Aareal Bank Group remains on track in the third quarter of 2012

Wiesbaden (ots) -

- Third-quarter consolidated operating profit of EUR 42 million
- Core Tier 1 ratio of 11.6 per cent as at 30 September 2012
- Basel III requirements already fulfilled as of today
- Aareal Bank affirms guidance for full-year consolidated
operating profit

Aareal Bank Group has remained on track during the third quarter
of 2012, and continued to perform well in a market environment that
is still challenging. At EUR 42 million, consolidated operating
profit was lower than the very good figure achieved in the same
period of the previous year (EUR 47 million), but solid nonetheless.
Consolidated net income was EUR 22 million, compared to EUR 24
million in the second quarter of 2012, and the same amount in the
same quarter of the previous year.

"Conditions remained exceptionally challenging throughout the
third quarter. Against this background, we retained our cautious
stance, whilst consistently taking advantage of market opportunities
that arose. While we boosted our new business as scheduled, we are
aware at the same time of a persistently volatile environment and
continue to hold considerable amounts of liquidity with the European
Central Bank and the Bundesbank. In light of this, we are very
satisfied with the earnings development in the third quarter, too",
Dr Wolf Schumacher, Chairman of the Management Board of Aareal Bank
Group, explained.

In view of the persistent uncertainty emanating from the European
sovereign debt crisis and the still unresolved regulatory plans,
Aareal Bank adhered to its cautious liquidity and investment strategy
during the third quarter as well, which continued to weigh on net
interest income during the period under review. Thanks to the
high-quality property finance portfolio, allowance for credit losses
in the third quarter of 2012 amounted to EUR 30 million (Q3 2011: EUR
36 million) and therefore remained within the anticipated range. The
volume of new business in the Structured Property Financing segment
rose slightly in the third quarter of 2012 over the previous quarter,
to EUR 1.3 billion.

"We continue to see attractive opportunities in the markets we
cover. Our deal pipeline is well-stocked for the remainder of the
financial year and beyond. We therefore remain confident that we will
reach our published new business target of between EUR 4.5 billion
and EUR 5.5 billion in the current financial year. As things
currently stand, we believe there is a good chance that we will reach
the upper end of this range", Dr Schumacher stated.

Structured Property Financing segment: new business volume
increased - deal pipeline well stocked

Operating profit in the Structured Property Financing segment was
EUR 42 million in the third quarter of 2012 and therefore in line
with the same period of the previous year (EUR 42 million).

Net interest income in the period under review was EUR 114 million
after EUR 123 million in the comparable period of the previous year.
The figure was burdened by the bank's cautious liquidity and
investment strategy.

Allowance for credit losses was EUR 30 million in the third
quarter of 2012, compared with EUR 36 million in Q3 2011. Allowance
for credit losses amounted to EUR 67 million for the first nine
months of the year, and 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 of fluctuation.

In commercial property financing, the trends that shaped the first
half of the year continued. The markets for first-class commercial
property remained largely stable, whereas rents and property values
in peripheral locations or for properties of lesser quality came
under pressure. Many banks in Europe continued to focus on their
domestic markets. As one of the few remaining, international and
fully-operational providers of commercial property finance, Aareal
Bank leveraged its competitive edge and strengthened its market
position.

The bank slightly increased the volume of new business in the
segment during the period under review compared with the previous
quarter, to EUR 1.3 billion. Aareal Bank consistently pursued its
business policy: having focused initially on its issuing activity in
the first quarter, it started to increasingly exploit market
opportunities presented in the new lending business during the second
quarter. Total new business for the first nine months of 2012
amounted to EUR 3.0 billion.

Consulting/Services: low-interest-rate environment continues to
pose a burden - volume of deposits up again

Contrary to expectations at the beginning of the year, interest
rate levels - which are relevant for income from the deposit-taking
business in Aareal Bank's Consulting/Services segment - have
continued to decline year-to-date. This burdened the segment result.
The operating profit in the Consulting/Services segment was zero
during the quarter under review, after EUR 5 million in Q3 2011.

Yet the importance of the deposit-taking business in the
Consulting/Services segment goes far beyond the interest margin
generated from the deposits - which is under pressure in the current
market environment. For Aareal Bank, deposits from the institutional
housing industry are a strategically important, additional source of
funding for the lending business that is largely independent of
developments on the capital markets. In addition to the German
Pfandbrief and unsecured bank bonds, they represent an important
pillar in the bank's long-term refinancing mix. Especially in the
prevailing difficult capital market environment, Aareal Bank
therefore sees this business as being a particular competitive
advantage.

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 third quarter Aareal Bank succeeded in further improving on the
already high average level of EUR 5.5 billion in the previous
quarter, to EUR 5.8 billion.

The business activities of the Aareon AG subsidiary were on
schedule during the period under review. As in the previous quarters,
numerous new clients opted for the Wodis Sigma product line during
the third quarter. Launched in 2009, Wodis Sigma is meanwhile used by
more than 400 property companies of all size categories. Aareon's
international business also developed favourably.

Successful refinancing activities and strong capitalisation /
Basel III requirements already fulfilled

Aareal Bank continued to successfully conduct its funding
activities in the third quarter, thereby securing its very solid
liquidity situation. More than EUR 500 million in long-term funds was
raised on the capital market, with Mortgage Pfandbriefe accounting
for around EUR 200 million and unsecured refinancing for approx. EUR
300 million. Aareal Bank has therefore maintained its long-term
funding at a high level. The total volume of long-term funding raised
in the first nine months of 2012 amounted to EUR 3.9 billion.

Aareal Bank therefore continues to be very solidly financed. As at
30 September 2012 the Tier 1 ratio was 16.8 per cent, which is
comfortable on an international level. The core Tier 1 ratio was 11.6
per cent. Aareal Bank thus already complies today with the demanding
capital and liquidity requirements under Basel III, which will be
gradually implemented until the end of 2018.

Notes to Group financial performance

Consolidated net interest income of EUR 119 million in the third
quarter was EUR 14 million lower than for the same period of the
previous year (EUR 133 million). It totalled EUR 370 million (9m
2011: EUR 401 million) for the first nine months of the financial
year and was burdened by the bank's very cautious liquidity and
investment strategy.

Net commission income of EUR 39 million for the quarter under
review was slightly higher than the figure of EUR 38 million for the
same period of the previous year. At EUR 119 million, net commission
income after the first nine months of the year was significantly
higher year-on-year (EUR 99 million).

The aggregate of net trading income/expenses and the net result on
hedge accounting was EUR 4 million in the third quarter. The relevant
aggregate figure for the period from January to September 2012 was
EUR -24 million. This result was 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.

Consolidated administrative expenses totalled EUR 90 million in
the third quarter (Q3 2011: EUR 93 million) and EUR 270 million for
the first nine months of the year (9m 2011: EUR 280 million).

Net other operating income/expenses of EUR -1 million (Q3 2011:
EUR 2 million; 9m 2011: EUR -10 million) were incurred in the third
quarter; the net figure for the entire first nine months of 2012 was
identical. The previous year's figure reflected, in particular,
expenses incurred with one individual property.

On balance, consolidated operating profit for the third quarter
amounted to EUR 42 million (Q3 2011: EUR 47 million). Taking into
consideration income taxes of EUR 10 million and EUR 5 million in
income attributable to non-controlling interests, net income after
non-controlling interest income amounted to EUR 27 million. After
deduction of the net interest payable on the SoFFin silent
participation, consolidated net income stood at EUR 22 million in the
third quarter.

Aareal Bank Group's consolidated operating profit for the first
nine months of the financial year totalled EUR 130 million (9m 2011:
EUR 138 million). Taking into consideration taxes of EUR 33 million
and non-controlling interest income of EUR 15 million, net income
attributable to shareholders of Aareal Bank AG amounted to EUR 82
million. After deduction of the net interest payable on the SoFFin
silent participation, consolidated net income stood at EUR 67 million
(9m 2011: EUR 69 million).

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

Given the still-unresolved sovereign debt crisis, Aareal Bank
anticipates continued volatility on the financial and capital markets
and therefore expects the risks in the financial system to persist
during the remainder of the financial year 2012 as well. Economic
development will also continue to face significant risks and
uncertainty. 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.

Owing to the uncertainty factors referred to, Aareal Bank will
adhere to its 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 and the current year. In this context, the ECB's
decision to cut its key interest rate at the beginning of July will
only marginally burden consolidated net interest income. Aareal Bank
therefore continues to expect a considerable decline in net interest
income 2012.

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. From today's perspective however, it expects the allowance
for credit losses to come in at the lower end of the range. As in the
previous years, the bank cannot rule out additional allowances for
unexpected credit losses that may be incurred during 2012.

Due to the measures that were introduced in 2011 to optimise the
bank's structures and processes, consolidated administrative expenses
are likely to fall significantly this year. Aareal Bank is
forecasting administrative expenses in a range between EUR 350
million and EUR 360 million; this includes the burden arising from
the bank levy.

Its well-stocked deal pipeline is just one reason why Aareal Bank
remains confident that it will achieve its published new business
target of EUR 4.5 billion to EUR 5.5 billion for the current
financial year. As things stand today, the outlook is good for
reaching the upper end of this range. Aareal Bank expects a lower
figure compared to the previous year for operating profit in the
Consulting/Services segment. This reflects the fact that, contrary to
expectations at the beginning of the year, 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 the current financial year, in spite of the ongoing
considerable challenges it faces. It continues to see good potential
for achieving full-year consolidated operating profit that is only
slightly below last year's very good result.

"While we do not anticipate any significant improvement to our
environment in the months ahead, we remain confident about our own
business. Aareal Bank's business model has proved its considerable
viability. This, together with our forward-looking funding policy and
our robust financial position, means we can exploit attractive
opportunities at any time", Schumacher commented.

Note to editors: The full interim report for the third quarter of
2012 is available on
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