Aareal Bank AG

Investor Presentation • Aug 14, 2018

Analyst Conference Call Q2 2018 results

August 14, 2018 Hermann J. Merkens, CEO

Agenda

• Highlights
• Group results at a glance
• Segment performance
• Group results
• B/S structure, capital & funding position
• Asset quality
• Outlook 2018
• Appendix
• Definitions and contacts

Highlights Robust operating performance despite challenging environment

Robust economic development. Unchanged high economic uncertainties (e.g. political uncertainties, raising interest rates in the USA, Brexit)

Solid operating profit of € 62 mn (Q2/2017: € 109 mn including one-off effects). EpS of 0.62 € (Q2/2017: 1.05 € including one-off effects)

Strong new business origination in the Structured Property Financing segment despite ongoing high competition in the CRE lending markets

NII increase following strong new business

Admin expenses on low level – as expected

Outlook operating profit confirmed

Group results at a glance

Group results at a glance Robust operating performance

€ mn	Q2 '17	Q3 '17	Q4 '17	Q1'18	Q2'18	Comments
Net interest income (incl. derecognition result)	158	164	148	139	141	NII increase following strong new business
Loss allowance	25	26	29	0	19	Within expectations
Net commission income	49	48	61	50	51	Further growth in Aareon sales revenues; EBT of € 37-38 mn expected
FV- / hedge-result	1	11	-1	1	-5
Admin expenses	129	120	123	128	109	Admin expenses on low level - as expected
Others	55	5	10	5	3
Operating profit	109	82	66	67	62	Robust operating performance
Income taxes	42	31	18	23	21	FY 2018 tax ratio of ~34% assumed
Minorities / AT1	5	4	4	5	4
Consolidated net income allocated to ord. shareholders	62	47	44	39	37
Earnings per share [€]	1.05	0.78	0.74	0.65	0.62

Segment performance

Structured Property Financing

Despite challenging markets strong new business origination in Q2

• Despite lower transaction volumes new business volume as planned
• Newly acquired business:
• Gross margins in Q2 / H1 2018 of ~190 / 210 bps (~170 / 190 bps after FX)
• Lower US share compared to Q1
• Sticking to FY margin target
• Despite further NCA reduction RE portfolio2) increase q-on-q to € 26.5 bn (31.03.2018: € 25.9 bn)

1) Incl. renewals

2) RE-business incl. private client business (€ 0.7 bn) and WIB's public sector loans (€ 0.5 bn)

Consulting / Services Now Aareon EBT of € 37-38 mn expected – due to one-offs

P&L C/S Segment	Q2 '17	Q3 '17	Q4 '17	Q1 '18	Q2 '18
€ mn
Sales revenue	55	53	64	56	57
Own work capitalised	1	1	2	1	2
Other operating income	1	1	4	1	1
Cost material purchased	9	8	9	9	11
Staff expenses	36	38	42	37	39
D, A, impairment losses	3	3	4	4	3
Other operat. expenses	15	13	18	16	15
Others	0	0	0	0	0
Operating profit	-6	-7	-4	-8	-8

• Aareon's mid-term target unaffected
• Further growth of Aareon revenues to € 57 mn (Q2 2017: € 55 mn), EBT of € 8 mn, EBT margin ~14%
• Deposit volume on a high level (Ø of € 10.5 bn in Q2)
• Focussing on further shift into sustainable deposits
• Deposit margins still burdening segment result by interest rate environment

Deposit taking business / other activities -14 -13 -17 -14 -16 -20 -15 -10 -5 0 Q2 2017 Q3 2017 Q4 2017 Q1 2018 Q2 2018 € mn Operating profit

Group results Q2 2018

Net interest income incl. derecognition result NII increase following strong new business

• NII further stabilising
• RE finance portfolio back on targeted level (€ 26.5 bn vs. € 25.9 bn as at 31.03.2018) despite further NCA reduction
• New business
• Gross margins in Q2 / H1 2018 of ~190 / 210 bps (~170 / 190 bps after FX)
• Lower US share compared to Q1
• Sticking to FY margin target
• Derecognition result on a low level
• Deposit margins still burdened by interest rate environment

Net interest income

Derecognition result - to be reported separately under IFRS 9 starting Q1/2018 (mainly effects from early repayments)

Loss allowance (LLP) Within expectations

Net commission income Further growth in Aareon sales revenues

• Aareon revenues of € 57 mn (Q2 2017: € 55 mn), EBT of € 8 mn, EBT margin ~14%
• Aareon revenues resulting from growth in all product lines, digital products with highest growth rates
• Q4 regularly includes positive seasonal effects
• Aareon's FY-EBT target down by € 2 3 mn due to one-off burden
• Aareon's mid-term target unaffected

Admin expenses

Admin expenses on low level - as expected

• Admin expenses in Q2 2018 include
• € 4 mn transformation costs (FY 2018 plan: € 25 mn)
• Reversal of restructuring provisions of € 4 mn (related to the acquisition of former WIB)
• Admin expenses in Q1 2018 include
• € 20 mn for the European bank levy and for the Deposit Protection Guarantee Schemes (both fully booked in Q1)
• € 4 mn transformation costs
• Reversal of restructuring provisions of € 3 mn (related to the acquisition of former CCB and WIB)

B/S structure, capital & funding position

B/S structure according to IFRS As at 30.06.2018: € 40.2 bn (31.12.2017: € 41.9 bn)

1) Other assets includes € 0.7 bn private client portfolio and WIB's € 0.5 bn public sector loans

Capital position Strong capital ratios

• Fulfilling Basel IV from day 1
• Remaining regulatory uncertainties well buffered (e.g. Hard test)
• Capital ratios significantly above SREP requirements
• T1-Leverage ratio : 6.2%

1) Underlying RWA estimate, given a 72.5 % output floor based on the final Basel Committee framework dated 7 December 2017; Calculation of material impact for Aareal Bank, subject to outstanding EU implementation as well as the implementation of further regulatory requirements (CRR II, EBA requirements, TRIM, etc.)

16 2) No interim profit recognition in CET 1 capital in 2018

3) Fully loaded

4) Acc. COREP

Funding position Diversified funding sources and distribution channels

Institutional customers

Housing industry customers

• Very strong deposit base
• H1 2018 funding activities
• Successful placement of Pfandbrief benchmark transactions (EUR 500 mn 6.3Y)
• Senior unsecured (> € 200 mn)
• 21st July 2018: Introduction of new asset class "Senior preferred", private placements successfully executed
• Fulfilling liquidity KPI's
• NSFR > 1
• LCR >> 1

Pfandbriefe

Asset quality

Commercial real estate finance portfolio1) € 25.3 bn highly diversified and sound

1) CRE-business only, private client business (€ 0.7 bn) and WIB's public sector loans (€ 0.5 bn) not included

2) Incl. Student housing (UK only)

Commercial real estate finance portfolio1) Portfolio details by country

Spotlight: UK CRE finance portfolio1) € 4.1 bn (~16% of total CRE-portfolio)

Logistic

Spotlight: Italian CRE finance portfolio1) € 2.8 bn (~11% of total portfolio)

Comments

• Performing:
• Share of developments financed below 10%
• ~ 50% of total portfolio in Greater Rome or Milan area
• € 319 mn with LTV > 60%
• Theoretical stress on property values (-20%): would lead to portfolio LTV of approx. 88%
• NPL: € 669 mn of which
• ~ 70% restructured / agreement in place or planned

• ~ 30% enforcement3)

• 2) Performing CRE-business only, exposure as at 30.06.2018

• 3) Current enforcement period 3-4 years, but improving due to new legislation

Spotlight: Russian CRE finance portfolio1) € 0.5 bn (~2% of total portfolio)

NPL portfolio Further declining NPL volume and NPL ratio

NPL/Total CRE-portfolio

NPL ratio ex signed Italian restructured loans

NPL ratio acc. Reg. Disclosure Report

Considering collaterals, NPL's fully covered

Treasury portfolio € 7.8 bn of high quality and highly liquid assets

Outlook 2018

Outlook 2018 Operating profit confirmed

Net interest income incl. derecognition result	 € 570 mn - € 610 mn
Loss allowance1)	 € 50 mn - € 80 mn
Net commission income	 € 215 mn - € 235 mn
Admin expenses	 € 470 mn - € 500 mn
Operating profit	 € 260 mn - € 300 mn
Pre-tax RoE	 9.5% - 11.0%
EpS	 € 2.60 - € 3.00
Target portfolio size	 € 25 bn - € 28 bn
New business origination2)	 € 7 bn - € 8 bn

1) As in 2017, the bank cannot rule out additional loss allowance

2) Incl. renewals

3) After segment adjustments

Conclusion Aareal Bank Group stays on track

Key takeaways

Robust operating performance in H1 underlines Aareal Bank Group's good market position in its two segments

Transformation of the Aareal Bank Group is well on its way, measures within the "Aareal 2020" future program show an increasingly positive effect

Aareal Bank Group is well on track to achieving its 2018-operating profit guidance as well as its strategic midterm to long-term targets

Appendix Group results

Aareal Bank Group Results Q2 2018

	01.04.- 30.06.2018	01.04.- 30.06.20171)	Change
	€ mn	€ mn
Profit and loss account
Net interest income	136	151	-10%
Loss allowance	19	25	-24%
Net commission income	51	49	4%
Net derecognition gain or loss	5	7	-29%
Gains / losses from financial instruments (fvpl)	-4	4
Net result on hedge accounting	-1	-3
Results from investments accounted for at equity	-	-
Administrative expenses	109	129	-16%
Net other operating income / expenses	3	55	-95%
Operating Profit	62	109	-43%
Income taxes	21	42	-50%
Consolidated net income	41	67	-39%
Consolidated net income attributable to non-controlling interests	0	1
Consolidated net income attributable to shareholders of Aareal Bank AG	41	66	-38%
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank AG2)	41	66	-38%
of which: allocated to ordinary shareholders	37	62	-40%
of which: allocated to AT1 investors	4	4	0%
Earnings per ordinary share (in €)3)	0.62	1.05	-40%
Earnings per ordinary AT1 unit (in €)4)	0.04	0.04	0%

• 1) Comparative amounts reclassified according to the new classification format
• 2) The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis.
• 3) Earnings per ordinary share are determined by dividing the earnings allocated to ordinary shareholders of Aareal Bank AG by the weighted average of ordinary shares outstanding during the financial year (59,857,221 shares). Basic earnings per ordinary share correspond to diluted earnings per ordinary share.
• 4) 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 Q2 2018 by segments

	Financing	Structured Property		Consulting / Services	Consolidation/ Reconciliation		Aareal Bank Group
	01.04.- 30.06. 2018	01.04.- 30.06. 20171)	01.04.- 30.06. 2018	01.04.- 30.06. 20171)	01.04.- 30.06. 2018	01.04.- 30.06. 20171)	01.04.- 30.06. 2018	01.04.- 30.06. 20171)
€ mn
Net interest income	139	153	0	0	-3	-2	136	151
Loss allowance	19	25	0				19	25
Net commission income	3	2	46	46	2	1	51	49
Net derecognition gain or loss	5	7					5	7
Gains / losses from financial instruments (fvpl)	-4	4					-4	4
Net result on hedge accounting	-1	-3					-1	-3
Results from investments accounted for at equity
Administrative expenses	55	77	55	53	-1	-1	109	129
Net other operating income / expenses	2	54	1	1	0	0	3	55
Operating profit	70	115	-8	-6	0	0	62	109
Income taxes	24	44	-3	-2			21	42
Consolidated net income	46	71	-5	-4	0	0	41	67
Allocation of results
Cons. net income attributable to non-controlling interests	0	0	0	1			0	1
Cons. net income attributable to shareholders of Aareal Bank AG	46	71	-5	-5	0	0	41	66

Aareal Bank Group Results H1 2018

	01.01.- 30.06.2018	01.01.- 30.06.20171)	Change
	€ mn	€ mn
Profit and loss account
Net interest income	269	305	-12%
Loss allowance	19	27	-30%
Net commission income	101	97	4%
Net derecognition gain or loss	11	17	-35%
Gains / losses from financial instruments (fvpl)	-1	3
Net result on hedge accounting	-3	-6
Results from investments accounted for at equity
Administrative expenses	237	268	-12%
Net other operating income / expenses	8	59	-86%
Operating Profit	129	180	-28%
Income taxes	44	66	-33%
Consolidated net income	85	114	-25%
Consolidated net income attributable to non-controlling interests	1	6	-83%
Consolidated net income attributable to shareholders of Aareal Bank AG	84	108	-22%
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank AG2)	84	108	-22%
of which: allocated to ordinary shareholders	76	100	-24%
of which: allocated to AT1 investors	8	8	0%
Earnings per ordinary share (in €)3)	1.27	1.68	-24%
Earnings per ordinary AT1 unit (in €)4)	0.08	0.08	0%

• 1) Comparative amounts reclassified according to the new classification format
• 2) The allocation of earnings is based on the assumption that net interest payable on the AT1 bond is recognised on an accrual basis.
• 3) Earnings per ordinary share are determined by dividing the earnings allocated to ordinary shareholders of Aareal Bank AG by the weighted average of ordinary shares outstanding during the financial year (59,857,221 shares). Basic earnings per ordinary share correspond to diluted earnings per ordinary share.
• 4) 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 H1 2018 by segments

	Structured Property Financing			Consulting / Services	Consolidation/ Reconciliation		Aareal Bank Group
	01.01.- 30.06. 2018	01.01.- 30.06. 20171)	01.01.- 30.06. 2018	01.01.- 30.06. 20171)	01.01.- 30.06. 2018	01.01.- 30.06. 20171)	01.01.- 30.06. 2018	01.01.- 30.06. 20171)
€ mn
Net interest income	275	310	0	0	-6	-5	269	305
Loss allowance	19	27	0				19	27
Net commission income	4	3	93	91	4	3	101	97
Net derecognition gain or loss	11	17					11	17
Gains / losses from financial instruments (fvpl)	-1	3					-1	3
Net result on hedge accounting	-3	-6					-3	-6
Results from investments accounted for at equity
Administrative expenses	129	166	110	104	-2	-2	237	268
Net other operating income / expenses	7	58	1	1	0	0	8	59
Operating profit	145	192	-16	-12	0	0	129	180
Income taxes	50	70	-6	-4			44	66
Consolidated net income	95	122	-10	-8	0	0	85	114
Allocation of results
Cons. net income attributable to non-controlling interests	0	4	1	2			1	6
Cons. net income attributable to shareholders of Aareal Bank AG	95	118	-11	-10	0	0	84	108

Aareal Bank Group Results – quarter by quarter

	Structured Property Financing				Consulting / Services				Consolidation / Reconciliation				Aareal Bank Group
	Q2 2018	Q1	Q4	Q3 20171)	Q2	Q2 2018	Q1	Q4	Q3 20171)	Q2	Q2 2018	Q1	Q4	Q3 20171)	Q2	Q2 2018	Q1	Q4	Q3 20171)	Q2
€ mn
Net interest income	139	136	139	147	153	0	0	0	0	0	-3	-3	-4	-3	-2	136	133	135	144	151
Loss allowance	19	0	29	26	25	0	0									19	0	29	26	25
Net commission income	3	1	3	1	2	46	47	55	45	46	2	2	3	2	1	51	50	61	48	49
Net derecognition gain or loss	5	6	13	20	7											5	6	13	20	7
Gains / losses from	-4	3	1	10	4											-4	3	1	10	4
financial instruments (fvpl)
Net result on hedge accounting	-1	-2	-2	1	-3											-1	-2	-2	1	-3
Results from investments
accounted for at equity
Administrative expenses	55	74	62	68	77	55	55	63	53	53	-1	-1	-2	-1	-1	109	128	123	120	129
Net other operating income /
expenses	2	5	7	4	54	1	0	4	1	1	0	0	-1	0	0	3	5	10	5	55
Operating profit	70	75	70	89	115	-8	-8	-4	-7	-6	0	0	0	0	0	62	67	66	82	109
Income taxes	24	26	19	34	44	-3	-3	-1	-3	-2						21	23	18	31	42
Consolidated net income	46	49	51	55	71	-5	-5	-3	-4	-4	0	0	0	0	0	41	44	48	51	67
Cons. net income attributable to
non-controlling interests	0	0	0	0	0	0	1	0	0	1						0	1	0	0	1
Cons. net income attributable to	46	49	51	55	71	-5	-6	-3	-4	-5	0	0	0	0	0	41	43	48	51	66
shareholders of Aareal Bank AG

Aareal 2020

Aareal 2020 – Adjust. Advance. Achieve. Our way ahead

Adjust

Safeguard strong base in a changing environment

• Enhance efficiency
• Optimise funding
• Anticipate regulation

Achieve

Create sustainable value for all stakeholders

• Realise strategic objectives for the Group and the segments
• Consistently implement required measures
• Achieve ambitious financial targets

Adjust

Aareal 2020 – Adjust. Advance. Achieve Our growth program is well on track – we have successfully

adjusted our organisational structure…

Achievements so far: (extract) Targets: (extract)

• Alignment of structures and processes successfully implemented to increase efficiency
• Further development of the future IT-infrastructure
• Balance sheet structure / funding optimised: new investor groups made accessible
• Housing industry deposits stabilised as a crisis proven refinancing source – volume on forecasted high level (~ € 10 bn)

• Fulfilment of Basel IV requirements from day 1, capital ratios significantly increased, IFRS 9 implemented

• Continued alignment of structures and processes, further digitisation and ongoing optimisation of the IT-infrastructure

• Further increase of flexibility and efficiency, reduction of complexity
• Retention of broadly diversified funding sources
• Efficient use of capital
• Continuous screening of the regulatory environment and early anticipation of possible changes

Aareal 2020 – Adjust. Advance. Achieve.

…for the strengthening of our basis to ensure an accelerated and successful implementation in both segments

	Achievements so far: (extract)	Targets: (extract)
Advance: Structured property financing	 Attractive markets further enhanced (e.g. USA)  Existing exit channels enlarged, additional opportunities identified and cooperations gained  NCA portfolio significantly reduced  Digitisation of internal credit processes as well as clients' interface on track  Mount Street cooperation established, expansion of servicing business	 Continuation of successful business development despite challenging environment with a focus on flexible allocation in the most attractive markets  Expansion of existing and developing of new exit strategies  Ongoing reduction of NCA-portfolio  Tapping new (digital) business opportunities along the value added chain  Identification and making use of additional potentials of the Mount Street cooperation
Advance: Consulting/ Services	 Position within the environment of the housing industry further strengthened  Utility market successfully tapped  Successful CRE-growth strategy, e.g. two acquisitions in 2017  Cross-selling activities of digital products in Europe launched, e.g. via digital platform  Cooperations with start-ups intensified	 Further development of digital solutions portfolio  Ongoing penetration of relevant eco systems and tapping into neighbouring markets  Developing of new markets in cooperation with the housing industry (B2B2C; B2C)  Intensifying cooperations focussing on start-ups, development of Aareon Ventures

Outlook Main takeaways for upcoming years

CET1:

Currently, management sees Basel IV CET1 target ratio of ~12.5% adequate

Excess capital:

• Partial use in lending business to keep portfolio stable at ~ € 26.5 bn
• Further review in 2018

Performance:

• Plan to stabilise NII on current level
• Future growth of total income mainly driven by NCI
• Operating profit will benefit from total income growth, successful transformation incl. efficiency improvements

RoE:

Accordingly RoE minimum target level structure lifted from 10% to 11% pre-tax, well on track to achieve our sustainable ~12% pre-tax RoE target

Dividend:

Confirming dividend policy

Achievements:

• Portfolio reduced: lowered NII and freed up equity
• LLP significantly reduced
• Admin expenses reduced
• NCI increased

Way ahead:

• Stabilising NII (but 'quality over quantity' still valid) and risk costs at 25-30 bps
• Continued reduction of admin expenses (lower transformational one-offs from 2020 onwards)
• Further growth of net commission income
• Future excess capital from NCA-run down to be invested in CRE portfolio (depending on market conditions)

1) The future dividend policy applies provided that the dividend payments resulting from it are consistent with a long-term and sustained business development of Aareal Bank AG. In addition, the dividend payments are subject to the proviso that corresponding dividend proposals have been made by the Management Board and the Supervisory Board for the respective year.

Dividend policy Confirmed

Base dividend

We intend to distribute approx. 50% of the earnings per ordinary share (EpS) as base dividend

Supplementary dividend

In addition, we plan to distribute supplementary dividends, started in 2016 with 10% increasing up to 20-30% of the EpS

Prerequisites:

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

Appendix Basel 4 / IFRS 9 / Defaulted exposure

Basel IV effect Already fulfilling future Basel IV capital requirements

1) Incl. effects from first-time adoption of IFRS 9

B3 RWA of 11.8 bn with current risk density of 22% would be 13.2 bn (based on 31.12.2016's risk density of 28%) Basel IV:

• New B4-regulation triggers significant RWA-inflation
• Low risk weighted CRE business excessively burdened
• Resulting capital needs precociously anticipated
• Remaining uncertainties:
• EU implementation
• Supervisors' decisions (e.g. on Hard test)

Others:

• 2018 stress test might result in new SREP guidance for 2019 onwards
• Combined efforts on internal models:
• Final EBA requirements: Some parts delivered, QIS announced, some still open
• TRIM exercise still ongoing
• Internal models have to be adjusted / redesigned and approved until mid 2020 to meet EBA deadline

IFRS 9 Remarks

First Time Application

• 1 January 2018
• Transition effects are recognised in equity

Classification and Measurement

• New model for the classification and measurement of financial assets (ac, fvoci or fvpl) based on business models and cash flow characteristics
• Aareal Bank will change B/S structure to measurement categories

Impairment

• Expected loss model:
• Stage 1: LLP based on 12-Month expected credit losses on recognition
• Stage 2: LLP based on lifetime expected credit losses on financial assets with significant increase in credit risk and
• Stage 3: LLP based on lifetime expected credit losses on impaired financial assets
• No LLP for financial assets fvpl, as it is part of gains/losses on the corresponding line item

Financial Statements

• B/S and P/L structure will change, eg. derecognition and modification gains / losses are added
• Extended Notes Disclosures for impairment and hedge accounting

Defaulted exposure

NPL development vs. defaulted exposure acc. Reg. Disc. Report

Defaulted exposure acc. Regulatory Disclosure Report (AIRBA, off-balance) Defaulted exposure KSA

Defaulted Exposure

NPL vs. Stage 3 (IFRS 9) vs. defaulted exposure acc. Reg. Disc. Report

Appendix SREP

SREP (CET 1) requirements

Demonstrating conservative and sustainable business model

1) SREP-CET1 Requirements incl. buffers (Capital Conservation and Countercyclical)

• Corresponding total capital requirement 2018 (Overall Capital Requirement (OCR) incl. buffers, phase-in) amounts to 11.718%
• As of 30 June 2018 total capital ratio

Appendix Development commercial real estate finance portfolio

Development commercial real estate finance portfolio

Commercial real estate finance portfolio1) Further declining NPL volume and NPL ratio

1) CRE-business only, private client business (€ 0.7 bn) and WIB's public sector loans (€ 0.5 bn) not included

Western Europe (ex Germany) CRE finance portfolio1) Total volume outstanding as at 30.06.2018: € 8.4 bn

1) CRE-business only

2) Incl. Student housing (UK only)

Southern Europe CRE finance portfolio1) Total volume outstanding as at 30.06.2018: € 3.7 bn

1) CRE-business only

German CRE finance portfolio1)

Total volume outstanding as at 30.06.2018: € 3.1 bn

1) CRE-business only

Eastern Europe CRE finance portfolio1) Total volume outstanding as at 30.06.2018: € 1.3 bn

1) CRE-business only

Northern Europe CRE finance portfolio1) Total volume outstanding as at 30.06.2018: € 1.3 bn

1) CRE-business only

North America CRE finance portfolio1) Total volume outstanding as at 30.06.2018: € 7.1 bn

1) CRE-business only

Asia CRE finance portfolio1) Total volume outstanding as at 30.06.2018: € 0.3 bn

1) CRE-business only

Appendix 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. 2014	31.12. 2015	31.12. 2016	31.12. 2017
€ mn
Net Retained Profit  Net income  Profit carried forward from previous year  Net income attribution to revenue reserves	77 77 - -	99 99 - -	122 122 - -	147 147 - -
+ Other revenue reserves after net income attribution	715	720	720	720
Total dividend potential before amount blocked1) =	792	819	842	870
./. Dividend amount blocked under section 268 (8) of the German Commercial Code ./. Dividend amount blocked under section 253 (6) of the German Commercial Code	240 -	287 -	235 28	283 35
= Available Distributable Items1)	552	532	579	552
+ Increase by aggregated amount of interest expenses relating to Distributions on Tier 1 Instruments1)	57	46	46	32
= 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)	609	578	625	584

1) Unaudited figures for information purposes only

Appendix RWA-split

From asset to risk weighted asset (RWA)

Effective date 30/06/2018

1) Amounts to € 41 mn

Sustainability Performance

Aareal Bank Group Stands for solidity, reliability and predictability

• 1) Basel 3, as at 30.06.2018
• 2) CRE business only, private client business (€ 0.7 bn) and WIB's public sector loans (€ 0.5 bn) not included, as at 30.06.2018
• 3) Mortgage Pfandbriefe rated Aaa by Moody's
• 64 4) At our main locations in Wiesbaden and Mainz, selected other German and international sites

Sustainability data Extends the financial depiction of the Group

Key takeaways at a glance

Transparent Reporting – facilitating informed investment decisions

• "COMBINED SEPARATE NON-FINANCIAL REPORT 2017 FOR AAREAL BANK AG"1) and SUSTAINABILITY REPORT 2017 "THINK FUTURE. ACT NOW."2) published on March 28, 2018
• PricewaterhouseCoopers performed a limited assurance engagement and issued an unqualified review opinion

Sustainability Ratings – confirming the company's sustainability performance

• MSCIAareal Bank Group with "AA Rating" in highest scoring range for all companies assessed relative to global peers reg. Corporate Governance practices [as per 01/2018]
• ISS-oekomAareal Bank Group holds "prime status", ranking among the leaders in its industry [since 2012]
• SustainalyticsAareal Bank Group was classified as "outperformer", ranking among the best 17% of its industry [as per 02/20173)]
• GRESBAareal Bank Group scores 56 out of 100 in GRESB Debt Assessment [as per 08/20173)]
• imugAareal Bank was rated "positive BB" in the category "Issuer Performance"; the second best result of all 60 rated Banks [as per 05/2018]

1) https://www.aareal-bank.com/fileadmin/05\_Verantwortung/03\_Other\_PDF-files/Nichtfinanzieller\_Bericht\_2017\_en.pdf

2) https://cr.aareal-bank.com/2017

Definitions and contacts

Definitions

• New Business = Newly acquired business + renewals
• Common Equity Tier 1 ratio = CET1 Risk weighted assets
• Pre tax RoE = Operating profit ./. income/loss attributable to non-controlling interests ./. AT1 cupon Average IFRS equity excl. non-controlling interests, other reserves, AT1 and dividends
• CIR = Admin expenses Net income
• Net income = net interest income + net commission income + net result on hedge accounting + net trading income + results from non-trading assets + results from investments accounted for at equity + results from investment properties + net other operating income
• Net stable funding ratio = Available stable funding Required stable funding
• Liquidity coverage ratio = Total stock of high quality liquid assets Net cash outflows under stress
• Bail-in capital ratio = Equity + subordinated capital (Long + short term funding) – (Equity + subordinated capital)
• Earnings per share = operating profit ./. income taxes ./. income/loss attributable to non controlling interests ./. net AT1 cupon Number of ordinary shares
• Yield on Debt = Net operating income (NOI) x 100 Current commitment incl. prior / pari-passu loans

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 Sustainability Management Phone: +49 611 348 3554 daniela.thyssen@aareal-bank.com
• Robin Weyrich Sustainability Management Phone: +49 611 348 2335 robin.weyrich@aareal-bank.com

Disclaimer

© 2018 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.