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Aareal Bank AG

Investor Presentation • Dec 23, 2013

11_ip_2013-12-23_85a26646-7f4a-4c6c-9e5c-4b7ababdc94a.pdf

Investor Presentation

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December 23, 2013Dr. Wolf Schumacher, CEO – Hermann J. Merkens, CFO

Agenda

  • Strategic rationale
  • Transaction structure
  • Financials
  • Next steps
  • Appendix: Corealcredit Bank AG
  • Definitions and contacts

Value enhancing transaction in line with current strategy

The transaction represents an attractive opportunity for Aareal Bank Group to pursue inorganic growth as it is creating shareholder value and EpS accretive from day one

Aareal Bank Group acquires Corealcredit Bank AG, which has been successfully realigned and refocused on its core business by its previous owner, in a favourable market environment at a conservative price

Corealcredit Bank AG is a well digestible addition to Aareal Bank Group. Legacy risks have been conservatively evaluated and comprehensively ring-fenced

Our mid-term targets and our goal to resume an active dividend policy remain unchanged

With the acquisition of Corealcredit Bank AG, Aareal Bank Group further strengthens its position as a leading commercial real estate lender

The acquisition of Corealcredit Bank AG from existing excess capital demonstrates the strength and strategic capacity of Aareal Bank Group

Favourable market environment for inorganic growth

Current environment

  • Favourable price-to-book valuations
  • Attractive asset and liability spreads for fair value appraisal
  • Limited interest of investors for the European CRE-Banking sector

Realisation of purchase price discount

Strong position of Aareal Bank

  • Aareal Bank has strong ability to act thanks to solid capitalisation
  • As a specialist in commercial real estate financing, Aareal Bank is an ideal buyer for corresponding portfolios or competitors

Specific target – Corealcredit Bank AG

  • Corealcredit Bank AG successfully restructured and downsized
  • Perfect match of core businesses of Corealcredit Bank AG and Aareal
  • Experienced Corealcredit Bank AG team

With the acquisition of Corealcredit Bank AG, Aareal Bank Group has made use of its excellent position in the current market environment and has exploited an attractive opportunity for inorganic growth in its core business.

Transaction in line with Aareal Bank mid-term action plan

Transaction structure

Transaction structureAttractive terms and conditions

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1)Subject to pre-closing measurements, BaFin and anti-trust approval

2)Subjects to purchase price adjustments as contracted

7

Financials

FinancialsImpact on EpS, RoE and capital ratios

Expected pro forma CT1 ratio Basel III fully loaded incl. IFRS & CRD IV

Capital ratios:

  • All cash transaction: RWA increase on group level compensated via negative goodwill and allocation of excess capital
  • Expected effect on total capital ratio of -100bp, but still within target range (~18-19%)
  • Bail in capital ratio expected above target (~8%)

EpS

  • The transaction is EpS accretive from day one
  • Present value of cumulative EPS for the next three years > €31)
  • Capital currently absorbed by acquired RWA to free up until 2016 for alternative utilisation:
  • -Allocation
  • -Alignment

RoE:

  • Transaction in line with mid-term RoE target
  • Pre-tax RoE target2) confirmed at ~12%

Dividend policy:

  • Plan to start active dividend policy in 2014 reconfirmed (for FY 2013, depending on market conditions)
  • 1) Negative goodwill, deferred tax assets realised upon initial consolidation and NPV of additional net income until 2016; assuming closing date 31.12.2013

92)Equity adjusted for effects arising from one-off deferred tax assets

FinancialsOutlook P&L-impact

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Next steps

Next stepsClosing envisaged for H1 2014

Next stepsFinancial calender

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Appendix:Corealcredit Bank AG financials

Corealcredit Bank at a glanceSuccessfully realigned and downsized Corealcredit Bank

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1)Beteiligungsgesellschaft der Gewerkschaften AG

Corealcredit Bank financials: ALM structure HGB book values as at 30.06.2013: € 7.6 bn

16

Corealcredit Bank financialsFunding base of € 5.5 bn as at 30.06.2013

  • Business portfolio is fully funded with matched maturities
  • New business generation has historically been clearly focused on cover-pool eligible business
  • Consequently, mortgage covered bonds remain the core financing instrument for the bank; current overcollateralisation of 20.7%1)
  • Uncovered funding predominately with customer deposits and (longer term) promissory notes

Note: All financials based on HGB reporting standards

1) Overcollaterisation based on present value; nominal overcollaterisation as of H1 2013 is 18.2%

Corealcredit Bank financials: German portfolioTotal volume outstanding as at 30.06.2013: € 3.6 bn

  • Broadly diversified portfolio
  • Focus on investment finance
  • Solely German business
  • German share of total CRE portfolio increases to 27% (16%) on group level
  • Average LtV of Corealcredit Bank AG portfolio at 62% below average Aareal Bank's LtV (Germany 64%, international 65%)

Corealcredit Bank financials Treasury portfolio of € 2.1 bn high quality assets

192) Promissory note loans of German issuers (Länder, Landesbanken and Sparkassen with Gewährträgerhaftung)

Definitions and contacts

Contacts

Sebastian Götzken

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

Karin Desczka

Investor RelationsPhone: +49 611 348 [email protected]

Disclaimer

© 2013 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. 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.
  • 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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