Aareal Bank AG — Call Transcript 2023

Aug 10, 2023

Conference Call H1 2023 results

August 10, 2023 Jochen Klösges (CEO) Marc Hess (CFO) Christof Winkelmann (CMO)

Successful Takeover

Further pursuing our strategy Aareal Next Level

• 1) CPP Investment Board Europe S.à r.l, a wholly owned subsidiary of Canada Pension Plan Investment Board ("CPP Investments")
• 2) Voting rights Indirect holding of participation in Atlantic Lux HoldCo S.à r.l
• 3) https://www.aareal-bank.com/en/about-us/corporate-governance/share-voting-rights-disclosures

1

Agenda

▪ Recent Financial Performance

• Loan Book & Asset Quality
• Liquidity & Funding
• Capital
• Outlook
• Appendix

Recent Financial Performance - Highlights

Strong increase in income ensures high level of operating resilience

Robust 6M results matched previous years' level despite significant investments in the announced strategic measures and headwinds from US office market

Strong operating resilience further improved

Resolution of legacy NPLs largely compensated NPL increase from US offices, no Russian exposure left

Successful funding activities, deposit volume above plan, comfortable liquidity position

Capital ratios stable at 19.4% despite portfolio growth and macro economic headwinds, above average results in recent ECB stress test

Outlook 2023 Operating profit targets confirmed

Recent Financial Performance - Group Profit & Loss

Robust 6M results matched PY level despite significant investments in the announced strategic measures and headwinds from US office market

Profit & loss (€ mn)	Q2 '22	Q1 '23	Q2 '23	6M '22	6M '23	∆ 6M '23/'22
Net interest income (NII)	171	222	240	330	462	+40%
Net commission income (NCI)	68	72	77	132	149	+13%
Admin expenses	142	199	143	295	342	+16%
Other op. income / expenses1)	22	-1	-21	31	-22	./.
Pre-provision profit	119	94	153	198	247	+25%
Loan loss provision (LLP)	58	32	128	107	160	+50%
Operating profit (EBT)	61	62	25	91	87	-4%
Profit after tax	39	42	16	58	58	./.

H1 operating profit of € 87 mn, incl. almost € 120 mn expenses for strategic measures

• Further significant increase in NII and NCI reflecting strong operating performance
• Costs under control
• H1 increase in admin expenses mainly due to investments in efficiency measures and inorganic growth at Aareon
• Costs in the banking business largely stable in H1 (CIR Bank2): 32%)
• LLP and other operating income / expenses (FVPL result) reflect effect of announced swift NPL reduction and headwinds from US office market; remaining Russian exposure sold
• Investments in Aareon dilute strong increase in pre-provision profit. Hence operating resilience is even stronger than shown

1) Includes Net derecognition gain or loss, Net gain or loss from financial instruments (fvpl), Net gain or loss from hedge accounting, Net gain or loss from investments accounted for using the equity method, Net other operating income/expenses

2) Segment SPF & BDS, excl. bank levy/deposit guaranty scheme

Recent Financial Performance – NII & NCI

Significant increase in income reflecting strong operating performance

Both segments contributed to increase

• SPF
• NII increased to € 365 mn (6M/22: € 313 mn) supported by portfolio growth, good margins and diversified funding mix
• ~80% of TLTRO repaid in Q4/22
• BDS
• NII increased to € 111 mn (6M/22: € 23 mn)
• Positive effects from rising interest rate environment
• Deposits from housing industry above targeted level

Aareon and BDS continue to grow

• Aareon
• NCI increased to € 137 mn (6M/22: € 119 mn) supported by healthy growth in recurring revenues
• Recurring revenues increased to 76%1) of total revenues (6M/22: 73%1))
• BDS
• NCI further increased to € 16 mn (6M/22: € 15 mn)
• High share of recurring revenues

Recent Financial Performance - Admin expenses / LLP

Increase in admin expenses and LLP reflect significant investments in the announced strategic measures and headwinds from US office market

Bank expenses largely unchanged, Aareon expenses incl. almost € 60 mn for efficiency measures

Bank1)

• Stable at € 172 mn (6M/22: € 183 mn, incl. PTO related one-off € 12 mn)
• H1/23 CIR2) Bank at 32% (H1/22: 41%) Aareon
• Expenses increased to € 175 mn (6M/22: € 118 mn) due to efficiency measures of almost € 60 mn and inorganic growth

Q2 LLP incl. € ~60 mn for swift NPL reduction

• € ~60 mn budget fully allocated
• Thereof € ~35 mn for sale of Russian exposure
• Further (legacy) NPLs prepared for resolution in H2
• Total 6M LLP at € 196 mn (incl. € 36 mn FVPL)

1) Segment SPF & BDS

2) Excl. bank levy/deposit guarantee scheme

Recent Financial Performance – Segment SPF

Selective new business with good LTVs and margins above plan

Selective new business

• Conservative avg. LTV of 53%1) (6M/22: 57%)
• Avg. margin of ~290 bps1) (6M/22: 227 bps) (FY plan 2023: 240-250 bps1))
• YE portfolio target for 2023 confirmed

Additional € ~1.4 bn Green loans2) in 6M/23

• € ~900 mn new business
• € ~500 mn eligible existing loans with clients' agreement converted

1) Newly acquired business

2) Governed by "Green Finance Framework"

Recent Financial Performance - Segment BDS

NII further benefitting from interest rate environment

NII increase driven by rising interest rates

• Deposit volume above targeted level of € ~13 bn
• Granular deposit structure from more than 3,700 housing industry clients managing ~8 mn rental units
• Sticky rental deposits continuously growing
• Continuous shift from sight into term deposits

NCI increased as planned

• High share of recurring revenues (banking and software fees)
• New products and services providing growth potential

Recent Financial Performance - Segment Aareon

Strong recurring revenue growth, adjusted EBITDA margin and cash generation improved by strategic and efficiency measures

• Overall, sales revenues increased by € 21 mn (+15%)
• Recurring revenue grew by 21% (incl. SaaS)
• Share of recurring increased to 76%2) of total revenues (H1/22: 73%)
• Adj. EBITDA increased by € 7 mn to € 39 mn (+24%), adj. EBITDA margin increased to 23% (H1/22: 22%) leading to stronger cash position (Adjusted EBITDAC)
• Major activities in Q2/23:
• Launch of partner program Aareon Connect in Germany, further increase to more than 20 partners and first customers via platform contracted
• Continuation of efficiency measures started in Q1/23 with investment in workforce transformation, additional streamlining of UK product portfolio and further process efficiency measures
• Noticeable savings from investments already in H2 expected

Note: Numbers not adding up refer to rounding

1) Other = Licenses and PS (Professional Services = Consulting business)

2) Last Twelve Months

Agenda

• Recent Financial Performance
• Loan Book & Asset Quality
• Liquidity & Funding
• Capital
• Outlook
• Appendix

Portfolio volume increased by selective new business

• Sticking to overall country and asset diversification
• YE portfolio target for 2023 of € 32 33 bn confirmed
• Virtually no financing of developments (< 1%) however, refurbishments to foster green transition
• Green loan volume at € 3.0 bn (06/22: € 1.5 bn)
• Green property financing portfolio at € 7.7 bn or 24% of total CREF portfolio

Loan Book & Asset Quality YoD further increased, stable LTV

LTV1) by property type

%	12 '19	12 '20	12 '21	12 '22	06 '23
Hotel	55	62	60	56	55
Logistics	54	56	55	52	53
Office	57	58	58	57	58
Retail	61	61	59	56	56

YoD1) 8.9% 6.7% 7.1% 8.5% 9.5% 0% 2% 4% 6% 8% 10% 12/19 12/20 12/21 12/22 06/23

1) Performing CREF-portfolio only (exposure)

YoD1) by property type

%	12 '19	12 '20	12 '21	12 '22	06 '23
Hotel	9.6	3.0	5.0	9.0	10.9
Logistics	8.5	9.2	8.7	9.0	9.2
Office	7.7	8.1	7.6	6.9	7.0
Retail	9.6	8.8	9.1	9.8	10.7

Loan Book & Asset Quality US portfolio broadly diversified

1) Performing CREF-portfolio only (exposure)

Loan Book & Asset Quality US office portfolio: Update

• New York represents >50% of the total US-office portfolio
• Rest largely spread throughout major US cities
• Focus on cash flow
• YoD2) in US office of ~7.3%
• Only 11% of leases expire in 2023, 8% in 2024
• Maturities widely spread with a peak in 2025

2) Performing CREF-portfolio only (exposure)

US office portfolio: Update

Total US office portfolio has been revalued in 2023

• Values of all US office loans reviewed in 2023, thereof ~50% by external appraiser
• External appraisals 2023:
• Non-performing: Value decrease of 20 35%
  • → Value decrease adequately considered in risk provisioning
• Performing: Average value decrease of ~12%
  • → Extrapolation to 100% of performing portfolio results in a pro-forma average LTV of ~70%
• ➢ Considering location & quality of the respective properties, value decreases are in general as expected and are comfortably within the headroom assumed in the stressed scenario

Assumed market value decrease of ~20%

• Avg. / weighted assumed market value decrease in US office of ~15% (class A), ~40% (class B) and ~60% (class C) leads to an average decline ~35%
• This translates into an assumed ~20% decrease for Aareal's portfolio due to focus on prime markets

Portfolio stressed with 25% market value decrease

• Average LTV up to 83% (from ~62% YE 2022)
• (Layered) LTV above 100%: 1% (< € 50 mn) of exposure
• (Layered) LTV 80%-100%: 8% (< € 300 mn) of exposure
• ➔ Sound headroom even under stress assumptions

¹⁾ Performing CREF-portfolio only (exposure)

European office portfolio well positioned

1) Performing CREF-portfolio only (exposure)

UK portfolio focusing on hotels in the London metropolitan area

17

Resolution of legacy NPLs largely compensated NPL increase from US offices, no Russian exposure left

▪ € 60 mn budget fully allocated

• Thereof € 35 mn for sale of Russian exposure
• Further (legacy) NPLs prepared for resolution in H2
• No hotel NPLs
• Ratios acc. to EBA methodology1):
• NPL: 3.2%
• NPE: 2.8%

1) EBA Risk Dashboard

Agenda

• Recent Financial Performance
• Loan Book & Asset Quality
• Liquidity & Funding
• Capital
• Outlook
• Appendix

Liquidity & Funding Comfortable liquidity position

Conservative liquidity management throughout the cycle

• On average long-term funds have longer maturities than CRE finance portfolio
• Substantial buffer in regulatory liquidity ratios (LCR / NSFR) despite strong growth in portfolio and difficult economic and capital markets environment
• NSFR: 120%, (12/22: 119%)
• LCR: 225%, (12/22: 210%)
• Liquid treasury portfolio with ~80% public sector
• TLTRO ~80% repaid in Q4/22

1) Other assets includes € 0.2 bn private client portfolio and WIB's € 0.2 bn public sector loans

Liquidity & Funding Well diversified Funding Mix

• Hypothekenpfandbriefe
• Senior Unsecured (SP)
• Senior Unsecured (SNP)
• Retail Deposits (Raisin)
• Public-sector Pfandbriefe
• Subordonated Capital

Successful 6M funding activities

• Pfandbrief and Senior totaling € 2.3 bn incl.
• 2 Pfandbrief Benchmarks (€ 1.5 bn) in Q1
• € 500 mn Pfandbrief Benchmark in 07/23
• Deposits from housing industry at avg. of € 13.5 bn above targeted level of € ~13 bn
• Granular deposit structure from more than ~3,700 housing industry clients managing ~8 mn rental units
• Sticky rental deposits continuously growing
• Retail (term) deposits by cooperating with Raisin / Weltsparen significantly increased to € 1.7 bn (12/22: € 0.6 bn)
• Commercial Paper Program enables offering ECP in EUR, GBP & USD as well as in Green format
• ➢ Having further diversified and optimized funding mix, less Senior capital market funding planned

Agenda

• Recent Financial Performance
• Loan Book & Asset Quality
• Liquidity & Funding
• Capital
• Outlook
• Appendix

Capital Solid capital position

• Stable CET1 ratio
• Positive effects from dividend retention after successful PTO closing compensate RWA increase from loan portfolio growth and macro economic headwinds
• B4 fully phased ratio at 13.4%
• T1-Leverage ratio at 6.2%

1) Based on draft version of the European implementation of Basel IV by the European Commission dated 27 October 2021 (CRR III)

Capital

Good stress test results demonstrating healthy risk profile and operating resilience

Risk driver stress test 2023

• Intensification of geopolitical tensions, partial de-globalisation
• Gas supply cuts, higher commodity prices and wage increases via large second round effects leading to persistently high inflation
• Higher current and expected inflation leading to higher interest rates, further exacerbating the contraction in output
• Significant and abrupt price adjustment in the real estate market (approx. 30% discount) given a severe tightening in financing conditions and a weak economic outlook
• Tighter financing conditions, deteriorated economic activity and high levels of government debt raising sovereign debt sustainability concerns

Aareal Bank's Results

• Stressed CET1 ratio comfortably within 11-14% range above EBA / ECB (SSM) average (10.4%) and well above regulatory requirements
• Stressed leverage ratio above 4%
• ➢ Good stress test results demonstrating healthy risk profile and operating resilience of Aareal Bank

Agenda

• Recent Financial Performance
• Loan Book & Asset Quality
• Liquidity & Funding
• Capital
• Outlook
• Appendix

Outlook 2023 Operating profit targets confirmed

	METRIC	Previous OUTLOOK 2023	Current OUTLOOK 2023
p u o Gr	▪ Net interest income ▪ Net commission income LLP1) ▪ ▪ Admin expenses	€ 730 - 770 mn € 315 - 335 mn € 170 - 210 mn incl. € 60 mn budget for a swift NPL reduction € 590 - 630 mn incl. € 35 mn budget for Aareon efficiency measures	Above € 770 mn unchanged Above € 210 mn Upper end of guided range (add. Aareon efficiency measures)
	▪ Operating profit (adjusted) ▪ Operating profit ▪ Earnings per share (EPS) Developments in the macroeconomic environment remain uncertain	€ ~350 mn € 240 - 280 mn € 2.40 - 2.802)	Lower end Lower end

		METRIC	2022	Current OUTLOOK 2023
s	Structured Property Financing	▪ REF Portfolio ▪ New business	€ 30.9 bn € 8.9 bn	33 bn3) € 32 - € 9 - 10 bn
nt e m g e S	Banking & Digital Solutions	▪ Deposit volume ▪ NCI	€ 13.4 bn € 31 mn	€ ~13 bn ~13% CAGR (2020-2023)
	Aareon	▪ Revenues ▪ Adj. EBITDA	€ 308 mn € 75 mn	€ 325 - 345 mn € 90 - 100 mn

1) Incl. value adjustments from NPL fvpl

2) Based on expected FY-tax ratio of ~33%

3) Subject to FX development

Key takeaways

Well equipped for the current challenges

In the fourth year of uncertainty and geopolitical crisis, strong capital ratios and solidly funded

Consistently implementing our strategy and further investing in our future and resilience

Appendix Segment: Aareon

Segment: Aareon H1 2023 P&L and other KPIs

P&L Aareon segment - Industry format1) € mn	H1'22	H1'23	∆ H1 '23/'22
Sales revenue ▪ Thereof recurring revenues ▪ Thereof other revenues	147 110 36	168 134 34	15% 22% -6%
Costs2) ▪ Thereof material	-126 -27	-169 -31	34% 15%
EBITDA	21	-1	> -100%
Adjustments3)	-11	-40	> 100%
Adj. EBITDA	32	39	22%
EBITDA	21	-1	> -100%
D&A / Financial result	-23	-50	> 100%
EBT / Operating profit	-3	-51	> 100%

R&D and Adjusted EBITDAC4)
R&D spend as % of software revenue – YTD	22%
YTD Operating Cash Flow (€ mn)	29

• R&D spend at 22%, 4% lower then in PY driven by product portfolio review last year in order to deliver the most value for our customers
• Adjusted EBITDAC at € 29 mn (H1'22: € 16 mn) from investments into operating leverage

1) Calculation refers to unrounded numbers

2) Costs also include other operating income and capitalized software

3) Incl. New product, M&A, VCP, Venture, other one-offs (legal cases, restructuring)

4) KPI measuring the Adjusted Cash performance (Adjusted EBITDA excl. capitalized software, IFRS 16 impact and other non-cash valuation effects)

Appendix ESG

ESG in our daily business

Putting sustainability at the core of our decisions

ESG in our lending business ESG in our funding activity

Aareal Bank "Green Finance Framework – Lending" put into place

• Aareal Bank's Green Finance Framework Lending confirmed through a Second Party Opinion (SPO) by Sustainalytics
• Ambition to extend ESG assessment in our day-to-day lending activities
• Explicit customer demand for Aareal Bank's green lending approach identified internationally and interest is high for the new product
• Green lending within the new framework provided since Q2 2021

Aareal Bank "Green Finance Framework – Liabilities" forms basis for Green Bonds

• In addition to the lending framework, Aareal Bank has implemented an accompanying liability-side/use-ofproceeds framework that allows issuance of green financing instruments
• The "Green Finance Framework Liabilities" is intended to not only reflect our sustainable lending activities but also our strategic approach towards sustainability
• Bond issuances under this framework invite open discussion and engagement with investors on the progress we have made and on the path forward

Continue to enlarge climate transparency in the portfolio

• Portfolio transparency and data accumulation significantly improved for both existing and new lending and to be continued
• Aareal Bank involved in international initiatives to calculate financed emissions (PCAF)

Aareal's demanding Green Finance Framework

1) All buildings within a financing have to qualify as green buildings according to Aareal GFF

2) Partnership for Carbon Accounting Financials

3) Chapter 7.2 "Renovation of existing buildings"

24% of CREF portfolio classified as Green Property Financings

€ 7.7 bn1) (24%) of total CREF portfolio fulfilling Aareal's Green Finance Framework and are classified as "Green Property Financings", thereof

• € 4.9 bn included in green asset pool for underlying of Green bond issues
• € 2.8 bn green property financings mainly for technical reasons not (yet) included

1) CREF excl. business not directly collateralized by properties Portfolio data as at 30.06.2023 – ESG Data as at 30.06.2023

2) Valid certificate is documented

ESG@Aareal

Phase 1: Mission accomplished

	We have laid the foundation…	…achieved our 2022 goals…	… and will continue to follow our path
	Green expansion of financing business € 2 bn by 2024 additional green loan volume	Achieved	On track for 2024
ct a p m	Optimisation of funding mix € 1 bn in 2022 - new allocation of green funding	€ 1 bn long-term funding + € 0.5 bn green CPs	+ € 0.5 bn green long-term funding in '23
ur i o g	Providing transparency for global CREF portfolio 20% by 2022 – Verified green properties	> 21% screening almost completed	Grow share of verified green properties PCAF report on financed emissions by '24
n wi Limiting our own Greenhouse Gas emissions o Carbon-neutralised own business operations worldwide by 2023 Gr		Achieved	On track for 2023
	Expansion of innovative solutions with ESG impact Growth targets by 2025 – Identification of enabler products by 2022	Achieved	On track for 2025
e n o p e t o	ESG governance with enhanced Board's oversight CEO responsibility – Regular Board engagement	Achieved	Achieved and continuing
e t h g t h at t n etti S	ESG integration in business, credit, investment, risk and refinancing strategies and decision making process Targeting of ESG initiatives in individual / group targets	15% ESG component in Management Boards variable remuneration	Increased to 25% of our Management Board's variable remuneration in 2023

Additional Highlights

• Green Finance Frameworks Lending & Liabilities established and signed off by second party opinion (SPO)
• Strengthened investability for green investors through consistently positive ESG rating results
• Strong performance in ECB climate stress test, which assessed our portfolio for its vulnerability to physical and transitory risks

ESG@Aareal

On the "Road to Paris" we are supporting our clients

On-going transparency initiatives to reach and surpass to highest market standards

Consistently positive rating results

Rewarding Aareal's ESG performance

36

Appendix Asset Quality

CREF portfolio by country

€ 31.7 bn highly diversified

CREF portfolio by property types

€ 31.7 bn highly diversified

Appendix Liquidity & Funding / Capital

Treasury portfolio of € 6.5 bn of highly rated, quality liquid assets providing collateral and additional liquidity

As at 30.06.2023 – all figures are nominal amounts

1) Composite Rating

• Diversification intensified by re-investing in new agencies and Covered Bonds supporting spread improvement
• Enables income generation vs holding just cash collateral
• Serves as a liquidity reserve in both economic and normative terms
• Mainly consists of
• Collateral for the Pfandbrief (public / mortgage)
• Assets permanently pledged for other reasons (e.g. collateral for LCH Clearing)

Diversified funding sources and distribution channels

Strong Mortgage Cover Pool and Aaa Rating for Pfandbriefe

Pfandbriefe funding cornerstone of wholesale issuance

• Cover pool of € 15.3 bn incl. € 0.7 bn substitute assets diversified over 20 countries
• High quality assets: first-class mortgage loans (mortgage-lending-value 55.2%)
• Mortgage-lending-value with high discount from market-value
• Avg. LTV of the mortgage cover pool 31.8%
• Moody´s has calculated a 'Aaa' supporting overcollateralisation ratio of 18.5% on a PV basis
• Over-collateralisation on a PV basis as of 30.06.2023 21.5%
• High diversification within property types
• No assets in the covered pool from Russia and Ukraine

MREL ratios well above regulatory requirements

Senior Preferred have significant protection from subordinated liabilities and own funds

• Ample buffer to MREL requirements
• Senior Preferred remains the predominant senior product, though Senior Non-Preferred remains a key element of the funding strategy
• The rundown remains manageable with a number of long-term liabilities providing significant levels of subordination

• 8% TLOF is the bank's upcoming binding MREL requirement, to be met with 100% subordinated liabilities

• 1) 8% TLOF with 100% subordinated debt (i.e. Own Funds and SNP). MREL requirements are only updated once a year

• 2) MREL-eligible Senior Non-Preferred Debt >1Y according to contractual maturities
• 3) Considering regulatory adjustments
• 4) CET1 assumed to be constant over time
• 44 5) Senior Preferred, excluding structured unsecured issuances

Liquidity & Funding Credit rating profile

Financial ratings
Fitch Ratings		Moody's
Issuer default rating1)	BBB+	Issuer rating1)	A3
Short-term issuer rating	F2	Short-term issuer rating	P-2
Deposit rating	A	Senior preferred	A3
Senior preferred	A	Senior non preferred	Baa2
Senior non preferred	BBB+	Bank deposit rating	A3
Viability rating	BBB+	BCA	Baa3
Subordinated debt	BBB	Mortgage Pfandbriefe	Aaa
Additional Tier 1	BB

Sustainability ratings
MSCI		AA
ISS-ESG		prime (C+)
Sustainalytics		Low (20-10)
CDP		Awareness Level B

Preservation of Fitch Ratings long-term senior preferred rating of at least A-

• Financial ratings a reflection of the strong and stable credit profile, cemented by the capital position
• Aareal's ESG performance has been rewarded by agencies:
• MSCI: Aareal is in the best 35% of 63 diversified financials
• ISS ESG: Prime Status confirms ESG performance above sector-specific Prime threshold
• Sustainalytics: Still "Low" risk classification", Rank 178 of 987 in Sector Banks, 16 of 99 in Thrifts and Mortgages
• MOODY's ESG Solutions: Above sector average results in Environment, Social and Governance

1) Outlook negative

Liquidity & Funding Aareal Bank`s outstanding Benchmark Transactions

Pfandbriefe, Senior Unsecured and AT1
Product	Ratings2)	Currency	Volume	Maturity 	Coupon	ISIN
Pfandbriefe	Aaa	USD	750,000,000	02/14/25	0.625%	XS2297684842
Pfandbriefe	Aaa	GBP	500,000,000	04/29/25	SONIA + 100bps	XS2337339977
Pfandbriefe	Aaa	EUR	500,000,000	07/31/23	0.125%	DE000AAR0223
Pfandbriefe	Aaa	EUR	750,000,000	02/01/24	0.125%	DE000AAR0249
Pfandbriefe	Aaa	EUR	500,000,000	07/30/24	0.375%	DE000AAR0207
Pfandbriefe	Aaa	EUR	500,000,000	07/15/25	0.375%	DE000AAR0215
Pfandbriefe2)	Aaa	EUR	750,000,000	02/13/26	3,125	DE000AAR0389
Pfandbriefe	Aaa	EUR	500,000,000	08/03/26	0.010%	DE000AAR0272
Pfandbriefe	Aaa	EUR	500,000,000	02/01/27	2.250%	DE000AAR0348
Pfandbriefe	Aaa	EUR	500,000,000	07/08/27	0.010%	DE000AAR0256
Pfandbriefe2)	Aaa	EUR	750,000,000	10/11/27	3.000%	DE000AAR0371
Pfandbriefe	Aaa	EUR	500,000,000	02/01/28	0.010%	DE000AAR0280
Pfandbriefe	Aaa	EUR	500,000,000	09/15/28	0.010%	DE000AAR0306
Pfandbriefe	Aaa	EUR	750,000,000	02/01/29	1.375%	DE000AAR0330
Pfandbriefe	Aaa	EUR	625,000,000	09/14/29	2.375	DE000AAR0363
Pfandbriefe	Aaa	EUR	750,000,000	02/01/30	0.125%	DE000AAR0314
Senior Preferred	A- / A3	EUR	500,000,000	04/10/24	0.375%	DE000A2E4CQ2
Senior Preferred green	A- / A3	EUR	500,000,000	07/25/25	4.500%	DE000AAR0355
Senior Preferred	A- / A3	EUR	500,000,000	09/02/26	0.050%	DE000AAR0298
Senior Preferred	A- / A3	EUR	500,000,000	04/07/27	0.050%	DE000AAR0264
Senior Preferred	A- / A3	EUR	750,000,000	11/23/27	0.250%	DE000A289LU4
Senior Preferred green	A- / A3	EUR	500,000,000	04/18/28	0.750%	DE000AAR0322
Additional Tier 1	BB	EUR	300,000,000	PERP_NC_5-1	10.897%	DE000A1TNDK2

1) Pfandbriefe are rated by Moody´s, AT1 by Fitch Ratings and Senior Unsecured by Fitch Ratings and Moody´s

2) Issued in 2023

Capital SREP (CET 1) requirements

• P2R relief by using possibility of partially fulfilling requirements with AT1 and T2 capital
• Total capital requirement (Overall Capital Requirement (OCR)) amounts to 14.0% compared to 23.4% total capital ratio

Pillar 1 Requirement Pillar 2 Requirement Capital Conservation Buffer Countercyclical / Systemic Risk Buffer

Appendix ADI of Aareal Bank

Interest payments and ADI of Aareal Bank AG

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

	31.12. 2016	31.12. 2017	31.12. 2018	31.12. 2019	31.12. 2020	31.12. 2021	31.12. 2022
€ mn
Net Retained Profit ▪ Net income ▪ Profit carried forward from previous year ▪ Net income attribution to revenue reserves	122 122 0 -	150 147 3 -	126 126 - -	120 120 - -	90 90 - -	96 30 66 -	61 61 - -
+ Other revenue reserves after net income attribution	720	720	720	720	840	840	936
Total dividend potential before amount blocked1) =	842	870	846	840	930	936	997
./. Dividend amount blocked under section 268 (8) of the German Commercial Code ./. Dividend amount blocked under section 253 (6)	235	283	268	314	320	386	466
of the German Commercial Code	28	35	42	40	43	36	24
= Available Distributable Items1)	580	552	536	486	566	515	507
+ Increase by aggregated amount of interest expenses relating to Distributions on Tier 1 Instruments1)	46	32	25	23	21	20	21
= 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)	626	584	560	509	588	535	529

Appendix Group Results

Aareal Bank Group Results H1 2023

	01.01.- 30.06.2023	01.01.- 30.06.2022	Change
	€ mn	€ mn
Profit and loss account
Net interest income	462	330	40%
Loss allowance	160	107	50%
Net commission income	149	132	13%
Net derecognition gain or loss	1 2	2 2	-45%
Net gain or loss from financial instruments (fvpl)	-41	1 8	-328%
Net gain or loss on hedge accounting	0	-7	-100%
Net gain or loss from investments accounted for using the equity method	-	-2	-100%
Administrative expenses	342	295	16%
Net other operating income / expenses	7	0
Operating Profit	8 7	9 1	-4%
Income taxes	2 9	3 3	-12%
Consolidated net income	5 8	5 8	0 %
Consolidated net income attributable to non-controlling interests	-9	1
Consolidated net income attributable to shareholders of Aareal Bank AG	6 7	5 7	18%
Earnings per share (EpS)
Consolidated net income attributable to shareholders of Aareal Bank AG1)	6 7	5 7	18%
of which: allocated to ordinary shareholders	5 8	5 0	16%
of which: allocated to AT1 investors	9	7	29%
Earnings per ordinary share (in €)2)	0.97	0.84	15%
Earnings per ordinary AT1 unit (in €)3)	0.09	0.07	29%

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) Earnings per AT1 unit (based on 100,000,000 AT1 units with a notional amount of 3 € each) are determined by dividing the earnings allocated to AT1 investors by the weighted average of AT1 units outstanding during the financial year. Earnings per AT1 unit (basic) correspond to (diluted) earnings per AT1 unit.

Aareal Bank Group

Results H1 2023 by segments

	A Structured Banking & a Property Digital r Financing Solutions e		Consolidation/ Aareon Reconciliation		Aareal Bank Group
	01.01.- 30.06. 2023	01.01.- 30.06. 2022	01.01.- 30.06. 2023	01.01.- 30.06. 2022	01.01.- 30.06. 2023	01.01.- 30.06. 2022	01.01.- 30.06. 2023	01.01.- 30.06. 2022	01.01.- 30.06. 2023	01.01.- 30.06. 2022
€ mn
Net interest income	365	313	111	2 3	-14	-6	0	0	462	330
Loss allowance	160	107	0	0	0	0			160	107
Net commission income	1	4	1 6	1 5	137	119	-5	-6	149	132
Net derecognition gain or loss	1 2	2 2							1 2	2 2
Net gain or loss from financial instruments (fvpl)	-41	1 8	0	0	0	0			-41	1 8
Net gain or loss on hedge accounting	0	-7							0	-7
Net gain or loss from investments accounted for using the equity method				-1		-1				-2
Administrative expenses	120	146	5 2	3 7	175	118	-5	-6	342	295
Net other operating income / expenses	7	-2	-1	-1	1	3	0	0	7	0
Operating profit	6 4	9 5	7 4	-1	-51	-3	0	0	8 7	9 1
Income taxes	2 5	3 4	2 3	0	-19	-1			2 9	3 3
Consolidated net income	3 9	6 1	5 1	-1	-32	-2	0	0	5 8	5 8
Allocation of results
Cons. net income attributable to non-controlling interests	0	0	0	0	-9	1			-9	1
Cons. net income attributable to shareholders of Aareal Bank AG	3 9	6 1	5 1	-1	-23	-3	0	0	6 7	5 7

Aareal Bank Group

Preliminary results – quarter by quarter

	Structured Property Financing					Banking & Digital Solutions					Aareon					Consolidation / Reconciliation					Aareal Bank Group
	Q2 2023	Q1	Q4	Q3 2022	Q2	Q2 2023	Q1	Q4	Q3 2022	Q2	Q2 2023	Q1	Q4	Q3 2022	Q2	Q2	Q1 2023	Q4	Q3 2022	Q2	Q2 2023	Q1	Q4	Q3 2022	Q2
€ mn
Net interest income	189	176	152	162	163	59	52	43	26	11	- 8	- 6	- 7	- 4	- 3	0	0	0	0	0	240	222	188	184	171
Loss allow ance	128	32	22	63	58	0	0	0	0		0	0	0	0	0						128	32	22	63	58
Net commission income	1	0	1	1	2	8	8	8	8	8	70	67	72	61	61	- 2	- 3	- 3	- 3	- 3	77	72	78	67	68
Net derecognition gain or loss	12	0	-23	2	13																12	0	-23	2	13
Net gain / loss from fin. instruments (fvpl)	-35	- 6	4	4	12	0	0	0	0	0	0	0	0		0						-35	- 6	4	4	12
Net gain or loss on hedge accounting	- 4	4	4	1	- 3																- 4	4	4	1	- 3
Net gain / loss from investments acc. for using the equity method			0							- 1			0	0	- 1								0	0	- 2
Administrative expenses	46	74	60	54	61	20	32	25	17	19	79	96	66	60	65	- 2	- 3	- 3	- 3	- 3	143	199	148	128	142
Net other operating income / expenses	7	0	- 2	- 2	1	- 1	0	0	0	- 1	0	1		1	2	0	0	0	0	0	6	1	1	- 1	2
Operating profit	- 4	68	54	51	69	46	28	26	17	- 2	-17	-34	2	- 2	- 6	0	0	0	0	0	25	62	82	66	61
Income taxes	10	15	18	18	24	14	9	8	6	0	-15	- 4	3	0	- 2						9	20	29	24	22
Consolidated net income	-14	53	36	33	45	32	19	18	11	- 2	- 2	-30	- 1	- 2	- 4	0	0	0	0	0	16	42	53	42	39
Cons. net income attributable to non controlling interests	0	0	0	0	0	0	0	0	0	0	0	- 9	0	- 1	0						0	- 9	0	- 1	0
Cons. net income attributable to ARL shareholders	-14	53	36	33	45	32	19	18	11	- 2	- 2	-21	- 1	- 1	- 4	0	0	0	0	0	16	51	53	43	39

Appendix Definitions and contacts

Definitions

= New Business	New business = Newly acquired business + renewals
=	CET 1
Common Equity Tier 1 ratio	Risk weighted assets
=	NPL-exposure acc. CRR (excl. exposure in cure period)
NPL ratio	Total REF Portfolio
=	Admin expenses (excl. bank levy, et al.)
CIR	Net income
= Net income	Net interest income + Net commission income + Net derecognition gain or loss + Net gain or loss from financial instruments (fvpl) + Net gain or loss on hedge accounting + Net gain or loss from investments accounted for using the equity method + Net other operating income / expense
=	Available stable funding
Net stable funding ratio	Required stable funding
=	Total stock of high quality liquid assets
Liquidity coverage ratio	Net cash outflows under stress
=	operating profit ./. income taxes ./. income/loss attributable to non controlling interests ./. net AT1 coupon
Earnings per share	Number of ordinary shares
= Yield on Debt	NOI x 100 (Net operating income, 12-months forward looking) (without developments) Outstanding incl. prior/pari-passu loans
= CREF-portfolio	Commercial real estate finance portfolio excl. private client business and WIB's public sector loans
= REF-portfolio	Real estate finance portfolio incl. private client business and WIB's public sector loans

Contacts Disclaimer

Frank Finger

Head of Treasury Managing Director Phone: +49 611 348 3001 frank.finger@aareal-bank.com

Alexander Kirsch

Head of Funding Director Treasury Phone: +49 611 348 3858 alexander.kirsch@aareal-bank.com

Hendrik Enzesberger

Analyst Treasury Phone: +49 611 348 3889 hendrik.enzesberger@aareal-bank.com

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

Disclaimer

© 2023 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.

This presentation may contain forward-looking statements. Forward looking statements are statements that are not historical facts; they include statements about Aareal Bank AG's beliefs and expectations and the assumptions underlying them; and they are 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.

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.

As far as this presentation contains information from third parties, this information has merely been compiled without having been verified. Therefore, Aareal Bank AG does not give any warranty, and makes no representation as to the completeness or correctness of any such 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.

Thank you.