38 Others: 128 Denmark: 44 Enforcement: 32% Spain: 109 France: 141 Italy: 832 Restructured / agreement in place or planned: 68% Italian NPL Restructuring period: vast majority to be solved till 2020 Current enforcement period 3-4 years, but improving due to new legislation All Italian NPL are fully covered despite being in different workout-stages 38

39 Treasury portfolio 9.3 bn of high quality and highly liquid assets by asset class by rating 1) Covered Bonds / Financials: 10% BBB: 15% < BBB / no rating: 2% A: 5% AAA: 40% Public Sector Debtors: 90% AA: 38% 39 As at all figures are nominal amounts 1) Composite Rating

40 Mortgage Cover Pool Well diversified regarding Geography and Property Type Ø LTV of the mortgage cover pool 38.4% High diversification within property types Cover pool diversified in 19 countries High quality of assets: first-class mortgage loans (mortgagelending-value 57.4%%) Mortgage-lending-value with high discount from marketvalue Fitch has calculated a 'AAA' supporting overcollateralisation ratio (SOC) of 24% Mortgage Cover Pool by LTVs 40-50% 7% 50-60% 1% < 40% 92% Cover Pool by Geography Cover Pool by Property Typ North America Germany 18% 19% Office properties 34% Eastern Europe 6% Southern Europe 11% Northern Europe 8% Western Europe (excluding Germany) 38% Other 21% Industry 10% Residential property 8% Retail properties 27% 40

41 Outlook 2016

42 Outlook 2016 raised Net interest income Allow. for credit losses 1) Net commission income Admin expenses Operating profit Pre-tax RoE EpS 2) Target portfolio size (ARL core portfolio) New business origination Operating profit Aareon 3) mn mn incl. effects from early repayments (Original plan 2016: 35 mn / FY 2015: 75 mn) 80 mn mn 190 mn mn 520 mn mn (incl. expenses for integration / projects and investments) 360 mn mn (from 300 mn mn) Considering 28 mn gain from solving / settlement of litigations incurred in connection with acquisition of ex Corealcredit ~13% (from ~11%) ~12 % adjusted by 28 mn gain from solving / settlement of litigations incurred in connection with acquisition of ex Corealcredit (from ) Considering 28 mn gain from solving / settlement of litigations incurred in connection with acquisition of ex Corealcredit and corresponding tax losses of 27 mn 25 bn - 27 bn 8 bn - 9 bn (from 7 bn - 8 bn) 33 mn - 35 mn 42 1) As in 2015, the bank cannot rule out additional allowances for credit losses 2) Earnings per ordinary share, tax rate of ~37% assumed (~31% adjusted by effects from solving / settlement of litigations incurred in connection with acquisition of ex Corealcredit and corresponding tax losses) 3) After segment adjustments

43 Conclusion Onging positive development Key takeaways at a glance Aareal Bank Group operating business remains on successful course FY-operating profit target raised to 360 mn mn, including expected positive one-off effect ( 28 mn) in Q Implementation of Aareal 2020 on track 43

44 Appendix Group results

45 Aareal Bank Group Results Q Profit and loss account mn mn Change Net interest income % Allowance for credit losses % Net interest income after allowance for credit losses % Net commission income % Net result on hedge accounting 3-3 Net trading income / expenses % Results from non-trading assets 5-13 Results from investments accounted for at equity 0 0 Administrative expenses % Net other operating income / expenses % Negative goodwill - - Operating Profit % Income taxes % Consolidated net income % Consolidated net income attributable to non-controlling interests 5 5 0% Consolidated net income attributable to shareholders of Aareal Bank AG % Earnings per share (EpS) Consolidated net income attributable to shareholders of Aareal Bank AG 1) % of which: allocated to ordinary shareholders % of which: allocated to AT1 investors 4 4 0% Earnings per ordinary share (in ) 2) % Earnings per ordinary AT1 unit (in ) 3) % 45 1) The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis. 2) Earnings per ordinary share are determined by dividing the earnings allocated to ordinary shareholders of Aareal Bank AG by the weighted average of ordinary shares outstanding during the financial year (59,857,221 shares). Basic earnings per ordinary share correspond to diluted earnings per ordinary share. 3) Eanings per AT1 unit (based on 100,000,000 AT1 units with a notional amount of 3 each) are determined by dividing the earnings allocated to AT1 investors by the weighted average of AT1 units outstanding during the financial year. Earnings per AT1 unit (basic) correspond to (diluted) earnings per AT1 unit.

46 Aareal Bank Group Results Q by segments Structured Property Financing Consulting / Services Consolidation/ Reconciliation mn Net interest income Allowance for credit losses Net interest income after allowance for credit losses Net commission income Net result on hedge accounting Net trading income / expenses Results from non-trading assets Results from investments accounted for at equity Administrative expenses Net other operating income / expenses Negative goodwill Operating profit Income taxes Consolidated net income Allocation of results Cons. net income attributable to non-controlling interests Cons. net income attributable to shareholders of Aareal Bank AG Aareal Bank Group

47 Aareal Bank Group Results 9M 2016 Profit and loss account mn mn Change Net interest income % Allowance for credit losses % Net interest income after allowance for credit losses % Net commission income % Net result on hedge accounting % Net trading income / expenses % Results from non-trading assets Results from investments accounted for at equity 0 0 Administrative expenses % Net other operating income / expenses % Negative goodwill ) Operating Profit ) -26% Income taxes % Consolidated net income ) -37% Consolidated net income attributable to non-controlling interests % Consolidated net income attributable to shareholders of Aareal Bank AG ) -39% Earnings per share (EpS) Consolidated net income attributable to shareholders of Aareal Bank AG 2) ) -39% of which: allocated to ordinary shareholders ) -40% of which: allocated to AT1 investors % Earnings per ordinary share (in ) 3) ,65 1) -40% Earnings per ordinary AT1 unit (in ) 4) % 47 1) Adjustment of previous year s figures due to completion of purchase price allocation for WestImmo, in accordance with IFRS 3 2) The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis. 3) Earnings per ordinary share are determined by dividing the earnings allocated to ordinary shareholders of Aareal Bank AG by the weighted average of ordinary shares outstanding during the financial year (59,857,221 shares). Basic earnings per ordinary share correspond to diluted earnings per ordinary share. 4) Eanings per AT1 unit (based on 100,000,000 AT1 units with a notional amount of 3 each) are determined by dividing the earnings allocated to AT1 investors by the weighted average of AT1 units outstanding during the financial year. Earnings per AT1 unit (basic) correspond to (diluted) earnings per AT1 unit.

48 Aareal Bank Group Results 9M 2016 by segments Structured Property Financing Consulting / Services Consolidation/ Reconciliation mn Net interest income Allowance for credit losses Net interest income after allowance for credit losses Net commission income Net result on hedge accounting Net trading income / expenses Results from non-trading assets Results from investments accounted for at equity Administrative expenses Net other operating income / expenses Negative goodwill 150 1) 150 1) Operating profit ) ) Income taxes Consolidated net income ) ) Allocation of results Cons. net income attributable to non-controlling interests Cons. net income attributable to shareholders of Aareal Bank AG ) ) Aareal Bank Group ) Adjustment of previous year s figures due to completion of purchase price allocation for WestImmo, in accordance with IFRS 3 48

49 Aareal Bank Group Results quarter by quarter Q Structured Property Financing Q Q Q Q Q Consulting / Services Q Q mn Net interest income Allowance for credit losses Net interest income after allowance for credit losses Net commission income Net result on hedge accounting Net trading income / expenses Results from non-trading assets Results from results accounted for at equity Administrative expenses Net other operating income / expenses Negative goodwill Operating profit Income taxes Consolidated net income Cons. net income attributable to non-controlling interests Cons. net income attributable to shareholders of Aareal Bank AG Q Q Q Consolidation / Reconciliation Q Q Q Q Q Aareal Bank Group Q Q Q Q

50 Appendix AT1: ADI of Aareal Bank AG

51 Interest payments and ADI of Aareal Bank AG Available Distributable Items (as of end of the relevant year) mn Net Retained Profit Net income Profit carried forward from previous year Net income attribution to revenue reserves Other revenue reserves after net income attribution = Total dividend potential before amount blocked 1) /. Dividend amount blocked under section 268 (8) of the German Commercial Code = Available Distributable Items 1) Increase by aggregated amount of interest expenses relating to Distributions on Tier 1 Instruments 1) = Amount referred to in the relevant paragraphs of the terms and conditions of the respective Notes as being available to cover Interest Payments on the Notes and Distributions on other Tier 1 Instruments 1) ) Unaudited figures for information purposes only 51

52 Appendix Development property finance portfolio

53 Development property finance portfolio Diversification continuously strengthened (in mn) 100% 90% Asia North America 80% 70% 60% 50% Europe East Europe North Europe South 40% % Europe West 20% 10% Germany 0%

54 Western Europe (ex Germany) credit portfolio Total volume outstanding as at : 9.1 bn Other: 0% by product type Residential: 1% Logistics: 7% by property type Others: 1% Retail: 22% Hotel: 35% Investment finance: 100% Office: 34% NPLs 2% by performance by LTV ranges 1) 60-80%: 3% > 80%: 1% Performing 98% < 60%: 96% 1) Performing business only, exposure as at

55 German credit portfolio Total volume outstanding as at : 4.4 bn Other: 1% by product type Others: 9% by property type Logistics: 12% Office: 26% Hotel: 13% Investment finance: 99% Retail: 17% Residential: 23% NPLs 1% by performance by LTV ranges 1) 60-80%: 4% > 80%: 2% Performing 99% < 60%: 94% 1) Performing business only, exposure as at

56 Southern Europe credit portfolio Total volume outstanding as at : 4.3 bn Developments: 15% by product type Other: 0% Others: 9% Logistics: 6% Hotel: 10% by property type Retail: 39% Investment finance: 85% Residential: 12% Office: 24% NPLs 22% by performance by LTV ranges 1) 60-80%: 10% > 80%: 5% Performing 78% < 60%: 85% 1) Performing business only, exposure as at

57 Eastern Europe credit portfolio Total volume outstanding as at : 2.5 bn Developments: 1% by product type Logistics: 8% by property type Others: 0% Hotel: 18% Office: 37% Investment finance: 99% Retail: 37% NPLs 5% by performance by LTV ranges 1) 60-80%: 3% > 80%: 0% Performing 95% < 60%: 97% 1) Performing business only, exposure as at

58 Northern Europe credit portfolio Total volume outstanding as at : 1.7 bn Developments: 10% by product type Other: 1% Residential: 3% Hotel: 9% by property type Others: 3% Retail: 39% Logistics: 17% Investment finance: 89% Office: 29% NPLs 6% by performance by LTV ranges 1) 60-80%: 8% > 80%: 9% Performing 94% < 60%: 83% 1) Performing business only, exposure as at

59 North America credit portfolio Total volume outstanding as at : 6.1 bn Developments: 1% by product type Residential: 7% by property type Retail: 19% Office: 51% Investment finance: 99% Hotel: 23% by performance by LTV ranges 1) 60-80%: 7% > 80%: 2% Performing 100% < 60%: 91% 1) Performing business only, exposure as at

60 Asia credit portfolio Total volume outstanding as at : 0.4 bn by product type by property type Retail: 12% Office: 47% Investment finance 100% Hotel: 41% by performance by LTV ranges 1) 60-80%: 0% Performing 100% < 60%: 100% 1) Performing business only, exposure as at

61 Appendix SREP requirements and RWA-split

62 Capital ratios SREP 1) requirements Capital ratios vs. SREP requirements (phased-in) % ~475 bps buffer Capital ratios vs. SREP requirements (fully phased) % 13.1 ~330 bps buffer CET1 ratio phased-in CET1 ratio phased-in 2016-SREP requirement 0 CET1 ratio fully phased SREP, countercyclical buffer and other buffer, estimate Main takeaways 62 Aareal Bank s SREP requirement according to ECB notification: 8.75% CET1 including capital conservation buffer Other buffer of 1% (estimated - not yet announced); actual countercyclical buffer: 0.02% CET1 ratio of 13.1% (fully phased) as at : ~330 bps above SREP requirement (including capital conservation buffer AND estimated other buffer) ~330 bps buffer currently available to cover uncertainties coming from regulatory environment As published April 14, ) Supervisory Review and Evaluation Process (SREP) Other buffer, estimate Countercyclical buffer SREP requirement

63 Stress Test Capital ratio remain above current SREP requirements in adverse scenario Current SREP ratio Even in adverse scenario CET1 ratio (fully phased) above current SREP requirements Solid leverage ratio Current SREP ratio 8.75% including capital conservation buffer 2016 SREP letter expected H ,8 5 5, phased-in Current leverage ratio requirements Base ( , fully phased) Adverse ( , fully phased) Including phasing effects Leverage ratio Common Equity Tier 1 (CET1) 63

64 From asset to risk weighted asset (RWA) Essential factors affecting volume of RWA Effective date 30/09/2016 RWA Aareal Group 15.4 bn + RWA RE Structured Finance 7.7 bn RWA Others 7.7 bn + RWA Loans outstanding 7.4 bn RWA Undrawn volume 0.3 bn x x + Loans outstanding (EaD) 26.4 bn Multiplier 0.28 Undrawn loans (EaD) 0.9 bn Multiplier 0.33 Sovereign 1) 0.0 bn Banks 0.5 bn x x Corporate (non-core RE portfolio) 2.4 bn Retail 0.5 bn Financial interest 1.2 bn Loans outstanding in loan currency FX Undrawn loans in loan currency FX Investment shares 0.0 bn 2) Others (tangible assets etc.) 1.0 bn Securitisation (ABS Investments) 0.0 bn Operational Risk 1.7 bn CVA-Charges 0.3 bn Market Risk 0.1 bn Total loan volume drawn as per effective date Depending on: type of collateral, geographic location of mortgaged properties, arrears, type of loan Total loan volume available to be drawn as per effective date Depending on: type of collateral geographic location of mortgaged properties, arrears, type of loan 64 1) Amounts to 38 mn 2) Amounts to 4 mn

65 Sustainability Performance

66 Aareal Bank Group stands for solidity, reliability and predictability Doing business sustainably 13.6% Common Equity Tier 1 ratio 1), exceeds the statutory requirements 28.4 mn Valuable property financing portfolio 2) Aareon's products & services boost our client's sustainability records Aareal Bank awarded as top employer for the 9 th time in succession Systematic approach: Code of Conduct for employees & suppliers Solid refinancing base: highest possible FITCH rating Aareal Bank & Aareon: Certified Ecoprofit companies, by using Above-average results in sustainability ratings AAA rating Mortgage Pfandbriefe Public sector Pfandbriefe 100% green electricity 66 1) full Basel III implementation, as at 30 September ) CRE business only, private client business ( 1.2 bn) and WIB s public sector loans ( 0.7 bn) not included, as at 30 September 2016

67 Sustainability data extends the financial depiction of the Group Key takeaways at a glance Transparent Reporting facilitating informed investment decisions 4 th Sustainability Report In Dialogue. By conviction. published on 10 May 2016 (online-version 1) ) Based on Global Reporting Initiative (GRI) G4 guidelines, in compliance with in accordance - core option, including GRI Materiality Disclosures Services check PricewaterhouseCoopers AG prepared a limited assurance engagement on materiality analysis / selected data Sustainability Ratings confirming the company s sustainability performance oekom research Aareal Bank Group holds prime status, ranking among the leaders in its industry [since 2012] Sustainalytics Aareal Bank Group was classified as outperformer, ranking among the best 16% of its industry [as per 12/2015] CDP Aareal Bank Group achieved a result of Management Level B, well above average of peer group Financials (DACH region) / MDAX companies ( Awareness Level C ) [Report 2016] imug Areal Bank was rated positive BB in the category Uncovered Bonds, ranking among Top 3 of 102 banks rated in total [as per 01/2016] 67 1)

68 Definitions and contacts

69 Definitions Structured Property Financing Portfolio = Paid-out financings on balance sheet New Business = Newly acquired business incl. renewals + Contract is signed by customer + Fixed loan value and margin Common Equity Tier 1 ratio = CET1 Risk weighted assets Pre tax RoE = Operating profit./. income/loss attributable to non-controlling interests./. AT1 cupon Average IFRS equity excl. non-controlling interests, other reserves, AT1 and dividends CIR = Admin expenses Net income Net income = net interest income + net commission income + net result on hedge accounting + net trading income + results from non-trading assets + results from investments accounted for at equity + results from investment properties + net other operating income Net stable funding ratio = Available stable funding 100% Required stable funding Liquidity coverage ratio = Total stock of high quality liquid assets 100% Net cash outflows under stress Bail-in capital ratio = Equity + subordinated capital (Long + short term funding) (Equity + subordinated capital) Earnings per share = operating profit./. income taxes./. income/loss attributable to non controlling interests./. net AT1 cupon Number of ordinary shares 69

70 Contacts Tobias Engel Alexander Kirsch Head of Capital Markets Capital Markets Phone: Phone: Jan Siemon Clarissa Veith Capital Markets Capital Markets Phone: Phone: Homepage Fitch Bloomberg Reuters Deutsche Börse Equity: ARL GR, Bond: AARB ARLG.F ARL 70

71 Disclaimer 2016 Aareal Bank AG. All rights reserved. This document has been prepared by Aareal Bank AG, exclusively for the purposes of a corporate presentation by Aareal Bank AG. The presentation is intended for professional and institutional customers only. It must not be modified or disclosed to third parties without the explicit permission of Aareal Bank AG. Any persons who may come into possession of this information and these documents must inform themselves of the relevant legal provisions applicable to the receipt and disclosure of such information, and must comply with such provisions. This presentation may not be distributed in or into any jurisdiction where such distribution would be restricted by law. This presentation is provided for general information purposes only. It does not constitute an offer to enter into a contract on the provision of advisory services or an offer to purchase securities. Aareal Bank AG has merely compiled the information on which this document is based from sources considered to be reliable without, however, having verified it. The securities of Aareal Bank AG are not registered in the United States of America and may not be offered or sold except under an exemption from, or pursuant to, registration under the United States Securities Act of 1933, as amended. Therefore, Aareal Bank AG does not give any warranty, and makes no representation as to the completeness or correctness of any information or opinion contained herein. Aareal Bank AG accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this presentation. The securities of Aareal Bank AG are not registered in the United States of America and may not be offered or sold except under an exemption from, or pursuant to, registration under the United States Securities Act of 1933, as amended. This presentation may contain forward-looking statements of future expectations and other forward-looking statements or trend information that are based on current plans, views and/or assumptions and subject to known and unknown risks and uncertainties, most of them being difficult to predict and generally beyond Aareal Bank AG s control. This could lead to material differences between the actual future results, performance and / or events and those expressed or implied by such statements. Aareal Bank AG assumes no obligation to update any forward-looking statement or any other information contained herein. 71