Aareal Bank Group posts a marked increase in profits for the 2011 financial year

Wiesbaden (ots) -
- Consolidated operating profit up 38 per cent over the previous
year to EUR 185 million - consolidated net income more than
doubled,

to EUR 93 million

- Tier 1 ratio at 16.3 per cent and core Tier 1 ratio at 11.3 per
cent, as at 31 December 2011
- CEO Dr Wolf Schumacher: "We exploited the opportunities
available to us during the year under review, and delivered on
our promises despite a challenging market environment."

Thanks to an excellent business performance also maintained during
the final quarter, Aareal Bank significantly increased its 2011
financial year results over the previous year. Based on preliminary,
unaudited figures, consolidated operating profit for the 2011
financial year climbed by 38% or EUR 51 million compared with 2010,
to EUR 185 million - despite the very challenging market environment
the bank faced for long periods during 2011. Consolidated net income
reached EUR 93 million and has therefore more than doubled
year-on-year (2010: EUR 46 million).

Aareal Bank Group replicated the positive performance of the
previous quarters in the fourth quarter of 2011 too. At EUR 47
million, consolidated operating profit was significantly higher than
in the final quarter of 2010 (EUR 40 million). Consolidated net
income increased to EUR 24 million in the fourth quarter (Q4 2010:
EUR 19 million).

Aareal Bank achieved its key targets in the financial year under
review. The excellent result - considering the challenging market
environment - is attributable to, amongst other things, a significant
increase in net interest income, which benefited from the previous
year's high-margin new business. Aareal Bank also consistently took
advantage of available market opportunities and increased the volume
of new business to EUR 8.0 billion; it was therefore at the upper end
of the projected target corridor of EUR 7 billion to EUR 8 billion
and clearly outperformed the level achieved in 2010 (EUR 6.7
billion). Maintaining a prudent business policy throughout 2011 paid
off, too: on the one hand, allowance for credit losses totalling EUR
112 million was at the lower end of the projected rage of EUR 110 to
EUR 140 million and was only marginally higher than last year (EUR
105 million), despite the poor economic development.

"We delivered on our promises again in the financial year under
review, despite the escalating turbulences on financial markets in
the second half of the year. Our very good results show that Aareal
Bank Group is well-positioned to master the challenges presented by
the economic downturn, the uncertain political framework and the
cumulative regulatory changes that are forthcoming", CEO Dr
Schumacher explained.

2011 financial year: good performance despite challenging
environment

Consolidated net interest income posted for the financial year
under review amounted to EUR 547 million (2010: EUR 509 million). The
increase was largely based on the higher average margins achieved in
the lending business. Margins from the deposit-taking business with
the institutional housing industry were lower than planned, due to
lower interest rate levels - which persist for longer than
anticipated.

At EUR 112 million, the allowance for credit losses in the 2011
financial year was slightly higher than the figure posted for the
previous year (EUR 105 million).

The significant improvement in net commission income of EUR 144
million (2010: EUR 123 million) reflected - amongst other things -
lower running costs of EUR 21 million for the guarantee facility
extended by SoFFin, compared with EUR 30 million in 2010. The item
also includes, for the first time, full net commission income of EUR
17 million (2010: EUR 4 million) from SG automatisering bv, which was
acquired in the fourth quarter of 2010.

Net trading income/expenses, results from non-trading assets and
the net result on hedge accounting totalled EUR -9 million after EUR
-6 million the year before. 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 the sale of hedges for selected EU sovereign countries. Results
from non-trading assets were defined largely by the sale of
fixed-income securities within the scope of active portfolio
management.

At EUR 382 million, administrative expenses were slightly higher
than the previous year (EUR 366 million). The figure includes special
effects, including the bank levy that was imposed for the first time
in 2011, as well as expenses incurred in conjunction with measures
taken to improve efficiency and optimise income.

Taking into account net other operating income and expenses of EUR
-14 million (2010: EUR -9 million), consolidated operating profit for
the 2011 financial year amounted to EUR 185 million (2010: EUR 134
million). After deduction of taxes of EUR 52 million and EUR 19
million in income attributable to non-controlling interests, net
income attributable to shareholders of Aareal Bank AG amounted to EUR
114 million (2010: EUR 76 million). After deduction of the EUR 21
million net interest payable on the SoFFin silent participation,
consolidated net income stood at EUR 93 million (2010: EUR 46
million).

The positive results mean that Aareal Bank will service all of its
subordinated refinancing vehicles for the 2011 financial year. This
includes the silent participation by SoFFin, and the bank's other
hybrid instruments.

Aareal Bank continued to pursue its successful business policy -
strictly focusing on quality - in its Structured Property Financing
segment. Despite an economic environment that deteriorated especially
in the second half of the year, Aareal Bank exploited available
opportunities to originate attractive new business, which increased
to EUR 8.0 billion during the 2011 financial year - up from EUR 6.7
billion the year before. This increase was also supported by, amongst
other things, the rights issue successfully conducted by Aareal Bank
in the second quarter, raising gross issuing proceeds of around EUR
270 million. The resulting strengthening of the capital base provided
greater scope for generating new business. The share of new loans
extended in new business increased, exceeding 60 per cent.

Net interest income posted by the segment for the financial year
under review amounted to EUR 508 million after EUR 467 million the
previous year. The increase is based largely on higher average
margins achieved in the lending business.

Segment administrative expenses of EUR 217 million was in line
with the previous year's levels, despite special effects including
the bank levy that was imposed for the first time in 2011, as well as
expenses incurred in conjunction with measures taken to improve
efficiency and optimise income. This highlights Aareal Bank's
continued strict cost discipline.

Net income from investment property amounted to EUR 10 million and
was attributable mainly to rental income. Last year's result of EUR
-17 million was burdened by a non-recurring charge recognised for the
repositioning of a property.

Taking into account net other operating income/expenses of EUR -17
million, operating profit for the Structured Property Financing
segment amounted to EUR 165 million (2010: EUR 108 million). After
deduction of tax expenses of EUR 46 million and EUR 17 million in
non-controlling interest income, the segment result was EUR 102
million (previous year: EUR 60 million).

In the Consulting / Services segment, Aareon's business developed
on schedule in the 2011 financial year, while the low interest rate
environment which persist for longer than anticipated burdened the
profitability of the deposit-taking business.

The volume of deposits placed in this segment increased
significantly although it is still facing intense competition; it
averaged EUR 4.7 billion in the 2011 financial year (2010: EUR 4.1
billion).

Sales revenue amounted to EUR 203 million in the 2011 financial
year (2010: EUR 199 million). This increase was accounted for by,
amongst other things, the sales revenue collected over the entire
period under review from SG automatisering bv, which was acquired by
Aareon in the fourth quarter of 2010 (2011: EUR 20 million, 2010: EUR
5 million). On the other hand, the low interest rate environment
burdened the margins from the deposit-taking business that are
reported in revenues.

On balance, the Consulting / Services segment generated operating
profit of EUR 20 million (2010: EUR 26 million). After deduction of
EUR 6 million in taxes and EUR 2 million in non-controlling
interests, the segment result stands at EUR 12 million (2010: EUR 16
million).

Successful funding activities - capitalisation remains solid

Aareal Bank Group successfully carried out all its funding
activities as planned during the 2011 financial year. The bank had
already reached its funding targets for the full-year 2011 by the end
of the third quarter, despite the challenging situation on the
financial and capital markets.

Aareal Bank raised a total of EUR 4.3 billion in medium- and
long-term funds on the capital market in 2011. The issue volume of
long-term, unsecured funds amounted to EUR 1.6 billion in a very
difficult environment, especially for unsecured issues; this confirms
the trust that fixed income investors still continue to place in
Aareal Bank. Pfandbriefe totalling EUR 2.7 billion were also issued,
once again proving how very important this instrument is to Aareal
Bank's refinancing mix.

The bank's solid refinancing situation is also reflected in the
early repayment of the issue guarantee granted by the Financial
Markets Stabilisation Fund (SoFFin). The EUR 2 billion
SoFFin-guaranteed bond maturing on 5 June 2013, which was held on the
bank's own books, was redeemed early in April 2011. Additionally,
investors holding the remaining EUR 2 billion in SoFFin-guaranteed
notes (maturing on 26 March 2012) were invited in June 2011 to redeem
their notes early. Investors took up our offer in an amount of EUR
0.8 billion. With the repayment of the residual amount, Aareal Bank
will have repaid all guarantees extended by SoFFin.

Aareal Bank remains very solidly financed. Besides an additional
partial repayment of the SoFFin silent participation and the
appropriation of funds for additional new business, some of the funds
raised from the successful capital increase were also used to
strengthen the regulatory capital. The bank's comfortable Tier 1
ratio of 16.3 per cent as at 31 December 2011 (up from 12.9 per cent
at year-end 2010) is also good by international standards. The core
Tier 1 ratio, excluding the SoFFin silent participation and other
hybrid capital, was 11.3 per cent. The capital ratios stated are
based on the full reinvestment of profits generated during the 2011
financial year.

Notes on the preliminary Income Statement for the fourth quarter
of 2011

At EUR 47 million, Aareal Bank Group's operating profit in the
fourth quarter was EUR 7 million higher than the same period of the
previous year.

Net interest income in the final quarter of 2011 was EUR 146
million, after EUR 139 million in Q4 2010, predominantly on account
of currency translation effects and non-recurring effects in the
lending business.

Allowance for credit losses in the fourth quarter was EUR 34
million, compared with EUR 8 million in Q4 2010. Net interest income
after allowance for credit losses amounted to EUR 112 million,
compared with EUR 131 million in the same quarter of 2010.

Net commission income in the fourth quarter was EUR 45 million,
compared with EUR 37 million in Q4 2010. The low costs for the
guarantee facility extended by SoFFin are reflected in particular
here.

The balance of net trading income/expenses, results from
non-trading assets, and the net result on hedge accounting, amounted
to EUR -7 million in the final quarter (Q4/2010: EUR -14 million).

Consolidated administrative expenses during the fourth quarter
were EUR 102 million, compared with EUR 95 million in Q4 2010. In
particular, this increase reflected measures taken to improve
efficiency and optimise income.

On balance, Aareal Bank Group generated consolidated operating
profit of EUR 47 million in the fourth quarter (Q4/2010: EUR 40
million). Taking into consideration income taxes of EUR 13 million
and EUR 5 million in income attributable to non-controlling
interests, net income after non-controlling interest income amounted
to EUR 29 million. After deduction of the net interest payable on the
SoFFin silent participation, consolidated net income stood at EUR 24
million (Q4 2010: EUR 19 million).

Outlook: solid performance, despite very challenging environment

Within the scope of the sovereign debt crisis that is still
unresolved, the Management Board believes financial markets will
remain volatile during the current year and therefore expects the
risks in the financial system to persist. The risks in relation to
economic development have also increased in recent months. This is
reflected in - amongst other things - a downgrading across the board
of growth forecasts for the important economies, and the global
economy overall. The uncertain political framework and the cumulative
effects of the forthcoming changes to the regulatory environment
(which have not yet been clarified) present further challenges.

Aareal Bank will counter these uncertainties, amongst other
things, by pursuing a very cautious liquidity and investment
strategy. This strategy will lead to a burden on net interest income
that will more than offset the positive effect of higher margins on
new business originated last year. On these assumptions, Aareal Bank
expects a considerable decline in net interest income over the year.

The bank continues to forecast allowance for credit losses in a
range of EUR 110 million to EUR 140 million, which is unchanged from
last year. As in previous years, the bank cannot rule out additional
allowances for unexpected credit losses in 2012. Aareal Bank expects
a significant increase in net commission income over 2011,
particularly since the charges on the SoFFin-guaranteed notes will no
longer apply. It anticipates a marked reduction in administrative
expenses, due to the cost-cutting measures that resulted in charges
last year.

All in all, the Management Board sees good potential for achieving
consolidated net income that is only slightly below last year's very
good result. "We are cautious business people who have to take into
account the deterioration of the economic framework during the
current year. Nevertheless, our great flexibility allows us to react
at all times to changes in the environment and to take advantages of
available opportunities", Schumacher commented.

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