Aareal Bank Group maintains successful performance during the second quarter of 2011

Wiesbaden (ots) -

- Consolidated operating profit up by 42 per cent year-on-year, to
EUR 44 million
- Tier 1 ratio at 15.8 per cent as at 30 June 2011 / Core Tier 1
ratio at 11.0 per cent
- Full-year outlook for 2011 affirmed

Aareal Bank Group's successful business development continued into
the second quarter of the current year. At EUR 44 million,
consolidated operating profit exceeded the previous year's figure by
around 42% (Q2 2010: EUR 31 million), almost matching the
extraordinary levels seen during the first quarter of 2011. Aareal
Bank Group thus once again proved its operative strength, in a market
environment that remains challenging.

"Our good performance during the second quarter once again
demonstrated that a prudent business policy geared towards
sustainable growth, which we pursued over recent years, is paying
off. After the first six months, we remain well on track for
achieving our goals for 2011 as a whole", said CEO Dr Wolf
Schumacher, commenting on the results. "We thus remain in an
excellent position to exploit the opportunities for attractive new
business that are available in the current market environment", he
added.

Despite prevailing uncertainty on the financial and capital
markets, Aareal Bank not only completed its scheduled funding
activities, but also successfully executed a rights issue during the
second quarter, raising gross issue proceeds of EUR 269.6 million.
The net proceeds from the capital increase will support the future
growth of the bank´s Structured Property Financing segment,
consistent with its current credit risk strategy. At the same time,
the bank used the capital increase to strengthen its regulatory
capital base, and used EUR 75 million of the net proceeds for a
further partial repayment of the silent participation provided by the
German Financial Markets Stabilisation Fund (SoFFin).

Against the background of its good funding situation, during April
2011 Aareal Bank also carried out an early redemption of the
SoFFin-guaranteed EUR 2 billion bond maturing in June 2013, which the
bank had held on its own books, in agreement with SoFFin. Moreover,
the bank was able to repurchase from investors just under EUR 0.8
billion worth of notes from the remaining EUR 2 billion
SoFFin-guaranteed bond issue maturing in March 2012.

Structured Property Financing: operating profit once again exceeds
the previous year's figure

Operating profit in the Structured Property Financing segment of
EUR 41 million for the second quarter of 2011 exceeded the previous
year's figure of EUR 25 million by 64 per cent, and almost matched
the extraordinarily strong results achieved in the first quarter (EUR
43 million). The year-on-year increase was largely due to an increase
in net interest income - reflecting higher margins - and lower
allowance for credit losses, which amounted to EUR 24 million in the
second quarter of 2011 (Q2 2010: EUR 33 million). Aggregate allowance
for credit losses of EUR 42 million for the first half of the year
was therefore lower than the pro-rata forecast range of EUR 110
million to EUR 140 million for the full year, but within the
fluctuation range expected.

During the course of 2011 to date, the property sector continued
to gradually improve, reflecting the predominantly positive
performance of the economy as a whole. In this economic environment,
the business framework for the commercial property markets was stable
to slightly positive.

As expected, there were attractive opportunities for high-margin
new business in this market situation - which the bank continued to
exploit during the second quarter, maintaining its risk-sensitive
lending policy. New business totalled EUR 1.8 billion from April to
June, thus exceeding the figures for both the previous quarter (EUR
1.4 billion) and for Q2 2010 (EUR 1.6 billion). Aggregate new
business originated during the first half of 2011 thus amounted to
EUR 3.2 billion - up approximately 10% year-on-year. Newly acquired
business more than doubled year-on-year, whilst the share of loan
renewals declined significantly.

Consulting/Services: volume of deposits remaining on a high level

Aareal Bank made further progress towards its strategic objectives
in the Institutional Housing Unit of its Consulting/Services segment
during the second quarter: these objectives were to increase the
volume of deposits by acquiring new clients, and to increase
cross-selling of the broad product range in its existing client base.
At an average EUR 4.7 billion, the volume of deposits was at a high
level during the second quarter of 2011 - in fact, it has been rising
continuously since the first quarter of 2010. Aareal Bank benefits
from its strong market penetration, its extensive range of products
and services, and from many years of experience as the lead bank to
the German institutional housing industry. This enabled the bank to
maintain a strong position in the market, despite strong competitive
pressure on money market investment terms.

IT subsidiary Aareon AG has performed on schedule during the
current financial year to date. In particular, Aareon's new Wodis
Sigma product line continued to develop positively during the second
quarter. A total of 347 clients have opted for Wodis Sigma since its
introduction, with 216 already using the software in production. To
adequately service the strong demand, Aareon has invested further in
expanding its advisory and support capacities. With the rollout of
the new Wodis Sigma Release 3.0 in the fourth quarter of 2011, Aareon
will increasingly be offering its clients an alternative software
rental option, alongside the existing licence model. Aareon can
therefore pave the way for its clients to benefit from the advantages
of cloud computing individually geared towards the institutional
housing industry. Against this background, more users of the WohnData
application - which will be phased out in 2012 - have opted to
migrate to the Software as a Service option. When using the software
under such a rental scheme, Aareon's SaaS clients pay regular usage
fees over a long-term period, but do not need to purchase a software
licence - thus saving the related one-off costs.

Operating profit in the Consulting/Services segment for the second
quarter of 2011 amounted to EUR 3 million, after EUR 4 million in the
previous quarter. The decline was attributable to a higher level of
investment in the future business, as mentioned above, particularly
in the Wodis Sigma product line. Due to consolidation effects
(related to the acquisition of SG|automatisering bv), among others,
the meaningfulness of a comparison with the same quarter of the
previous year (Q2 2010: EUR 6 million) is limited.

Successful funding activities / capital base strengthened further

Aareal Bank Group continued to successfully carry out its funding
activities during the second quarter of 2011. The bank continues to
benefit from a good liquidity status, as evidenced in the early
redemption of the majority of SoFFin-guaranteed bonds. Aareal Bank
raised a total of EUR 1.7 billion in long-term funds on the capital
markets during the period under review, with Mortgage Pfandbriefe
accounting for EUR 0.8 billion and unsecured funding for EUR 0.9
billion. Key funding transactions included in particular, a
three-year bearer bond and the placement of a five-year Mortgage
Pfandbrief on the capital market. Both transactions were sized at EUR
500 million each.

The bank raised a total of EUR 2.8 billion in long-term funds on
the capital market through private and public transactions during the
first six months of the financial year, comprising EUR 1.6 billion in
Mortgage Pfandbriefe and EUR 1.2 billion in unsecured funding.

Aareal Bank further strengthened its already solid capital base
via the capital increase executed during the second quarter. Aareal
Bank's Tier 1 ratio as at 30 June 2011 stood at 15.8 per cent, which
is also good by international standards, compared to 12.9 per cent at
the 2010 year-end. In this context, it is worth noting that the bank
will only apply the portion of the proceeds from the capital increase
earmarked for additional growth during the second half of the year
for the purpose of originating additional new business. The bank's
Core Tier 1 ratio (the Tier 1 ratio excluding hybrid capital and the
SoFFin silent participation) was 11.0 per cent as at 30 June 2011.

Notes to Group financial performance

Net interest income amounted to EUR 134 million in the second
quarter (Q2 2010: EUR 122 million), which corresponds to a total
figure for the first six months of the financial year of EUR 268
million (H1 2010: EUR 239 million). Net interest income after
allowance for credit losses for the first half of the year totalled
EUR 226 million (H1 2010: EUR 174 million).

Net commission income for the quarter under review was EUR 31
million (Q2 2010: EUR 32 million). Net commission income totalled EUR
61 million for the first half of the year (H1 2010: EUR 62 million).
This figure includes costs of EUR 15 million (H1 2010: EUR 11
million) incurred for bonds guaranteed by SoFFin.

Net trading income/expenses for the second quarter totalled EUR 2
million (Q2 2010: EUR -13 million). The figure for the first six
months amounted to EUR -6 million (H1 2010: EUR -7 million). Net
trading income/expenses is primarily attributable to the measurement
of derivatives used to hedge interest rate and currency risks, as
well as from unrealised changes in value from sold hedging
instruments on selected EU sovereign countries.

Aareal Bank's result from non-trading assets amounted to EUR 2
million for the second quarter (Q2 2010: EUR 14 million). The
half-year figure amounted to EUR 4 million, compared to EUR 14
million in the same period of the previous year. The positive result
was mainly attributable to sales of fixed-income securities.

Consolidated administrative expenses amounted to EUR 96 million in
the second quarter (Q2 2010: EUR 92 million), and EUR 187 million in
the first half-year - almost unchanged from the previous year (EUR
183 million). This continues to reflect pursuance of the Group's
strict cost discipline.

Net other operating income and expenses in the second quarter
amounted to EUR -10 million (Q2 2010: EUR -6 million). The figure for
the first half of the year amounted to EUR -12 million (H1 2010: EUR
-8 million).

On balance, consolidated operating profit for the second quarter
amounted to EUR 44 million (Q2 2010: EUR 31 million). Taking into
consideration income taxes of EUR 14 million and non-controlling
interest income of EUR 4 million, consolidated net income after
non-controlling interest income amounted to EUR 26 million. After
deduction of the net interest payable on the SoFFin silent
participation, consolidated income stood at EUR 21 million (Q2 2010:
EUR 9 million).

Aareal Bank Group's consolidated operating profit thus amounted to
EUR 91 million for the first six months of the financial year (H1
2010: EUR 61 million). Taking into consideration taxes of EUR 26
million and non-controlling interest income of EUR 9 million, net
income attributable to shareholders of Aareal Bank AG amounted to EUR
56 million. After deduction of the net interest payable on the SoFFin
silent participation, consolidated net income stood at EUR 45 million
(H1 2010: EUR 17 million).

Outlook: Forecasts for the full year 2011 affirmed

Despite the Brussels summit resolutions on 21 July 2011, the
European sovereign debt crisis and the US debt issue are set to
remain at the top of the agenda of financial and capital markets. It
is thus fair to expect volatility on financial and capital markets to
remain high for the time being. Overall, the risks in the financial
system have increased.

Provided that the sovereign debt crisis will not deteriorate
further, Aareal Bank Group continues to see good potential for
maintaining its positive business development during the remainder of
the year, in this challenging market environment. The bank is making
good progress in achieving its targets for 2011, which were last
raised in April.

Accordingly, on the back of a moderately higher interest rate
environment and expected revenues from additional new business, the
Management Board expects net interest income for 2011 to be higher
than in the previous year. The volume of new business generated in
the Structured Property Financing segment is expected to increase to
between EUR 7 billion and EUR 8 billion. The bank expects allowance
for credit losses in a range of EUR 110 million to EUR 140 million
during the 2011 financial year. As in the previous years, the bank
cannot rule out additional allowances for unexpected credit losses
that may be incurred during 2011. Net commission income for the
financial year 2011 is expected to show a marked increase compared
with the previous year. The net figure will benefit from relief due
to lower guarantee fees, due to the partial redemption of
SoFFin-guaranteed bonds. Aareal Bank continues to believe that during
2011 it will be able to once again markedly increase operating
results over and above those for the 2010 financial year - results
which were already good in the context of the challenging market
environment.

Note to editors: Aareal Bank's full interim report for the second
quarter of 2011 is available for download from
http://www.aareal-bank.com/financialreports.

Aareal Bank

Aareal Bank AG is one of the leading international specialist
property banks. The Aareal Bank share is included in Deutsche Börse's
mid-cap MDAX index. Aareal Bank operates on three continents:
leveraging its successful European business model, the bank has
established similar platforms in North America and in the
Asia-Pacific region. It provides property financing solutions in more
than 20 countries.

Contact:
Aareal Bank AG
Corporate Communications

Sven Korndörffer
phone: +49 611 348 2306
sven.korndoerffer@aareal-bank.com

Christian Feldbrügge
phone: +49 611 348 2280
christian.feldbruegge@aareal-bank.com

Investor Relations

Jürgen Junginger
phone: +49 611 348 2636
juergen.junginger@aareal-bank.com