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Aareal Bank AG

Investor Presentation • Nov 17, 2015

11_ip_2015-11-17_44a3ccb5-1b96-4e5c-8c4d-8a786e46167b.pdf

Investor Presentation

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Analyst Conference CallQ3 2015 results

November 10, 2015Hermann J. Merkens, CEO

Agenda

  • Highlights
  • General environment
  • Group results Q3 2015 at a glance
  • Segment performance
  • B/S structure, capital & funding position
  • Group results Q3 2015
  • Asset quality
  • Outlook 2015
  • Midterm Outlook
  • Appendix
  • Definitions and Contacts

HighlightsAareal Bank stays on track

Highlights

  • Positive business development in Q3 with very good quarterly results: Operating profit of € 82 mn
  • Guidance for 2015 Operating profit increased to € 450 mn - € 460 mn, New business target also lifted to € 8 - 9 bn
  • Integration of WestImmo proceeding as planned, Technical integration completed October, 18th 2015
    • Aareal Bank Group is ideally positioned to perform successfully – even in this challenging environment

General environment

General environment

  • Slight world economic recovery continues in combination with low inflation rates in the US and Europe
  • Different regional speed of economic recovery: US-recovery is speeding up, Europe stuck close to deflation, China's pace of economic growth is slowing down (construction, manufacturing)
  • Geopolitical risks and tensions e.g. towards Russia still unsolved, new challenges ahead
  • Increasing divergences in monetary policy between ECB on one side and FED/BOE on the other side
  • Markets expecting ECB's QE to be prolonged and extended, having an enormous impact on capital markets - risking asset bubbles
  • Regulatory environment becomes more predictable but further uncertainties

Main takeaways

Increasing competition burdens margins as predicted which can only partly be compensated by an optimised funding structure. Furthermore funding costs have bottomed out throughout the year.WestImmo acquisition enabling very selective new business generation. Early repayments of high margin loans continue.

Moderately increasing property values and stable to slightly positive rents in most European countries but risks from LTVs based on extreme low cap rates.Further NPL inflow in Q4 expected, mainly from our Italian portfolio.

Aareon with a slightly positive development expected but deposit business will continue to suffer on segment reporting level – deposit volume supports funding and cheapens funding costs

Group results Q3 2015 at a glance

Group results at a glance

NII driven strong development of operating profit

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2) Earnings per ordinary share, excl. negative goodwill, tax rate of ~31% assumed

Structured property financing

High early renewals

2) Additional effects exceeding originally planned repayments

Consulting / Services

Solid in IT & volumes – weak in deposit margins

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Unchanged low interest rate environment continues to burden segment results

  • Deposit volume of the housing industry on a high level of € 8.6 bnØ in Q3 2015 (€ 8.7 bn Ø in Q3 '14)
  • The strategic importance of the housing industry deposits as an additional source of funding exceeds the importance of the margins reflected in the segment performance

Consulting / Services

Deposit taking business burdens segment results

B/S structure, capital & funding position

Capital ratiosStrong despite WestImmo takeover

1) Actual figures may vary significantly from estimates

  • Strong capital ratios in line with business model, company size and capital market expectations
  • New ECB requirementsin line with capital planning
  • Ytd consolidated net income allocated to ordinary shareholders (ex negative goodwill) less dividends not recognised as CET1 capital
  • Bail-in capital ratio (acc. to our definition): above 8%
  • Leverage ratio as at 30.09.2015: 4.5% (fully phased)

RWA development

Continuously run down of non core assets

2015-increase coming from

  • WestImmo
  • FX-effects

Reduction coming from

  • Corealcredit non core assets
  • WestImmo non core assets

Asset- / Liability structure according to IFRSAs at 30.09.2015: € 53.9 bn (31.12.2014: € 49.6 bn ex. WIB)

1) Interbank includes reverse repos of € 1.3 bn2) Other assets includes € 1.6 bn private client portfolio and WIB's € 0.8 bn public sector loans

Asset- / Liability structure according to IFRSAs at 30.09.2015: € 53.9 bn (30.06.2015: € 55.5 bn incl. WIB)

1) Interbank includes reverse repos of € 1.3 bn2) Other assets includes € 1.6 bn private client portfolio and WIB's € 0.8 bn public sector loans

Net stable funding- / liquidity coverage ratio Sound liquidity position despite WestImmo takeover

  • Aareal Bank already fulfils future requirements
  • NSFR > 1.0
  • LCR >> 1.0
  • Basel III and CRR require adherence of specific liquidity ratios starting end 2018
  • As intended, additional funding requirements from acquisition of WestImmo covered by NSFR surplus

Refinancing situation 2015Funding needs 2015 already fulfilled

Total funding of € 1.3 bn in 9M 2015

  • Pfandbriefe: € 0.7 bnthereof USD 500 mn mortgage Pfandbrief
  • Senior unsecured: € 0.6 bn

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

Deposits of the housing industry with € 8.6 bn on a high level

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 30.09.2015, this share has fallen below 30% (or even below 10% without Pfandbriefe)

As at 30.09.2015

Net interest income

Pushed by WestImmo & early repayments

  • NII Consulting / ServicesNII Structured Property FinancingNII effect from early repayments1)

  • 1) Additional effects exceeding originally planned repayments

  • NII pushed by

  • Full quarter contribution of WestImmo(~ € 9 mn per month)
  • Q3 includes additional ~€ 22 mn from early repayments1) (Q2 '15: € 10 mn, Q1 '15: € 5 mn, Q4 '14: € 20 mn, Q3 '14: € 13 mn)
  • NII burdened by
  • Total portfolio of € 31.2 bn (Q2: € 33.1 bn), "old ARL stand alone" portfolio below YE-target size of ~ € 26 bn
  • Margin pressure
  • NII Consulting / Services still burdened by interest rate environment
  • Aareal Bank already fulfils future NSFR / LCR requirements

Allowances for credit losses (LLP)In line with guidance

Unchanged FY-guidance (2015 vs. 2014) despite a significantly larger portfolio

Net commission incomeConfirming guidance

  • Aareon on track
  • Q3 with expected seasonal summer slump
  • Strong Aareon revenue regularly pushing Q4

Admin expensesWithin FY-guidance

Admin expenses in Q3 especially include

  • € 15 mn WIB "operating" admin expenses(€ 5 mn in Q2)
  • € 12 mn integration cost for WestImmoand Corealcredit (€ 12 mn in Q2)
  • No Q3-expenses for European bank levy (Q2: € 7 mn / Q1: € 9 mn)
  • Compensation payment related to change in CEO position

Total property finance portfolio1) € 31.2 bn highly diversified and sound

Total property finance portfolio1) Portfolio details

Total property finance portfolio1) Portfolio details

Total property finance portfolio

Continuing conservative approach

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Total property finance portfolio Italian NPLs expected to peak in Q4 2015

Total treasury portfolio

€ 10.8 bn of high quality and highly liquid assets

Outlook 2015 raised

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  • 1) As in 2014, the bank cannot rule out additional allowances for credit losses
  • 2) Preliminary, further adjustments possible
  • 3) Earnings per ordinary share, tax rate of ~31% assumed

324) After segment adjustments

Midterm Outlook

Summary, prerequisites and challenges

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Prerequisites

  • No Eurozone break up
  • Normalised asset valuations
  • Healthy world GDP growth beside some European peripherals
  • Sound regulatory environment
  • No additional burdens
  • ECB to keep key interest rates low due to little inflation pressure – therefore short-term Euro interest rates will likely stay low as well

Challenges

  • ECB supervision
  • Banking resolution
  • Basel activities

Midterm Outlook

Management options

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p
m
s
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p
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dm
in
/
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ex
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3
t
a
e
g
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y
f
fe
he
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ts
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r e
c		 - k
t
m
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s
Un
de
ly
ing
r
C
2
t
a
e
g
o
r
y
i
l
ta
ca
p		 +
+
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E
ta
p
re
x
C
1
t
a
e
g
o
r
y
ta
t
rg
e		 ~1
2
%		 ~1
2
%

1) Mainly from unplanned early repayments


O
f
/
f
i
i
i
d
i
l
i
i
d
i
l
i
t
t
t
t
t
t
p
m
s
a
o
n
u
n
n
g
s
r
u
c
u
r
e
q
u
y
p
o
r
o
o
  • Loan portfolio size depending on margin compression
  • RWA and LTV development depending on regulation and markets
  • Increase in Aareon's profit contribution

  • Keep cost base under control

  • Optimisation of regulatory capital structure

  • Alignment or allocation of underlying capital depending on chances and challenges in the markets

Midterm Outlook

Prerequisites, challenges and management options

As of today

  • Eurozone did not break up
  • Far away from normalised asset valuations clear tendency of asset price inflation hence increasing inherent portfolio risk visible
  • Compared to the last decade anaemic world GDP growth: the new normal?
  • Regulatory environment still unpredictable (e.g. RWA floors, model reviews, Basel IV)
  • Additional burdens (e.g. bank levy, deposit guarantee scheme)
  • Markets anticipate the ECB to follow the "Japanese route" to defeat low inflation rates and kick of economic recovery
  • Pre-tax RoE FY 2015 of 11.0% - 11.5% (ex neg. goodwill) but supported by tailwinds (e.g. early repayments)
  • Future capital optimisation / usage will be key for RoE performance relative to CoE and CRE portfolio risk

Aareal Bank GroupResults Q3 2015

Qu
r 3
te
ar		 Q
r 3
rte
ua		 Ch
an
e
20
15		 20
14		 g
€
m
n		 €
m
n
Pr
of
it
d
lo
nt
an
ss
a
cc
ou
Ne
t i
t i
nt
er
es
nc
om
e		 21
4		 18
1		 18
%
Al
low
fo
dit
lo
an
ce
r c
re
ss
es		 37 36 3%
Ne
t i
t i
af
llo
fo
di
t l
nt
te
er
es
nc
om
e
r a
w
an
ce
r c
re
os
se
s		 17
7		 14
5		 22
%
Ne
iss
ion
in
t c
om
m
co
m
e		 40 37 8%
Ne
ult
he
dg
tin
t r
es
o
n
e
ac
co
un
g		 -3 0 -
Ne
di
in
/ e
t t
ra
ng
co
m
e
xp
en
se
s		 13 5
-		 -
Re
lts
fr
ad
ing
-tr
et
su
om
n
on
a
ss
s		 -1
3		 0 -
Re
lts
fr
in
ed
fo
ity
st
ts
nt
t e
su
om
ve
m
en
a
cc
ou
r a
qu		 0 0 -
Ad
ini
ive
st
rat
m
e
xp
en
se
s		 14
7		 10
9		 35
%
Ne
th
ing
in
/ e
t o
at
er
o
p
er
co
m
e
xp
en
se
s		 15 2
-		 -
Ne
ive
dw
ill
at
g
g
oo		 -
Op
in
Pr
of
it
at
er
g		 82 66 24
%
Inc
ta
om
e
xe
s		 26 21 24
%
Co
ol
id
ed
in
at
et
ns
n
co
m
e		 56 45 24
%
Co
ol
ida
d
t i
tri
bu
ble
llin
int
te
at
ta
to
tro
ts
ns
ne
nc
om
e
n
on
-c
on
g
er
es		 5 4 25
%
Co
ol
ida
d
t i
tri
bu
ble
ha
ho
lde
f A
l B
k
AG
te
at
ta
to
ns
ne
nc
om
e
s
re
rs
o
ar
ea
an		 51 41 24
%
1)
Ea
in
ha
(
Ep
S
)
rn
g
s
p
er
s
re
Co
ol
ida
d
t i
tri
bu
ble
ha
ho
lde
f A
l B
k
AG
te
at
ta
to
ns
ne
nc
om
e
s
re
rs
o
ar
ea
an		 51 36 42
%
2)
f w
hic
h:
al
loc
ed
rd
ina
sh
eh
old
at
to
o
o
ry
ar
er
s		 47 36 31
%
f w
hic
h:
al
loc
ed
A
T1
in
at
to
st
o
ve
or
s		 4 -
2)3
)
Ba
sic
nin
rd
ina
sh
(
in
€)
e
ar
g
s
p
er
o
ry
ar
e		 0,
78		 0,
58		 34
%
4)
Ba
sic
nin
rd
ina
AT
1
it
(
in
€)
e
ar
g
s
p
er
o
ry
un		 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) SoFFin's silent participation was repaid on 30 October 2014. In order to facilitate comparability and for the purpose of an economic analysis, net interest payable on the SoFFin silent participation was deducted from the comparative figure as at 30 September 2014 (€ 5 million) in the EpS calculation.

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

38during the financial year. Earnings per AT1 unit (basic) correspond to (diluted) earnings per AT1 unit.

Aareal Bank GroupResults Q3 2015 by segments

S
tru
c
Pr
op
F
in
an		 d
tu
re
ty
er
in
c
g		 Co
ns
u
Se
rv		 /
l
in
t
g
ice
s		 Co
l
i
ns
o
Re
co
nc		 /
da
io
t
n
i
l
ia
io
t
n		 Aa
re
a
Gr		 l
Ba
k
n
ou
p
0
1.
0
7.
-		 0
1.
0
7.
-		 0
1.
0
7.
-		 0
1.
0
7.
-		 0
1.
0
7.
-		 0
1.
0
7.
-		 0
1.
0
7.
-		 0
1.
0
7.
-
3
0.
0
9.
2
0
1
5		 3
0.
0
9.
2
0
1
4		 3
0.
0
9.
2
0
1
5		 3
0.
0
9.
2
0
1
4		 3
0.
0
9.
2
0
1
5		 3
0.
0
9.
2
0
1
4		 3
0.
0
9.
2
0
1
5		 3
0.
0
9.
2
0
1
4
€
m
n
Ne
in
inc
t
te
t
res
om
e		 2
1
4		 1
8
2		 0 0 0 1
-		 2
1
4		 1
8
1
A
l
low
fo
d
i
los
t
an
ce
r c
re
se
s		 3
7		 3
6		 3
7		 3
6
Ne
in
in
f
l
lo
fo
d
i
lo
t
te
t
te
t
re
s
co
m
e
a
r a
w
an
ce
r c
re
ss
es		 1
7
7		 1
4
6		 0 0 0 1
-		 1
7
7		 1
4
5
Ne
iss
ion
inc
t c
om
m
om
e		 2 1 3
9		 3
6		 1
-		 0 4
0		 3
7
Ne
l
he
dg
ing
t r
t o
t
es
n
e
ac
co
un
u		 -3 0 -3 0
Ne
d
ing
inc
/ e
t
tra
om
e
xp
en
se
s		 1
3		 5
-		 1
3		 5
-
Re
l
fro
d
ing
ts
tra
ts
su
m
no
n-
a
ss
e		 -1
3		 0 -1
3		 0
Re
l
fro
inv
d
fo
i
ts
tm
ts
te
t e
ty
su
m
es
en
a
cc
ou
n
r a
q
u		 0 0 0 0 0
A
dm
in
is
ive
tra
t
e
xp
en
se
s		 1
0
1		 6
4		 4
7		 4
6		 1
-		 1
-		 1
4
7		 1
0
9
/ e
Ne
he
ing
inc
t o
t
t
r o
p
er
a
om
e
xp
en
se
s		 1
4		 4
-		 1 2 0 0 1
5		 2
-
Ne
ive
dw
i
l
l
t
g
a
g
oo
Op
in
f
i
t
t
er
a
g
p
ro		 8
9		 4
7		 7
-		 8
-		 0 0 8
2		 6
6
Inc
ta
om
e
xe
s		 2
9		 2
3		 3
-		 2
-		 2
6		 2
1
Co
l
i
da
d
in
te
t
ns
o
ne
co
m
e		 6
0		 5
1		 4
-		 6
-		 0 0 5
6		 4
5
Co
inc
i
bu
b
le
l
l
ing
in
t
t
tr
ta
to
tro
te
ts
ns
. n
e
om
e
a
n
on
-c
on
res		 5 4 0 0 5 4
Co
inc
i
bu
b
le
ha
ho
l
de
f
Aa
l
Ba
k
A
G
t
t
tr
ta
to
ns
. n
e
om
e
a
s
re
rs
o
rea
n		 5
5		 4
7		 4
-		 6
-		 0 0 1
5		 4
1

Aareal Bank GroupResults1) 9M 2015

01
.0
1.
-		 01
.0
1.
-		 Ch
an
g
e
30
.0
9.
20
15
€
m
n		 30
.0
9.
20
14
€
m
n
Pr
of
it
d
lo
nt
an
ss
a
cc
ou
Ne
t i
t i
nt
er
es
nc
om
e		 58
3		 49
4		 18
%
Al
low
fo
dit
lo
an
ce
r c
re
ss
es		 86 10
5		 18
%
-
Ne
t i
t i
af
llo
fo
di
t l
nt
te
er
es
nc
om
e
r a
w
an
ce
r c
re
os
se
s		 49
7		 38
9		 28
%
Ne
iss
ion
in
t c
om
m
co
m
e		 12
3		 11
6		 6%
Ne
ult
he
dg
tin
t r
es
o
n
e
ac
co
un
g		 5 3 67
%
Ne
di
in
/ e
t t
ra
ng
co
m
e
xp
en
se
s		 8 1
-		 -
Re
lts
fr
ad
ing
-tr
et
su
om
n
on
a
ss
s		 -1
5		 0 -
Re
lts
fr
in
ed
fo
ity
st
ts
nt
t e
su
om
ve
m
en
a
cc
ou
r a
qu		 0 0 -
Ad
ini
ive
st
rat
m
e
xp
en
se
s		 41
5		 32
5		 28
%
Ne
th
ing
in
/ e
t o
at
er
o
p
er
co
m
e
xp
en
se
s		 25 14 79
%
Ne
ive
dw
ill
at
g
g
oo		 15
4		 15
4		 0%
Op
in
Pr
of
it
at
er
g		 38
2		 35
0		 9%
Inc
ta
om
e
xe
s		 72 62 16
%
Co
ol
id
ed
in
at
et
ns
n
co
m
e		 31
0		 28
8		 8%
Co
ol
ida
d
t i
tri
bu
ble
llin
int
te
at
ta
to
tro
ts
ns
ne
nc
om
e
n
on
-c
on
g
er
es		 15 14 7%
Co
ol
ida
d
t i
tri
bu
ble
ha
ho
lde
f A
l B
k
AG
te
at
ta
to
ns
ne
nc
om
e
s
re
rs
o
ar
ea
an		 29
5		 27
4		 8%
2)
Ea
in
ha
(
Ep
S
)
rn
g
s
p
er
s
re
Co
ol
ida
d
t i
tri
bu
ble
ha
ho
lde
f A
l B
k
AG
te
at
ta
to
ns
ne
nc
om
e
s
re
rs
o
ar
ea
an		 29
5		 25
9		 14
%
3)
f w
hic
h:
al
loc
ed
rd
ina
sh
eh
old
at
to
o
o
ry
ar
er
s		 28
3		 25
9		 9%
f w
hic
h:
al
loc
ed
A
T1
in
at
to
st
o
ve
or
s		 12 - -
3)4
)
Ea
ing
rd
ina
sh
(
in
€)
rn
s
p
er
o
ry
ar
e		 4,
73		 4,
32		 9%
5)
Ea
ing
rd
ina
AT
1
it
(
in
€)
rn
s
p
er
o
ry
un		 0,
12		 -

1) Adjustment of previous year's figures due to completion of purchase price allocation in accordance with IFRS 3 for Corealcredit.

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) SoFFin's silent participation was repaid on 30 October 2014. In order to facilitate comparability and for the purpose of an economic analysis, net interest payable on the SoFFin silent participation was deducted from the comparative figure as at 30 September 2014 (€ 15 million) in the EpS calculation.

4) 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.

5) 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

40during the financial year. Earnings per AT1 unit (basic) correspond to (diluted) earnings per AT1 unit.

Aareal Bank GroupResults1) 9M 2015 by segments

S
tru
c
Pr
op
F
in
an		 d
tu
re
ty
er
in
c
g		 Co
ns
u
Se
rv		 /
l
in
t
g
ice
s		 Co
l
i
ns
o
Re
co
nc		 /
da
io
t
n
i
l
ia
io
t
n		 Aa
l
Ba
k
re
a
n
Gr
ou
p
0
1.
0
1.-		 0
1.
0
1.-		 0
1.
0
1.-		 0
1.
0
1.-		 0
1.
0
1.-		 0
1.
0
1.-		 0
1.
0
1.-		 0
1.
0
1.-
3
0.
0
9.		 3
0.
0
9.		 3
0.
0
9.		 3
0.
0
9.		 3
0.
0
9.		 3
0.
0
9.		 3
0.
0
9.		 3
0.
0
9.
2
0
1
5		 2
0
1
4		 2
0
1
5		 2
0
1
4		 2
0
1
5		 2
0
1
4		 2
0
1
5		 2
0
1
4
€
m
n
Ne
in
inc
t
te
t
res
om
e		 5
8
4		 4
9
3		 0 0 1
-		 1 5
8
3		 4
9
4
A
l
low
fo
d
i
los
t
an
ce
r c
re
se
s		 8
6		 1
0
5		 8
6		 1
0
5
Ne
in
in
f
l
lo
fo
d
i
lo
t
te
t
te
t
re
s
co
m
e
a
r a
w
an
ce
r c
re
ss
es		 4
9
8		 3
8
8		 0 0 1
-		 1 4
9
7		 3
8
9
Ne
iss
ion
inc
t c
om
m
om
e		 4 3 1
2
0		 1
1
6		 1
-		 3
-		 1
2
3		 1
1
6
Ne
l
he
dg
ing
t r
t o
t
es
n
e
ac
co
un
u		 5 3 5 3
Ne
d
ing
inc
/ e
t
tra
om
e
xp
en
se
s		 8 1
-		 8 1
-
Re
l
fro
d
ing
ts
tra
ts
su
m
no
n-
a
ss
e		 -1
5		 0 -1
5		 0
Re
l
fro
inv
d
fo
i
ts
tm
ts
te
t e
ty
su
m
es
en
a
cc
ou
n
r a
q
u		 0 0 0 0 0
A
dm
in
is
ive
tra
t
e
xp
en
se
s		 2
4
7		 1
8
8		 1
4
3		 1
3
9		 2
-		 2
-		 4
1
5		 3
2
5
/ e
Ne
he
ing
inc
t o
t
t
r o
p
er
a
om
e
xp
en
se
s		 2
3		 1
1		 2 3 0 0 2
5		 1
4
Ne
ive
dw
i
l
l
t
g
a
g
oo		 1
5
4		 1
5
4		 1
5
4		 1
5
4
Op
in
f
i
t
t
er
a
g
p
ro		 4
0
3		 3
0
7		 2
1
-		 2
0
-		 0 0 3
8
2		 3
5
0
Inc
ta
om
e
xe
s		 9
7		 6
8		 7
-		 6
-		 2
7		 6
2
Co
l
i
da
d
in
te
t
ns
o
ne
co
m
e		 3
2
4		 3
0
2		 1
4
-		 1
4
-		 0 0 3
1
0		 2
8
8
A
l
lo
io
f r
l
t
ts
ca
n
o
es
u
Co
inc
i
bu
b
le
l
l
ing
in
t
t
tr
ta
to
tro
te
ts
ns
. n
e
om
e
a
n
on
-c
on
res		 1
3		 1
2		 2 2 1
5		 1
4
Co
f
G
inc
i
bu
b
le
ha
ho
l
de
Aa
l
Ba
k
A
t
t
tr
ta
to
ns
. n
e
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4

1) Adjustment of previous year's figures due to completion of purchase price allocation in accordance with IFRS 3 for Corealcredit.

Aareal Bank GroupResults – quarter by quarter

St
tur
ruc
Fin		 ed
P
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3
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3
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2
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1
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4
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3
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3
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2
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1
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3
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14
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1
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1		 16
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all
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4		 40 42 41

Interest payments and ADI of Aareal Bank AG

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

3
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1

1) Unaudited figures for information purposes only

AppendixDevelopment property finance portfolio

Development property finance portfolioDiversification continuously strengthened (in € mn)

Western Europe (ex Germany) credit portfolio Total volume outstanding as at 30.09.2015: € 10.3 bn

German credit portfolio

Total volume outstanding as at 30.09.2015: € 5.9 bn

Southern Europe credit portfolio

Total volume outstanding as at 30.09.2015: € 4.6 bn

Eastern Europe credit portfolio

Total volume outstanding as at 30.09.2015: € 2.9 bn

Northern Europe credit portfolio

Total volume outstanding as at 30.09.2015: € 2.0 bn

North America credit portfolio

Total volume outstanding as at 30.09.2015: € 5.1 bn

Asia credit portfolio

Total volume outstanding as at 30.09.2015: € 0.3 bn

AppendixNew ownership structure

Aareal's new ownership structure

Successful placement underlines confidence in ARL

Acquisition of WestImmo

Acquisition of WestImmo1): Strategic rationaleAttractive opportunity to pursue inorganic growth

Acquisition of WestImmo1): Strategic rationaleValue enhancing transaction in line with business strategy

Transaction represents attractive opportunity for Aareal Bank to pursue inorganic growth as it is EpS accretive and creating shareholder value from day one while mid-term targets unchanged

Acquisition using existing excess capital demonstrates strength and strategic capacity while generating further excess capital and therefore dividend distribution potential at the same time

Immediate (inorganic) growth of interest earning asset base in times of increasing competition

Perfect overlap to Aareal's core business further strengthens position as a specialised commercial real estate lender

International well experienced staff and platform maintained despite currently not being allowed to write new business (acc. to EU-regulations) and therefore in run-down mode

High diversification of CRE portfolio and conservative risk profile remains unchanged

Optimisation of capital structure in line with communicated strategy

1) As published February 22, 2015

Acquisition of WestImmo1): Strategic rationaleBusiness ability even without new business origination

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Acquisition of WestImmo1): Transaction structure Attractive terms and conditions

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1) As published February 22, 2015

2)Subject to further adjustments

Acquisition of WestImmo1): Financials Impact on capital ratios, EpS, and RoE2)

  • Allocation of excess capital
  • RWA increase partly compensated by negative goodwill
  • Expected pro forma CET1 as at 31.12.2015: 11.8%
  • Bail in capital ratio expected above target (~8%)
  • 1) As published February 22, 2015
  • 2)Pro forma extrapolated, assumed closing 31.03.2015

EpS

  • Transaction is EpS accretive from day 1
  • Expected cumulative EpS for the next three years > 3 €
  • Substantial part of the capital currently absorbed by acquired RWA already to be released until 2017
  • No capital relief from switch of rating model (WestImmo already on AIRBA)

RoE

  • Transaction in line with mid term RoE target
  • Pre-tax RoE target confirmed at ~12%

Reconfirming active dividend policy with payout ratios of ~50% (excl. negative goodwill)

Dividend policy

Acquisition of WestImmo1): Financials

Purchase price illustration2)

1) As published February 22, 2015

2)Pro forma extrapolated, assumed closing 31.03.2015

Acquisition of WestImmo1) :

Private client loans and Public sector loans2)

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63

Revaluation surplus

Change mainly driven by asset spreads

CET1 development and RWA-split

CET1 development (fully phased)

Mainly driven by negative goodwill from WIB acquisition

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

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 = CET1Risk weighted assets
  • Pre tax RoE = Operating profit ./. income/loss attributable to non-controlling interests ./. AT1 cuponAverage 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 fundingRequired stable funding
  • Liquidity coverage ratio = ≥ 100%Total stock of high quality liquid assetsNet 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 cuponNumber of ordinary shares

Contacts

Jürgen Junginger Managing Director Investor Relations Phone: +49 611 348 [email protected]

Carsten Schäfer

Director Investor RelationsPhone: +49 611 348 [email protected]

Sebastian Götzken

Senior Manager Investor RelationsPhone: +49 611 348 [email protected]

Karin Desczka

Investor RelationsPhone: +49 611 348 [email protected]

Disclaimer

© 2015 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 notbe 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 anyinformation 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.

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