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Aareal Bank AG

Investor Presentation • Aug 12, 2015

11_ip_2015-08-12_d969bd33-bb9a-40b3-97c1-b19a7722e08c.pdf

Investor Presentation

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August 11, 2015Dr. Wolf Schumacher, CEO – Hermann J. Merkens, CFO

Agenda

  • Highlights
  • General environment
  • Update on Westdeutsche ImmobilienBank AG ("WestImmo") and on COREALCREDIT BANK AG ("Corealcredit")
  • Group results at a glance
  • Segment performance
  • B/S structure, capital & funding position
  • Group results
  • Asset quality
  • Outlook 2015
  • Midterm Outlook
  • Appendix
  • Definitions and Contacts

HighlightsAareal Bank stays on track

Highlights

  • Consolidated operating profit of € 233 mn (including negative goodwill from the acquisition of WestImmo) on a new record level – adjusted figure rises to € 79 mn (Q2 2014: € 65 mn)
  • Net interest income - incl. one-offs - rises to € 191 mn (Q2 2014: € 169 mn)
  • Acquisition of WestImmo completed, integration according to plan, Corealcredit's operational business successfully integrated
  • Full-year outlook for 2015 affirmed: Consolidated operating profit of between € 400 mn and € 430 mn expected(including negative goodwill)

General environment

General environment

  • Slight world economic recovery continues with different regional speed: US economic recovery is speeding up vs. a slowing down of the Chinese economy which is burdening (local) stock markets
  • Discussions about possible "Grexit" burdened Europe, tensions towards Russia still unsolved
  • Increasing divergences in monetary policy between ECB on one side and FED/BOE on the other side
  • ECB's QE programme have an enormous impact on capital markets especially in Europe but turns slight deflation into slight inflation while risking asset bubbles
  • Regulatory environment becomes more predictable but further uncertainties (still possible challenges, e.g. additional capital requirements resulting from RWA-floors, TLAC1), etc.)

Main takeaways

Further increasing transaction volumes and competition in our lending business burdens margins, funding costs are bottoming out.

WestImmo acquisition enabling very selective new business generation. Early repayments of high margin loans will continue

Moderately increasing property values and stable to slightly positive rents in the majority of European countries but further NPL inflow mainly from our Southern European portfolio expected

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 on.

1) Total Loss Absorbing Capacity

Update on WestImmo& Corealcredit

Acquisition of WestImmo

Closing as at 31.05.2015 - Integration on track

Update

  • Acquisition of WestImmo completed effective 31 May 2015 completedInitial consolidation Q2 2015
  • Preliminary purchase price: € 336 mnpreliminary negative goodwill: € 154 mn
  • Controlling and profit transfer agreement effective 1 June 2015
  • New composition of Supervisory Board
  • Technical integration until end of 2015 planned, preparations on track
  • Reorganisation of overlapping international branch network until end of 2015WestImmo will close Madrid, Paris, London, Warsaw and New York
  • Maintenance of business operations in Mainz for at least 3 years, WestImmo has initiated the examination of displacement of business functions from Münster to Mainz

Integration of Corealcredit

Operational banking business successfully merged

Update

  • Corealcredit's operational banking business split off and successfully merged into Aareal Bank (June 2015),
  • Corealcredits Frankfurt office turned into Aareal Bank's new Frankfurt branch
  • Remaining non-operational part renamed into Aareal Beteiligungen AG, controlling and profit transfer agreement with Aareal Bank stays in place

Group results at a glance

Group results at a glance

Strong operating profit due to WestImmo take over

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

Structured property financing

New business in line with planning

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
  • -€ 9.2 bn Ø in Q2 2015
  • € 9.3 bn Ø in Q1 2015
  • 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 performance

B/S structure, capital & funding position

Capital ratiosStrong despite WestImmo takeover

  • Strong capital ratios in line with business model, company size and capital market expectations
  • New ECB requirementsin line with capital planning
  • Bail-in capital ratio (acc. to our definition): above 8%
  • Leverage ratio as at 30.06.2015: 4.4% (fully phased)

Asset- / Liability structure according to IFRSAs at 30.06.2015: € 55.5 bn (31.12.2014: € 49.6 bn ex. WIB)

1) Interbank includes reverse repos of € 0.8 bn2) Other assets includes € 1.6 bn private client portfolio and € 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 specific liquidity ratios starting end 2018
  • Positive effect in 2014 due to changed weighting factors
  • Additional funding requirements from acquisition of WestImmo easily covered by NSFR surplus
  • Strong liquidity position: Funding needs 2015 already fulfilled (as of today)

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 30.06.2015, this share has fallen below 30% (or even below 10% without Pfandbriefe)

As at 30.06.2015

Net interest income

Margin pressure in the CRE business not yet reflected in NII

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

  • 1) Additional effects exceeding originally planned repayments

  • Larger portfolio due to closing of WestImmoacquisition

  • Q2 includes additional ~€ 10 mn from early repayments1) (Q1: € 5 mn, Q4 '14: € 20 mn, Q3 '14: € 13 mn, Q2 '14: € 8 mn, Q1 '14: € 4 mn)
  • Former central bank liquidity used for strategic ALM measures according to our long term plan, residual amounts switched to reverse repos
  • NII Consulting / Services further burdened by interest rate environment
  • Aareal Bank already fulfils future NSFR / LCR requirements

Allowances for credit losses (LLP)In line with guidance

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

Net commission incomeConfirming guidance

  • Aareon on track
  • Strong Aareon revenue regularly pushing Q4

Admin expensesWithin FY-guidance

  • WestImmo related "operating" admin expenses will regularly increase admin expenses on group level
  • Admin expenses in Q2 further include
    • € 12 mn integration cost for WestImmo and Corealcredit
    • Additional € 7 mnEuropean bank levy (due to an updated assessment base)
  • Admin expenses in Q1 burdened by
  • -€ 12 mn redundancy plan for Corealcredit
  • -€ 9 mnEuropean bank levy

Total property finance portfolio1) € 33.1 bn highly diversified and sound

Total property finance portfolio

€ 33.1 bn highly diversified and sound

Total property finance portfolio € 33.1 bn highly diversified and sound

Total property finance portfolio Continuing conservative approach

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1) Incl. property finance portfolio still on DEPFA's balance sheet

2) Portfolio allowances mainly reflect expected losses which are calculated on the bases of specific loans in most cases

3) NPL-Exposure net acc. to IFRS3

284) Allowances allocated in the course of purchase price allocation (PPA)

Total property finance portfolio

€ 33.1 bn of high quality real estate assets

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Western Europe (ex Germany) credit portfolio Total volume outstanding as at 30.06.2015: € 11.0 bn

German credit portfolio

Total volume outstanding as at 30.06.2015: € 6.5 bn

Southern Europe credit portfolio

Total volume outstanding as at 30.06.2015: € 4.6 bn

Eastern Europe credit portfolio

Total volume outstanding as at 30.06.2015: € 3.0 bn

Northern Europe credit portfolio

Total volume outstanding as at 30.06.2015: € 2.2 bn

North America credit portfolio

Total volume outstanding as at 30.06.2015: € 5.2 bn

Asia credit portfolio

Total volume outstanding as at 30.06.2015: € 0.5 bn

Total treasury portfolio

€ 11.5 bn of high quality and highly liquid assets

Total treasury portfolio

€ 11.5 bn of high quality and highly liquid assets

Outlook 2015 confirmed

Closing of WestImmo as at 31.05.2015 considered

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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

404) After segment adjustments

Midterm Outlook

Summary, prerequisites and challenges

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o
n
g
e
r
m
)
t
t
a
r
g
e		 1
0
%
7
5
>
(
f
b
t.
e
o
r
e
m
g
m
f
f
)
b
u
e
r
C
I
R		 4
0
%
~
(
S
P
F
)
E
B
T
i
m
a
r
g
n		 1
%
7
5
>
(
)
A
a
r
e
o
n
P
R
E
t
r
e-
a
x
o		 1
2
%
~
C
f
i
t
t
o
s
o
e
q
u
y
(
)
t
n
e

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

M
i
d
t
e
r
m		 L
t
o
n
g
e
r
m		 M
i
t
t
a
n
a
g
e
m
e
n
o
p
o
n
s
1)
A
d
j
d
te
C
us
p
re
7
t
a
e
g
o
r
y
Ro
E
ta
2
0
1
4
x		 ~1
0
%		 ~1
2
%
L
f
l
i
i
d
d
i
t
o
a
n
p
o
r
o
o
s
z
e
e
p
e
n
n
g
o
n
m

i
c
o
m
p
r
e
s
s
o
n
Ne
in
t
te
t
C
re
s
6
t
a
e
g
o
r
y
inc
om
e		 -
-		 R
W
A
d
L
T
V
d
l
d
t
a
n
e
v
e
o
p
m
e
n
e
p
e
n

l
i
d
k
t
t
r
e
g
u
a
o
n
a
n
m
a
r
e
s
A
l
low
fo
an
ce
r
C
t
5
a
e
g
o
r
y
d
i
los
t
cre
se
s		 + f
I
i
A
's
i
i
b
t
t
n
c
r
e
a
s
e
n
a
r
e
o
n
p
r
o
c
o
n
r

K
b
d
l
t
t
e
e
p
c
o
s
a
s
e
n
e
r
c
o
n
r
o

u
C
4
t
a
e
g
o
r
y
Aa
re
on		 o O
i
i
i
f
l
i
l
t
t
t
t
p
m
s
a
o
n
o
r
e
g
u
a
o
r
y
c
a
p
a
s
/
A
dm
in
C
ex
p.
3
t
a
e
g
o
r
y
he
f
fe
t
ts
o
r e
c		 - k
t
m
a
r
e
s
Un
de
ly
ing
r
C
2
t
a
e
g
o
r
y
i
l
ta
ca
p		 +
+
Ro
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

Optimisation funding structure / liquidity portfolio

  • 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

Aareal Bank GroupResults Q2 2015

01
.0
4.
-
30
.0
6.
20
15
€
m
n		 01
.0
4.
-
30
.0
6.
20
14
€
m
n		 Ch
an
g
e
of
it
Pr
d
lo
nt
an
ss
a
cc
ou
Ne
t i
t i
nt
er
es
nc
om
e		 19
1		 16
9		 13
%
fo
Al
low
dit
lo
an
ce
r c
re
ss
es		 31 32 3%
-
Ne
t i
t i
af
llo
fo
di
t l
nt
te
er
es
nc
om
e
r a
an
ce
r c
re
os
se
s
w		 16
0		 13
7		 17
%
Ne
iss
ion
in
t c
om
m
co
m
e		 42 39 3%
Ne
ult
he
dg
tin
t r
es
o
n
e
ac
co
un
g		 -3 1 40
0%
-
Ne
di
in
/ e
t t
ra
ng
co
m
e
xp
en
se
s		 2 2 0%
Re
lts
fr
ad
ing
-tr
et
su
om
n
on
a
ss
s		 1 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 -
Ad
ini
ive
st
rat
m
e
xp
en
se
s		 13
6		 11
4		 19
%
Ne
th
ing
in
/ e
t o
at
er
o
p
er
co
m
e
xp
en
se
s		 13 0 -
Ne
ive
dw
ill
at
g
g
oo		 15
4		 -
Op
in
Pr
of
it
at
er
g		 23
3		 65 25
8%
Inc
ta
om
e
xe
s		 24 21 14
%
Ne
t i
/ l
nc
om
e
os
s		 20
9		 44 37
5%
Al
lo
tio
of
lts
ca
n
re
su
/ l
Ne
t i
tri
bu
ble
llin
int
at
ta
to
tro
ts
nc
om
e
os
s
n
on
-c
on
g
er
es		 5 5 0%
/ l
f A
AG
Ne
t i
at
tri
bu
ta
ble
to
ha
ho
lde
l B
k
nc
om
e
os
s
s
re
rs
o
ar
ea
an		 20
4		 39 42
3%
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		 20
4		 34 50
0%
2)
f w
hic
h:
at
tri
bu
ta
ble
to
rd
ina
sh
eh
old
o
o
ry
ar
er
s		 20
0		 34 48
8%
f w
hic
h:
tri
bu
ble
A
T1
in
at
ta
to
st
o
ve
or
s		 4 -
2)3
)
Ea
ing
rd
ina
sh
(
in
€)
rn
s
p
er
o
ry
ar
e		 3,
35		 0,
58		 47
8%
4)
(
€)
Ea
ing
rd
ina
AT
1
it
in
rn
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 June 2014 (€ 5 million) in the EpS calculation. 3) Earnings per ordinary share are determined by dividing the earnings attributable 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 attributable to AT1 investors by the weighted average of AT1 units outstanding

45during the financial year. Earnings per AT1 unit (basic) correspond to (diluted) earnings per AT1 unit.

Aareal Bank GroupResults Q2 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
4.
-		 0
1.
0
4.
-		 0
1.
0
4.
-		 0
1.
0
4.
-		 0
1.
0
4.
-		 0
1.
0
4.
-		 0
1.
0
4.
-		 0
1.
0
4.
-
3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.
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		 1
9
2		 1
6
8		 0 0 1
-		 1 1
9
1		 1
6
9
A
l
low
fo
d
i
los
t
an
ce
r c
re
se
s		 3
1		 3
2		 3
1		 3
2
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
6
1		 1
3
6		 0 0 1
-		 1 1
6
0		 1
3
7
Ne
iss
ion
inc
t c
om
m
om
e		 2 1 4
0		 4
0		 0 2
-		 4
2		 3
9
Ne
l
he
dg
ing
t r
t o
t
es
n
e
ac
co
un
u		 -3 1 -3 1
Ne
d
ing
inc
/ e
t
tra
om
e
xp
en
se
s		 2 2 2 2
Re
l
fro
d
ing
ts
tra
ts
su
m
no
n-
a
ss
e		 1 0 1 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
A
dm
in
is
ive
tra
t
e
xp
en
se
s		 8
9		 6
8		 4
8		 4
7		 1
-		 1
-		 1
3
6		 1
1
4
/ e
Ne
he
ing
inc
t o
t
t
r o
p
er
a
om
e
xp
en
se
s		 1
2		 1
-		 1 1 0 0 1
3		 0
Ne
ive
dw
i
l
l
t
g
a
g
oo		 1
5
4		 1
5
4
Op
in
f
i
t
t
er
a
g
p
ro		 2
4
0		 1
7		 7
-		 6
-		 0 0 2
3
3		 6
5
Inc
ta
om
e
xe
s		 2
6		 2
3		 2
-		 2
-		 2
4		 2
1
Ne
in
/
lo
t
co
m
e
ss		 2
1
4		 4
8		 5
-		 4
-		 0 0 2
0
9		 4
4
A
l
lo
io
f r
l
t
ts
ca
n
o
es
u
Ne
inc
/
los
i
bu
b
le
l
l
ing
in
t
t
tr
ta
to
tro
te
ts
om
e
s
a
n
on
-c
on
res		 4 4 1 1 5 5
/
f
G
Ne
inc
los
i
bu
b
le
ha
ho
l
de
Aa
l
Ba
k
A
t
t
tr
ta
to
om
e
s
a
s
re
rs
o
rea
n		 2
1
0		 4
4		 6
-		 5
-		 0 0 2
0
4		 3
9

Aareal Bank GroupResults H1 2015

01
.0
1.
-
30
.0
6.
20
15		 01
.0
1.
-
30
.0
6.
20
14		 Ch
an
g
e
€
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		 36
9		 31
3		 18
%
Al
low
fo
dit
lo
an
ce
r c
re
ss
es		 49 69 29
%
-
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		 32
0		 24
4		 31
%
Ne
iss
ion
in
t c
om
m
co
m
e		 83 79 5%
Ne
t r
ult
he
dg
tin
es
o
n
e
ac
co
un
g		 8 3 16
7%
/ e
Ne
t t
di
in
ra
ng
co
m
e
xp
en
se
s		 -5 4 22
5%
-
Re
lts
fr
ad
ing
-tr
et
su
om
n
on
a
ss
s		 -2 0 -
fr
fo
Re
lts
in
st
ts
nt
ed
t e
ity
su
om
ve
m
en
a
cc
ou
r a
qu		 0 -
Ad
ini
st
rat
ive
m
e
xp
en
se
s		 26
8		 21
6		 24
%
/ e
Ne
th
ing
in
t o
at
er
o
p
er
co
m
e
xp
en
se
s		 10 16 38
%
-
Ne
ive
dw
ill
at
g
g
oo		 15
4		 15
4		 -
Op
in
Pr
of
it
at
er
g		 30
0		 28
4		 6%
Inc
ta
om
e
xe
s		 46 41 12
%
/ l
Ne
t i
nc
om
e
os
s		 25
4		 24
3		 5%
Al
lo
tio
of
lts
ca
n
re
su
Ne
t i
/ l
tri
bu
ble
llin
int
at
ta
to
tro
ts
nc
om
e
os
s
n
on
-c
on
g
er
es		 10 10 0%
Ne
t i
/ l
tri
bu
ble
ha
ho
lde
f A
l B
k
AG
at
ta
to
nc
om
e
os
s
s
re
rs
o
ar
ea
an		 24
4		 23
3		 5%
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		 24
4		 22
3		 9%
2)
f w
hic
h:
tri
bu
ble
rd
ina
sh
eh
old
at
ta
to
o
o
ry
ar
er
s		 23
6		 22
3		 6%
f w
hic
h:
tri
bu
ble
A
T1
in
at
ta
to
st
o
ve
or
s		 8 - -
2)3
)
Ea
ing
rd
ina
sh
(
in
€)
rn
s
p
er
o
ry
ar
e		 3,
95		 3,
74		 6%
4)
Ea
ing
rd
ina
AT
1
it
(
in
€)
rn
s
p
er
o
ry
un		 0,
08		 -

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 June 2014 (€ 10 million) in the EpS calculation. 3) Earnings per ordinary share are determined by dividing the earnings attributable 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 attributable to AT1 investors by the weighted average of AT1 units outstanding

47during the financial year. Earnings per AT1 unit (basic) correspond to (diluted) earnings per AT1 unit.

Aareal Bank GroupResults H1 2015 by segments

S
tru
c
Pr
op
F
in
an		 tu
d
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
6.		 3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.		 3
0.
0
6.
5
2
0
1		 2
0
1
4		 5
2
0
1		 2
0
1
4		 5
2
0
1		 2
0
1
4		 5
2
0
1		 2
0
1
4
€
m
n
Ne
in
inc
t
te
t
res
om
e		 3
7
0		 3
1
1		 0 0 1
-		 2 3
6
9		 3
1
3
A
l
low
fo
d
i
los
t
an
ce
r c
re
se
s		 4
9		 6
9		 4
9		 6
9
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		 3
2
1		 2
4
2		 0 0 1
-		 2 3
2
0		 2
4
4
Ne
iss
ion
inc
t c
om
m
om
e		 2 2 8
1		 8
0		 0 3
-		 8
3		 7
9
Ne
l
he
dg
ing
t r
t o
t
es
u
n
e
ac
co
un		 8 3 8 3
/ e
Ne
d
ing
inc
t
tra
om
e
xp
en
se
s		 -5 4 -5 4
Re
l
fro
d
ing
ts
tra
ts
su
m
no
n-
a
ss
e		 -2 0 -2 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
A
dm
in
is
ive
tra
t
e
xp
en
se
s		 1
7
3		 1
2
4		 9
6		 9
3		 1
-		 1
-		 2
6
8		 2
1
6
Ne
he
ing
inc
/ e
t o
t
t
r o
p
er
a
om
e
xp
en
se
s		 9 1
5		 1 1 0 0 1
0		 1
6
Ne
ive
dw
i
l
l
t
g
a
g
oo		 1
5
4		 1
5
4		 1
5
4		 1
5
4
in
f
i
Op
t
t
er
a
g
p
ro		 3
1
4		 2
9
6		 1
4
-		 1
2
-		 0 0 3
0
0		 2
8
4
Inc
ta
om
e
xe
s		 5
0		 4
5		 4
-		 4
-		 4
6		 4
1
Ne
in
/
lo
t
co
m
e
ss		 2
6
4		 5
2
1		 1
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Aareal Bank GroupResults – quarter by quarter

ruc ed
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Interest payments and ADI of Aareal Bank AG

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

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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

1) As published February 22, 2015

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%)

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%
  • Dividend policy

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

  • 1) As published February 22, 2015

  • 2)Pro forma extrapolated, assumed closing 31.03.2015

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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AppendixDevelopment property finance portfolio

Development property finance portfolioDiversification continuously strengthened (in € mn)

Revaluation surplus

Change mainly driven by asset spreads

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

2) Exposure to investment shares amounts to € 4 mn

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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