Aareal Bank AG

Investor Presentation • Feb 23, 2017

Annual Analyst Conference Preliminary 2016 results

February 23, 2017 Hermann J. Merkens, CEO

Agenda

• Results 2016: What we achieved
• Outlook 2017: What we target
• Aareal 2020: How we have started

Highlights 2016 Continued positive development in challenging 2016

Highlights

Positive development in challenging environment continued Aareal Bank Group with strong 2016 results – fulfilling raised guidance

New business

Stable margin due to flexible new business allocation towards attractive markets

Successful growing IT-business Aareons EBT up by more than 25% and further strengthened it's leading market position

Adequate shareholders participation

Significant dividend increase by more than 20%: DpS proposal of 2.00 € (from 1,65 € for 2015)

Well prepared for regulatory challenges Capital ratio significantly strengthened further

3

Implementation of "Aareal 2020" successfully launched Future program showing first success: US-lending business and international cross selling (in the IT business) enhanced, redesign of IT-infrastructure started and cooperation with start-ups initiated.

Preliminary 2016 results at a glance

Preliminary 2016 figures at a glance

Fully in line with raised targets – dividend proposal: 2.00€

Targets	Original guidance (Q1 / 2016)	Latest guidance (Q4 / 2016)	Preliminary
Dividend proposal		60% payout ratio	€ 2.00 pS (60%)
Net interest income	€ 700 mn - € 740 mn	€ 700 mn - € 740 mn	€ 701 mn
Allowance for credit losses (LLP)	€ 80 - 120 mn	€ 80 - 120 mn	€ 97 mn
Net commission income	€ 190 - 200 mn	€ 190 - 200 mn	€ 193 mn
Admin expenses	€ 520 - 550 mn € 520 - 550 mn		€ 547 mn
Operating profit	€ 300 - 330 mn	€ 360 - 380 mn	€ 366 mn
Pre-tax RoE	~ 11%	~13%1)	13.2%2)
EpS	3.193) € 2.85 - €	3.434) € 3.20 - €	€ 3.33
Target portfolio size (ARL core portfolio)	€ 25 bn - € 27 bn	€ 25 bn - € 27 bn	€ 25.4 bn
New business origination5)	€ 7 bn - € 8 bn	€ 8 - 9 bn	€ 9.2 bn
Operating profit Aareon6)	€ 33 mn - € 35 mn	€ 33 mn - € 35 mn	€ 34 mn

1) ~12% adjusted by € 28 mn gain from resolution of litigations incurred in connection with acquisition of former Corealcredit, but including non-recurring effect from property sale 'Aqvatrium'

2) 12.0% adjusted by € 28 mn gain from resolution of litigations incurred in connection with acquisition of former Corealcredit, but including non-recurring effect from property sale 'Aqvatrium' (excluding 'Aqvatrium': 9.6%)

3) Earnings per ordinary share, tax rate of ~31% assumed

4) Considering € 28 mn gain from resolution of litigations incurred in connection with acquisition of former Corealcredit and corresponding tax losses of € 27 mn, tax rate of ~37% assumed

5) Incl. renewals

5

Note: All 2016 figures preliminary and unaudited

Preliminary FY-2016 results

Another strong operating profit

	2016	2015	Comments
€ mn
Net interest income	701	781	 Core-portfolio: strong performance  NCA-portfolio: planned portfolio reduction  Early repayments: lower effects € 41 mn (FY '15: € 75 mn)
Allowance for credit losses	97	128	Conservative lending policies paying off
Net commission income	193	175	Successful growth of IT-business
Net result from trading / non-trading / hedge acc.	86	4	Incl. € 61 mn from closing Aqvatrium / Fatburen
Admin expenses	547	553	FY-2016 includes € 64 mn costs from integration as well as from projects / investment (FY 2015: € 56 mn)
Others	30	41	Incl. effects from resolution of CCB litigation, (2015 included € 22 mn from property sale / revaluation)
Negative goodwill	-	150	2015: Gain from initial WestImmo consolidation
Operating profit	366	470	Another strong operating profit
Income taxes	132	96	Effects from resolution of CCB litigation triggers higher tax ratio
Minorities / AT1	35	35
Consolidated net income allocated to ord. shareholders	199	339
Earnings per share [€]	3.33	5.66 3.16	EpS incl. neg. goodwill (2015) EpS excl. neg. goodwill (2015)

Preliminary Q4 2016 at a glance

Concluding a successful 2016

	Q4 2016	Q3 2016	Q2 2016	Q1 2016	Q4 2015	Comments
€ mn
Net interest income (excl. unplanned effects from early repayments)	169 (169)	175 (171)	177 (175)	180 (180)	198 (183)	NII reflects  Stable margins – declining Portfolio  € 41 mn early repayment effects (FY 2016)
Allow. for credit losses	33	33	29	2	42	In line with full year target
Net commission income	56	44	47	46	52	Aareon on track with strong Q4-effect
Admin expenses	130	127	144	146	138	€ 17 mn one-offs from integration as well as from project / investment costs
Operating profit	85	74	120	87	92	Operating profit includes income from resolution of CCB litigation
Earnings per share [€]	0.55	0.70	1.23	0.85	1.01	Effects from resolution of CCB litigation triggers higher tax ratio

7

Segment performance

Structured property financing

Stable margins due to flexible new business allocation

1) Incl. renewals

• Newly acquired business up by 15% YoY
• Gross margins
• Q4 2016: ~220 bps, ~200 bps after FX
• FY-2016: ~235 bps, ~210 bps after FX (FY-2015: ~230 bps, ~210 bps after FX)
• € 41 mn effects from early repayments (FY '15: € 75 mn)
• Syndicated volume of € 1.8 bn in 2016 showing active portfolio management (FY 2015: € 0.9 bn)
• Despite steering the portfolio (€ 25.4 bn) towards lower end of targeted size (€ 25-27 bn), strong margins supported achievement of targeted NII-range

Structured property financing Strong new business but portfolio reduction

1) Incl. renewals

2) Incl. € 61 mn from closing Aqvatrium / Fatburen

Note: All 2016 figures preliminary and unaudited

Consulting / Services

Aareon with strong results but burdening deposit margins

P&L C/S Segment	2016	2015	Change
€ mn
Sales revenue	206	193	7%
Own work capitalised	6	4	50%
Other operating income	7	9	-22%
Cost of materials purchased	35	24	46%
Staff expenses	144	139	4%
D, A, impairment losses	11	12	-8%
Other op. expenses	58	54	7%
Others	0	0	-
Operating profit	-29	-23	-21%

• Aareon revenues of € 211 mn (FY 2015: € 187 €), EBT of € 34 mn, EBT margin ~16%
• Stronger Aareon revenues resulting from growth in all product lines, digital products with highest growth rates
• Deposit volume further increased acc. to Aareal 2020 to Ø of € 9.6 bn in 2016 (Ø of € 9.0 bn in 2015)
• Deposit margins further burden segment result due to low-interest environment
• Housing industry deposits generate a stable funding base, crisis-proven

Deposit taking business / other activities

Consulting / Services Aareon above previous year-level

P&L C/S Segment	Q4 2016	Q3 2016	Q2 2016	Q1 2016	Q4 2015
€ mn
Sales revenue	58	47	52	49	56
Own work capitalised	2	1	2	1	0
Other operating income	4	2	0	1	4
Cost of material purchased	11	8	9	7	7
Staff expenses	37	36	35	36	37
D, A, impairment losses	2	3	3	3	3
Other operating expenses	15	14	15	14	15
Others	0	0	0	0	0
Operating profit	-1	-11	-8	-9	-2

• Deposit further increased to an Ø of € 10.0 bn in Q4 2016 (Ø of € 9.0 bn in Q4 2015)
• Focussing on further shift into sustainable deposits
• Q4 regularly includes positive seasonal effects

Preliminary group results 2016

Net interest income Stable margins – declining NCA

• 1) Newly acquired business

• 2) Additional effects exceeding originally planned repayments

• NII core stable despite portfolio size at lower end

• Gross margins1)
• Q4 2016: ~220 bps, ~200 bps after FX
• FY 2016: ~235 bps, ~210 bps after FX (FY 2015: ~230 bps, ~210 bps after FX)
• NII effected by run down of non core assets as planned
• € 41 mn effects from early repayments (FY 2015 of € 75 mn)
• NII Consulting / Services further burdened by interest rate environment
• Aareal Bank already fulfils future NSFR / LCR requirements

Note: All 2016 figures preliminary and unaudited

Allowance for credit losses (LLP) In line with full year target

• FY 2016 LLP of € 97 mn fully in line with guidance (FY 2015: € 128 mn)
• Conservative lending policies paying off
• Further reduction of risk costs proves high portfolio quality: 2016: 33 bp (2015: 43 bp / 2014: 54 bp)
• No additional NPL's in Italian portfolio

Net commission income Aareon above previous year level

• Net commission income of € 193 mn in 2016 (FY 2015: € 175 mn)
• Stronger Aareon revenues resulting from growth in all product lines, digital products with highest growth rates
• Q4 regularly includes positive seasonal effects

Admin expenses

Integration costs above guidance, but FY-admin expenses within range

• Admin expenses of € 547 mn in 2016 (FY 2015: € 553 mn)
• FY 2016 costs from integration as well as from projects / investment costs of € 64 mn
• Q4 figures include € 17 mn
• Q3 figures include € 7 mn
• Q2 figures include € 30 mn
• Q1 figures include € 10 mn as well as € 17 mn for the European bank levy for the fiscal year 2016
• WIB integration faster than originally planned

B/S structure, capital & funding position

RWA development Successful run down of NCA

• Decreasing RWA from NCA reduction and from steering the core portfolio towards the lower end of range
• Operational risk already based on standardised approach
• RWA from "Financials" already close to CRSA-level

Credit risk core business Credit risk non core business Operational risk Market risk

Capital ratios Strong development

• Regulatory uncertainties buffered by very strong capital ratios
• Instruments assumed to mature until 2019 (planning period) are excluded from the fully phased ratios
• Bail-in capital ratio (acc. to our definition): above 8%
• T1-Leverage ratio as at 31.12.2016: 5.7% (fully phased)

Common Equity Tier 1 (CET1) Additional Tier 1 (AT1) Tier 2 (T2)

SREP (CET 1) requirements

Demonstrating conservative and sustainable business model

• SREP requirement 2017 conceptual adjusted from CET1 approach to total SREP capital requirements (TSCR) approach
• Corresponding total capital requirement 2017 (Overall Capital Requirement (OCR) incl. buffers, phase-in) amounts to 11.03%. As of 31 Dec 2016 total capital ratio (phase-in) amounts to 27.5%

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

Pillar 1 Requirement Pillar 2 Requirement Capital Conservation Buffer

Current CET 1 ratio Countercyclical Buffer

Asset- / Liability structure according to IFRS As at 31.12.2016: € 47.7 bn (30.09.2016: € 50.5 bn)

1) Other assets includes € 1.1 bn private client portfolio and WIB's € 0.6 bn public sector loans

Asset- / Liability structure according to IFRS As at 31.12.2016: € 47.7 bn (31.12.2015: € 51.9)

1) Other assets includes € 1.1 bn private client portfolio and WIB's € 0.6 bn public sector loans

Capital market funding activity 2016 Sound liquidity position

• Total funding raised in 2016: € 1.2 bn mainly senior unsecured (€ 1.1 bn)
• Low Pfandbrief issuance due to acquisition of WestImmo
• Backbone of capital market funding is a loyal, granular, domestic private placement investor base
• Hold-to-maturity investors: over 600
• Ticket size: € 10 mn € 50 mn
• Fulfilling liquidity KPIs
• NSFR > 1
• LCR >> 1

Refinancing situation

Diversified funding sources and distribution channels

• Aareal Bank has clearly reduced its dependency on wholesale funding
• 2002 long term wholesale funding accounted for 47% of overall funding volumes by 31.12.2016, this share has fallen below 25% (or even below 10% without Pfandbriefe)

As at 31.12.2016

Asset quality

Property finance portfolio1) € 27.9 bn highly diversified and sound

1) CRE business only, private client business (€ 1.1 bn) and WIB's public sector loans (€ 0.6 bn) not included

2) Performing business only, exposure as at 31.12.2016

Property finance portfolio1) Portfolio details

Note: All 2016 figures preliminary and unaudited

Property finance portfolio Stable NPL volume but decreasing portfolio

29

Property finance portfolio NPL exposure fully covered including collaterals

	31.12.2016	31.12.2015
Coverage ratio specific allowance	32%	31%	NPL exposure Portfolio allowance
Coverage ratio including portfolio allowance	41%	40%	Specific allowance Collaterals

Collaterals

Treasury portfolio € 9.3 bn of high quality and highly liquid assets

As at 31.12.2016 – all figures are nominal amounts 1) Composite Rating

Outlook 2017

Outlook 2017

	2017
Net interest income	 € 620 mn - € 660 mn incl. planned effects from early repayments (€ 35 mn - € 75 mn)
Allow. for credit losses1)	 € 75 mn - € 100 mn
Net commission income	 € 195 mn - € 210 mn
Admin expenses	 € 470 mn - € 510 mn incl. expenses for projects and investments / effects from integration
Operating profit	 € 260 mn - € 300 mn
Pre-tax RoE	 9% - 10.5%
EpS	 € 2.45 - € 2.90
Target portfolio size	 € 25 bn - € 28 bn
New business origination2)	 € 7 bn - € 8 bn
Operating profit Aareon3)	 € 34 mn - € 35 mn

1) As in 2016, the bank cannot rule out additional allowances for credit losses

2) Incl. renewals

3) After segment adjustments

33

Note: All 2016 figures preliminary and unaudited

Aareal 2020

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

Adjust

Safeguard strong base in a changing environment

• Enhance efficiency
• Optimise funding
• Anticipate regulation

As published February 25, 2016

Achieve

Create sustainable value for all stakeholders

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

innovation and willingness to adapt

Aareal 2020 – Adjust. Advance. Achieve.

We successfully started – in our operational business …

	Achievements so far	Focus 2017	Targets 2020 Plus
RSF	 US-portfolio enhanced  Non-core assets reduced  Syndication volume increased  Servicing platform, cooperation signed	 Further enhancing of attractive markets, e.g. USA  Further reduction of non-core assets  Further increasing syndication, enhancing investor bases and product scope  Digitalisation of internal processes as well as clients' interface	 Expansion in markets with attractive risk return profile  Strengthened portfolio- and balance sheet management  New (digital) opportunities taken by enhancing value chain
C/DL	 Core business successfully enhanced  Digital platform developed and new digital solutions launched  International cross-selling increased  Network with start-ups enlarged, first cooperation signed	 Enlarging digital solutions portfolio  Tapping joint markets and customer groups, e.g. utilities and CRE  Intensifying cooperation, in particular with start-ups	 Eco system housing industry and utilities expanded  Existing platform products for the B2C business for the housing industry further developed  Further development of our payment transaction system and IT products as well as enlarging our customer base

Aareal 2020 – Adjust. Advance. Achieve … and investing in our organisation and IT

Achieve. Keep RoE on an attractive level despite difficult environment

RoE-Development (%)

Further medium-term increase is possible on the basis of a positive development of interest rate levels

Payout ratio 2013 - 2019 2013 48% 51% 52% 60% 70-80% 70-80% 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, from 10% increasing up to 20-30% of the EpS Prerequisites: No material deterioration of the environment (with longer-term and sustainably negative effects) Nor attractive investment opportunities neither positive growth environment 2014 2015 2016 2017 2018 70-80% 2019

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.

Note: All 2016 figures preliminary and unaudited

39

Conclusion Aareal Bank Group well positioned to continue successful development

Key takeaways

Aareal Bank Group with very successful operating development despite challenging environment: Strong new business and stable margins in attractive markets as well as growth in the IT-business emphasis sustainable business model

Aareal Bank Group's strategy program "Aareal 2020" successfully launched: Requirements for implementation of strategic measures accomplished

Aareal Bank Group remains an attractive investment: Shareholders participate from once more significantly increased dividend proposal, dividend policy confirmed

Aareal Bank Group looking ahead optimistically:

Solid capital base, proven sustainable business model as well as "Aareal 2020" are key to continue its success story

Appendix Group results

Aareal Bank Group Results 2016

	01.01.- 31.12.2016	01.01.- 31.12.2015	Change
	€ mn	€ mn
Profit and loss account
Net interest income	701	781	-10%
Allowance for credit losses	97	128	-24%
Net interest income after allowance for credit losses	604	653	-8%
Net commission income	193	175	10%
Net result on hedge accounting	0	8
Net trading income / expenses	19	13	46%
Results from non-trading assets	67	-17
Results from investments accounted for at equity	0	0
Administrative expenses	547	553	-1%
Net other operating income / expenses	30	41	-27%
Negative goodwill	-	150
Operating Profit	366	470	-22%
Income taxes	132	96	38%
Consolidated net income	234	374	-37%
Consolidated net income attributable to non-controlling interests	19	19	0%
Consolidated net income attributable to shareholders of Aareal Bank AG	215	355	-39%
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank AG1)	215	355	-39%
of which: allocated to ordinary shareholders	199	339	-10%
of which: allocated to AT1 investors	16	16	0%
Earnings per ordinary share (in €)2)	3.33	5.66	-41%
Earnings per ordinary AT1 unit (in €)3)	0.16	0.16	0%

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) Eanings 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.

Note: All 2016 figures preliminary and unaudited

42

Aareal Bank Group Results 2016 by segments

	Structured Financing	Property		Consulting / Services	Consolidation/ Reconciliation		Aareal Bank Group
	01.01.-	01.01.-	01.01.-	01.01.-	01.01.-	01.01.-	01.01.-	01.01.-
	31.12.	31.12.	31.12.	31.12.	31.12.	31.12.	31.12.	31.12.
	2016	2015	2016	2015	2016	2015	2016	2015
€ mn
Net interest income	716	783	0	0	-15	-2	701	781
Allowance for credit losses	97	128					97	128
Net interest income after allowance for credit losses	619	655	0	0	-15	-2	604	653
Net commission income	10	6	171	169	12	0	193	175
Net result on hedge accounting	0	8					0	8
Net trading income / expenses	19	13	0	0			19	13
Results from non-trading assets	66	-17	1				67	-17
Results from investments accounted for at equity		0	0	0			0	0
Administrative expenses	346	359	204	197	-3	-3	547	553
Net other operating income / expenses	27	37	3	5	0	-1	30	41
Negative goodwill		150						150
Operating profit	395	493	-29	-23	0	0	366	470
Income taxes	143	106	-11	-10			132	96
Consolidated net income	252	387	-18	-13	0	0	234	374
Allocation of results
Cons. net income attributable to non-controlling interests	16	16	3	3			19	19
Cons. net income attributable to shareholders of Aareal Bank AG	236	371	-21	-16	0	0	215	355

Aareal Bank Group Results Q4 2016

	01.10.- 31.12.2016	01.10.- 31.12.2015	Change
	€ mn	€ mn
Profit and loss account
Net interest income	169	198	-15%
Allowance for credit losses	33	42	-21%
Net interest income after allowance for credit losses	136	156	-13%
Net commission income	56	52	8%
Net result on hedge accounting	-4	3
Net trading income / expenses	-2	5
Results from non-trading assets	1	-2
Results from investments accounted for at equity	0	0
Administrative expenses	130	138	-6%
Net other operating income / expenses	28	16	75%
Negative goodwill	-	-
Operating Profit	85	92	-8%
Income taxes	44	24	83%
Consolidated net income	41	68	-40%
Consolidated net income attributable to non-controlling interests	4	4	0%
Consolidated net income attributable to shareholders of Aareal Bank AG	37	64	-42%
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank AG1)	37	64	-42%
of which: allocated to ordinary shareholders	33	60	-10%
of which: allocated to AT1 investors	4	4	0%
Earnings per ordinary share (in €)2)	0.55	1.01	-46%
Earnings per ordinary AT1 unit (in €)3)	0.04	0.04	0%

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) Eanings 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.

Note: All 2016 figures preliminary and unaudited

44

Aareal Bank Group Results Q4 2016 by segments

	Financing	Structured Property		Consulting / Services	Consolidation/ Reconciliation		Aareal Bank Group
	01.10.-	01.10.-	01.10.-	01.10.-	01.10.-	01.10.-	01.10.-	01.10.-
	31.12.	31.12.	31.12.	31.12.	31.12.	31.12.	31.12.	31.12.
	2016	2015	2016	2015	2016	2015	2016	2015
€ mn
Net interest income	174	199	0	0	-5	-1	169	198
Allowance for credit losses	33	42					33	42
Net interest income after allowance for credit losses	141	157	0	0	-5	-1	136	156
Net commission income	5	2	47	49	4	1	56	52
Net result on hedge accounting	-4	3					-4	3
Net trading income / expenses	-2	5		0			-2	5
Results from non-trading assets	0	-2	1				1	-2
Results from investments accounted for at equity			0	0			0	0
Administrative expenses	80	85	51	54	-1	-1	130	138
Net other operating income / expenses	26	14	2	3	0	-1	28	16
Negative goodwill
Operating profit	86	94	-1	-2	0	0	85	92
Income taxes	45	27	-1	-3			44	24
Consolidated net income	41	67	0	1	0	0	41	68
Allocation of results
Cons. net income attributable to non-controlling interests	3	3	1	1			4	4
Cons. net income attributable to shareholders of Aareal Bank AG	38	64	-1	0	0	0	37	64

Aareal Bank Group Results – quarter by quarter

		Structured Property	Financing				Consulting / Services						Consolidation / Reconciliation			Aareal Bank Group
	Q4	Q3	Q2	Q1	Q4	Q4	Q3	Q2	Q1	Q4	Q4	Q3	Q2	Q1	Q4	Q4	Q3	Q2	Q1	Q4
	2016	2016	2016	2016	2015	2016	2016	2016	2016	2015	2016	2016	2016	2016	2015	2016	2016	2016	2016	2015
€ mn
Net interest income	174	179	181	182	199	0	0	0	0	0	-5	-4	-4	-2	-1	169	175	177	180	198
Allowance for credit losses	33	33	29	2	42											33	33	29	2	42
Net interest income after
allowance for credit losses	141	146	152	180	157	0	0	0	0	0	-5	-4	-4	-2	-1	136	142	148	178	156
Net commission income	5	2	1	2	2	47	39	43	42	49	4	3	3	2	1	56	44	47	46	52
Net result on hedge accounting	-4	3	0	1	3											-4	3	0	1	3
Net trading income / expenses	-2	4	8	9	5			0	0	0						-2	4	8	9	5
Results from non-trading assets	0	5	61	0	-2	1										1	5	61	0	-2
Results from results accounted
for at equity						0	0	0	0	0						0	0	0	0	0
Administrative expenses	80	77	94	95	85	51	51	51	51	54	-1	-1	-1	0	-1	130	127	144	146	138
Net other operating income /
expenses	26	2	0	-1	14	2	1	0	0	3	0	0	0	0	-1	28	3	0	-1	16
Negative goodwill
Operating profit	86	85	128	96	94	-1	-11	-8	-9	-2	0	0	0	0	0	85	74	120	87	92
Income taxes	45	27	41	30	27	-1	-4	-3	-3	-3						44	23	38	27	24
Consolidated net income	41	58	87	66	67	0	-7	-5	-6	1	0	0	0	0	0	41	51	82	60	68
Cons. net income attributable to
non-controlling interests	3	5	4	4	3	1	0	1	1	1						4	5	5	5	4
Cons. net income attributable to
shareholders of Aareal Bank AG	38	53	83	62	64	-1	-7	-6	-7	0	0	0	0	0	0	37	46	77	55	64

Material litigations concerning the former Corealcredit concluded: Successful conclusion with no material EPS impact as expected

Impact on P/L
€ mn
Reversal of provisions for litigation and considering compensation claims	28
Total operating profit		28
Reversal of deferred tax assets and provisions	-27
Total income taxes		-27
Total net income			1

• To comprehensively cover risks from ongoing litigations, assumed within the framework of acquiring the former Corealcredit (SPA), provisions were recognised on the date of acquisition. Moreover, the Bank contractually agreed upon mutual compensation claims with the former owner of Corealcredit, depending upon the outcome of the litigations.
• Given the conclusion of the litigations, the Bank will be able to reverse these provisions during the fourth quarter. The reversal of provisions will partially be offset by considering contractually-agreed compensation claims.
• The resulting net income of €28 million will be offset by the reversal of deferred tax assets and provisions recognised in connection with the former Corealcredit (in the amount of €27 million); as expected. Overall, this issue will have only a minor impact on results after taxes (around €1 million).
• Specifically, negative goodwill of €154 million recognised upon acquisition will remain unaffected.

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. 2016	31.12. 2015	31.12. 2014	31.12. 2013
€ mn
Net Retained Profit  Net income  Profit carried forward from previous year  Net income attribution to revenue reserves	122 122 - -	99 99 - -	77 77 - -	50 50 - -
+ Other revenue reserves after net income attribution	720	720	715	710
Total dividend potential before amount blocked1) =	842	819	792	760
./. 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	287 -	240 -	156 -
= Available Distributable Items1)	579	532	552	604
+ Increase by aggregated amount of interest expenses relating to Distributions on Tier 1 Instruments1)	46	46	57	57
= 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	578	609	661

1) Unaudited figures for information purposes only

Note: All 2016 figures preliminary and unaudited

Appendix Development property finance portfolio

Development property finance portfolio

Diversification continuously strengthened (in € mn)

Spotlight: UK property finance portfolio € 3.8 bn (~14% of total portfolio)

Spotlight: Turkey property finance portfolio € 0.6 bn (~2% of total portfolio)

Spotlight: Italian property finance portfolio € 3.1 bn (~11% of total portfolio)

Spotlight Italy Italian NPL: clear going forward strategy

• Restructuring period: vast majority to be solved till 2020
• Current enforcement period 3-4 years, but improving due to new legislation

All Italian NPL are fully covered despite being in different workout-stages

Western Europe (ex Germany) credit portfolio Total volume outstanding as at 31.12.2016: € 8.7 bn

German credit portfolio Total volume outstanding as at 31.12.2016: € 4.5 bn

Note: All 2016 figures preliminary and unaudited

Southern Europe credit portfolio

Total volume outstanding as at 31.12.2016: € 4.3 bn

Eastern Europe credit portfolio

Total volume outstanding as at 31.12.2016: € 2.4 bn

Northern Europe credit portfolio

Total volume outstanding as at 31.12.2016: € 1.7 bn

North America credit portfolio

Total volume outstanding as at 31.12.2016: € 6.1 bn

Asia credit portfolio Total volume outstanding as at 31.12.2016: € 0.3 bn

Appendix Revaluation surplus

Revaluation surplus

Change mainly driven by asset spreads

64

Appendix RWA-split

From asset to risk weighted asset (RWA) Essential factors affecting volume of RWA

Effective date 31/12/2016

1) Amounts to € 36 mn

2) Amounts to € 1 mn

Sustainability Performance

Aareal Bank Group Stands for solidity, reliability and predictability

• 1) full Basel III implementation, as at 31. December 2016
• 2) CRE business only, private client business (€ 1.1 bn) and WIB's public sector loans (€ 0.6 bn) not included, as at 31 December 2016
• 3) Mortgage Pfandbriefe and Public-sector Pfandbriefe rated AAA by Fitch; Mortgage Pfandbriefe rated Aaa by Moody's
• 4) at our main locations in Wiesbaden and Mainz, selected other German sites as well as at our Stockholm branch 68 Note: All 2016 figures preliminary and unaudited

Sustainability data Extends the financial depiction of the Group

Key takeaways at a glance

Transparent Reporting – facilitating informed investment decisions

• 4 th Sustainability Report "In Dialogue. By conviction." published on 10 May 2016 (online-version1))
• Based on Global Reporting Initiative (GRI) G4 guidelines, in compliance with "in accordance core" option, including GRI Materiality Disclosures Services check
• PricewaterhouseCoopers AG prepared a limited assurance engagement on materiality analysis / selected data

1) http://www.aareal-bank.com/fileadmin/DAM_Content/Konzern/dokumente/06_nachhaltigkeitsbericht2015_en.pdf

Definitions and contacts

Definitions

• Structured Property Financing Portfolio = Paid-out financings on balance sheet
• New Business = Newly acquired business incl. renewals + Contract is signed by customer + Fixed loan value and margin
• 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 = ≥ 100% Available stable funding Required stable funding
• Liquidity coverage ratio = ≥ 100% 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

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

Disclaimer

© 2017 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.