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IP - Analysts' call on the 2024 Q3 figures, Presentation to the Analyst Conference Call

Company: Aareal Bank AG Date: 2024-11-07 Language: English Register to download
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## **9M 2024 results** 7th November 2024

Dr Christian Ricken (CEO) Andy Halford (CFO) Christof Winkelmann (CMO)

![](_page_0_Picture_2.jpeg)

### **Agenda**

### ▪ **Highlights**

- Financial Performance
- Business Development
- Funding, Liquidity & Capital
- Outlook
- Appendix

![](_page_1_Picture_7.jpeg)

### **Highlights**

Maintaining strong performance, 9M operating profit up significantly

19% increase in nine month cumulative operating profit to € 261 mn

Strong contributions from both business segments

Increase in new business - particularly renewals - with good margins

Non-performing loans actively managed down

Loan loss charges excluding US offices at normal level

Strong capital and liquidity and 2024 funding already complete

Full year profit outlook confirmed even after absorbing likely efficiency charges

Aareon gain on sale to be booked in the fourth quarter

Full year net income likely to be around € 2.2 bn

![](_page_2_Picture_11.jpeg)

### **Group structure** Two strong segments

#### **Diversified business model - strong operating resilience**

#### **Structured Property Financing (SPF)**

- Supporting our clients with large-sized commercial property investments
- Focus on hotel, logistics, shopping centres / retail, alternative residential properties and office buildings

![](_page_3_Figure_5.jpeg)

#### **Banking & Digital Solutions (BDS)**

- Leading provider of payment transaction services to the German housing industry
- Process optimisation of payment and business transactions
- Rental deposit and guarantee management

![](_page_3_Picture_10.jpeg)

### **Agenda**

- Highlights
- **Financial Performance**
- Business Development
- Funding, Liquidity & Capital
- Outlook
- Appendix

![](_page_4_Picture_7.jpeg)

#### **Financial Performance - Group Profit & Loss**

#### 9M operating profit up 19%

| Profit & loss (€ mn)                                                  | 9M '23 | 9M '24 | ∆ 9M<br>'24/'23 |
|-----------------------------------------------------------------------|--------|--------|-----------------|
| Net interest income (NII)                                             | 734    | 792    | 8%              |
| s<br>Net commission income (NCI)<br>n<br>o                            | 30     | -1     | -               |
| erati<br>Admin expenses<br>p                                          | -248   | -253   | 2%              |
| o<br>g<br>Others<br>n                                                 | 20     | 11     | -45%            |
| ui<br>n<br>Loan loss provision incl. FVPL<br>nti                      | -316   | -288   | -9%             |
| o<br>m c<br>Operating profit<br>o                                     | 220    | 261    | 19%             |
| s fr<br>Income taxes<br>ult                                           | -66    | -76    | 15%             |
| Consolidated net income<br>s<br>e<br>R<br>from continuing operations  | 154    | 185    | 20%             |
| 1)<br>Return on equity (RoE)                                          | 6.0    | 7.4    |                 |
| Consolidated net income<br>from discontinued operations               | -50    | -161   |                 |
| Consolidated net income                                               | 104    | 24     |                 |
| Net income attributable to ordinary<br>shareholders of Aareal Bank AG | 96     | 37     |                 |

1) After tax, annualized

- NII up 8%
	- Increased average loan portfolio
	- Good margins on lending business
	- Diversified funding mix at improved spreads
	- Payment business of BDS
- Positive NCI offset by fees paid to paymenttransaction-JV ("First Financial Software"), established with Aareon
- Admin expenses largely stable
- LLP down 9%, but, as expected, still at elevated level from ongoing challenges in the US office market
- Operating profit (€ 261 mn) up 19%, both segments contributing similarly
	- SPF: € 136 mn (9M/23: € 100 mn)
	- BDS: € 125 mn (9M/23: € 120 mn)
- Consolidated net income from discontinued operations includes costs relating to the sale of Aareon
- Gain on sale will be recognised in Q4

![](_page_5_Picture_17.jpeg)

#### **Financial Performance**

#### Leveraging business model on stable cost base

![](_page_6_Figure_2.jpeg)

![](_page_6_Figure_3.jpeg)

1) Segment SPF & BDS excluding bank levy/deposit guarantee scheme

#### **Up 8%**

- Increase based on
	- Increased average loan portfolio
	- Good new business margins
	- Diversified funding mix at improved spreads
	- Positive interest rate effects on BDS deposits
- FY NII above last years' level expected

#### **Largely stable**

- Decrease in Q1 due to reduced bank levies offset by one-off effects in Q2
- Cost/income ratio (CIR)1) of 32% (9M/23: 31%) at benchmark leading level
- One-off charges for efficiency enhancement measures in Q4

![](_page_6_Picture_16.jpeg)

#### **Financial Performance** LLP (incl. FVPL) charge down 9%

![](_page_7_Figure_1.jpeg)

![](_page_7_Figure_2.jpeg)

#### **LLP already down on last year but still at an elevated level**

- Total LLP of € 288 mn (9M/23: € 316 mn) includes € 31 mn FVPL (9M/23: € 54 mn)
- 9M LLP reflects
	- Costs of active NPL management
	- € 35 mn net additions to management overlays (aggregated management overlays at € 60 mn)

#### **Ongoing challenges in the US office market**

- US office charge represents 60% of total ytd charge (incl. management overlay)
- Rest of portfolio on normal level with risk costs of ~45 bps1)

![](_page_7_Picture_11.jpeg)

7

### **Agenda**

- Highlights
- Financial Performance
- **Business Development**
- Funding, Liquidity & Capital
- Outlook
- Appendix

![](_page_8_Picture_7.jpeg)

#### Strong Q3 new business mainly driven by renewals

![](_page_9_Figure_2.jpeg)

## Confirming YE portfolio target of € 33-34 bn

![](_page_10_Figure_2.jpeg)

- Portfolio highly diversified by region and property type, primarily in major global metropolitan areas
	- No Signa loan exposure
	- Virtually no developments
	- Limited exposure in Germany (~7% of CREF portfolio)
	- No exposure to Russia, China, Middle East
- Financing of refurbishments to foster green transition
- Green loan volume of € 6.0 bn (12/23: € 4.8 bn)

![](_page_10_Figure_10.jpeg)

Asset quality improved by strict low-risk focus on new business

![](_page_11_Figure_2.jpeg)

#### **Loan-to-value (LTV)1) by property type**

| %         | 12 '20 | 12 '21 | 12 '22 | 12 '23 | 09 '24 |
|-----------|--------|--------|--------|--------|--------|
| Hotel     | 62     | 60     | 56     | 54     | 52     |
| Logistics | 56     | 55     | 52     | 55     | 56     |
| Office    | 58     | 58     | 57     | 62     | 63     |
| Retail    | 61     | 59     | 56     | 58     | 55     |

**Performing portfolio yield-on-debt (YoD)**

![](_page_11_Figure_6.jpeg)

**Yield-on-debt (YoD) 1) by property type**

| %         | 12 '20 | 12 '21 | 12 '22 | 12 '23 | 09 '24 |
|-----------|--------|--------|--------|--------|--------|
| Hotel     | 3.0    | 5.0    | 9.0    | 10.6   | 10.8   |
| Logistics | 9.2    | 8.7    | 9.0    | 9.3    | 10.0   |
| Office    | 8.1    | 7.6    | 6.9    | 7.5    | 7.6    |
| Retail    | 8.8    | 9.1    | 9.8    | 11.3   | 12.2   |

![](_page_11_Picture_9.jpeg)

Ongoing challenges in the US market, rest of the portfolio performing well

![](_page_12_Figure_2.jpeg)

US office: Still challenging

![](_page_13_Figure_2.jpeg)

- No newly acquired business in 2024
- Concentrating on high quality class A properties in A markets
- New York represents ~45% of the US office portfolio, rest largely spread throughout major US cities

![](_page_13_Figure_6.jpeg)

- 80% of portfolio has a (layered) LTV < 60%
	- (Layered) LTV 80 100%: 4% (€ ~100 mn)
	- (Layered) LTV above 100%: none

![](_page_13_Picture_10.jpeg)

![](_page_13_Figure_11.jpeg)

#### European office portfolio performing well

![](_page_14_Figure_2.jpeg)

![](_page_14_Figure_3.jpeg)

Note: others including countries with a portfolio below € 100 mn

2) Including undrawn commitments

- No new office NPLs in Europe since 2022
- French office portfolio mainly in Paris
	- High share of planned refurbishments into green assets (~1/3 of total French office portfolio)
- UK portfolio mainly in London city centre, no Canary Wharf
- Structural differences European vs US office markets
	- Different interest rate environment
	- Lower vacancy rates in European markets
	- Longer investment horizons in Europe
	- Tighter interest rate hedges in Europe
	- Higher equity share / limited subordinated debt structures in Europe resulting in lower LTVs
	- Longer commuting time and larger homes in the US, European cities offer larger mix of attractive areas to live and work
	- Subleasing not common in Europe

![](_page_14_Picture_19.jpeg)

<sup>1)</sup> Excluding undrawn commitments

#### NPLs further reduced by ongoing active management

![](_page_15_Figure_2.jpeg)

#### **Ongoing active NPL management**

- Resolution of already announced € ~300 mn without further P/L charge
- Up to € ~500 mn NPLs prepared for resolution
- Two exposures moved into NPL in Q3
- NPL-portfolio, outside US office, significantly reduced from € 1.6 bn in 12/21 to € 0.5 bn 09/24
- NPE ratio as of 09/24 acc. to EBA methodology1): 3.0% (12/23: 3.4%)
- Coverage ratio (incl. FVPL) of 30% (12/23: 24%)

![](_page_15_Figure_10.jpeg)

## **Banking & Digital Solutions**

High deposit base stable

![](_page_16_Figure_2.jpeg)

1) Average on annual / YtD-basis

- Segment NII increased vs. 9M/23
	- Deposit volume above earlier expectations of € ~13 bn
	- Normalised interest rate environment
- Segment NCI decreased vs. 9M/23
	- Commission income (CI) increase offset by fees paid to First Financial Software (9M/24: € 29 mn)
	- First Financial Software already attracting new clients to secure and enhance deposits for the Bank

![](_page_16_Figure_10.jpeg)

### **Agenda**

- Highlights
- Financial Performance
- Business Development
- **Funding, Liquidity & Capital**
- Outlook
- Appendix

![](_page_17_Picture_7.jpeg)

### Successfully diversified funding activities / 2024 funding plan fulfilled

![](_page_18_Figure_2.jpeg)

- Solid liquidity ratios:
	- NSFR 122%1)
	- LCR 250%2)
- Deposits from housing industry stable at € 13.7 bn3)
- € 3.6 bn retail term deposits through cooperation with Raisin, slightly above the target volume of € 3.5 bn (12/23: € 2.6 bn), ~97% with a maturity ≥ 2 years

![](_page_18_Figure_8.jpeg)

2) Q3 average

18

- 2024 funding plan fulfilled
	- Tier 2 benchmark after absence from market in over a decade successfully placed
	- Inaugural green senior non-preferred benchmark, with strong performance in the secondary market
	- Three benchmark Pfandbriefe, thereof one in 10/24
- 2025 focus on
	- Pfandbrief benchmark issuance
	- Further deposit optimisation; no significant Senior unsecured needs
	- Additional funding and capital management activities depending on market conditions

### **Funding & Liquidity** Strong Mortgage Cover Pool and Aaa Rating for Pfandbriefe

![](_page_19_Figure_1.jpeg)

As at 30.09.2024

#### **Pfandbrief funding cornerstone of wholesale issuance**

- Cover pool of € 16.8 bn incl. € 0.7 bn substitute assets diversified over 19 countries
- High quality assets: first-class mortgage loans (mortgage-lending-value 55.6%)
- Mortgage-lending-value with high discount from market-value
- Avg. LTV of the mortgage cover pool 34.7%
- Moody´s has calculated a 'Aaa' supporting overcollateralisation ratio of 16.0% on a PV basis
- Over-collateralisation on a PV basis as of 30.09.2024: 19.4%
- High diversification within property types and countries

![](_page_19_Picture_11.jpeg)

### **Capital**  Solid capital ratios

![](_page_20_Figure_1.jpeg)

- B4 CET1 (phase-in) remaining resilient at 19.3%
- B4 CET1 (fully phased) ratio at 15.2%1) (12/23: 13.4%). Strong increase in 9M/24 mainly resulting from first-time adoption of the SME factor within the B4 CRSA
- T1-Leverage ratio at 6.8%1) (12/23: 6.6%)

1) (Proforma) Ratios solely based on continuing operations according to IFRS 5. Capital ratios (phase-in) as at 30.9.24 acc. COREP stood at 16.9% (CET1), 18.9% (T1), 23.2% (TC)

2) Based on the European Commission's final version for implementation of Basel IV (CRR III) on the Regulation 2024/1623 of 31 May 2024

20 3) B4 (phase-in) capital ratios are based on RWA calculation taking the higher-of RWAs from Advanced Internal Rating Based Approach (A-IRBA) and B4 Revised Credit Risk Standard Approach (CRSA@50% output floor)

![](_page_20_Picture_8.jpeg)

### **Agenda**

- Highlights
- Financial Performance
- Business Development
- Funding, Liquidity & Capital
- **Outlook**
- Appendix

![](_page_21_Picture_7.jpeg)

### **Outlook 2024**  Confirming operating profit target range

|                                                                         |                                  | METRIC                                  | 2023                   | OUTLOOK 2024                        |  |
|-------------------------------------------------------------------------|----------------------------------|-----------------------------------------|------------------------|-------------------------------------|--|
|                                                                         | Structured<br>Property Financing | ▪<br>REF Portfolio<br>▪<br>New business | € 32.9 bn<br>€ 10.0 bn | 34 bn1)<br>€ 33 -<br>€ 9 -<br>10 bn |  |
| k<br>n<br>a<br>B                                                        | Banking & Digital Solutions      | ▪<br>Deposit volume                     | € ~13.6 bn             | € >13 bn                            |  |
|                                                                         | Operating profit (EBT)           |                                         | € 221 mn               | € 250 -<br>300 mn                   |  |
| n<br>o<br>e<br>Net capital gain from sale of approx. € ~2 bn<br>ar<br>A |                                  |                                         |                        |                                     |  |

#### **Net capital gain from sale of approx. € ~2 bn**

**OUTLOOK 2024**

**Group net income € ~2.2 bn**

**Confirming operating profit target range based on a strong operating performance after expected one-off charges for efficiency enhancement measures in Q4** ➢

1) Subject to FX development

![](_page_22_Picture_7.jpeg)

#### **Key takeaways**

![](_page_23_Figure_1.jpeg)

#### Appendix **Business Development**

![](_page_24_Picture_1.jpeg)

## **Segment SPF: CREF portfolio by country**

€ 31.6 bn well diversified

![](_page_25_Figure_2.jpeg)

1) Including undrawn commitments, performing only

### **Segment SPF: CREF portfolio by property types**

€ 31.6 bn well diversified

![](_page_26_Figure_2.jpeg)

#### Appendix **Funding, Liquidity & Capital**

![](_page_27_Picture_1.jpeg)

#### **Funding & Liquidity**  Comfortable liquidity position

| Balance sheet as at 30.09.2024: € 46.6 bn (31.12.2023: € 46.8 bn)      |                                                                                                  |  |  |
|------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------|--|--|
| € bn<br>55                                                             |                                                                                                  |  |  |
| 50                                                                     |                                                                                                  |  |  |
| 45<br>3.6 (4.0) Money Market<br>8.2 (7.3)                              | 2.0 (3.5) Money Market (incl. inst. client's deposits)<br>3.6 (2.6) Deposits from retail clients |  |  |
| 40<br>Treasury portfolio                                               | 12.5 (12.7)<br>Deposits from                                                                     |  |  |
| 35<br>31.6 (32.5)<br>Commercial real estate<br>30<br>finance portfolio | housing industry                                                                                 |  |  |
| 25                                                                     | 24.8 (24.2)<br>Long-term funds<br>and equity                                                     |  |  |
| 20                                                                     | ▪<br>20.9 (20.5)<br>Long-term funds<br>−<br>13.0 (12.9) Pfandbriefe                              |  |  |
| 15<br>10                                                               | −<br>7.9 (7.7) Senior<br>▪<br>0.9 (0.7)<br>Subordinated capital                                  |  |  |
| 5                                                                      | ▪<br>3.0 (3.0)<br>Shareholders' equity                                                           |  |  |
| 2.6 (3.9) Other assets1)<br>3.2 (3.0) Other assets1)                   | 3.7 (3.8) Other liabilities                                                                      |  |  |
| 0<br>Assets                                                            | Liabilities & equity                                                                             |  |  |

1) Other assets includes € 0.1 bn private client portfolio and WIB's € 0.2 bn public sector loans

![](_page_28_Picture_3.jpeg)

Diversified funding sources and distribution channels

![](_page_29_Figure_2.jpeg)

#### Strong deposit franchise reduces dependence on capital markets

![](_page_30_Figure_2.jpeg)

#### **Deposit base consistently increased**

- Total deposit base with three strong pillars significantly improved over time
- Granular and sticky Housing Industry (BDS) deposit structure from ~4,000 clients managing more than 9 mn units
- Retail clients as additional source for term deposit introduced in 2022 anticipating expected decrease of Institutional Clients deposits caused by reform of the German deposit protection

![](_page_30_Figure_7.jpeg)

1) Average on annual / YtD-basis

2) Initial contractual maturity, > 9 month

#### Treasury portfolio of € 8.0 bn ensures comfortable liquidity buffer

![](_page_31_Figure_2.jpeg)

As of 30.09.2024 – all numbers refer to nominal amounts 1) Composite Rating

#### MREL capacity well above regulatory requirements

![](_page_32_Figure_2.jpeg)

- Senior Preferred have significant protection from subordinated liabilities and own funds
- Run-down of subordinated liabilities well manageable, after 5 years cet.par. still comfortably complying with requirements
- (Subordinated) MREL ratios as at 30.06.2024:

| %              | TREA  | LRE   |
|----------------|-------|-------|
| Actual         | 46.10 | 14.55 |
| Requirements1) | 24.07 | 7.94  |

1) (Subordinated) MREL Requirements coming in effect in 2025

2) Based on 2025 requirements in relation to current RWAs (phase-in) and leverage ratio exposure

### **Funding & Liquidity** Rating profile

| Financial Ratings                 |      |                             |      |  |  |  |  |
|-----------------------------------|------|-----------------------------|------|--|--|--|--|
| Fitch Ratings                     |      | Moody's                     |      |  |  |  |  |
| Issuer default rating<br>(Stable) | BBB  | Issuer rating<br>(stable)   | Baa1 |  |  |  |  |
| Short-term issuer<br>rating       | F2   | Short-term issuer<br>rating | P-2  |  |  |  |  |
| Deposit<br>rating                 | BBB+ | Senior preferred            | Baa1 |  |  |  |  |
| Senior preferred                  | BBB+ | Senior non preferred        | Baa3 |  |  |  |  |
| Senior non preferred              | BBB  | Bank deposit<br>rating      | Baa1 |  |  |  |  |
| Viability<br>rating               | BBB  | BCA                         | Ba1  |  |  |  |  |
| Subordinated<br>debt<br>(Tier 2)  | BB+  | Mortgage<br>Pfandbriefe     | Aaa  |  |  |  |  |
| Additional Tier 1                 | BB   |                             |      |  |  |  |  |

|                | ESG-Ratings |                      |
|----------------|-------------|----------------------|
| MSCI           |             | A                    |
| ISS-ESG        |             | prime (C)            |
| Sustainalytics |             | Low (20-10)          |
| CDP            |             | Managment<br>Level B |

#### **Financial Ratings**

▪ Ratings reflect strong credit profile based on solid capital and liquidity position

#### **ESG-Ratings**

Aareal's ESG performance has been rewarded by the rating agencies:

▪ MSCI:

"A" Rating shows strong ESG Performance in the upper midfield in relative comparison to our industry peers

▪ ISS ESG:

Prime Status confirms ESG performance above sector-specific Prime threshold

- Sustainalytics: "Low" risk classification", Rank 214 of 1043 in Sector Banks, 15 of 105 in Thrifts and Mortgages
- CDP:

Management Level B in CDP's Climate Change survey, affirms Aareal addressed the environmental impacts of its business and ensures good environmental management

![](_page_33_Picture_14.jpeg)

Note: ESG-Ratings and Benchmarks as of 18/10/2024

### **Capital** SREP (CET 1) requirements

![](_page_34_Figure_1.jpeg)

Appendix **ESG**

![](_page_35_Picture_1.jpeg)

### **ESG is fundamental to our business and therefore, part of our corporate strategy**

Supporting our clients on their "Road to Paris"

![](_page_36_Figure_2.jpeg)

#### **We are fostering the transition… …because it is important to us**

- **Deep integration of ESG** into business, credit, investment, risk and funding strategies
- Comprehensive **Green** Finance and Green Funding **frameworks** in place
- Continuously **leveraging our Green product portfolio**
- Consistently **positive ESG-rating results**  rewarding Aareal's ESG performance
- We are **aware of our responsibility** for the environment and strive to make a **positive contribution to a green future**
- Our **aim** is to **integrate ESG considerations** into **all business decisions**
- We are **committed to transparency, integrity and continuous improvement and** to working together with our clients for a sustainable world

![](_page_36_Picture_11.jpeg)

### **ESG in our daily business**

#### Sustainability at the core of our decisions since Q2 2021

![](_page_37_Picture_2.jpeg)

#### **ESG in our lending business ESG in our funding activity**

#### **Aareal Bank "Green Finance Framework – Lending" put into place**

- Aareal Bank's Green Finance Framework Lending confirmed through a Second Party Opinion (SPO) by Sustainalytics
- Ambition to extend ESG assessment in our day-to-day lending activities
- Explicit customer demand for Aareal Bank's green lending approach identified internationally and interest is high for the new product
- Green lending within a regularly updated framework provided

#### **Aareal Bank "Green Finance Framework – Liabilities" forms basis for Green Bonds**

- In addition to the lending framework, Aareal Bank has implemented an accompanying and regularly updated liability-side / use-of-proceeds framework - confirmed through SPO by Sustainalytics - that allows issuance of green financing instruments
- "Green Finance Framework Liabilities" is intended to not only reflect our sustainable lending activities but also our strategic approach towards sustainability
- Bond issuances under this framework invite open discussion and engagement with investors on the progress we have made and, on the path, forward

![](_page_37_Picture_14.jpeg)

#### **Continue to enlarge climate transparency in the portfolio**

- Portfolio transparency and data accumulation significantly improved for both existing and new lending and to be continued
- Aareal Bank involved in international initiatives to calculate financed emissions (PCAF)

![](_page_37_Picture_18.jpeg)

### **Aareal's 'credible and impactful' Green Finance Framework**

![](_page_38_Picture_1.jpeg)

| Aareal Green Finance Framework (GFF) in place                                                                                                                                                                                                                                                                                          |                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                       |                                                                                 |  |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---|--------------------------------------------------------------------------------------------------------------------------------------------------------------------|--|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------|--|
| Green Property Financing:<br>Requirements to qualify as green property<br>(as set out below under "Eligibility criteria")<br>▪<br>Meets EU Taxonomy criteria<br>and / or<br>▪<br>Certified with an above-average ratings<br>and / or<br>▪<br>Classified as nearly zero-energy building (nZEB) / thresholds as<br>defined in Aareal GFF |                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                          | + | Green Loan<br>Rider:<br>Customer of a Green Loan<br>agrees to<br>Maintaining "Aareal<br>Green<br>Finance Framework"<br>requirements during the term<br>of the loan |  |                                                                                                                                                                                                                                                                       | Green Loan:<br>Combination of<br>▪<br>Green property1)<br>and<br>▪<br>Agreement |  |
| Eligibility category<br>Eligibility criteria (alternatives)                                                                                                                                                                                                                                                                            |                                                                                                                                                                                                     |                                                                                                                                                                                                                                                                                          |   |                                                                                                                                                                    |  |                                                                                                                                                                                                                                                                       |                                                                                 |  |
| Green Buildings                                                                                                                                                                                                                                                                                                                        | 1. EU taxonomy compliant:<br>Buildings meet the EU Taxonomy<br>criteria according to the EU<br>Commission Delegated Regulation,<br>Chapter 7.7 "Acquisition and<br>ownership of existing buildings" | 2. Green building certification:<br>▪<br>BREEAM: "Very Good" and above<br>▪<br>LEED: "Gold" and above<br>▪<br>DGNB: "Gold" and above<br>▪<br>Green Star: "5 Stars" and above<br>▪<br>NABERS: "4.5 Stars" and above<br>▪<br>HQE: "Excellent" and above<br>▪<br>Energy Star. "80" or above |   |                                                                                                                                                                    |  | 3. Energy efficiency:<br>Classified as a nearly zero-energy<br>building (nZEB) and / or property<br>falls below<br>the maximum energy<br>reference values<br>75 kWh/m² p.a.<br>Residential<br>140 kWh/m² p.a.<br>Office, Hotel, Retail<br>65 kWh/m² p.a.<br>Logistics |                                                                                 |  |
| Energy<br>efficiency<br>upgrades                                                                                                                                                                                                                                                                                                       | 1. EU taxonomy compliant:<br>Modernisation measures meet the<br>EU Taxonomy criteria acc. EU<br>Commission Delegated Regulation3)                                                                   | 2. Upgrade to Green Building:<br>Completion of the measure brings<br>the property up to the green building<br>standard defined above.                                                                                                                                                    |   | 3. Energy efficiency improvement:<br>Completion of the measure results in<br>an energy efficiency improvement of<br>at least 30%.                                  |  |                                                                                                                                                                                                                                                                       |                                                                                 |  |

1) All buildings within a financing have to qualify as green buildings according to Aareal GFF

2) Partnership for Carbon Accounting Financials

3) Chapter 7.2 "Renovation of existing buildings"

#### **34% of CREF portfolio classified as Green Property Financings**

![](_page_39_Figure_1.jpeg)

€ 10.8 bn1) or 34% of total CREF portfolio fulfilling Aareal's Green Finance Framework and are classified as "Green Property Financings", thereof

- € 5.8 bn included in green asset pool for underlying of Green bond issues
- € 5.0 bn green property financings not (yet) included

![](_page_39_Figure_5.jpeg)

1) CREF excluding business not directly collateralized by properties Portfolio data as at 30.09.2024 – ESG Data as at 30.09.2024

2) Valid certificate is documented

## 40

**Internal**

**Clients**

On the "Road to Paris" we are supporting our clients and enhancing **Short-term ambition 2024 Mid-term ambition** Expansion of Green Financing: + **€ 1.5 bn Successes in 2023** Green Loan volume **€ 4.8 bn € ~6-7 bn total Green Loan volume1)** by 2026

#### Publish PCAF report on financed emissions in `24 / Provide further transparency for CREF portfolio

**additional Green Loans1)**

**+ € 0.5 bn** green long-term funding in 2024

Further develop **ESG products**

**Deep ESG integration in business, credit, investment, risk and refinancing strategies and decision-making process**

ESG continues to be part of our Management Board's variable remuneration

+ additionally, workforce's variable remuneration is partly linked to ESG since 2023

**Limiting our own Greenhouse Gas emissions**

Carbon-neutrality through compensation of our business operations worldwide

1) Assuming current Green Finance Framework (vintage 2023)

![](_page_40_Picture_10.jpeg)

*(as per 31.12.2023)*

Green Funding volume **€ 1.0 bn green bonds + € 0.4 bn green CPs**  *(as per 31.12.2023)*

![](_page_40_Picture_11.jpeg)

Continuously **leverage our Green Asset Pool**  for long-term funding

![](_page_40_Picture_12.jpeg)

### **Consistently positive rating results**

Rewarding Aareal's ESG performance

![](_page_41_Figure_2.jpeg)

Note: Results and Benchmarks as of 18/10/2024

#### Appendix **ADI of Aareal Bank**

![](_page_42_Picture_1.jpeg)

### **Interest payments and ADI of Aareal Bank AG**

![](_page_43_Picture_1.jpeg)

Available Distributable Items (as of end of the relevant year)

|                                                                                                                                                                                                                         | 31.12.<br>2020     | 31.12.<br>2021      | 31.12.<br>2022     | 31.12.<br>2023        |
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------|---------------------|--------------------|-----------------------|
| € mn<br>Net Retained Profit<br>▪<br>Net income<br>▪<br>Profit carried forward from previous year<br>▪<br>Net income attribution to revenue reserves                                                                     | 90<br>90<br>-<br>- | 96<br>30<br>66<br>- | 61<br>61<br>-<br>- | 452<br>391<br>61<br>- |
| +<br>Other revenue reserves after net income attribution                                                                                                                                                                | 840                | 840                 | 936                | 936                   |
| =<br>Total dividend potential before amount blocked1)                                                                                                                                                                   | 930                | 936                 | 997                | 1.388                 |
| ./.<br>Dividend amount blocked under section 268 (8)<br>of the German Commercial Code<br>./.<br>Dividend amount blocked under section 253 (6)<br>of the German Commercial Code                                          | 320<br>43          | 386<br>36           | 466<br>24          | 487<br>6              |
| = Available Distributable Items1)                                                                                                                                                                                       | 566                | 515                 | 507                | 895                   |
| +<br>Increase by aggregated amount of interest expenses relating to<br>Distributions on Tier 1 Instruments1)                                                                                                            | 21                 | 20                  | 21                 | 29                    |
| =<br>Amount referred to in the relevant paragraphs of the terms and<br>conditions of the respective Notes as being available to cover Interest<br>Payments on the Notes and Distributions on other Tier 1 Instruments1) | 588                | 535                 | 529                | 924                   |

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#### Appendix **Group Results**

![](_page_44_Picture_1.jpeg)

## **Aareal Bank Group**

Results 9M 20241)

|                                                                         | 01.01.-<br>30.09.2024 | 01.01.-<br>30.09.2023 | Change |
|-------------------------------------------------------------------------|-----------------------|-----------------------|--------|
| € mn                                                                    |                       |                       |        |
| Net income from continuing operations                                   |                       |                       |        |
| Net interest income                                                     | 792                   | 734                   | 8<br>% |
| Loss allowance                                                          | 257                   | 262                   | -2%    |
| Net commission income                                                   | -1                    | 3<br>0                |        |
| Net derecognition gain or loss                                          | 1<br>9                | 1<br>8                | 6<br>% |
| Net gain or loss from financial instruments (fvpl)                      | -51                   | -58                   | -12%   |
| Net gain or loss from hedge accounting                                  | 2                     | -2                    |        |
| Net gain or loss from investments accounted for using the equity method | -                     | 2                     |        |
| Administrative expenses                                                 | 253                   | 248                   | 2<br>% |
| Net other operating income / expenses                                   | 1<br>0                | 6                     | 67%    |
| Operating profit from continuing operations                             | 261                   | 220                   | 19%    |
| Income taxes                                                            | 7<br>6                | 6<br>6                | 15%    |
| Consolidated net income from continuing operations                      | 185                   | 154                   | 20%    |
| Net income from discontinued operations                                 | -161                  | -50                   | 222%   |
| Consolidated net income                                                 | 2<br>4                | 104                   | -77%   |
| Consolidated net income attributable to non-controlling interests       | -37                   | -13                   | 185%   |
| Consolidated net income attributable to shareholders of Aareal Bank AG  | 6<br>1                | 117                   | -48%   |

1) In accordance with IFRS 5, net income from discontinued operations is disclosed separately; the previous year's figures have been adjusted

![](_page_45_Picture_4.jpeg)

#### **Aareal Bank Group**

#### Results 9M 2024 by segments1)

|                                                                    | Financing                 | Structured<br>Property    | Banking & Digital<br>Solutions | r                         | A<br>Consolidation/<br>a<br>Reconciliation<br>e |                           | Aareal Bank<br>Group      |                           |
|--------------------------------------------------------------------|---------------------------|---------------------------|--------------------------------|---------------------------|-------------------------------------------------|---------------------------|---------------------------|---------------------------|
|                                                                    | 01.01.-<br>30.09.<br>2024 | 01.01.-<br>30.09.<br>2023 | 01.01.-<br>30.09.<br>2024      | 01.01.-<br>30.09.<br>2023 | 01.01.-<br>30.09.<br>2024                       | 01.01.-<br>30.09.<br>2023 | 01.01.-<br>30.09.<br>2024 | 01.01.-<br>30.09.<br>2023 |
| € mn                                                               |                           |                           |                                |                           |                                                 |                           |                           |                           |
| Net interest income                                                | 589                       | 564                       | 203                            | 170                       | 0                                               | 0                         | 792                       | 734                       |
| Loss allowance                                                     | 257                       | 262                       | 0                              | 0                         |                                                 |                           | 257                       | 262                       |
| Net commission income                                              | 2                         | 6                         | -3                             | 2<br>4                    | 0                                               | 0                         | -1                        | 3<br>0                    |
| Net derecognition gain or loss                                     | 1<br>9                    | 1<br>8                    |                                |                           |                                                 |                           | 1<br>9                    | 1<br>8                    |
| Net gain or loss from financial instruments (fvpl)                 | -50                       | -58                       | -1                             | 0                         |                                                 |                           | -51                       | -58                       |
| Net gain or loss from hedge accounting                             | 2                         | -2                        |                                |                           |                                                 |                           | 2                         | -2                        |
| Net gain or loss from investments                                  |                           |                           |                                |                           |                                                 |                           |                           |                           |
| accounted for using the equity method                              |                           |                           |                                | 2                         |                                                 |                           |                           | 2                         |
| Administrative expenses                                            | 180                       | 173                       | 7<br>3                         | 7<br>5                    |                                                 |                           | 253                       | 248                       |
| Net other operating income / expenses                              | 1<br>1                    | 7                         | -1                             | -1                        | 0                                               | 0                         | 1<br>0                    | 6                         |
| Operating profit<br>from continuing operations                     | 136                       | 100                       | 125                            | 120                       | 0                                               | 0                         | 261                       | 220                       |
| Income taxes                                                       | 3<br>6                    | 2<br>8                    | 4<br>0                         | 3<br>8                    |                                                 |                           | 7<br>6                    | 6<br>6                    |
| Consolidated net income<br>from continuing operations              | 100                       | 7<br>2                    | 8<br>5                         | 8<br>2                    | 0                                               | 0                         | 185                       | 154                       |
| Net income from discontinued operations                            |                           |                           |                                |                           | -161                                            | -50                       | -161                      | -50                       |
| Consolidated net income                                            | 100                       | 7<br>2                    | 8<br>5                         | 8<br>2                    | -161                                            | -50                       | 2<br>4                    | 104                       |
| Allocation of results                                              |                           |                           |                                |                           |                                                 |                           |                           |                           |
| Cons. net income attributable to non-controlling interests         | 0                         | 0                         | 0                              | 0                         | -37                                             | -13                       | -37                       | -13                       |
| Cons. net income attributable to shareholders<br>of Aareal Bank AG | 100                       | 7<br>2                    | 8<br>5                         | 8<br>2                    | -124                                            | -37                       | 6<br>1                    | 117                       |

1) Presentation in line with the structure prescribed by IFRS 5

#### **Aareal Bank Group** Results1) - quarter by quarter

|                                                                      | Structured Property<br>Financing |     |        |        |        | Banking & Digital<br>Solutions |        |        |        |    | Consolidation /<br>Reconciliation |      |    |        |        | Aareal Bank Group |      |        |      |        |
|----------------------------------------------------------------------|----------------------------------|-----|--------|--------|--------|--------------------------------|--------|--------|--------|----|-----------------------------------|------|----|--------|--------|-------------------|------|--------|------|--------|
|                                                                      | Q3                               | Q2  | Q1     | Q4     | Q3     | Q3                             | Q2     | Q1     | Q4     | Q3 | Q3                                | Q2   | Q1 | Q4     | Q3     | Q3                | Q2   | Q1     | Q4   | Q3     |
|                                                                      | 2024                             |     |        | 2023   |        | 2024                           |        |        | 2023   |    |                                   | 2024 |    | 2023   |        |                   | 2024 |        | 2023 |        |
| € mn                                                                 |                                  |     |        |        |        |                                |        |        |        |    |                                   |      |    |        |        |                   |      |        |      |        |
| Net interest income                                                  | 194                              | 192 | 203    | 212    | 199    | 68                             | 70     | 65     | 68     | 59 | 0                                 | 0    | 0  | 0      | 0      | 262               | 262  | 268    | 280  | 258    |
| Loss allow<br>ance                                                   | 94                               | 80  | 83     | 179    | 102    | 0                              | 0      | 0      | 0      | 0  | 0                                 | 0    |    |        |        | 94                | 80   | 83     | 179  | 102    |
| Net commission income                                                | 1                                | 2   | -<br>1 | 0      | 5      | 0                              | -<br>2 | -<br>1 | 9      | 8  | 0                                 | 0    | 0  | 0      | 0      | 1                 | 0    | -<br>2 | 9    | 6      |
| Net derecognition gain or loss                                       | 10                               | 6   | 3      | 5      | 6      |                                |        |        |        |    |                                   |      |    |        |        | 10                | 6    | 3      | 5    | 6      |
| Net gain / loss from fin. instruments (fvpl)                         | -22                              | -11 | -17    | -13    | -17    | 0                              | 0      | -<br>1 | 0      | 0  |                                   |      |    |        |        | -22               | -11  | -18    | -13  | -17    |
| Net gain or loss from hedge accounting                               | -<br>6                           | 0   | 8      | 3      | -<br>2 |                                |        |        |        |    |                                   |      |    |        |        | -<br>6            | 0    | 8      | 3    | -<br>2 |
| Net gain / loss from investments acc. for<br>using the equity method |                                  |     |        | 1      |        |                                |        |        |        | 2  |                                   |      |    |        |        |                   |      |        | 1    | 2      |
| Administrative expenses                                              | 48                               | 72  | 60     | 58     | 53     | 25                             | 24     | 24     | 35     | 23 | 0                                 | 0    |    |        |        | 73                | 96   | 84     | 89   | 76     |
| Net other operating income / expenses                                | 2                                | 9   | 0      | -11    | 0      | 0                              | 0      | -<br>1 | -<br>1 | 0  | 0                                 | 0    | 0  | 0      | 0      | 2                 | 9    | -<br>1 | -12  | 0      |
| Operating profit<br>from continuing operations                       | 37                               | 46  | 53     | -40    | 36     | 43                             | 44     | 38     | 41     | 46 | 0                                 | 0    | 0  | 0      | 0      | 80                | 90   | 91     | 1    | 82     |
| Income taxes                                                         | 9                                | 15  | 12     | 16     | 0      | 14                             | 14     | 12     | 12     | 15 |                                   |      |    |        |        | 23                | 29   | 24     | 28   | 18     |
| Consolidated net income<br>from continuing operations                | 28                               | 31  | 41     | -56    | 33     | 29                             | 30     | 26     | 29     | 31 | 0                                 | 0    | 0  | 0      | 0      | 57                | 61   | 67     | -27  | 64     |
| Net income from discontinued operations                              |                                  |     |        |        |        |                                |        |        |        |    | -25                               | -142 | 6  | -29    | -18    | -25               | -142 | 6      | -29  | -18    |
| Consolidated net income                                              | 28                               | 31  | 41     | -56    | 33     | 29                             | 30     | 26     | 29     | 31 | -25                               | -142 | 6  | -29    | -18    | 32                | -81  | 73     | -56  | 46     |
| Cons. net income attributable<br>to non-controlling interests        | 0                                | 0   | 0      | -<br>1 | 0      | 0                              | 0      | 0      | 0      | 0  | -<br>7                            | -32  | 2  | -<br>9 | -<br>4 | -<br>7            | -32  | 2      | -10  | -<br>4 |
| Cons. net income attributable<br>to ARL shareholders                 | 28                               | 31  | 41     | -55    | 33     | 29                             | 30     | 26     | 29     | 31 | -18                               | -110 | 4  | -20    | -14    | 39                | -49  | 71     | -46  | 50     |

1) Presentation in line with the structure prescribed by IFRS 5

![](_page_47_Picture_3.jpeg)

#### Appendix **Definitions and contacts**

![](_page_48_Picture_1.jpeg)

#### **Definitions**

| New Business               | = | New business = Newly acquired business + renewals                                                                                                                                                                                                                                               |
|----------------------------|---|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| Common Equity Tier 1 ratio | = | CET 1<br>Risk weighted assets                                                                                                                                                                                                                                                                   |
| CIR                        | = | Admin expenses (excl. bank levy, et al.)<br>Net income                                                                                                                                                                                                                                          |
| Net income                 | = | Net interest income + Net commission income + Net derecognition gain or loss + Net gain or loss from financial instruments<br>(fvpl) + Net gain or loss on hedge accounting + Net gain or loss from investments accounted for using the equity method +<br>Net other operating income / expense |
| Net stable funding ratio   | = | Available stable funding<br>Required stable funding                                                                                                                                                                                                                                             |
| Liquidity coverage ratio   | = | Total stock of high quality liquid assets<br>Net cash outflows under stress                                                                                                                                                                                                                     |
| Earnings per share         | = | operating profit ./. income taxes ./. income/loss attributable to non controlling interests ./. AT1 coupon<br>Number of ordinary shares                                                                                                                                                         |
| Yield on Debt              | = | NOI x 100 (Net operating income, 12-months forward looking)<br>(without developments)<br>Outstanding incl. prior/pari-passu loans                                                                                                                                                               |
| CREF-portfolio             | = | Commercial real estate finance portfolio excl. private client business and WIB's public sector loans                                                                                                                                                                                            |
| REF-portfolio              | = | Real estate finance portfolio incl. private client business and WIB's public sector loans                                                                                                                                                                                                       |
| Exposure (performing)      | = | Maximum [actual commitment (performing) or Outstanding (performing)]                                                                                                                                                                                                                            |

![](_page_49_Picture_2.jpeg)

#### **Contacts**

![](_page_50_Picture_1.jpeg)

#### **Jürgen Junginger**

Head of Investor Relations Managing Director Phone: +49 611 348 2636 [juergen.junginger@aareal-bank.com](mailto:juergen.junginger@aareal-bank.com)

#### **Sebastian Götzken**

Director Investor Relations Phone: +49 611 348 3337 [sebastian.goetzken@aareal-bank.com](mailto:sebastian.goetzken@aareal-bank.com)

#### **Carsten Schäfer**

Director Investor Relations Phone: +49 611 348 3616 [carsten.schaefer@aareal-bank.com](mailto:carsten.schaefer@aareal-bank.com)

#### **Ralf Löwe**

Head of Treasury Managing Director Phone: +49 611 348 3001 [ralf.loewe@aareal-bank.com](mailto:frank.finger@aareal-bank.com)

#### **Christopher Linnert**

Head of Funding Director Treasury Phone: +49 611 348 3889 [christopher.linnert@aareal-bank.com](mailto:alexander.kirsch@aareal-bank.com)

#### **Sandro Wieandt**

Assistant Vice President Treasury Phone: +49 611 348 3883 [sandro.wieandt@aareal-bank.com](mailto:alexander.kirsch@aareal-bank.com)

![](_page_50_Picture_14.jpeg)

#### **Disclaimer**

![](_page_51_Picture_1.jpeg)

#### **© 2024 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.

This presentation may contain forward-looking statements. Forward looking statements are statements that are not historical facts; they include statements about Aareal Bank AG's beliefs and expectations and the assumptions underlying them; and they are 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.

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.

As far as this presentation contains information from third parties, this information has merely been compiled without having been verified. Therefore, Aareal Bank AG does not give any warranty, and makes no representation as to the completeness or correctness of any such 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.

![](_page_51_Picture_9.jpeg)

# **Thank you.**

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