Aareal Bank Group reports successful business development for the second quarter of 2012

Wiesbaden (ots) -
- Consolidated operating profit up slightly year-on-year, to EUR
45 million
- Core Tier 1 ratio at 11.7 per cent, providing a solid foundation
for the planned expansion of new business during the second half
of the year
- Aareal Bank affirms guidance for full-year consolidated
operating profit

Aareal Bank Group once again performed well in a challenging
market environment, continuing its successful business development
throughout the second quarter of 2012. With EUR 45 million in
consolidated operating profit for the period from April to June, the
bank exceeded both the previous quarter's figure of EUR 43 million
and the corresponding figure for the second quarter of 2011 (EUR 44
million). Consolidated net income was EUR 24 million, compared to EUR
21 million in the first quarter of the year, and the same amount in
the second quarter of the previous year.

"There was no relief for the banking sector in the challenging
environment during the second quarter. Quite the contrary, in fact:
financial and capital markets have remained particularly volatile,
with the renewed aggravation of the European sovereign debt crisis
adding to market uncertainty. The issue of the cumulative impact of
impending regulatory changes on banks and on the real economy still
remains unresolved, whilst there are no signs of a stable policy
framework for banks. Against this background, we are very satisfied
with Aareal Bank's second-quarter results", said Dr Wolf Schumacher,
Chairman of the Management Board.

Given the uncertain environment, Aareal Bank continued to adhere
to its very cautious liquidity and investment strategy during the
second quarter, which burdened net interest income for the period
under review. Thanks to the bank's conservative business policy over
the past several years, allowance for credit losses was in line with
that of the previous year (which was already very low), thus
remaining at a clearly manageable level. Due to its extremely
successful refinancing activities during the second quarter, Aareal
Bank further safeguarded its good liquidity status.

Following a reticent start of the year, Aareal Bank increased its
new business origination in the Structured Property Financing segment
during the second quarter. New business volume totalled EUR 1.2
billion, up from EUR 0.5 billion in the first quarter. "Based on our
decidedly robust financial position and thanks to our successful
funding activities during the first half of the year, we are in a
position to exploit attractive market opportunities at any time. We
will focus more heavily on doing so in the second half of 2012",
Schumacher said. "We thus affirm our projected new business target of
EUR 4.5 billion to EUR 5.5 billion for the year 2012 as a whole.

Structured Property Financing segment: new business expanded

At EUR 44 million, operating profit in the Structured Property
Financing segment for the second quarter of 2012 exceeded the
previous year's figure of EUR 41 million as well as the first-quarter
result of EUR 40 million.

Net interest income in the period under review was EUR 115 million
after EUR 124 million in the comparable period of the previous year.
The positive effects of higher margins from new business originated
in the previous year were offset by the burden resulting from the
very cautious liquidity and investment strategy.

Allowance for credit losses in the second quarter of 2012 amounted
to EUR 25 million (Q2 2011: EUR 24 million), bringing the figure for
the first half of the year to EUR 37 million (H1 2011: EUR 42
million). It was therefore lower than the pro-rata forecast range of
EUR 110 million to EUR 140 million for the financial year, but within
the expected range.

In commercial property financing, the developments of the first
quarter continued, with markets remaining largely stable overall.
Looking at the competitive environment, many institutions are
currently focusing on their domestic markets, especially in Europe.
In this environment, Aareal Bank is one of the few remaining
providers of commercial property finance that is fully operational on
an international level.

Aareal Bank increased the new business originated in the segment
during the second quarter, compared to the first three months of the
year, to EUR 1.2 billion - with a growing share of new loans granted.
Total new business volume for the first half of 2012 amounted to EUR
1.7 billion.

Consulting/Services: deposit volumes continued to rise

Contrary to expectations, interest rate levels - which are
relevant for income from the deposit-taking business in our
Consulting/Services segment - have declined year-to-date. This
burdened the segment result. Operating profit in the
Consulting/Services segment totalled EUR 1 million for the quarter
under review (Q2 2011: EUR 3 million). However, the importance of
this business goes way beyond the interest margin generated from the
deposits - which is under pressure in the current market environment.
This is because the deposits from the institutional housing industry
represent a strategically important additional source of funding for
Aareal Bank.

Against this background, the development of deposit volumes from
institutional housing industry clients - in the banking business of
the Consulting/Services segment - developed very favourably. During
the second quarter Aareal Bank further improved on the already high
average level of EUR 5.0 billion in the previous quarter, to EUR 5.5
billion.

The business activities of the Aareon AG subsidiary were on
schedule during the second quarter. Once again, the Wodis Sigma
product line - which came to the market in 2009 - provided the basis
for this. The second quarter once again saw numerous clients deciding
to adopt the product; roughly 400 property management companies of
all shapes and sizes now use it. Aareon's international business also
developed favourably.

Successful funding activities - capitalisation remains solid

Aareal Bank was successful in its refinancing activities during
the second quarter. The bank raised a total of EUR 1.3 billion in
long-term funds, comprising EUR 800 million in Mortgage Pfandbriefe,
EUR 400 million in unsecured funding, and EUR 100 million in
subordinated bonds. Aareal Bank has therefore maintained its
long-term funding inventory at a high level. Of the issues launched
in the second quarter, the EUR 500 million Mortgage Pfandbrief with a
five-year term to maturity issued in June is particularly worth
mentioning.

The bank raised a total of EUR 3.3 billion in long-term funds on
the capital market during the first six months of 2012, comprising
EUR 1.8 billion in Mortgage Pfandbriefe, EUR 1.4 million in unsecured
refinancing, and EUR 0.1 billion in subordinated bonds.

Aareal Bank therefore continues to be very solidly financed. As at
30 June 2012 the Tier 1 ratio was 16.7 per cent, which is comfortable
on an international level. The core Tier 1 ratio was 11.7 per cent.
Aareal Bank thus already largely complies with the tightened capital
requirements under Basel III, and is thus well-positioned for the
planned expansion of new business during the second half of 2012.

Notes to Group financial performance

Net interest income of EUR 122 million for the second quarter of
2012 was EUR 12 million lower year-on-year (Q2 2011: EUR 134
million). The figure for the first six months of the financial year
was EUR 251 million (H1 2011: EUR 268 million). The positive effects
of higher margins from new business originated in the previous year
were offset by the burden resulting from the very cautious liquidity
and investment strategy.

Net commission income of EUR 40 million for the quarter under
review was markedly higher year-on-year (Q2 2011: EUR 31 million).
Net commission income totalled EUR 80 million for the first half of
the year (H1 2011: EUR 61 million). Costs for the bonds guaranteed by
SoFFin were incurred for the last time in the first half of 2012,
amounting to EUR 3 million (H1 2011: EUR 15 million).

The aggregate of net trading income/expenses and the result from
hedge accounting amounted to EUR -2 million for the second quarter
(Q2 2011: EUR 4 million); the relevant aggregate figure for the first
six months of 2012 was EUR -28 million. This was primarily
attributable to the measurement of derivatives used to hedge interest
rate and currency risks.

Consolidated administrative expenses totalled EUR 89 million for
the second quarter (Q2 2011: EUR 96 million) and EUR 180 million for
the first half of the year (H1 2011: EUR 187 million), thus remaining
significantly below the previous year's figures, both for the second
quarter and the first half of the year. This was largely due to the
measures designed to optimise structures and processes, which were
implemented in the previous year.

Consolidated net other operating income and expenses broke even
for the second quarter and the first half of 2012. The figure for the
same period of the previous year (H1 2011: EUR -12 million) reflected
in particular expenses incurred with one individual property.

On balance, consolidated operating profit for the second quarter
amounted to EUR 45 million (Q2 2011: EUR 44 million). Taking into
consideration income taxes of EUR 11 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.

Aareal Bank Group's consolidated operating profit for the first
six months of the financial year totalled EUR 88 million (H1 2011:
EUR 91 million). Taking into consideration taxes of EUR 23 million
and non-controlling interest income of EUR 10 million, net income
attributable to shareholders of Aareal Bank AG amounted to EUR 55
million. After deduction of the net interest payable on the SoFFin
silent participation, consolidated income stood at EUR 45 million.

Outlook: Aareal Bank affirms guidance for full-year consolidated
operating profit

In the wake of the still-unresolved sovereign debt crisis, Aareal
Bank anticipates continued volatility - and hence, prevailing risks -
on the financial and capital markets during the remainder of the
financial year 2012. Economic development will also continue to face
significant risks and uncertainties. The uncertain political
framework and cumulative effects of forthcoming changes to the
regulatory environment - which have not yet been clarified - also
present further challenges for the banking sector.

Aareal Bank continues to counter this uncertainty by pursuing a
cautious liquidity and investment strategy. The resulting burden on
net interest income can only partially be offset by the positive
impact of higher margins from new business originated in the previous
year. ECB's decision to cut its key interest rate at the beginning of
July will only marginally burden net interest income. Aareal Bank
therefore continues to expect a marked decline in net interest income
2012.

The Management Board 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 the previous years, the bank cannot
rule out additional allowances for unexpected credit losses that may
be incurred during 2012. Net commission income will increase
significantly, since the charges pertaining to the SoFFin-guaranteed
bonds will no longer apply. Due to measures designed to optimise
structures and processes, implemented in 2011, administrative
expenses are expected to notably decline compared to the financial
year 2011.

The bank also affirms its target for new business in the
Structured Property Financing segment, which is projected in a range
between EUR 4.5 billion to EUR 5.5 billion. Only for the operating
profit in the Consulting/Services segment Aareal Bank now expects a
lower figure than in the previous year. This reflects the fact that,
contrary to previous expectations, interest rate levels have declined
further year-to-date; these are relevant for income from the
deposit-taking business.

Aareal Bank has affirmed its forecast for consolidated operating
profit for 2012, in spite of the various challenges identified above:
The bank continues to see good potential for achieving full-year
consolidated operating profit that is only slightly below last year's
very good result.

"Even though the situation on global financial markets remains
tense, thanks to our decidedly robust capital base and refinancing
situation, we are in an excellent position to be successful in this
challenging environment. We can leverage our competitive edge: client
proximity on an international scale, combining profound property and
sector expertise with the flexibility that our mid-sized structure
affords us. This will allow us to continue expanding our leading
market position going forward", Schumacher emphasised.

Note to editors: Aareal Bank's full interim report for the second
quarter of 2012 is available for download from
http://www.aareal-bank.com/en/investor-relations/financial-reports/.

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