Aareal Bank AG

Investor Presentation • Jan 20, 2021

Kepler Cheuvreux 20th German Corporate Conference

January 20, 2021 Marc Hess, CFO

Aareal Bank leaves the pandemic year 2020 firmly behind with extensive loss allowance and looks ahead with confidence (1/2)

Environment

• Recent pandemic development massively worse than expected in Q3
• Extended and further tightened global lockdown measures
• Continuously anticipating a marked economic recovery to occur in the current year, as soon as global vaccination campaigns start to take effect
• ➢ Anticipate a clearly positive operating profit for 2021

Comprehensively taking account of the recent intensification of the pandemic

• All loans for which liquidity support measures (payment deferrals and liquidity facilities) classified as stage 2
• In addition, stage 3 allowance has been raised in individual cases
• ➢ Expect consolidated operating loss in a € double-digit mn amount for FY 2020

Aareal Bank leaves the pandemic year 2020 firmly behind with extensive loss allowance and looks ahead with confidence (2/2)

Intention to resume dividend payments¹

• Dividend distribution in compliance with ECB guidance of approx. € 0.35 0.40 per share¹ in H1 / 2021 plus additional distribution of approx. € 1.10 - 1.15 per share1,2 in Q4 in 2021, if at that time requirements are met
• ➢ Attractive shareholder renumeration addressing investors' demand for cash distributions in current lowest for longer rate environment
• ➢ Envisaged total dividend per share equivalent to dividend yield of ~7%, based on XETRA closing price as of 18. January 20212 of € 21.50

Strategic review: significant increase in results envisaged by 2023

• Adjustments to be made within the "Aareal Next Level" strategic framework in order to be able to fully exploit the opportunities arising from changes induced by Covid-19, and to retain successful performance in the future
• Envisages consolidated operating profit in the range of € 300 mn, to be achieved already in 2023³
• This translates into a RoE after taxes of ~8%⁴ , in line with CoE; this applies to the Aareal Bank Group and to the Bank (excluding Aareon)

Note: All 2020 figures preliminary and unaudited excluding any potential acquisitions; subject to the Covid 19 crisis being fully overcome by then

¹⁾ Subject to the preparation and audit of the financial statements and the regulatory authority's approval for inclusion of profits, the Management Board plans to submit a corresponding proposal for the appropriation of profits to the ordinary Annual General Meeting in May 2021

²⁾ Provided that regulatory requirements concerning uncertainty surrounding the Covid-19 crisis will have been fulfilled at that time

³⁾ Excluding any potential acquisitions, and subject to the Covid-19 crisis being fully overcome by then. 4) 15% CET 1 ratio (Basel IV, phase-in, revised IRBA) exceeding the market average as a reference;

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

360 degree strategic review – preliminary key findings

Aareal Next Level	Key levers
ACTIVATE! Structured Property Financing	1. Continue to pursue risk-conscious, organic expansion of financing business, as already expedited in the fourth quarter of 2020, with a target volume of around € 30 billion by the end of 2022 2. Additional optimisation of funding mix and capital structure to further enhance inherent profitability
ELEVATE! Consulting / Services Bank	3. Use the opportunities – which will increase with the conclusion of the unbundling exercise – for expanding product range, and entering into further partnerships, with a particular focus on strengthening commission-based business
ACCELERATE!	4. Stronger profit momentum through the implementation of the Value Creation Plan for Aareon, which is currently being prepared together with partner Advent
Aareon	▪ With Arthur, Aareon executed already the first transaction of its M&A roadmap since Advent closing
Organisation	5. Further efficiency measures in organisation, of processes and infrastructure with one of the objectives being SPF target CIR of ~40%

On top: free capital retained for additional M&A e.g. in Aareon

Excerpt from Analyst Conference Call Q3 2020 results

November 12, 2020 Marc Hess, CFO – Christof Winkelmann, CMO

Agenda

• Asset Quality
• Segments
• Group results Q3 2020
• Capital, B/S, Funding/Liquidity
• Appendix

Asset quality

Asset quality

Actively managing Covid-19 implications, precautionary model based risks provisioning (management overlays)

	▪ Pre-crisis: Sound portfolio quality with low LTVs and strong cash flows
	▪ Contacted 90%+ of our clients during the first three weeks following mid-march's Covid-19 related- and vastly implemented global restrictions
	▪ Debt service
	▫ During the crisis, the portfolio has benefitted of significant equity contributions by our clients
	▫ Normal loan servicing by large part of our clients
	▫ Governmental programs are providing additional support to the real estate sector
Covid-19 implications	▫ So far, reasonable monetary support from our side (€ 80 mn amortisation, € 107 mn liquidity lines / interest suspensions), representing an increase <1% in our CREF exposure
	▫ In majority of cases, borrowers and the bank are both participating in bridging cashflow needs
	▫ This is in part possible, as clients have build up significant cash reserves during the last cycle
	▪ Property values
	▫ External appraisals successively undertaken. Impact so far in line with current assumptions, reflected in management overlays, with limited effect on overall portfolio LTV
	▫ Overlays are anticipating possible changes in property values going forward
	▫ Especially assets in good locations in metropole areas are trading at or around their

pre Covid-19 valuations and in parts above the same

Uncertainties continue and further LTV changes are possible, however they are expected to stay below the level of ~70% at the onset of the WFC in 2008

Commercial real estate finance portfolio (CREF)

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

2) Performing CREF-portfolio only (exposure). Due to lockdown in H1 2020 only limited number of external appraisals available as at 30.09.2020

3) Acc. to our market value development expectations

€ 26.1 bn highly diversified

Commercial real estate finance portfolio (CREF) by country

Commercial real estate finance portfolio (CREF) by property types

€ 26.1 bn highly diversified

Experienced team, solid portfolio

• Team members recruited from hotel related industries (i.e. Operators, Managers, Valuers and hotel equity investments)
• Gradual increase in hotel lending since 2000, decreasing leverage levels over time with growing differentiation via USPs and recognition in the industry with increasing client base globally (initiative started in 2000; by 12/2008 € 3.7 bn loan book with an average LTV of 68%; by 12/2019: € 8.6 bn loan book with LTV an average LTV of 56%)
• 06/2001: Securitisation of an European and American Hotel portfolio ("Global Hotel One") € 1.1 bn, maturity 5 years, no defaults, despite 9/11 in NYC
• Successfully accompanied our hotel finance portfolio through the GFC

History

Key facts

Key findings

▪ Well diversified by 236 hotels in 19 countries

The Aareal hotel portfolio is:

• Well balanced in terms of brand and hotel category
• Well backed by i.a. sound public companies, sovereign wealth funds and HNWI who have shown their financial commitment to the assets throughout this crisis

• Conservatively leveraged with sufficient buffer for value decreases caused by the current crisis

• Of the top 15 loans (all are loans above € 150 mn, of which 12 are portfolio financings), only 6 were provided with additional liquidity since March. Overall, 35% (~ € 3 bn) of our hotel exposure has received liquidity support since the beginning of the year.

• The sum of all hotel loan support financed so far represents approximately 1.4% of the total hotel portfolio size.
• 45% portfolio deals vs. 55% single assets deals (portfolio deals are all cross collateralised to the extend legally permissible)

Asset quality: Hotel Portfolio

Hotel portfolio well positioned to master Covid-19 crisis

3) Acc. to STR classification

Expectations and examples

▪ In the interim, people will learn to live and travel with Covid-19 and not against it ▪ Final resolution with accepted treatment / vaccine Expectations ▪ Currently, Resort Hotels and drive-to-destinations far better, while China is a possible projection on how hotels will fare, as Covid-19 is under control ▪ With our profound know-how and well-established network in hospitality industry, we are expecting to apply our expertise and USPs to generate attractive risk / return through the cycle A picture is worth a thousand words…	▪ Catch up effect for business related travel expected to be significant, as is pent up demand for personal travel

Segments

Segment: Structure Property Financing

New business with low LTVs and significantly above planned margins

• Newly acquired business in Q3:
• Margins of ~220 bp above plan (180-190 bps)
• Strong Ø LTV of 57%
• Increased focus on logistics
• Portfolio size picking up despite FX effects
• Further portfolio increase in Q4 expected to upper end of guided range (€ 26 - 28 bn); TLTRO-bonus collection therewith likely
• Using market opportunities through the cycle by applying expertise and USPs 1)

Segment: Consulting/Services Bank Housing industry deposits proven stable, Ytd NCI increased

€ mn	Q3 '19	Q4 '19	Q1 '20	Q2 '20	Q3 '20
Net interest income	-4	-5	10	10	9
Net commission income	7	6	5	7	6
Admin expenses	20	16	18	17	15
Net other operating income	0	1	0	0	0
Operating profit	-17	-14	-3	0	0

• Stable deposit volume of € 11 bn
• Structure further improved, sticky rental guarantee deposits grown above € 2 bn
• Q3 NII at € 9 mn / 9M '20 at € 29 mn (Q3 '19: € -4 mn / 9M '19: € -10 mn) Improvement in current year mainly due to adjusted modelling and transfer pricing, reflecting value of housing industry deposits as stable funding source
• Due to higher short term interest rates and Covid-19 related underspend segment FY-EBT now expected even better than revised guidance of ~ € -10 mn (original guidance ~ € -20 mn)
• Unlocking further business opportunities, e.g. joint-venture with ista ("objego")

Segment: Aareon

Continued Covid-19 resiliency, limited adj. EBITDA impact confirmed

P&L Aareon segment - Industry format1) € mn	Q3'19	9M'19	Q1'20	Q2'20	Q3'20	9M'20	∆ Q3 '20/'19	∆ 9M '20/'19
Sales revenue	60	182	64	61	63	188	5%	4%
▪ Thereof ERP ▪ Thereof Digital	48 12	146 35	49 15	47 15	49 14	144 44	1% 20%	-1% 25%
Costs2) ▪ Thereof material	-47 -11	-140 -32	-50 -11	-51 -12	-50 -10	-152 -34	7% -2%	8% 7%
EBITDA	13	41	14	10	13	36	-1%	-12%
New products / Inorganic3)	-1	-1	-1	-2	-2	-4	>100%	>100%
One offs	0	0	0	0	0	0
Adj. EBITDA	14	42	15	12	14	41	6%	-3%
EBITDA	13	41	14	10	13	36	-1%	-12%
D&A / Financial result	-6	-17	-7	-7	-6	-20	9%	12%
EBT / Operating profit	7	24	7	3	6	17	-9%	-29%

• Sales revenues increased by € 6 mn to € 188 mn (+4%); Q2 was the quarter most affected by Covid-19 whereas catch-up becomes visible in Q3
• Costs: Steadfast on investments supporting Aareon's growth strategy which is in line with 2020 run rate – driven by increasing FTE numbers and additional investments
• As of now, Aareon continues to assess this crisis from a business point of view as a singular event and still expects an adjusted EBITDA effect in FY 20 of approx. € -10 mn
• Adj. EBITDA as well as adj. EBITDA margin virtually stable at € 41 mn (PY: € 42 mn) and 22% (PY: 23%) respectively – growing digital business compensated lower consulting revenues due to Covid-19 crisis

▪ Outlook 2025:

Development of value creation plan with goal to become a "Rule of 40" company

• 1) Calculation refers to unrounded numbers
• 2) Incl. capitalised software and other income
• 3) New Products consist of e.g. Virtual Assistant, Aareon Smart Platform, etc., Inorganic bundles Venture (e.g. Ophigo)

and M&A activities, include investments in new product developments

Segment: Aareon

YTD: Recurring revenue providing stability, growth in digital continues

Q3: Share of recurring revenue (LTM)2)

1) Represents growth rate from 9M '19 to 9M '20 (based on unrounded numbers)

2) LTM: Last twelve months

• mainly driven by Digital and Consulting
• Digital grew by 25% yoy, based on higher penetration with existing digital products and CalCon
• ERP decreased by -1% yoy because of lower Consulting due to Covid-19
• Consulting utilisation rate: ~60% (previous years ~70%) still relatively high thanks to green (digitalised) consulting
• The recurring revenues share (LTM) of 66% (2019: 64%) at high level and has steadily been growing throughout the quarters
• Increasing assurance of revenues independent from circumstances another pillar of becoming a "Rule of 40" company
• The trend in the customer base to buy into SaaS based ERP- and digital solution is ongoing, additionally the demand for outsourcing services is high as well

Group results Q3 2020

Q3 results 2020

Positive operating profit despite Covid-19 impacts, growing NII & NCI

€ mn	Q3 '19	Q4 '19	Q1 '20	Q2 '20	Q3 '20	Q3 2020-Comments
Net interest income	134	130	123	122	128	Positive impacts from TLTRO participation and increased portfolio
Derecognition result	15	22	7	9	3	Effects from early repayments
Loss allowance	27	35	58	48	61	Above last years' level due to Covid-19 impact
Net commission income	54	65	57	54	57	Above last years' level driven by Aareon's growth
FV- / hedge-result	2	-4	11	-16	-2
Admin expenses	114	118	129	109	114	Flat despite Aareon growth
Others	0	2	0	-10	0
Operating profit (EBT)	64	62	11	2	11	Positive operating profit despite Covid-19 impacts, growing NII & NCI
Income taxes	24	20	4	-7	10	FY tax ratio above 50% expected due to expenses non effective for tax purposes
Minorities	1	0	1	0	1
Consolidated net income allocated to shareholders	39	42	6	9	0	Additional € ~180 mn from Aareon minority sale will be shown in Q4 directly in equity position under IFRS consolidated financial statements (unlike in HGB financial statements)
Earnings per share1) (€)	0.60	0.62	0.04	0.07	-0.05

1) After AT1 accrual

Net interest income (NII)

Positive impacts from TLTRO participation and increased portfolio

• Positive TLTRO effect (bonus) of ~ € 4 mn
• Portfolio increase (€ 26.7 bn) by strong new business supporting NII despite weakened USD
• YE-portfolio size in the upper end of guided range expected (€ 26 - 28 bn); TLTRO-bonus collection therewith likely

Loss allowance (LLP) / Others

Above last years' level due to Covid-19 impact

Covid-19 related P/L effects with respect to asset valuation management 9M 2020 € mn

9M LLP amounts to € 167 mn, thereof

• € 57 mn management overlay (Q1: € 17 mn, Q2: € 20 mn, Q3: € 20 mn)
• € 51 mn Stage 1/2 including but not limited to Covid-19 (Q1: € 15 mn, Q2: € 11 mn, Q3: € 25 mn) Stage 1/2 related LLP stock increased throughout the crises by 108% to € 79 mn
• Covid-19 effect (with respect to asset valuation) of € 138 mn in 9M (Q3: € 32 mn) reflected in the following P/L positions:
• LLP: € 111 mn (Q3: € 30 mn) thereof management overlays: € 57 mn (Q3: € 20 mn)
• Fvpl: € 14 mn (Q3: € 1 mn) thereof management overlays: € 16 mn (Q3: € 3 mn)
• Other expenses: € 13 mn (Q3: € 0 mn)

Defaulted exposure NPL portfolio further decreased

Defaulted exposure Defaulted exposure / Total CREF portfolio

Defaulted exposure by country (€ mn)

• Successful accelerated de-risking activities
• Additional outflow of several smaller and inflow of two new NPLs
• ➢ Net NPL reduction in Q3 of € 82 mn
• Opportunities for further accelerated de-risking will be assessed if they emerge

Net commission income

Above last years' level driven by Aareon's growth

• • Growth in digital solutions continuous
• Recovery in Consulting business
• High share of recurring revenues providing earnings stability even in times of Covid-19 crisis
• C/S Bank segment increased NCI YtD

Admin expenses

Flat despite Aareon growth

• Q3 admin expenses kept on previous years' level
• 9M 2020 figure (€ 352 mn) significantly reduced despite Aareon growth (9M 2019 € 370 mn, incl. € 11 mn DHB Integration)
• Q1 including € 18 mn European bank levy and ESF
• Aareon
• Q3 2020: € 46 mn (Q3 2019: € 43 mn)
• 9M 2020: € 138 mn (9M 2019: € 127 mn)

Capital, B/S, Funding/Liquidity

Capital Solid capital ratios

• Portfolio growth & first Covid-19 effects triggered Q3 RWA increase. CRR2 Quick-Fix overcompensate B3 RWA increase
• RWA increase in Q4 expected (e.g. portfolio growth, Covid-19 effects). B4 RWA less exposed to Covid-19 volatility due to floor
• Capital gain (~€ 180 mn) from sale of Aareon minority share will positively impact Q4 capital ratios (B3: ~150bps / B4: ~110bps)
• Significant CET1, AT1 and T2 buffers; optimisation potential in review
• T1-Leverage ratio at 6.0% despite TLTRO participation

• Remaining regulatory uncertainties (models, ICAAP, ILAAP, B4 etc.): modelled RWA's may further inflate

• 1) Underlying RWA estimate, given a 72.5 % output floor based on the final Basel Committee framework dated 7 December 2017, calculation subject to outstanding EU implementation as well as the implementation of further regulatory requirements

• 2) Ratings not yet reflecting potential changes from management overlays

3) When calculating own funds as at 30 Sep. 2020, interim profits were taken into account, deducting the pro-rata dividend in line with the dividend policy, and incorporating the pro-rata accrual of net interest payable on the AT1 bond. Moreover, the expected relevant impact of the TRIM exercise on commercial property financings, and of the SREP recommendations concerning the NPL inventory as well as the ECB's NPL guidelines for exposures newly classified as NPLs, were taken into account for determining regulatory indicators.

13,9%

B/S structure according to IFRS

As at 30.09.2020: € 44.5 bn (31.12.2019: € 41.1 bn)

• Well balanced B/S structure
• Temporary significant increase of total assets due to participation in ECBs' TLTRO (> € 4 bn) currently reflected in money market positions

1) Other assets includes € 0.4 bn private client portfolio and WIB's € 0.3 bn public sector loans

Funding / Liquidity

Diversified funding sources and distribution channels

• Sustainable and strong housing industry deposit base being part of well diversified funding mix
• Successful capital market transactions during the first 9 months:
• More than 40 senior unsecured private placements with a volume of € 600 mn
• September: € 500 mn senior preferred benchmark (6.5Y, MS +95bps)
• October: € 500 mn Pfandbrief benchmark (6Y, MS+1bp)
• ➢ Expected Q4 portfolio growth already funded
• Liquidity ratios significantly over fulfilled:
• NSFR > 100%
• LCR >> 100%

Treasury portfolio € 7.3 bn (2019: € 7.3 bn) of high quality and highly liquid assets

Asset quality

Development commercial real estate finance portfolio By region

10.681 11.252 3.538 2.121 1.792 1.152 4.103 6.212 7.718 7.762 7.374 7.630 1.764 2.562 4.796 6.385 6.612 5.853 892 2.987 3.671 5.327 8.032 8.583 1.032 2.147 2.584 2.068 1.956 2.508 2.249 1.592 ^{528 630 327} 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 1998 2003 2008 2013 2018 Q3 2020 others Logistic Retail Office Hotel Residential

Development commercial real estate finance portfolio By property type

€ mn

Western Europe (ex Germany) CREF portfolio Total volume outstanding as at 30.09.2020: € 8.6 bn

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

Spotlight: UK CREF portfolio € 3.8 bn (~15% of total CREF-portfolio)

52% 68% 55% 57% 55% Hotel Retail Logistic Office Student housing Average LTV by property type1) Ø LTV: 57%

Comments (vs. 2019)

• Performing:
• Investment finance only, no developments
• ~ 60% of total portfolio in Greater London area, emphasising on hotels
• € 155 mn with LTV > 60%
• Avg. LTV on same level as total CREF-portfolio
• Significant drop in YoD due to high hotel share of portfolio strongly effected by Covid-19
• Defaulted exposure: € 165 mn (€ 182 mn)

German CREF portfolio

Total volume outstanding as at 30.09.2020: € 3.0 bn

Southern Europe CREF portfolio

Total volume outstanding as at 30.09.2020: € 3.0 bn

Spotlight: Italian CREF portfolio (€ 1.7 bn)

Successful de-risking led to further significant NPL reduction

Eastern Europe CREF portfolio

Total volume outstanding as at 30.09.2020: € 1.5 bn

Northern Europe CREF portfolio

Total volume outstanding as at 30.09.2020: € 1.3 bn

North America CREF portfolio

Total volume outstanding as at 30.09.2020: € 7.9 bn

Asia / Pacific CREF portfolio

Total volume outstanding as at 30.09.2020: € 0.8 bn

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

Commercial real estate finance portfolio1) (CREF)

Conservative risk parameters

					LTV
Exposure							70% bis 75% 75% bis 80% 80% bis 85% 85% bis 90% 90% bis 95% 95% bis 100% über 100%
	100%	250		132		71
	95%
Probability	90%
	85%
	80%
	75%
	70%
	60%
	40%
	20%

Density

Current average LTV of 57%

Layered LTVs:

• 70% LTV exposure: € 250 mn

• 80% LTV exposure: € 132 mn

• 90% LTV exposure: € 71 mn

• High portfolio concentration at 57% LTV

• Fairly small tail risk

1) Performing CREF-portfolio only, LTV / YoD pre Covid-19, exposure (excl. commitments) as at 31.03.2020

Accelerated de-risking

1.9 Non performing loans, H1 2019 – H1 2020 € bn

Accelerated de-risking

• Program with focus on Italian portfolio, continued in Q4 with Italian credit risk further down by approx. € 0.6 bn (thereof € 0.3 bn NPL, € 0.3 bn single borrower risk)
• Total effect from accelerated de-risking of approx. € 1.2 bn1) Italian credit risk in 2019
• P&L burden 2019 of approx. € 50 mn (€ ~15 mn in Q4)

NPL reduction

• In H2 2019 total NPL volume down by approx. 40%
• Italian NPL also down by approx. 40% in 2019 (incl. a foreclosed Italian asset of approx. € 90 mn taken on own book for future development, not part of acc. de-risking)

1) Thereof € 350 mn NPL (in FY 2019, of which € 310 mn in H2 2019), € 350 mn single borrower risk, € 410 mn BTPs, € 80 mn NPL provisioned for future reduction

Commercial real estate finance portfolio (CREF)

Dimension of (theoretical) Stage migration effects have benefit from successful de-risking executed in 2019 and Covid-19 related provisions already considered in Q1/20 LLP

Segments

Aareon segment

Dimension products / markets and M&A activities / other cooperations

	Progress on the development of products, markets and M&A activities / other cooperations
Products/Markets	▪ Launch of Wodis Yuneo – user centric approach and based on newest technology (intelligent tools and analytics components. Routine tasks, for example, can be automated and errors avoided using certain algorithms, optimized user interface, high flexibility due to web-based technology). First customers decided for Wodis Yuneo ▪ Neela AI based Virtual Assistant: Start of roll-out ▪ Venture OFI Group with platform Ophigo used by first customers. Two other ventures (ecaria and Refurbio) created and start to build-up the business model ▪ Online event Aareon Live "Pioneering Spirit" with about 1,600 registered participants. First presentation of the new ERP product generation Wodis Yuneo in Germany, prominent key notes, further product information as well as online exhibition
M&A activities / other cooperations	▪ CalCon integration project on track – product integrated in Aareon Smart World and sales synchronized as well as internal process set up; communications intensified. ▪ M&A activity to expand inorganically and drive digital product capabilities according to communicated growth case – extensive market screening for potential targets and numerous opportunities have been identified which are systematically pursued and modelled within a value creation plan ▪ Success will lead to upside potential

Accelerate growth and value creation by partnership with Advent

This landmark transaction delivers on one of the key pillars of "Aareal Next Level"

Structured Property Financing (SPF) Consulting/Service (C/S) Bank Aareon

Commercial real estate financing

solutions across 3 continents: Europe, North American and Asia/Pacific

Diverse property types

• Hotels, logistics, offices, retail, residential and student housing
• Additional industry experts in hotels, logistics and retail properties

Investment finance

• Single asset, portfolio, value add
• Portfolio size: c.€ 26 bn; average LTV: 57%

Integrated payment transaction system for the housing industry (market-leading) and the utility sector

Financial solutions

• Payment processing provider
• Deposit bank

Software solutions

• Intelligent solutions to improve connectivity and efficiency for bank and non-bank customers
• Average deposit volume of € 11.0 bn in Q3 2020

European leader for real estate software, 60+ years in the market serving c.3k customers and 10m+ units with 40 locations in DACH, Netherlands, France, Nordics and UK

Mission-critical ERP and broad set of modular Digital Solutions built on a cloud-enabled PaaS platform

Sustainable and resilient business model with strong downside protection delivers decades of consistent profitable growth

Experienced leadership team combining deep software expertise and longstanding real estate experience with a strong M&A roll-up track-record

"Activate" "Elevate" "Accelerate"

Ideally positioned to drive consolidation in the fragmented real estate ecosystem by further stepping up M&A activity

Accelerated M&A add-on strategy with support of Advent Track record of successful M&A execution and integration Ideally positioned to drive industry consolidation Great home for businesses Customer and market footprint Ability to unlock further synergies Considerable M&A fire power + 2015 2017 2013 2012 2010 2008 2000 2006 2007 2020 (1) System Team Housing AIPG real estate Businesses Track record "We have done it before" Scale and footprint "We are the natural consolidator" Unique ability to unlock synergies "We can make these deals work" Supportive shareholders "We have the resources" + +

Important milestone on the path to implementing "Aareal Next Level"

Strategic milestone: Aareal Bank enters into a long-term partnership with Advent to accelerate growth and value creation of Aareon

• 30% minority stake in Aareon will be acquired by Advent at an attractive Enterprise value of € ~960 mn¹
• Corresponding equity value of €~860 mn¹ of which Aareal Bank will receive net cash proceeds of € ~260 mn as of closing
• Additionally Advent granted an earn-out component of up to € 50 mn dependent on certain performance conditions
• Closing of the transaction is subject to customary conditions, primarily related to anti-trust approvals, and is anticipated to take place in the fourth quarter of 2020

Advent acquires 30% of Aareon Financial effects on Aareal Bank Group

• Expected realisation (as of closing) of a significant, P&L neutral, capital gain of € ~180 mn after taking into account minority interest in equity, transaction costs and taxation on capital gain
• CET1 capital to be strengthened accordingly
• Upfront capital gain significantly outweighs minor EPS dilution (FY 2020: ~0.05 EUR² )
• EPS effect to be compensated over time by significantly raised Aareon ambition level and reinvestment of proceeds

The transaction takes advantage of the very favourable market environment for resilient software-centric businesses

Rationale for the transaction: Aareal Bank and Advent to jointly support Aareon on its way to "Next Level"

Ambition level: Become a "Rule of 40" software company

"Rule of 40": Sum of Aareon's annual revenue growth and EBITDA margin will at least reach 40 per cent

Partnering with Advent will enable Aareal Bank and Aareon to even stronger support our clients

Aareon is ideally positioned to help its clients with the challenges and opportunities that come with the rapid digitisation of the real estate industry – Covid-19 seen as a catalyst for digitisation

Continued R&D investment will allow Aareon to underpin its role as a digital pioneer in the real estate industry by expanding its suite of innovative products and digital solutions for our clients

As the natural consolidator and a great home for acquired businesses, Aareon will bring the best products and solutions in the ecosystem to our clients

As Aareal Bank will remain the majority shareholder committed to Aareon's long-term performance, the existing synergies between the parent and subsidiary will be preserved – in the interests of both institutions' clients

Value crystallisation today and strengthen the upsides for the future boost shareholder value

Value crystallisation today	▪ Crystallise Aareon's current value in a very favourable market environment for resilient software-centric businesses for Aareal Bank ▪ Realise an attractive capital gain as of closing, hence… ▪ …significant increase of our regulatory capital
Upsides for the future	▪ Achieve higher value contribution to our shareholders in a partnership by… ▪ further accelerating Aareon's EBITDA and revenue growth beyond promised 2025 levels ▪ multiple re-rating of Aareon as a "Rule of 40" company ▪ Minor EPS effect on Aareal Bank Group level to be compensated over time by significantly raised Aareon ambition level
Use of proceeds	▪ Unlock additional growth potential as promised in "Aareal Next Level": ▪ Pursue value-enhancing sustainable opportunities in both segments See of the Bank's business next page ▪ Further support Aareon's M&A roadmap with strong new partner ▪ Enhance flexibility regarding capital management actions

Additional boost by investing the proceeds value-enhancing

Proceeds of the transaction

Investing in our business…

…leading to

Increased optionality regarding value-enhancing opportunities, if and when they arise

Advanced flexibility regarding potential capital management actions

By doing so create sustainable value for Aareal Bank and hence our shareholders…

Aareal Bank and Aareon have 60+ years of shared history and look forward to an exciting future with Advent

Capital, B/S, Funding/Liquidity

SREP (CET 1) requirements

Demonstrating conservative and sustainable business model

• Capital ratios significant above SREP requirements
• B3 CET1 buffer translates into > € 1.3 bn
• P2R relief by using possibility of partially fulfilling requirements with AT1 and T2 capital
• Total capital requirement 2020 (Overall Capital Requirement (OCR)) amounts to 12.8% compared to 30.3% total capital ratio
• All ratios already include TRIM effects as well as prudential provisioning

Pillar 1 Requirement Pillar 2 Requirement Capital Conservation Buffer Countercyclical Buffer

The way ahead

We take a strategic approach to sustainability management

Action areas key to securing the Company's long-term success – as identified in regularly updated materiality analysis

• We are fostering the transition in Real Estate to a more sustainable, digitised and connected future
• Our intensified effort will make ESG an even more integral part of our DNA and a driver of value enhancement for all our stakeholders

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

		Ongoing	By next year	By 2022 & Beyond
	Strategy Development & Implementation	Define sustainability targets for management compensation schemes	Quantitative sustainability measures and targets for long-term compensation schemes in place
s) e		Ongoing
ur s a e M +	Attractive Employer	▪ Frequent employee surveys and disclosure ▪ External recognition of human capital management	[Fair Pay Certification, Logib-D (08/2020), Top Employer (13th, 2019)]	Employee satis faction score
s a Are n o			By next year
Acti (	Green Offering	▪ ESG product offering e.g. lending, funding		No. of products
s e pl		Establish	Expand
m xa E d e				By 2022
ct e el S	66 Transparency	▪ Transparency at portfolio level on selected ESG aspects [80%] For more than 50% of our portfolio Green Building Certificates1) ▪ Energy Performance Certificates or both are in place	,	Full ESG transparency

1) DGNB, BREEAM, HQE, LEED

Dividend Policy

Aareal Next Level

Our Dividend Policy – Confirmed despite significant regulatory burdens

Base Dividend

+

• We intend to distribute approx. 50% of the earnings per ordinary share (EpS) as base dividend
• In addition, we plan to distribute supplementary dividends of up to 20-30% of the EpS under the following prerequisites:

Supplementary Dividend

• No material deterioration of the environment (with longer-term and sustainably negative effects)
• Nor attractive investment opportunities neither positive growth environment

Payout ratio of up to 80% confirmed Significant book value per share growth incl. dividend

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

Regulation

Economic ICAAP the next focus on the regulatory agenda – our reading and take away

1

Regulatory capital ratios Economic ICAAP

Normative internal perspective

• Ongoing fulfilment of all relevant regulatory requirements and external constraints
• Medium-term projections for at least three years:
• Ensure the ongoing fulfillment of OCR plus P2G in the baseline, and TSCR in adverse scenarios
• Takes into account all material risks (not limited to Pillar 1 risks)
• Considers upcoming changes in the legal / regulatory / accounting framework
• Adequate and consistent internal methods to quantifying impacts on Pillar 1 ratios

• Additional management buffers determined by the institutions

• Economic internal perspective ▪ Risks that may cause economic

• losses are covered by internal capital1)
• Capital adequacy concept based on economic value considerations (e.g. net present value approach)
• Internal definition of capital ▪ Point-in-time risk qualification of
• the current situation feeding into medium-term assessment covering future developments
• Adequate and consistent internal risk quantification methods
• Internal indicators, thresholds and management buffers.

Economic ICAAP on SSM priority list 2020

• Ongoing discussions regarding interpretation of requirements
• Different methods currently used throughout Europe to estimate future volatility (scenario based vs. VAR models)
• ICAAP Guidelines published end of 2018 are very conservative regarding holding period and confidential interval
• ECB aims for future harmonization (equal to TRIM?) and potential tightening

AT1 with normative triggers will no longer be eligible under Economic ICAAP: 2

Regulatory capital ratios: Future treatment appears to be more generous, although decisions will be taken on a case by case basis

▪ P2R could be partly covered by AT1 (and/or T2)

Economic ICAAP: Future requirements will be tightened

• AT1 with normative triggers not accountable any more (see ECB feedback statement; question 208)
• Interim grandfathering of existing AT1 (issued, cut off date?) not decided yet, but unlikely from our point of view
• AT1 in the economic ICAAP, currently and presumably in future no alternative instruments (beside CET1) available to fulfil ECB requirements (economic triggers instead of normative)

▪ Economic ICAAP to become the new capital constraint for European banks?

1) Different risk categories regarding regulatory capital ratios and economic ICAAP

AT1: ADI of Aareal Bank AG

Interest payments and ADI of Aareal Bank AG

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

	31.12. 2015	31.12. 2016	31.12. 2017	31.12. 2018	31.12. 2019
€ mn
Net Retained Profit ▪	99 99	122 122	147	126	120
Net income ▪ Profit carried forward from previous year	-	-	147 -	126 -	120 -
▪ Net income attribution to revenue reserves	-	-	-	-	-
+ Other revenue reserves after net income attribution	720	720	720	720	720
Total dividend potential before amount blocked1) =	819	842	870	846	840
./. Dividend amount blocked under section 268 (8) of the German Commercial Code	287	235	283	268	314
./. Dividend amount blocked under section 253 (6) of the German Commercial Code	-	28	35	42	40
= Available Distributable Items1)	532	579	552	536	486
+ Increase by aggregated amount of interest expenses relating to Distributions on Tier 1 Instruments1)	46	46	32	24	23
= 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)	578	625	584	560	509

Group results Q3 2020

Aareal Bank Group Results Q3 2020

	01.07.- 30.09.2020	01.07.- 30.09.2019	Change
	€ mn	€ mn
Profit and loss account
Net interest income	128	134	-4%
Loss allowance	6 1	2 7	126%
Net commission income	5 7	5 4	6 %
Net derecognition gain or loss	3	1 5	-80%
Net gain or loss from financial instruments (fvpl)	-4	5	-180%
Net gain or loss on hedge accounting	2	-3	-167%
Net gain or loss from investments accounted for using the equity method	0	0	0 %
Administrative expenses	114	114	0 %
Net other operating income / expenses	0	0	0 %
Operating Profit	1 1	6 4	-83%
Income taxes	1 0	2 4	-58%
Consolidated net income	1	4 0	-98%
Consolidated net income attributable to non-controlling interests	1	1	0 %
Consolidated net income attributable to shareholders of Aareal Bank AG	0	3 9	-100%
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank AG1)	0	3 9	-100%
of which: allocated to ordinary shareholders	-4	3 5	-111%
of which: allocated to AT1 investors	4	4
Earnings per ordinary share (in €)2)	-0.05	0.60	-108%
Earnings per ordinary AT1 unit (in €)3)	0.04	0.04

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.

74 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 Q3 2020 by segments

	Structured Property Financing		Consulting / Services Bank r		A a Aareon e			Consolidation/ Reconciliation		Aareal Bank Group
	01.07.- 30.09. 2020	01.07.- 30.09. 2019	01.07.- 30.09. 2020	01.07.- 30.09. 2019	01.07.- 30.09. 2020	01.07.- 30.09. 2019	01.07.- 30.09. 2020	01.07.- 30.09. 2019	01.07.- 30.09. 2020	01.07.- 30.09. 2019
€ mn
Net interest income	119	138	9	-4	0	0	0	0	128	134
Loss allowance	6 1	2 7			0	0			6 1	2 7
Net commission income	1	2	6	7	5 3	4 9	-3	-4	5 7	5 4
Net derecognition gain or loss	3	1 5							3	1 5
Net gain or loss from financial instruments (fvpl)	-4	5			0				-4	5
Net gain or loss on hedge accounting	2	-3							2	-3
Net gain or loss from investments					0	0			0	0
accounted for using the equity method
Administrative expenses	5 6	5 5	1 5	2 0	4 6	4 3	-3	-4	114	114
Net other operating income / expenses	0	-1	0	0	0	1	0	0	0	0
Operating profit	4	7 4	0	-17	7	7	0	0	1 1	6 4
Income taxes	9	2 7	-1	-6	2	3			1 0	2 4
Consolidated net income	-5	4 7	1	-11	5	4	0	0	1	4 0
Allocation of results
Cons. net income attributable to non-controlling interests	0	0	0	0	1	1			1	1
Cons. net income attributable to shareholders of Aareal Bank AG	-5	4 7	1	-11	4	3	0	0	0	3 9

Aareal Bank Group Results 9M 2020

	01.01.- 30.09.2020	01.01.- 30.09.2019	Change
	€ mn	€ mn
Profit and loss account
Net interest income	373	403	-7%
Loss allowance	167	5 5	204%
Net commission income	168	164	2 %
Net derecognition gain or loss	1 9	4 2	-55%
Net gain or loss from financial instruments (fvpl)	-11	5	-320%
Net gain or loss on hedge accounting	4	-4	-200%
Net gain or loss from investments accounted for using the equity method	0	0	0 %
Administrative expenses	352	370	-5%
Net other operating income / expenses	-10	1
Operating Profit	2 4	186	-87%
Income taxes	7	6 5	-89%
Consolidated net income	1 7	121	-86%
Consolidated net income attributable to non-controlling interests	2	2	0 %
Consolidated net income attributable to shareholders of Aareal Bank AG	1 5	119	-87%
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank AG1)	1 5	119	-87%
of which: allocated to ordinary shareholders	3	107	-97%
of which: allocated to AT1 investors	1 2	1 2
Earnings per ordinary share (in €)2)	0.06	1.80	-97%

1) The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis.

Earnings per ordinary AT1 unit (in €)3) 0.12 0.12

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.

76 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 9M 2020 by segments

	Structured Property Financing		Services Bank	Consulting /	A a Aareon r e		Consolidation/ Reconciliation		Aareal Bank Group
	01.01.- 30.09. 2020	01.01- 30.09. 2019	01.01.- 30.09. 2020	01.01- 30.09. 2019	01.01.- 30.09. 2020	01.01- 30.09. 2019	01.01.- 30.09. 2020	01.01- 30.09. 2019	01.01.- 30.09. 2020	01.01- 30.09. 2019
€ mn
Net interest income	345	414	2 9	-10	-1	-1	0	0	373	403
Loss allowance	167	5 5			0	0			167	5 5
Net commission income	4	6	1 8	1 7	155	150	-9	-9	168	164
Net derecognition gain or loss	1 9	4 2							1 9	4 2
Net gain or loss from financial instruments (fvpl)	-11	5	0		0				-11	5
Net gain or loss on hedge accounting	4	-4							4	-4
Net gain or loss from investments					0	0			0	0
accounted for using the equity method
Administrative expenses	173	195	5 0	5 7	138	127	-9	-9	352	370
Net other operating income / expenses	-11	0	0	-1	1	2	0	0	-10	1
Operating profit	1 0	213	-3	-51	1 7	2 4	0	0	2 4	186
Income taxes	4	7 4	-2	-17	5	8			7	6 5
Consolidated net income	6	139	-1	-34	1 2	1 6	0	0	1 7	121
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	6	139	-1	-34	1 0	1 4	0	0	1 5	119

Aareal Bank Group

Results – quarter by quarter

			Structured Property Financing			Consulting / Services Bank				Aareon					Consolidation / Reconciliation					Aareal Bank Group
	Q3	Q2	Q1	Q4	Q3	Q3	Q2	Q1	Q4	Q3	Q3	Q2	Q1	Q4	Q3	Q3	Q2	Q1	Q4	Q3	Q3	Q2	Q1	Q4	Q3
€ mn		2020		2019			2020 2019			2020 2019			2020 2019			2020	2019
Net interest income	119	113	113	135	138	9	10	10	- 5	- 4	0	- 1	0	0	0	0	0	0	0	0	128	122	123	130	134
Loss allow ance	61	48	58	35	27				0		0	0	0	0	0						61	48	58	35	27
Net commission income	1	1	2	4	2	6	7	5	6	7	53	49	53	58	49	- 3	- 3	- 3	- 3	- 4	57	54	57	65	54
Net derecognition gain or loss	3	9	7	22	15																3	9	7	22	15
Net gain / loss from fin.	- 4	-17	10	- 4	5		0				0	0	0	0							- 4	-17	10	- 4	5
instruments (fvpl)
Net gain or loss on hedge accounting	2	1	1	0	- 3																2	1	1	0	- 3
Net gain / loss from
investments acc. for				1							0	0	0	0	0						0	0	0	1	0
using the equity method
Administrative
expenses	56	49	68	59	55	15	17	18	16	20	46	46	46	46	43	- 3	- 3	- 3	- 3	- 4	114	109	129	118	114
Net other operating	0	-11	0	- 1	- 1	0	0	0	1	0	0	1	0	1	1	0	0	0	0	0	0	-10	0	1	0
income / expenses
Operating profit	4	- 1	7	63	74	0	0	- 3	-14	-17	7	3	7	13	7	0	0	0	0	0	11	2	11	62	64
Income taxes	9	- 8	3	21	27	- 1	0	- 1	- 4	- 6	2	1	2	3	3						10	- 7	4	20	24
Consolidated net income	- 5	7	4	42	47	1	0	- 2	-10	-11	5	2	5	10	4	0	0	0	0	0	1	9	7	42	40
Cons. net income
attributable to non	0	0	0	0	0	0	0	0	0	0	1	0	1	0	1						1	0	1	0	1
controlling interests
Cons. net income
attributable to ARL	- 5	7	4	42	47	1	0	- 2	-10	-11	4	2	4	10	3	0	0	0	0	0	0	9	6	42	39
shareholders

Definitions and contacts

Definitions

= New Business	Newly acquired business + renewals
Common Equity =	CET 1
Tier 1 ratio	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
	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	Available stable funding
= ratio	Required stable funding
Liquidity coverage	Total stock of high quality liquid assets
= ratio	Net cash outflows under stress
	operating profit ./. income taxes ./. income/loss attributable to non controlling interests ./. net AT1 coupon
= Earnings per share	Number of ordinary shares
	NOI x 100 (Net operating income, based on 12-months forward looking estimate)
= Yield on Debt	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
= CREF-portfolio	Real estate finance portfolio incl. private client business and WIB's public sector loans
= NPL-ratio	Defaulted exposure acc. CRR (excl. exposure in cure period) / Total CREF 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.

This presentation may contain forward-looking statements of future expectations and other forward-looking statements or trend information that are based on current plans, views and/or assumptions and subject to known and unknown risks and uncertainties, most of them being difficult to predict and generally beyond Aareal Bank AG's control. This could lead to material differences between the actual future results, performance and/or events and those expressed or implied by such statements.

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

Thank you.