Aareal Bank AG

Earnings Release • Nov 11, 2021

Analyst Conference Call

Q3 2021 results

November 11, 2021 Jochen Klösges (CEO) Marc Hess (CFO) - Christof Winkelmann (CMO)

Agenda

• Highlights
• Group Results
• Segments
• Capital, Funding & Liquidity
• Outlook
• Key Takeaways
• Appendix

Agenda

• Highlights
• Group Results
• Segments
• Capital, Funding & Liquidity
• Outlook
• Key Takeaways
• Appendix

Highlights

Good Q3 results demonstrate continued positive development

Aareal Bank Group	Still uncertain environment	▪ Gradually normalising environment supporting positive development ▪ Covid-19 related uncertainties continue, esp. for the running winter quarter ▪ Swoosh scenario expected to remain intact (economic recovery)
	Encouraging performance	▪ Successfully executing our strategy - significant top line driven profit increase continued ▪ Strong NII development based on profitable, risk conscious portfolio growth ▪ LLP as expected still above normalised average due to remaining Covid-19 related uncertainties ▪ SPF: - Strong new business with attractive margins further supporting growth plan - Portfolio-YoD significantly recovered - Portfolio volume already above original YE-target ▪ BDS: - NCI further increased - Deposit volume at high level ▪ Aareon: - Successful M&A activities - Sales revenue growth still diluted by Covid-19
	Outlook	▪ Operating profit target for 2021 confirmed, FY-tax rate as communicated between 50% - 60% expected ▪ The Bank invited to an EGM to be held on 9 Dec. 2021 for shareholders to vote on the second tranche of the dividend for the 2020 financial year amounting to 1.10 € per share. ▪ However the discussions with Centerbridge and Advent are still ongoing. In the event of an offer being submitted the dividend proposal for the EGM might be reassessed

Agenda

• Highlights
• Group Results
• Segments
• Capital, Funding & Liquidity
• Outlook
• Key Takeaways
• Appendix

Group Results

Successfully executing our strategy - significant top line driven profit increase continued

€ mn	Q3 '20	Q4 '20	Q1 '21	Q2 '21	Q3 '21	9M '20	9M '21	2021-Comments
Net interest income	128	139	138	142	155	373	435	Strong NII development based on profitable, risk conscious portfolio growth
Loss allowance	61	177	7	33	39	167	79	LLP as expected still above normalised average due to remaining uncertainties
Net commission income	57	66	59	59	56	168	174	9M growth driven by Aareon's recurring revenue and M&A. Sales revenue growth still diluted by Covid-19
Derecognition result	3	9	0	8	7	19	15	Positive effects from early loan repayments in line with expectations
FV- / hedge-result	-2	-19	-4	-2	-5	-7	-11	Q3 incl. € -7 mn value adjustments (NPLs)
Admin expenses	114	117	150	118	125	352	393	Cost discipline maintained; 9M increase mainly driven by Aareon growth and lower Covid-19 related underspend
Others	0	-1	-4	-15	1	-10	-18
Operating profit (EBT)	11	-99	32	41	50	24	123	Successfully executing our strategy - significant top line driven profit increase continued
Income taxes	10	-13	11	29	27	7	67	FY-tax rate as communicated between 50% - 60% expected
Minorities	1	3	1	1	0	2	2
AT1	4	4	4	3	3	12	10
Consolidated net income allocated to ord. shareholders	-4	-93	16	8	20	3	44
Earnings per share (€)	-0.05	-1.56	0.27	0.13	0.33	0.06	0.73

Net interest income (NII) / Net commission income (NCI)

Strongest NII in 4 years

Strong NII development based on profitable, risk conscious portfolio growth

• Significant NII increase of >20% vs Q3/20, FY-guidance increased
• 9M NII up by € 62 mn (+16%) reflecting successful execution of our strategy on both sides of the B/S
• Q3 TLTRO contribution of € 7 mn vs. € 4 mn in Q3/20 (9M/21: € 19 mn vs. 9M/20: € 4 mn)
• Strong new business generation with good margins well above plan leveraging market opportunities
• Portfolio already increased above original YE-target

NCI 9M growth driven by recurring revenue and Aareon's M&A (9M/21: € 174 mn, 9M/20: € 168 mn). Sales revenue growth still diluted by Covid-19

• Aareon:
  • 9M sales revenue increased (incl. M&A) despite ongoing Covid-19 impact on professional service
  • NCI affected by seasonally earlier revenue recognition in Q2
  • Q4 regularly boosted by seasonal effects
• BDS continues positive underlying development towards defined target

Admin expenses / Loan loss provisions (LLP)

Cost discipline maintained; LLP as expected still slightly above normalised average due to remaining uncertainties

Bank:

• Lower Covid-19 related underspend
• Figures include transformation costs of € 1 mn in Q3/21 (Q3/20: € 0 mn) for "Aareal Next Level"

Aareon:

▪ Increase vs. Q3/20 driven by investments in organic growth (Value creation program) and M&A activities

LLP as expected still above normalised average due to remaining uncertainties

• Q3-LLP significantly below last year's Covid-19 burdened level
• Total Q3-LLP of € 46 mn incl. € 7 mn value adjustments in FVPL-line
• Despite 9M development confirming guidance for FY 2021 incl. FVPL. Uncertainties ongoing especially for the running winter quarter

Non performing loans (NPL)

NPLs reduced by concluded Italian de-risking initiative

Agenda

• Highlights
• Group Results
• Segments
• Capital, Funding & Liquidity
• Outlook
• Key Takeaways
• Appendix

Business environment recovering step by step

General observations

• Economic recovery ongoing, however impacted by:
  • Existing delta variant and potential new variants, which may lead to additional challenges
  • Speed of vaccination is slowing down and boosters may be needed
  • Delivery chains are slow to recover to pre Covid-19 levels
  • Inflation driven rise in energy prices
• Transaction volumes are further increasing across the globe, but are still below pre Covid-19 levels
• Significant increase of national budget expenditures and corresponding deficits
• Inflation rates are rising across the globe, increasing the likelihood of intervention by corresponding central banks
• Fed is expected to start tapering activities this winter to counter rising inflation rates

Our portfolio

• Lockdowns have been lifted and urban life is normalising around the world
• People are catching up with their (social) life: dining, shopping, vacation
• ➢ Pressure on CREF-portfolio is declining and KPIs are picking up

Business Environment

Impact on asset classes

Hotel	▪ Hotels back open after lockdown measures have been lifted around the world ▪ Performance improvement driven by national and international tourism ▪ Business travel picking up and is expected to further increase during 2022 ▪ Conference bookings for the next few years show positive and promising trend ▪ Filling open positions due to labour shortage remains major focus
Retail	▪ Retail parks showed stable cash flows during the crisis, malls are recovering ▪ Market value decline is bottoming out – first transactions with stabilised values ▪ Declining demand for space, primarily in B- and C-locations, due to a greater focus on online retail and quality rather than quantity ▪ Structural change caused by online retailing = increased omnichannel development
Logistic	▪ Supply chain problems will lead to an increased need for buffer capacities in the future ▪ Increasing importance of online trading ▪ Original speed of growth accelerated by Covid-19 ▪ Rising importance of last-mile-logistics due to demands for fast delivery
Office	▪ General trend towards more office presence ▪ Lower space demands due to more home office partially compensated by hygiene rules ▪ Increasing demands for flexible space options to enable hybrid working models ▪ Buildings must be "sustainable" or be adaptable via investments

Strong new business further supporting growth plan

More than 20% of the portfolio fulfills Aareal's demanding Green Finance Framework

portfolio within three years

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

2) Partnership for Carbon Accounting Financials

Portfolio already above original YE-target

• By leveraging market opportunities focusing on healthy risk-return profile REF-portfolio already increased to € 29.6 bn by end of Q3
• YE-portfolio target increased to € ~30 bn (from originally € ~29 bn)
• Sticking to overall country and asset diversification with increasing importance of logistics financings, as well as portfolios for risk improvement due to cross collateralisation
• Deal pipeline well filled with KPIs at or better than plan

2) Incl. Student housing (UK & Australia only)

Gradually normalising environment

• Ø-portfolio LTV1) further improved vs. YE 2020 figures
• Ø-portfolio YoD1) significantly up at 7.0%
• Correspondingly, demand for liquidity support further declined in Q3

Update on hotel- and retail portfolio

• The average LTV has further improved to 61% for the portfolio, as performance and visibility increase
• YoD's have risen markedly to above YE-level of 2020, with further uplift expected by YE

• Borrowers continue to adapt to the circumstances, working on and implementing new business strategies
• YoD has improved and represents a healthier overall level
• Updated valuations support further overall stabilisation of LTV level

Segment: Banking & Digital Solutions

NCI further increased, deposits at high level

Deposits by type > Sight deposits: 63% Rental guaranty deposits: 19% Maintanance reserve: 18% € 11.9 bn Avg. Q3/21

NCI further increased

• BDS continues positive underlying development towards defined target
• 9M-NCI further increase to € 20 mn in 9M/21 vs. € 18 mn in 9M/20
• Q2 burdened by BGH-ruling of € ~1 mn

Deposits at high level

• YE-guidance raised to € 12 bn (from € 11 bn)
• Deposits from rental guarantees and maintenance reserves increased by € ~0.5 bn mn to € 4.4 bn vs. Q3/20
• Stable funding source during crisis continuously proven over last decade

Segment: Aareon - on the way to become a "Rule of 40" company Strong investments in M&A and VCP to achieve our 2025 targets

M&A activities: strong execution in 2021

• Building on a strong pan-European M&A roll-up platform to realise growth opportunities in our target customers
• 6 acquisitions closed in 2021 financed by hunting line

Operational business: significantly strengthened

New products based on new technologies, e.g.

• Continuation of campaign for new ERP product generation Wodis Yuneo with focus on SaaS (VCP)
• New digital solutions developed to expand Aareon Smart World – marketing and product launches started, e.g. for AI-based products

DACH: Further increased market share, expanded product offering and increased cross-selling potentials

• GAP-Group (10/21): ERP solution for housing industry, crossselling potential for digital solutions of Aareon Smart World
• wohnungshelden (08/21): SaaS solution for lettings process, cross-selling opportunities and expansion of product portfolio

UK: Increased market reach by tapping and consolidating fastgrowing adjacent SMB property management market

• Tilt (07/21): SaaS property management solution
• Fixflo (05/21): SaaS digital solution for repairs workflow
• Arthur Online (01/21): SaaS property management solution

NL: Strong platform further expanded – new client group, increased cross-selling potential

▪ Twinq (05/21): SaaS solution privately owned housing management

Value Creation Program: substantial progress

Focus on transforming process to become a full SaaS company

• SaaS/subscription campaign leading to higher recurring revenues (diluting revenue growth in 2021)
• Go-to-Market: campaign for higher client value product packages started in Gerrmany in Q2, now extended to France and NL for selected customers

Segment: Aareon

Growth driven by increased recurring revenues and acquisitions, remaining on sustainable growth path despite temporarily lower PS

Note: Numbers not adding up refer to rounding 1) PS (Professional Services) = Consulting business

Agenda

• Highlights
• Group Results
• Segments
• Capital, Funding & Liquidity
• Outlook
• Key Takeaways
• Appendix

Capital Solid capital position

21

• Q3 increase in B3 and B4 (phase-in)1) CET1 ratios mainly resulting from lower RWAs
• RWA increase from strong and profitable portfolio growth more than compensated by positive effects from retroactively collateral recognition and from NPL reduction in Q3
• Following the publication of the Commission's proposal for the European implementation of B4 the standards have become more specific. To further align internal steering we currently consider to adjust the calculation of the B3 ratios accordingly from 2022 onwards
• Early redemption of € 300 mn Tier 2 Notes in Q1 reflected in total capital ratios, further optimisation potential
• Solid T1-Leverage ratio at 5.7% despite TLTRO participation and portfolio growth
• Remaining regulatory uncertainties (models, ICAAP, ILAAP, B4, etc.)

1) Underlying RWA estimate, incorporating the higher figure determined using the revised AIRBA or the revised CRSA (phased-in), based on the draft version dated 27 October 2021 of the European implementation of Basel IV by the European Commission. The conservative calculation of the material impact upon Aareal Bank is subject to the final EU implementation as well as the implementation of additional regulatory requirements, such as the EBA requirements.

Funding & Liquidity

Diversified funding sources and distribution channels

• Sustainable and strong housing industry deposits increased by almost € 1 bn and verified as an important part of well diversified funding mix
• Larger CREF loan book to result in a higher number of public benchmark transactions
• Successful new issuance transactions of € 3.5 bn in 2021 incl.:
  • Two € 500 mn Pfandbrief Benchmarks
  • \$ 750 mn Pfandbrief Benchmark
  • Inaugural SONIA linked £ 500 mn Pfandbrief
  • € 250 mn increase of outstanding Senior preferred Bond (Nov/2027) to new notional amount of € 750 mn
  • € 500 mn Senior Preferred Benchmark
• Participation in ECB's TLTRO (€ +1 bn) increased to a total of € 5.3 bn in Q1/21
• Liquidity ratios significantly over fulfilled:
  • NSFR > 100%
  • LCR >> 100%

Agenda

• Highlights
• Group Results
• Segments
• Capital, Funding & Liquidity
• Outlook
• Key Takeaways
• Appendix

Outlook 2021 Operating profit target confirmed

	METRIC	2020	OUTLOOK 20211)
p u o Gr	▪ Net interest income ▪ Net commission income ▪ LLP ▪ Admin expenses	€ 512 mn € 234 mn € 344 mn € 469 mn	€ 550 - 580 mn € 570 - 590 mn € 250 - 270 mn € 240 - 250 mn € 125 - 200 mn € 520 - 540 mn
	▪ Operating profit ▪ Earnings per share (EPS)	€ -75 mn € -1.50	€ 100 - 175 mn € ~0.40 - ~1.202)

	Aareal Next Level		METRIC	2020	OUTLOOK 20211)
s nt e	"Activate"	Structured Property Financing	▪ REF Portfolio ▪ New business	€ 27.8 bn € 7.2 bn	€ ~30 bn3) € ~29 bn3) € 7 bn - € 8 bn
m g e S	"Elevate"	Banking & Digital Solutions	▪ Deposit volume ▪ NCI	€ 11.0 bn € 26 mn	€ ~12 bn € ~11 bn € ~28 mn
	"Accelerate"	Aareon	▪ Revenues ▪ Adj. EBITDA	€ 258 mn € 62 mn	€ 270 - 274 mn € 276 - 280 mn € 63 mn - € 65 mn

1) Based on "Swoosh" scenario. In the current environment, this forecast is subject to significant uncertainty, especially with regard to the assumed duration and intensity of the crisis, the pace of recovery and the associated effects on our clients, as well as prevailing unclear regulatory and accounting provisions, and the possibility that individual loan defaults cannot be reliably predicted.

2) EPS calculation based on expected FY-tax ratio between 50% and 60%

3) Subject to FX development

24

Agenda

• Highlights
• Group Results
• Segments
• Capital, Funding & Liquidity
• Outlook
• Key Takeaways
• Appendix

Key takeaways

Positive development continued in the third quarter

• Operating profit increased to € 50 mn in Q3
• Strong net interest income development based on profitable and risk conscious portfolio growth reflecting successful execution of our strategy "Aareal Next Level"
• Loan loss provisions significantly below last year, but Covid-19 related slightly above normalised level

Growth initiatives paying off

• SPF: By end of Q3 REF-portfolio already increased above original YE-target Strong new business focusing on healthy risk-return profile with attractive margins and good LtVs
• BDS: Net commission income further increased, deposits at high level
• Aareon: Successful M&A activities supporting further growth

Outlook: Operating profit target 2021 confirmed

• Swoosh-scenario intact, depending on the duration of the pandemic and the pace of recovery
• FY-operating profit target confirmed
• FY-loan loss provision remains in guided range due to remaining uncertainties caused by the pandemic
• Course set for further controlled growth in the future

Group results Q3 / 9M 2021

Aareal Bank Group Results Q3 2021

	01.07.- 30.09.2021	01.07.- 30.09.2020	Change
	€ mn	€ mn
Profit and loss account
Net interest income	155	128	21%
Loss allowance	3 9	6 1	-36%
Net commission income	5 6	5 7	-2%
Net derecognition gain or loss	7	3	133%
Net gain or loss from financial instruments (fvpl)	-3	-4	-25%
Net gain or loss on hedge accounting	-2	2	-200%
Net gain or loss from investments accounted for using the equity method	0	0	0 %
Administrative expenses	125	114	10%
Net other operating income / expenses	1	0
Operating Profit	5 0	1 1	355%
Income taxes	2 7	1 0	170%
Consolidated net income	2 3	1	2200%
Consolidated net income attributable to non-controlling interests	0	1	-100%
Consolidated net income attributable to shareholders of Aareal Bank AG	2 3	0
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank AG1)	2 3	0
of which: allocated to ordinary shareholders	2 0	-4	-600%
of which: allocated to AT1 investors	3	4	-25%
Earnings per ordinary share (in €)2)	0.33	-0.05	-760%
Earnings per ordinary AT1 unit (in €)3)	0.03	0.04	-25%

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.

Results Q3 2021 by segments

		Structured Property Financing		Banking & Digital Solutions	A a r e	Aareon		Consolidation/ Reconciliation	Aareal Bank Group
	01.07.- 30.09. 2021	01.07.- 30.09. 2020	01.07.- 30.09. 2021	01.07.- 30.09. 2020	01.07.- 30.09. 2021	01.07.- 30.09. 2020	01.07.- 30.09. 2021	01.07.- 30.09. 2020	01.07.- 30.09. 2021	01.07.- 30.09. 2020
€ mn
Net interest income	146	119	1 1	9	-2	0	0	0	155	128
Loss allowance	3 9	6 1			0	0			3 9	6 1
Net commission income	2	1	7	6	5 0	5 3	-3	-3	5 6	5 7
Net derecognition gain or loss	7	3							7	3
Net gain or loss from financial instruments (fvpl)	-3	-4				0			-3	-4
Net gain or loss on hedge accounting	-2	2							-2	2
Net gain or loss from investments accounted for using the equity method					0	0			0	0
Administrative expenses	5 9	5 6	1 7	1 5	5 2	4 6	-3	-3	125	114
Net other operating income / expenses	-1	0	0	0	2	0	0	0	1	0
Operating profit	5 1	4	1	0	-2	7	0	0	5 0	1 1
Income taxes	2 8	9	0	-1	-1	2			2 7	1 0
Consolidated net income	2 3	-5	1	1	-1	5	0	0	2 3	1
Allocation of results
Cons. net income attributable to non-controlling interests	0	0	0	0	0	1			0	1
Cons. net income attributable to shareholders of Aareal Bank AG	2 3	-5	1	1	-1	4	0	0	2 3	0

Results 9M 2021

	01.01.- 30.09.2021	01.01.- 30.09.2020	Change
	€ mn	€ mn
Profit and loss account
Net interest income	435	373	17%
Loss allowance	7 9	167	-53%
Net commission income	174	168	4 %
Net derecognition gain or loss	1 5	1 9	-21%
Net gain or loss from financial instruments (fvpl)	-7	-11	-36%
Net gain or loss on hedge accounting	-4	4	-200%
Net gain or loss from investments accounted for using the equity method	-1	0
Administrative expenses	393	352	12%
Net other operating income / expenses	-17	-10	70%
Operating Profit	123	2 4	413%
Income taxes	6 7	7	857%
Consolidated net income	5 6	1 7	229%
Consolidated net income attributable to non-controlling interests	2	2	0 %
Consolidated net income attributable to shareholders of Aareal Bank AG	5 4	1 5	260%
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank AG1)	5 4	1 5	260%
of which: allocated to ordinary shareholders	4 4	3
of which: allocated to AT1 investors	1 0	1 2	-17%
Earnings per ordinary share (in €)2)	0.73	0.06
Earnings per ordinary AT1 unit (in €)3)	0.10	0.12	-17%

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.

Results 9M 2021 by segments

		Structured Property Financing	Solutions	Banking & Digital	A a Aareon r e			Consolidation/ Reconciliation	Aareal Bank Group
	01.01.- 30.09. 2021	01.01.- 30.09. 2020	01.01.- 30.09. 2021	01.01.- 30.09. 2020	01.01.- 30.09. 2021	01.01.- 30.09. 2020	01.01.- 30.09. 2021	01.01.- 30.09. 2020	01.01.- 30.09. 2021	01.01.- 30.09. 2020
€ mn
Net interest income	406	345	3 3	2 9	-4	-1	0	0	435	373
Loss allowance	7 9	167			0	0			7 9	167
Net commission income	6	4	2 0	1 8	157	155	-9	-9	1 5	168
Net derecognition gain or loss	1 5	1 9							1 5	1 9
Net gain or loss from financial instruments (fvpl)	-7	-11		0		0			-7	-11
Net gain or loss on hedge accounting	-4	4							-4	4
Net gain or loss from investments			-1		0	0			-1	0
accounted for using the equity method
Administrative expenses	193	173	5 3	5 0	156	138	-9	-9	393	352
Net other operating income / expenses	-21	-11	0	0	4	1	0	0	-17	-10
Operating profit	123	1 0	-1	-3	1	1 7	0	0	123	2 4
Income taxes	6 8	4	-1	-2	0	5			6 7	7
Consolidated net income	5 5	6	0	-1	1	1 2	0	0	5 6	1 7
Allocation of results
Cons. net income attributable to non-controlling interests	0	0	0	0	2	2			2	2
Cons. net income attributable to shareholders of Aareal Bank AG	5 5	6	0	-1	-1	1 0	0	0	5 4	1 5

Results – quarter by quarter

			Financing	Structured Property	Banking & Digital Solutions			Aareon				Consolidation / Reconciliation					Aareal Bank Group
	Q3	Q2 2021	Q1	Q4 2020	Q3	Q3	Q2 2021	Q1	Q4 2020	Q3	Q3	Q2 2021	Q1	Q4 2020	Q3	Q3	Q2 2021	Q1	Q4 2020	Q3	Q3	Q2 2021	Q1	Q4 2020	Q3
€ mn
Net interest income	146	133	127	129	119	11	11	11	10	9	- 2	- 2	0	0	0	0	0	0	0	0	155	142	138	139	128
Loss allow ance	39	33	7	177	61				0		0	0		0	0						39	33	7	177	61
Net commission income	2	2	2	4	1	7	6	7	8	6	50	54	53	58	53	- 3	- 3	- 3	- 4	- 3	56	59	59	66	57
Net derecognition gain or loss	7	8	0	9	3																7	8	0	9	3
Net gain / loss from fin. instruments (fvpl)	- 3	- 3	- 1	-21	- 4									0	0						- 3	- 3	- 1	-21	- 4
Net gain or loss on hedge accounting	- 2	1	- 3	2	2																- 2	1	- 3	2	2
Net gain / loss from investments acc. for using the equity method				2			- 1				0	0	0	- 1	0						0	- 1	0	1	0
Administrative expenses	59	50	84	54	56	17	17	19	18	15	52	54	50	50	46	- 3	- 3	- 3	- 5	- 3	125	118	150	117	114
Net other operating income / expenses	- 1	-15	- 5	- 3	0	0	0	0	0	0	2	1	1	3	0	0	0	0	- 1	0	1	-14	- 4	- 1	0
Operating profit	51	43	29	-109	4	1	- 1	- 1	0	0	- 2	- 1	4	10	7	0	0	0	0	0	50	41	32	-99	11
Income taxes	28	30	10	-18	9	0	- 1	0	1	- 1	- 1	0	1	4	2						27	29	11	-13	10
Consolidated net income	23	13	19	-91	- 5	1	- 1	- 1	- 1	1	- 1	- 1	3	6	5	0	0	0	0	0	23	12	21	-86	1
Cons. net income attributable to non controlling interests	0	0	0	0	0	0	0	0	0	0	0	1	1	3	1						0	1	1	3	1
Cons. net income attributable to ARL shareholders	23	13	19	-91	- 5	1	0	- 1	- 1	1	- 1	- 2	2	3	4	0	0	0	0	0	23	11	20	-89	0

Asset quality

CREF portfolio by country

€ 29.0 bn highly diversified

CREF portfolio by property types

€ 29.0 bn highly diversified

Western Europe (ex Germany) CREF portfolio

Total volume outstanding as at 30.09.2021: € 10.4 bn

1) Incl. Student housing (UK & Australia only)

German CREF portfolio

Total volume outstanding as at 30.09.2021: € 3.1 bn

Southern Europe CREF portfolio

Total volume outstanding as at 30.09.2021: € 2.6 bn

Accelerated Italian De-Risking initiative successfully concluded

• De-Risking initiative started in 2019 which in itself led to a significant reduction of the Italian legacy exposure by € 1.6 bn
  • NPLs reduction of € 730 mn2) or ~65%
  • Performing loans with LtV > 90% reduced by € 350 mn
  • BTPs3) reduced by € 530 mn
• Significant net capital release resulting from de-risking initiative exceeding P&L burden
  • Net capital release eco. ICAAP: € ~150 mn
  • Net capital release reg. Capital (B34) ): € ~140 mn
  • Net capital release reg. Capital (B45)): € ~110 mn

1) Figures as of 30/06/21 less two NPLs derecognised in 08/21

• 2) Foreclosed Italian assets taken on own book for future development of € 137 mn not included
• 3) BTP = Buono del Tesoro Poliennali

39 4) Based on B3 CET1-ratio of 18.8%

5) Based on B4 CET1-ratio (phase-in) of 17.3%

Eastern Europe CREF portfolio

Total volume outstanding as at 30.09.2021: € 1.9 bn

Northern Europe CREF portfolio

Total volume outstanding as at 30.09.2021: € 1.4 bn

North America CREF portfolio

Total volume outstanding as at 30.09.2021: € 8.6 bn

Asia / Pacific CREF portfolio

Total volume outstanding as at 30.09.2021: € 1.0 bn

B/S & Treasury Portfolio

B/S structure according to IFRS

Well balanced

1) Other assets includes € 0.3 bn private client portfolio and WIB's € 0.3 bn public sector loans

Treasury portfolio € 7.3 bn of high quality and highly liquid assets

As at 30.06.2021 – all figures are nominal amounts 1) Composite Rating

Segment: Aareon

Segment: Aareon P&L and other KPIs

P&L Aareon segment - Industry format1) € mn	Q3'20	9M'20	Q3'21	9M'21	∆ Q3 '21/'20	∆ 9M '21/'20
Sales revenue ▪ Thereof ERP ▪ Thereof Digital	63 49 14	188 144 44	62 46 16	195 145 49	-2% -6% 13%	3% 1% 12%
Costs2) ▪ Thereof material	-50 -10	-150 -34	-54 -12	-169 -38	8% 16%	11% 12%
EBITDA	13	36	8	25	-40%	-31%
Adjustments2)	-2	-4	-5	-16	>100%	>100%
Adj. EBITDA	15	41	13	42	-12%	2%
EBITDA	13	36	8	25	-40%	-31%
D&A / Financial result	-6	-20	-9	-24	42%	24%
EBT / Operating profit	6	17	-2	1	<-100%	-94%

R&D, RPU and operating cashflow
Revenue per unit (RPU) – LTM (€)	22
R&D spend as % of software revenue – YTD	23%
YTD Operating Cash Flow (€ mn)	13

• RPU (last 12 months) at 22 € (H1/21: 24€)
• R&D spend picking up in line with communicated pattern of gradual increase in the short term up to 25%
• VCP- as well as M&A-related investments led to higher costs growth in relation to revenue growth as planned
• Operating Cash Flow at € 13 mn (9M/20: € 34 mn) mainly driven by lower operating result due to higher investments

1) Calculation refers to unrounded numbers

2) Incl. New product, VCP, Ventures, M&A and one-offs

Aareal Next Level – 360^o-review

Aareal enters into first stage evolution of 'Aareal Next Level'

Operating profit target of € ~300 mn to be achieved already in 20231)

January 2020	▪ We introduced our strategy 'Aareal Next Level' with three strategic pillars ACTIVATE!, ELEVATE! and ACCELERATE!
Q4 2020	▪ Management initiated a 360° review of 'Aareal Next Level' in the context of Covid-19 and its mid term structural implications supported by McKinsey ▪ Key focus of 360° review: i) create sustainable shareholder value in a new normal after Covid-19 mid-term1) and ii) resume our track record as reliable dividend payer2) with the aim of earning our CoE
	▪ 360° review confirms 'Aareal Next Level' remaining a successful and attractive strategy even in a post Covid-19 environment. Thus, we will enter into first stage evolution of 'Aareal Next Level'
Early 2021	1 2 3 4 5 ▪ We identified additional levers within the 'Aareal Next Level' strategic framework to significantly improve our successful performance in the future
	already in 20233) which translates ▪ We envisage to achieve an operating profit target of € ~300 mn into a return on equity after taxes of ~8%1) on Group as well as on Bank level
	▪ Free capital retained for either M&A and/or capital management

1) 15% CET 1 reference ratio (Basel IV, phase-in, revised IRBA) exceeding the market average as a reference; excluding any potential acquisitions; subject to the Covid 19 crisis being fully overcome by then

2) Subject to ECB approval

50 Note: All 2020 figures preliminary and unaudited 3) Excluding any potential acquisitions, and subject to the Covid-19 crisis being fully overcome by then

'Aareal Next Level' strategy confirmed as successful and attractive Operating profit target of € ~300 mn to be achieved already in 20231)

Strategy and business model confirmed, being successful in a normalised environment post Covid-19

First evolution of 'Aareal Next Level' enables utilising market opportunities in Covid-19 environment and increase efficiency in organisation, of processes and infrastructure

Operating profit target of € ~300 mn to be achieved already in 20231) translating into a RoE after taxes of ~8%2) on Group and Bank level

Transformation, innovation and investment budgets

• Aareal Bank: i) transformation budget of € 10 mn fully financed by related positive one-offs and ii) innovation budget for growth initiatives of on avg. € ~2 mn p.a. (2021 - 2023) to boost NCI in Banking & Digital Solutions3)

• Additional investment budget4) for Aareon with growth costs in context of VCP implementation (2021: € ~8 mn) leading to a temporary dilution of EBT

• 3) Formerly known as Consulting / Services Bank: has been renamed effective from Jan. 2021

• 51 Note: All 2020 figures preliminary and unaudited 4) Excluding costs for Aareon M&A and M&A financing

¹⁾ Excluding any potential acquisitions, and subject to the Covid-19 crisis being fully overcome by then

²⁾ 15% CET 1 reference ratio (Basel IV, phase-in, revised IRBA) exceeding the market average as a reference; excluding any potential acquisitions; subject to the Covid 19 crisis being fully overcome by then

ACTIVATE! Structured Property Financing

Take advantage of market opportunities, grow book and optimize funding

We continue to leverage on expanded origination, structuring and exit opportunities – "Play the Matrix" i .e. countries, property types and structures

Lever	First stage evolution of 'Aareal Next Level'	Targets
1	Continue to pursue risk-conscious and ESG conform, organic expansion of financing business based on attractive margins to increase our on-balance credit portfolio	REF portfolio: YE 21: € ~29 bn
	▪ As done in Q4, utilizing market opportunities in the Covid-19 environment with attractive risk / return profiles building on our USPs	YE 22: € ~30 bn
	▪ Increase our NII, leverage our platform and enhance profitability through RoE accretive business, syndication capability is continuously used to improve structure of new business and profitability / return
	▪ We will continue to further develop our asset light strategy
2	Optimisation of funding mix and capital structure to enhance profitability and return ▪ Review and fine-tune our liquidity and ALM strategy, but maintain prudent liquidity ratios ▪ Enhance our funding mix regarding new products e.g. establishing a CP programme and optimize funding costs, by speeding up our cover pool process ▪ Optimize our regulatory capital structure	Q1 21: Termination of T2 € 300 mn YE 22: Executed ALM / liquidity strategy

ACTIVATE! We continue to strive towards greater ESG-transparency

Preliminary data on climate performance for about 85% of our existing CREF portfolio has been collected – pursuit of further data ongoing

53

ELEVATE! Banking & Digital Solutions1)

Leverage on our deeply embedded customer integration and increase NCI

We continue to leverage and grow our housing and adjacent industries business through elevation and expansion of our product suite with focus on NCI based income and take opportunities in cooperation with customers and other partners

Lever 3	First stage evolution of 'Aareal Next Level'	Targets
	Increase our opportunities for a further expansion with a particular focus on our net commission income in our Digital Solutions business	Ø 23: Deposit volume of
	▪ Sharpening our strategic profile and enhance our development capabilities	€ >11 bn
	▪ Continue to leverage and grow our housing and adjacent industries business through cross selling with an increasing contribution of our innovation portfolio	Grow NCI with a CAGR of 13%
	➢ grow NCI with a CAGR of 13% until 2023	until 2023
	▪ On top: Innovation budget for growth initiatives of on average € ~2 mn p.a. between 2021 and 2023 together with pursuing selected M&A opportunities with the ambition to double NCI until 2025	Ambition to double NCI until 2025

We reconfirm the attractiveness of our deposit base in our Banking business which is deeply imbedded in our clients' processes

▪ Sticky deposit base at attractive terms and costs from group perspective, further upside in a rising rate environment and the opportunity of additional cross selling

1) Formerly known as Consulting / Services Bank: has been renamed effective from Jan. 2021

property industry with a strong value proposition

ACCELERATE! Aareon

VCP, developed with Advent, Aareon and Aareal, to increase mid-term adj. EBITDA target from € >110 mn to € 135 mn and M&A on top ▪ Accelerate investment in developing new digital products and offerings to add to Aareon's growing portfolio of Digital Solutions ▪ Go to market excellence and accelerate "new logo" wins ▪ Leveraging Aareon's core ERP installed base to upsell / cross sell new modules and digital solutions from Aareon's Smart World ▪ Additional investment budget1) for Aareon with growth costs in context of VCP implementation (2021: € ~8 mn) leading to a temporary dilution of EBT YE 23: VCP with add. positive EBT impact (organic) YE 25: Increase adj. EBITDA from € >110 mn to € ~135 mn; achieve Rule of 402) Implementing Aareon's strategic M&A roadmap ▪ Execution of strategic M&A roadmap and EBITDA contribution from M&A activities on top ▪ Initially up to € 250 mn debt funding of M&A roadmap negotiated EBITDA from M&A on top Lever First stage evolution of 'Aareal Next Level' Targets 4 M&A

VCP to increase mid-term adj. EBITDA target to € 135 mn, M&A on top

We continue to strengthen Aareon's position as the leading and independent software company for the

▪ Recent acquisition of SaaS company Arthur being the first evidence of the successful partnership with Advent

1) Excluding costs for Aareon M&A and M&A financing

2) Rule of 40: Sum of Aareon's annual revenue growth and adj. EBITDA margin will at least reach 40%

55

Aareon unmatched growth opportunity

Substantial upside unlocked through a combination of RPU growth and unit expansion

• Highly integrated digital ecosystem Aareon Smart World
• End-to-end product suite and roadmaps, from ERP to Digital Solutions
• Strong pan-European M&A roll-up platform

Increase RPU – Following the US Market experience

Aareon elevated to a "Rule of 40 company"

Operational business (as presented at Investor Day)

• ERP 2025: Ambitious continuation of implementation of new ERP product generations
• Offer Digital Solutions, continued investment in developing innovative and competitive digital products
• Employee Engagement Program: Empower people for success

Well structured M&A process

• Highly attractive M&A platform, with opportunity to further scale internationally
• New M&A and PMI teams implemented
• Sharpened & expanded M&A pipeline is systematically pursued – considering mature business & high growth ventures
• Financing structure for M&A has been negotiated (€250m)

Value Creation Program

• Go-To-Market: Improve GTM excellence with focus on targeting new logos and driving up-/cross-sell. Opportunity to extend value based packages to customers while driving digitalisation of industry
• SaaS Acceleration: Drive SaaS to realise higher share of recurring revenues
• Software Implementation Efficiency: Accelerate growth from recurring software through highly efficient software implementations
• Operations Excellence: Leverage potential organisational value creation levers that could support growth
• 36One: Provide a data lake for reporting excellence. Improve back office performance and automation

Aareon further increased strong financial outlook

Despite Covid-19 pandemic KPIs remained rather solid in 2020

	2020A	Former Mid Term	2025E
Revenue growth	2%	7-9%	10%*
% Recurring revenues of total revenue	67%	-	70%
Revenue per unit (RPU) in €	24	35-40	40
Adj. EBITDA in €m (without M&A)	62	110	135
Rule of 40	27%	-	≥40%
% R&D spend** (of software revenue)	22%	20%	20%
**short-term up to 25%			*CAGR 20/25

Organisation: Implementation of group wide efficiency measures

Maintaining strict cost discipline and implement further efficiency measures

Lever	First stage evolution of 'Aareal Next Level'	Targets
5	YE 23: SPF CIR of <40%1) Transformation budget financed by related one off effects
	/ Income Ratio LTM2) Cost ARL SPF1) Aareon1) ARL ex. Continued cost discipline, Target 23 Aareon1) ARL SPF1) ex. 20 20 23 costs underlines our compared to peers best in 49% class Cost/Income Ratio 44% <40%	additional efficiency measures and growth at low marginal
1)	Excluding bank levy; 2020 ARL ex Aareon incl. bank levy 54% / 2020 ARL SPF incl. bank levy 48%

2) Euro StoxxBanks plus Deutsche Pfandbriefbank as of 15.02.2021, total non-interest expense LTM divided by revenue before loan losses LTM (excluding unusual Items like goodwill impairments, restructuring costs etc.); Source: S&P Capital IQ

Note: All 2020 figures preliminary and unaudited

59

'Aareal Next Level': Our KPIs and targets

Operating profit target of € ~300 mn to be achieved already in 20231)

		On track to achieve 'Aareal Next Level' objectives (February 2020)	Our KPIs and targets
	2020		2023	2025
Aareal Bank Group
Revenues2) ▪	€ 746 mn	✓	Mid-single digit growth CAGR
▪ Operating profit	€ -75 mn		€ ~300 mn1) Incl. positive impact of VCP
▪ RoE post tax Group	-3.5%		~8%3)
▪ Dividend policy	Announced	Unchanged, 50% base dividend plus 20-30% supplementary dividend4)
Aareal Bank
▪ CIR SPF5)	44%		<40%
Aareon
▪ Revenue	€ 258 mn	✓	10% CAGR
▪ Adj. EBITDA	€ 62 mn	✓		€ ~135 mn Achieve rule of 40
			EBITDA from M&A on top

• 1) Excluding any potential acquisitions, and subject to the Covid-19 crisis being fully overcome by then
• 2) Net interest income and net commission income

3) 15% CET 1 reference ratio (Basel IV, phase-in, revised IRBA) exceeding the market average as a reference; excluding any potential acquisitions; subject to the Covid-19 crisis being fully overcome by then

• 60
  • 4) Subject to ECB approval according to conditions mentioned on page 68 5) Excluding bank levy

2023 Target RoE post tax above peers… …despite higher CET1 Ratio

2023 RoE post tax – Broker estimates1)

2023 CET1 Ratio – Broker estimates2)

Note: All 2020 figures preliminary and unaudited

Next Steps in our ESG Journey

Strengthening ESG as an integral part of our DNA by refining our strategy and setting ambitious goals and targets

1) e.g. Building certificates (i.e. DGNB, BREEAM, HQE, LEED, NABERS) or energy-performance certificates based on an ongoing dialogue with our clients as well as research in external databases

Regulation

SREP (CET 1) requirements

Demonstrating conservative and sustainable business model

Dividend Policy

Dividend Policy and BVPS-development

Distribute approx. 50% of the earnings per ordinary share (EpS) as base dividend

Potential Supplementary Dividend1)

A supplementary dividend up to 20 - 30% of the EpS to be considered, if

• No material deterioration of the environment (with longer-term and sustainably negative effects) and
• No material changes in regulation incl. sufficient capital buffers in a forward looking perspective and
• No attractive investment opportunities and
• No positive growth environment beyond current planning

For FY 2021, payable in 2022: Further development of Covid-19 and above-mentioned factors to be considered regarding supplementary dividend

Attractive dividend policy and significant book value growth created sustainable value for Aareal and hence our shareholders

AT1: ADI of Aareal Bank AG

Interest payments and ADI of Aareal Bank AG

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

€ mn	31.12. 2016	31.12. 2017	31.12. 2018	31.12. 2019	31.12. 2020
Net Retained Profit ▪ Net income ▪ Profit carried forward from previous year ▪ Net income attribution to revenue reserves	122 122 - -	147 147 - -	126 126 - -	120 120 - -	90 90 - -
+ Other revenue reserves after net income attribution	720	720	720	720	840
Total dividend potential before amount blocked1) =	842	870	846	840	930
./. Dividend amount blocked under section 268 (8) of the German Commercial Code ./. Dividend amount blocked under section 253 (6) of the German Commercial Code	235 28	283 35	268 42	314 40	320 43
= Available Distributable Items1)	579	552	536	486	566
+ Increase by aggregated amount of interest expenses relating to Distributions on Tier 1 Instruments1)	46	32	24	23	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)	625	584	560	509	587

1) Unaudited figures for information purposes only

Definitions and contacts

Definitions

= New Business	New business = Newly acquired business + renewals
Common Equity = Tier 1 ratio	CET 1 Risk weighted assets
= Pre tax RoE	Operating profit/income ./. loss attributable to non-controlling interests ./. AT1 coupon Average IFRS equity excl. non-controlling interests, AT1 and dividends
= CIR	Admin expenses (excl. bank levy, et al.) Net income
= Net income	net interest income + net commission income + net result on hedge accounting + net trading income + results from non-trading assets + results from investments accounted for at equity + results from investment properties + net other operating income
Net stable funding = ratio	Available stable funding 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) Outstanding incl. prior/pari-passu loans (without developments)
= 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

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

Karin Desczka

Manager Investor Relations Phone: +49 611 348 3009 karin.desczka@aareal-bank.com

Julia Taeschner

Group Sustainability Officer Director Investor Relations Phone: +49 611 348 3424 julia.taeschner@aareal-bank.com

Daniela Thyssen

Manager Sustainability Management Phone: +49 611 348 3554 daniela.thyssen@aareal-bank.com

Leonie Eichhorn

Sustainability Management Phone: +49 611 348 3433 leonie.eichhorn@aareal-bank.com

Robin Weyrich

Sustainability Management Phone: +49 611 348 2335 robin.weyrich@aareal-bank.com

Disclaimer

© 2021 Aareal Bank AG. All rights reserved.

This document has been prepared by Aareal Bank AG, exclusively for the purposes of a corporate presentation by Aareal Bank AG. The presentation is intended for professional and institutional customers only.

It must not be modified or disclosed to third parties without the explicit permission of Aareal Bank AG. Any persons who may come into possession of this information and these documents must inform themselves of the relevant legal provisions applicable to the receipt and disclosure of such information, and must comply with such provisions. This presentation may not be distributed in or into any jurisdiction where such distribution would be restricted by law.

This presentation is provided for general information purposes only. It does not constitute an offer to enter into a contract on the provision of advisory services or an offer to purchase securities. Aareal Bank AG has merely compiled the information on which this document is based from sources considered to be reliable – without, however, having verified it. The securities of Aareal Bank AG are not registered in the United States of America and may not be offered or sold except under an exemption from, or pursuant to, registration under the United States Securities Act of 1933, as amended. Therefore, Aareal Bank AG does not give any warranty, and makes no representation as to the completeness or correctness of any information or opinion contained herein. Aareal Bank AG accepts no responsibility or liability whatsoever for any expense, loss or damages arising out of, or in any way connected with, the use of all or any part of this presentation. The securities of Aareal Bank AG are not registered in the United States of America and may not be offered or sold except under an exemption from, or pursuant to, registration under the United States Securities Act of 1933, as amended.

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

Thank you.