Aareal Bank AG

Quarterly Report • May 11, 2023

Conference Call Q1 2023 results

May 11, 2023

Jochen Klösges (CEO) Marc Hess (CFO) Christof Winkelmann (CMO)

Agenda

▪ Recent Financial Performance

• Loan Book & Asset Quality
• Liquidity & Funding
• Capital
• Outlook
• Appendix

Recent Financial Performance - Highlights Q1 2023

Good start in 2023 despite challenging environment

Solid asset quality, moderate LLP incl. management overlay, NPL volume slightly further decreased

Successful funding activities, comfortable liquidity position

Solid capital ratios

Outlook 2023 confirmed

Takeover Investors expect successful completion of qualifying holding procedure in due course

Recent Financial Performance - Group Profit & Loss

Good quarterly results driven by ongoing strong income momentum

Profit & loss (€ mn)	Q1 '22	Q1 '23	∆%
Net interest income (NII)	159	222	+40
Net commission income (NCI)	64	72	+13
Administrative expenses	153	199	+30
Other operating income / expenses1)	9	-1
Pre-provision profit	79	94	+19
Loan loss provisions (LLP)	49	32	-35
Operating profit (EBT)	30	62	>100
Profit after tax	15	47	>100

Operating profit of € 62 mn doubled yoy despite announced increase in expenses at Aareon

• Further significant increase in NII and NCI reflecting strong operating performance and interest rate environment
• Costs under control
  • Increase in admin expenses mainly due to announced increase in expenses at Aareon (€ 34 mn) and inorganic growth
  • Costs in the banking business largely stable (CIR Bank2) at 35%)
  • Q1 includes FY bank levy / ESF
• LLP at moderate level, despite recognition of management overlay for US Office headwinds

1) Includes Net derecognition gain or loss, Net gain or loss from financial instruments (fvpl), Net gain or loss from hedge accounting, Net gain or loss from investments accounted for using the equity method, Net other operating income/expenses

2) Segment SPF & BDS, excl. bank levy/deposit guaranty scheme

Recent Financial Performance – NII & NCI

Ongoing strong income momentum

Further significant increase

• SPF
  • NII increased to € 176 mn (Q1/22: € 150 mn) supported by portfolio growth, good margins and diversified funding mix
  • ~80% of TLTRO repaid in Q4/22
• BDS
  • NII increased to € 52 mn (Q1/22: € 12 mn)
  • Positive effects from rising interest rate environment
  • Deposits from housing industry above targeted level

Aareon and BDS continue to grow

• Aareon
  • NCI increased to € 67 mn (Q1/22: € 58 mn) supported by healthy growth in recurring revenues
  • Shift from license to SaaS/Subscription making further progress
• BDS
  • NCI further increased to € 8 mn (Q1/22: € 7 mn)
  • High share of recurring revenues

Recent Financial Performance - Admin expenses / LLP Costs under control

Bank expenses largely unchanged, announced efficiency measures of Aareon underway

Bank1)

• Largely unchanged at € 103 mn (Q1/22: € 100 mn)
• Q1 includes € 25 mn bank levy and contributions to the deposit guarantee scheme (Q1/22: 24 mn)
• CIR2) Bank at 35% (Q1/22: 43%)

Aareon

▪ Expenses increased to € 96 mn (Q1/22: € 53 mn) incl. announced efficiency measures (€ 34 mn) and inorganic growth

Moderate, incl. management overlay

• Recognition of € 21 mn management overlay in stage 1 and 2 based on modelled 20% property value decrease in US Office portfolio in the light of current headwinds
• (Underlying) LLP is evidence of strong recovery after Covid-crisis

1) Segment SPF & BDS

Recent Financial Performance – Segment SPF

Selective new business in a challenging environment

1) Newly acquired business

2) Governed by "Green Finance Framework"

Recent Financial Performance - Segment BDS

NII benefitting from interest rate environment

NII increase driven by rising interest rates

• Deposit volume above targeted level of € ~13 bn
• Granular deposit structure from more than 3,700 housing industry clients managing ~8 mn rental units
• Sticky rental deposits continuously growing

NCI increased as planned

• High share of recurring revenues (banking and software fees)
• New products and services providing growth potential

Recent Financial Performance - Segment Aareon

Strong recurring run-rate, operational business on track and new efficiency measures underway

• Overall, sales revenues increased by € 11 mn (+15%)
  • Share of recurring revenues (LTM1)) successfully increased to 75% (Q1/22: 73%)
  • SaaS grew by 32%
• Adj. EBITDA increased by € 2 mn to € 18 mn (+16%), adj. EBITDA margin unchanged at 22% (Q1/22: 22%); FY adj. EBITDA target of € 90 - 100 mn confirmed
• Efficiency measures underway with investment in Early Retirement Program, additional streamlining of UK product portfolio and further process efficiency measures identified
• New M&A
  • UTS (DE), shared-ownership property management
  • Embrace (NL), CRM
• Launch of partner program Aareon Connect more than 10 partners already on platform

Note: Numbers not adding up refer to rounding 1) LTM = Last Twelve Months

Agenda

• Recent Financial Performance
• Loan Book & Asset Quality
• Liquidity & Funding
• Capital
• Outlook
• Appendix

Loan Book & Asset Quality

Portfolio volume unchanged excluding FX effects, YE target confirmed

▪ Sticking to overall country and asset diversification. Portfolio transactions with risk reducing cross collateralisation increasing in importance

• € 30.7 bn largely unchanged vs YE 2022, YE target of € 32 - 33 bn confirmed based on promising deal pipeline
• Virtually no financing of developments (~0.5%) however, refurbishments to foster green transition
• Green loan volume at € 2.6 bn (03/22: € 0.7 bn)
• Green property financing portfolio at € 6.6 bn or 22% of total CREF portfolio

(27%)

Office: 26%

(2%)

Hotel: 36%

(35%)

Loan Book & Asset Quality

YoD further increased, LTV unchanged

LTV1) by property type

%	12 '19	12 '20	12 '21	12 '22	03 '23
Hotel	55	62	60	56	56
Logistics	54	56	55	52	52
Office	57	58	58	57	57
Retail	61	61	59	56	56

1) Performing CREF-portfolio only (exposure)

YoD1) by property type

%	12 '19	12 '20	12 '21	12 '22	03 '23
Hotel	9.6	3.0	5.0	9.0	10.1
Logistics	8.5	9.2	8.7	9.0	9.2
Office	7.7	8.1	7.6	6.9	6.7
Retail	9.6	8.8	9.1	9.8	10.4

US CRE markets: What we are up against

US CRE markets - What we are up against? Aareal as a CRE lender

• After limited losses during the pandemic the property market is now suffering from the aftermath of "Covid" incl. various economic challenges
• Severity of the symptoms varies significantly by type, quality and location of the property
• After the long period of loose monetary and fiscal policy market entered a period of inflation and rapid interest rate increases
• Challenge is the speed and ultimate level of interest rate increases. Additionally, the slower than expected return to office from an almost fully "work from home" order, puts pressure on the leasing markets
• Uncertainty with respect to the FED is causing reluctance to real estate transactions, as sponsors cannot predict the interest movements in the short term to estimate their cost of capital going forward
• Hotels and retail properties have for the large part recovered from Covid and show few "Long Covid" symptoms

• High portion of US CRE lending has been provided by regional banks. Aareal has no partner- or tenantrelationships with these banks

• Senior lender with strong focus on investment finance

• Broadly diversified in terms of regions and property types
• Highly specialized, facilitating complex structures, quick and flexible
• Conservative approach to risk, concentrating on strong sub-markets / properties with strict underwriting standards
• Current LTV of 55% reflects conservative underwriting standards while entered WFC with LTV >70%
• Risk management expertise mastered the ultimate stress test for our loan book (Covid)
• Black figures in every quarter since 2005 except Q4 2020
• Sustainability as essential part of long-term financing decisions: supporting clients' green transformation by financing refurbishments to transition their assets to better ESG standards

US Business

• Present in the US since 2000 with a very experienced local management team since 2006
• Focus on the central business districts (CBDs) in the bigger metropolitan statistical areas (MSAs)
• Large, national and/or international, institutional quality investors as sponsors tend to have both, a longer-term view and deeper pockets

US portfolio: Broad diversification in attractive locations / properties

US office portfolio by region

1) Performing CREF-portfolio only (exposure)

US Office market: What we are up against

US Office market - What we are up against? How we are positioned

US Office market faces structural changes

• Home office
  • Some employees prefer home office; many companies reaching 3 days per week in office but on the same days
  • Space under-utilized Mondays and Fridays and over-utilized mid-week: accommodation not attractive
• Tech layoffs
  • Layoffs largely a response to over hiring during the pandemic, mainly remote workers
  • Re-opening shifted demand or reduced requirement for remote work support, but job creation remains strong

• Tenant repositioning

  • Flight to quality better building / location
  • Space reconfigured to meet different work / engagement strategies
  • Relocation to avoid disruption during reconfiguration is common even among Class A property tenants
  • Job creation remains strong due to long term economic forecasts but demand for office space is down
  • Planned refurbishments and temporary vacancies with likely longer reletting periods following new work norms

• ~50 finance projects US office

• High quality properties
  • US office portfolio concentrated in class A properties and Class A markets / sub-markets
  • Majority is LEED Silver or better or Energy Star score > 80
• Focus on market values
  • Overall low LTV of 63% in US office (63% US portfolio)
  • Management overlay (€ 21 mn) in Q1 for a potential market value decrease of 20% in US office portfolio
• Focus on cash flow
  • YoD in US office of ~6.6% (~8.7% US portfolio) after more than 1 year of increasing interest rates
  • Major part of underwriting policy is to generally hedge loans with caps / cash collaterals
  • Leases largely unchanged: only 11% / 8% of leases expire in 2023/24
• Conservative underwriting standards tightened in booming markets
• Particular monitoring of our portfolio (especially US office) for more than a year incl. site-visits in 2022 and Q1 23

US Office portfolio: High quality portfolio

US Office portfolio: Even under stress assumptions, sound headroom remains

• Avg. / weighted assumed market value decrease in US office of ~15% (class A), ~40% (class B) and ~60% (class C) leads to an average decline ~35%
• This translates into an assumed ~20% decrease for Aareal's portfolio due to focus on prime markets
• Based on this assumption (incl. corresponding rating change of one class for each exposure and potential stage migrations S1 => S2), a management overlay was built in Q1 2023

Portfolio value stressed with 25%

• Average LTV up to 83% (from 63%)
• (Layered) LTV above 100%: Only 1% (< 40 mn) of exposure
• (Layered) LTV 80%-100%: Only 7% (< 300 mn) of exposure
• RWA up by ~350 mn leading to a CET1 ratio decrease of ~0.5 pp

1) Performing CREF-portfolio only (exposure)

Loan Book & Asset Quality

NPL volume decreased slightly further

• NPL portfolio significantly reduced following post Covid recovery, reduction predominantly in the retail and hotel segment witnessing strong recovery
• Q1-reductions exceed single new NPL
• One-off budget of € ~60 mn assigned for a swift NPL reduction to sustainably reduce NPL ratio < 3% not yet used, preparations underway
• NPE ratio1): 2.6% (12/22: 2.8%)

1) Acc. to EBA Risk Dashboard, preliminary

Agenda

• Recent Financial Performance
• Loan Book & Asset Quality
• Liquidity & Funding
• Capital
• Outlook
• Appendix

Liquidity & Funding Comfortable liquidity position

Conservative liquidity management throughout the cycle

• On average long-term funds have longer maturities than CRE finance portfolio
• Substantial buffer in regulatory liquidity ratios (LCR / NSFR) despite strong growth in portfolio and difficult economic and capital markets environment
  • NSFR: 123%, (03/22: 119%2))
  • LCR: 240%, (03/22: 217%2))
• Liquid treasury portfolio with ~80% public sector
• HQLA of € 9.1 bn (03/22: € 7.3 bn2))
• TLTRO ~80% repaid in Q4/22

1) Other assets includes € 0.2 bn private client portfolio and WIB's € 0.2 bn public sector loans 2) As at 01.04.2022

Liquidity & Funding Well diversified Funding Mix

Successful 3M funding activities

• Pfandbrief and Senior totaling € 1.7 bn incl.
  • 2 Pfandbrief Benchmarks (€ 1.5 bn)
• Commercial Paper Program enables offering ECP in EUR, GBP & USD as well as in Green format
  • € 800 mn ECP outstanding Thereof € ~500 mn Green ECPs
• Deposits from housing industry at avg. of € 13.7 bn above targeted level of € ~13 bn
  • Granular deposit structure from more than 3,700 housing industry clients managing ~8 mn rental units
  • Sticky rental deposits continuously growing
• Retail (term) deposits by cooperating with Raisin / Weltsparen significantly increased to € 1.4 bn (12/22: € 0.6 bn)
• ➢ Having further diversified and optimized funding mix, less Senior capital market funding planned despite targeted CREF-portfolio growth

Agenda

• Recent Financial Performance
• Loan Book & Asset Quality
• Liquidity & Funding
• Capital
• Outlook
• Appendix

Capital Solid capital position

12.8 13.2 12.9 12.8 12.91)

12/19 12/20 12/21 12/22 03/23

• CET1 ratio further improved
• RWA largely stable
• Interest rate (change) risk hedged to the largest extend
  • OCI reserve on debt instruments: € +3 mn (03/23)
  • Total unrealised losses on remaining bonds portfolio only 3% of IFRS capital (therein interest rate related 2% of IFRS capital)
  • Unrealised losses fully deducted from economic capital (ICAAP)
• Capital ratios very solid throughout Covid-19 crisis
• T1-Leverage ratio at 6.0%

10

11

12

Agenda

• Recent Financial Performance
• Loan Book & Asset Quality
• Liquidity & Funding
• Capital
• Outlook
• Appendix

Outlook 2023 confirmed

	METRIC	2022	OUTLOOK 2023
p u o Gr	▪ Net interest income ▪ Net commission income ▪ LLP1) ▪ Admin expenses	€ 702 mn € 277 mn € 192 mn € 571 mn	€ 730 - 770 mn € 315 - 335 mn € 170 - 210 mn incl. € 60 mn budget for a swift NPL reduction € 590 - 630 mn incl. € 35 mn budget for Aareon efficiency measures
	▪ Operating profit (adjusted) ▪ Operating profit ▪ Earnings per share (EPS)	€ 239 mn € 2.32	€ ~350 mn € 240 - 280 mn 2.802) € 2.40 -

Developments in the macroeconomic environment remain uncertain

		METRIC	2022	OUTLOOK 2023
s	Structured Property Financing	▪ REF Portfolio ▪ New business	€ 30.9 bn € 8.9 bn	33 bn3) € 32 - € 9 - 10 bn
nt e m g e S	Banking & Digital Solutions	▪ Deposit volume ▪ NCI	€ 13.4 bn € 31 mn	€ ~13 bn ~13% CAGR (2020-2023)
	Aareon	▪ Revenues ▪ Adj. EBITDA	€ 308 mn € 75 mn	€ 325 - 345 mn € 90 - 100 mn

1) Incl. value adjustments from NPL fvpl

2) Based on expected FY-tax ratio of ~33%

3) Subject to FX development

Key takeaways Strategy is bearing fruit in all three segments

Successful Q1 with group operating profit more than doubled and very dynamic earnings development

Confirmation of targets for financial year 2023

Successful completion of qualifying holding procedure will support investments in sustainable development and risk conscious growth of our business model

Appendix Segment: Aareon

Segment: Aareon Q1 2023 P&L and other KPIs

P&L Aareon segment - Industry format1) € mn	Q1'22	Q1'23	∆ Q1 '23/'22
Sales revenue ▪ Thereof recurring revenues ▪ Thereof other revenues	72 54 18	83 64 18	15% 20% 1%
Costs2) ▪ Thereof material	-59 -14	-91 -15	63% 11%
EBITDA	13	-9	< -100%
Adjustments3)	-3	-27	> 100%
Adj. EBITDA	16	18	16%
EBITDA	13	-9	< -100%
D&A / Financial result	-11	-25	> 100%
EBT / Operating profit	3	-34	< -100%

R&D and operating cashflow
R&D spend as % of software revenue – YTD	22%
YTD Operating Cash Flow (€ mn)	15

1) Calculation refers to unrounded numbers

2) Costs also include other operating income and capitalized software

3) Incl. New product, M&A, VCP, Venture, other one-offs (legal cases, restructuring)

Appendix ESG

ESG in our daily business

Putting sustainability at the core of our decisions

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 the new framework provided since Q2 2021

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

• In addition to the lending framework, Aareal Bank has implemented an accompanying liability-side/use-ofproceeds framework that allows issuance of green financing instruments
• The "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

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)

Aareal's demanding Green Finance Framework

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"

22% of CREF portfolio classified as Green Property Financings

€ 6.6 bn1) (22%) of total CREF portfolio fulfilling Aareal's Green Finance Framework and are classified as "Green Property Financings", thereof

• € 4.5 bn included in green asset pool for underlying of Green bond issues
• € 2.1 bn green property financings mainly for technical reasons not (yet) included

1) CREF excl. business not directly collateralized by properties Portfolio data as at 31.03.2023 – ESG Data as at 31.03.2023 2) Valid certificate is documented

ESG@Aareal

Phase 1: Mission accomplished

	We have laid the foundation…	…achieved our 2022 goals…	… and will continue to follow our path
ct a p m	Green expansion of financing business € 2 bn by 2024 additional green loan volume	Achieved	On track for 2024
	Optimisation of funding mix € 1 bn in 2022 - new allocation of green funding	€ 1 bn long-term funding + € 0.5 bn green CPs	+ € 0.5 bn green long-term funding in '23
ur i o g n	Providing transparency for global CREF portfolio 20% by 2022 – Verified green properties	> 21% screening almost completed	Grow share of verified green properties PCAF report on financed emissions by '24
wi o Gr	Limiting our own Greenhouse Gas emissions Carbon neutrality by 2023 of our business operations worldwide	Achieved	On track for 2023
	Expansion of innovative solutions with ESG impact Growth targets by 2025 – Identification of enabler products by 2022	Achieved	On track for 2025
e n o p e t o e t h g t h at t n etti S	ESG governance with enhanced Board's oversight CEO responsibility – Regular Board engagement	Achieved	Achieved and continuing
	ESG integration in business, credit, investment, risk and refinancing strategies and decision making process Targeting of ESG initiatives in individual / group targets	15% ESG component in Management Boards variable remuneration	Increased to 25% of our Management Board's variable remuneration in 2023

Additional Highlights

• Green Finance Frameworks Lending & Liabilities established and signed off by second party opinion (SPO)
• Strengthened investability for green investors through consistently positive ESG rating results
• Strong performance in ECB climate stress test, which assessed our portfolio for its vulnerability to physical and transitory risks

ESG@Aareal

On the "Road to Paris" we are supporting our clients

On-going transparency initiatives to reach and surpass to highest market standards

Consistently positive rating results

Rewarding Aareal's ESG performance

Note: Results and Benchmarks as of 02/05/2023

Appendix Asset Quality

CREF portfolio by country

€ 30.3 bn highly diversified

CREF portfolio by property types

€ 30.3 bn highly diversified

Asset quality

Deep dive: Office portfolio well positioned to face structural changes

• USA: see page 12ff
• France: € 1.9 bn in 19 deals in Paris region
  • High share of planned refurbishments into green assets (~1/3 of total office portfolio)
  • Avg. LTV of 58% (layered LTV > 60%: € 37 mn)
  • Only one deal matures in 2023
• UK: € 0.6 bn in 9 deals mainly in London area
  • Avg. LTV of 53% (layered LTV > 60%: € 11 mn)
  • Only one deal matures in 2023

Non performing loans (NPL ex Russia)

Deep dive

• NPL classification depends on a variety of triggers (e.g. arrears, NOI, DSCR, LTVs, yields, prices, marketability, …)
• NPL classification might be triggered even if no nominal loss will be made but contractual payments are or potentially will not be received in line with the agreement (timing / amounts)
• Current NPL portfolio (ex Russian NPL):
  • 24% of NPL portfolio with LTV <100%
  • 27% of NPL portfolio with DSCR >100%

➔Only 48% of NPL portfolio with LTV >100% and DSCR <100%

Implications of the Russian war against Ukraine

Russian exposure 63% provisioned

Russian operations

• Rep office with 2 employees in Moscow
• Russia defined as non-core market about a decade ago
• Last newly acquired business in 2012
• From more than € 1 bn in 2010 portfolio significantly reduced to an exposure of around € ~200 mn

Russian exposure

• One loan; outstanding € 213 mn (EURO denominated)
• Office complex in Moscow
• Nearly fully let to international and Russian tenants
• Client able and willing to pay
• Currently Russian sanctions hinder cash transfer out of Russia
  • ➢ € 134 mn LLP booked in 2022
  • ➢ Remaining net exposure of € 78 mn equals ~30% of 10/2021 market value of the financed property

As of today impacts from geopolitical and macroeconomic environment are not predictable. However the markdown reflects volatility seen in other crisis in the past.

Appendix TR-portfolio / Liquidity & Funding / Capital

Treasury portfolio

€ 6.8 bn of highly rated, quality liquid assets providing collateral and additional liquidity

As at 31.03.2023 – all figures are nominal amounts

1) Composite Rating

• Diversification intensified by re-investing in new agencies and Covered Bonds supporting spread improvement
• Enables income generation vs holding just cash collateral
• Serves as a liquidity reserve in both economic and normative terms
• Mainly consists of
  • Collateral for the Pfandbrief (public / mortgage)
  • Assets permanently pledged for other reasons (e.g. collateral for LCH Clearing)

Liquidity & Funding

Diversified funding sources and distribution channels

Liquidity & Funding

Strong Mortgage Cover Pool and Aaa Rating for Pfandbriefe

Pfandbriefe funding cornerstone of wholesale issuance

• Cover pool of € 15.1 bn incl. € 0.7 bn substitute assets diversified over 19 countries
• High quality assets: first-class mortgage loans (mortgage-lending-value 55.5%)
• Mortgage-lending-value with high discount from market-value
• Avg. LTV of the mortgage cover pool 31.9%
• Moody´s has calculated a 'Aaa' supporting overcollateralisation ratio of 18.5% on a PV basis
• Over-collateralisation on a PV basis as of 31.03.2023 21.9%
• High diversification within property types
• No assets in the covered pool from Russia and Ukraine

Liquidity & Funding

MREL ratios well above regulatory requirements

Senior Preferred have significant protection from subordinated liabilities and own funds

• Ample buffer to MREL requirements
• Senior Preferred remains the predominant senior product, though Senior Non-Preferred remains a key element of the funding strategy
• The rundown remains manageable with a number of long-term liabilities providing significant levels of subordination

• 8% TLOF is the bank's upcoming binding MREL requirement, to be met with 100% subordinated liabilities

• 1) 8% TLOF with 100% subordinated debt (i.e. Own Funds and SNP). MREL requirements are only updated once a year

• 2) MREL-eligible Senior Non-Preferred Debt >1Y according to contractual maturities
• 3) Considering regulatory adjustments
• 4) CET1 assumed to be constant over time

45 5) Senior Preferred, excluding structured unsecured issuances

Liquidity & Funding Credit rating profile

Financial ratings
Fitch Ratings		Moody's
Issuer default rating1)	BBB+	Issuer rating1)	A3
Short-term issuer rating	F2	Short-term issuer rating	P-2
Deposit rating	A	Senior preferred	A3
Senior preferred	A	Senior non preferred	Baa2
Senior non preferred	BBB+	Bank deposit rating	A3
Viability rating	BBB+	BCA	Baa3
Subordinated debt	BBB	Mortgage Pfandbriefe	Aaa
Additional Tier 1	BB

Sustainability ratings
MSCI		AA
ISS-ESG		prime (C+)
Sustainalytics		Low (20-10)
CDP		Awareness Level B

Preservation of Fitch Ratings long-term senior preferred rating of at least A-

• Recently solicited a second rating from Moody's through Q2-2022 to broaden the investor base
• Financial ratings a reflection of the strong and stable credit profile, cemented by the capital position
• Aareal's ESG performance has been rewarded by agencies:
  • MSCI: Aareal is in the best 35% of 63 diversified financials
  • ISS ESG: Prime Status confirms ESG performance above sector-specific Prime threshold
  • Sustainalytics: Still "Low" risk classification", Rank 178 of 987 in Sector Banks, 16 of 99 in Thrifts and Mortgages
  • MOODY's ESG Solutions: Above sector average results in Environment, Social and Governance

1) Outlook negative

Liquidity & Funding Aareal Bank`s outstanding Benchmark Transactions

Pfandbriefe, Senior Unsecured and AT1
Product	Ratings2)	Currency	Volume	Maturity 	Coupon	ISIN
Pfandbriefe	Aaa	USD	750,000,000	02/14/25	0.625%	XS2297684842
Pfandbriefe	Aaa	GBP	500,000,000	04/29/25	SONIA + 100bps	XS2337339977
Pfandbriefe	Aaa	EUR	500,000,000	07/31/23	0.125%	DE000AAR0223
Pfandbriefe	Aaa	EUR	750,000,000	02/01/24	0.125%	DE000AAR0249
Pfandbriefe	Aaa	EUR	500,000,000	07/30/24	0.375%	DE000AAR0207
Pfandbriefe	Aaa	EUR	500,000,000	07/15/25	0.375%	DE000AAR0215
Pfandbriefe2)	Aaa	EUR	750,000,000	02/13/26	3,125	DE000AAR0389
Pfandbriefe	Aaa	EUR	500,000,000	08/03/26	0.010%	DE000AAR0272
Pfandbriefe	Aaa	EUR	500,000,000	02/01/27	2.250%	DE000AAR0348
Pfandbriefe	Aaa	EUR	500,000,000	07/08/27	0.010%	DE000AAR0256
Pfandbriefe2)	Aaa	EUR	750,000,000	10/11/27	3.000%	DE000AAR0371
Pfandbriefe	Aaa	EUR	500,000,000	02/01/28	0.010%	DE000AAR0280
Pfandbriefe	Aaa	EUR	500,000,000	09/15/28	0.010%	DE000AAR0306
Pfandbriefe	Aaa	EUR	750,000,000	02/01/29	1.375%	DE000AAR0330
Pfandbriefe	Aaa	EUR	625,000,000	09/14/29	2.375	DE000AAR0363
Pfandbriefe	Aaa	EUR	750,000,000	02/01/30	0.125%	DE000AAR0314
Senior Preferred	A- / A3	EUR	500,000,000	04/10/24	0.375%	DE000A2E4CQ2
Senior Preferred green	A- / A3	EUR	500,000,000	07/25/25	4.500%	DE000AAR0355
Senior Preferred	A- / A3	EUR	500,000,000	09/02/26	0.050%	DE000AAR0298
Senior Preferred	A- / A3	EUR	500,000,000	04/07/27	0.050%	DE000AAR0264
Senior Preferred	A- / A3	EUR	750,000,000	11/23/27	0.250%	DE000A289LU4
Senior Preferred green	A- / A3	EUR	500,000,000	04/18/28	0.750%	DE000AAR0322
Additional Tier 1	BB	EUR	300,000,000	PERP_NC_5-1	10.897%	DE000A1TNDK2

1) Pfandbriefe are rated by Moody´s, AT1 by FitchRatings and Senior Unsecured by FitchRatings and Moody´s

2) Issued in 2023

Capital SREP (CET 1) requirements

Appendix ADI of Aareal Bank

Interest payments and ADI of Aareal Bank AG

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

	31.12.	31.12.	31.12.	31.12.	31.12.	31.12.	31.12.
	2016	2017	2018	2019	2020	2021	2022
€ mn
Net Retained Profit ▪ Net income ▪ Profit carried forward from previous year	122 122 0	150 147 3	126 126 -	120 120 -	90 90 -	96 30 66	61 61 -
▪ Net income attribution to revenue reserves	-	-	-	-	-	-	-
+ Other revenue reserves after net income attribution	720	720	720	720	840	840	936
Total dividend potential before amount blocked1) =	842	870	846	840	930	936	997
./. Dividend amount blocked under section 268 (8) of the German Commercial Code	235	283	268	314	320	386	466
./. Dividend amount blocked under section 253 (6) of the German Commercial Code	28	35	42	40	43	36	24
= Available Distributable Items1)	580	552	536	486	566	515	507
+ Increase by aggregated amount of interest expenses relating to Distributions on Tier 1 Instruments1)	46	32	25	23	21	20	21
= 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 Instruments1)	626	584	560	509	588	535	529

Appendix Group Results

Aareal Bank Group Results Q1 2023

	01.01.- 31.12.2023	01.01.- 31.12.2022	Change
	€ mn	€ mn
Profit and loss account
Net interest income	222	159	40%
Loss allowance	3 2	4 9	-35%
Net commission income	7 2	6 4	13%
Net derecognition gain or loss	0	9
Net gain or loss from financial instruments (fvpl)	-6	6
Net gain or loss on hedge accounting	4	-4
Net gain or loss from investments accounted for using the equity method		0
Administrative expenses	199	153	30%
Net other operating income / expenses	1	-2
Operating Profit	6 2	3 0	107%
Income taxes	2 0	1 1	82%
Consolidated net income	4 2	1 9	121%
Consolidated net income attributable to non-controlling interests	-9	1
Consolidated net income attributable to shareholders of Aareal Bank AG	5 1	1 8	183%
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank AG1)	5 1	1 8	183%
of which: allocated to ordinary shareholders	4 7	1 5	213%
of which: allocated to AT1 investors	4	3	33%
Earnings per ordinary share (in €)2)	0.78	0.25	212%
Earnings per ordinary AT1 unit (in €)3)	0.04	0.03	33%

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) Earnings 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.

Aareal Bank Group

Results Q1 2023 by segments

		Structured Property Financing		Banking & Digital Solutions	A a r e	Aareon		Consolidation/ Reconciliation	Aareal Bank Group
	01.01.- 31.12. 2023	01.01.- 31.12. 2022	01.01.- 31.12. 2023	01.01.- 31.12. 2022	01.01.- 31.12. 2023	01.01.- 31.12. 2022	01.01.- 31.12. 2023	01.01.- 31.12. 2022	01.01.- 31.12. 2023	01.01.- 31.12. 2022
€ mn
Net interest income	172	150	5 2	1 2	-6	-3	0	0	222	159
Loss allowance	3 2	4 9	0	0	0	0			3 2	4 9
Net commission income	0	2	8	7	6 7	5 8	-3	-3	7 2	6 4
Net derecognition gain or loss	0	9							0	9
Net gain or loss from financial instruments (fvpl)	-6	6	0		0				-6	6
Net gain or loss on hedge accounting	4	-4							4	-4
Net gain or loss from investments accounted for using the equity method				0		0				0
Administrative expenses	7 4	8 5	3 2	1 8	9 6	5 3	-3	-3	199	153
Net other operating income / expenses	0	-3	0	0	1	1	0	0	1	-2
Operating profit	6 8	2 6	2 8	1	-34	3	0	0	6 2	3 0
Income taxes	1 5	1 0	9	0	-4	1			2 0	1 1
Consolidated net income	5 3	1 6	1 9	1	-30	2	0	0	4 2	1 9
Allocation of results
Cons. net income attributable to non-controlling interests	0	0	0	0	-9	1			-9	1
Cons. net income attributable to shareholders of Aareal Bank AG	5 3	1 6	1 9	1	-21	1	0	0	5 1	1 8

Aareal Bank Group

Preliminary results – quarter by quarter

	Structured Property Financing				Banking & Digital Solutions				Aareon					Consolidation / Reconciliation					Aareal Bank Group
	Q1 '23	Q4	Q3 2022	Q2	Q1	Q1 '23	Q4	Q3 2022	Q2	Q1	Q1 '23	Q4	Q3 2022	Q2	Q1	Q1 '23	Q4	Q3 2022	Q2	Q1	Q1 '23	Q4	Q3	Q2 2022	Q1
€ mn
Net interest income	176	152	162	163	150	52	43	26	11	12	- 6	- 7	- 4	- 3	- 3	0	0	0	0	0	222	188	184	171	159
Loss allow ance	32	22	63	58	49	0	0	0		0	0	0	0	0	0						32	22	63	58	49
Net commission income	0	1	1	2	2	8	8	8	8	7	67	72	61	61	58	- 3	- 3	- 3	- 3	- 3	72	78	67	68	64
Net derecognition gain or loss	0	-23	2	13	9																0	-23	2	13	9
Net gain / loss from fin. instruments (fvpl)	- 6	4	4	12	6	0	0	0	0		0	0		0							- 6	4	4	12	6
Net gain or loss on hedge accounting	4	4	1	- 3	- 4																4	4	1	- 3	- 4
Net gain / loss from investments acc. for using the equity method		0							- 1	0		0	0	- 1	0							0	0	- 2	0
Administrative expenses	74	60	54	61	85	32	25	17	19	18	96	66	60	65	53	- 3	- 3	- 3	- 3	- 3	199	148	128	142	153
Net other operating income / expenses	0	- 2	- 2	1	- 3	0	0	0	- 1	0	1		1	2	1	0	0	0	0	0	1	1	- 1	2	- 2
Operating profit	68	54	51	69	26	28	26	17	- 2	1	-34	2	- 2	- 6	3	0	0	0	0	0	62	82	66	61	30
Income taxes	15	18	18	24	10	9	8	6	0	0	- 4	3	0	- 2	1						20	29	24	22	11
Consolidated net income	53	36	33	45	16	19	18	11	- 2	1	-30	- 1	- 2	- 4	2	0	0	0	0	0	42	53	42	39	19
Cons. net income attributable to non controlling interests	0	0	0	0	0	0	0	0	0	0	- 9	0	- 1	0	1						- 9	0	- 1	0	1
Cons. net income attributable to ARL shareholders	53	36	33	45	16	19	18	11	- 2	1	-21	- 1	- 1	- 4	1	0	0	0	0	0	51	53	43	39	18

Appendix Definitions and contacts

Definitions

New Business	=	New business = Newly acquired business + renewals
Common Equity Tier 1 ratio	=	CET 1 Risk weighted assets
NPE ratio (acc. EBA Risk Dashboard)	=	Non-performing debt instruments (loans and advances & debt securities) other than held for trading Total gross debt instruments
CIR	=	Admin expenses (excl. bank levy, et al.) Net income
Net income	=	Net interest income + Net commission income + Net derecognition gain or loss + Net gain or loss from financial instruments (fvpl) + Net gain or loss on hedge accounting + Net gain or loss from investments accounted for using the equity method + Net other operating income / expense
Net stable funding ratio	=	Available stable funding Required stable funding
Liquidity coverage ratio	=	Total stock of high quality liquid assets Net cash outflows under stress
Earnings per share	=	operating profit ./. income taxes ./. income/loss attributable to non controlling interests ./. net AT1 coupon Number of ordinary shares
Yield on Debt	=	NOI x 100 (Net operating income, 12-months forward looking) (without developments) 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
NPL ratio	=	NPL-exposure acc. CRR (excl. exposure in cure period) Total REF Portfolio

Contacts Disclaimer

Frank Finger

Head of Treasury Managing Director Phone: +49 611 348 3001 frank.finger@aareal-bank.com

Alexander Kirsch

Head of Funding Director Treasury Phone: +49 611 348 3858 alexander.kirsch@aareal-bank.com

Hendrik Enzesberger

Analyst Treasury Phone: +49 611 348 3889 hendrik.enzesberger@aareal-bank.com

Jürgen Junginger

Managing Director Investor Relations Phone: +49 611 348 2636 juergen.junginger@aareal-bank.com

Sebastian Götzken

Director Investor Relations Phone: +49 611 348 3337 sebastian.goetzken@aareal-bank.com

Carsten Schäfer

Director Investor Relations Phone: +49 611 348 3616 carsten.schaefer@aareal-bank.com

Disclaimer Disclaimer

© 2023 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.

This presentation includes information with respect to the voluntary public takeover offer published by Atlantic BidCo GmbH on 26 April 2022. These references are provided for general information purposes only and do not constitute an offer to enter into a contract for the provision of advisory services or an offer to purchase securities. Any decisions by investors in relation to Aareal Bank shares should be based on the public tender offer documentation published by Atlantic BidCo GmbH.

As far as this presentation contains information from Atlantic BidCo GmbH or other 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.

Aareal Bank AG assumes no obligation to update any forward-looking statement or any other information contained herein

Disclaimer Thank you.