Aareal Bank looks to the future with confidence after a successful 2012 financial year

Wiesbaden (ots) -
- Fourth quarter consolidated operating profit of EUR 46 million
and

EUR 176 million for the full year - consolidated net income for
2012: EUR 85 million

- At EUR 6.3 billion, new Structured Property Financing business
clearly exceeded forecast

- Outlook for 2013: Consolidated operating profit expected to
match the level of 2012 - potential to reach the very good level
achieved in 2011

- Aareal Bank specifies its medium-term objectives: 12 per cent
return on equity before taxes targeted by 2016 at the latest /
resumption of an active dividend policy for the 2013 financial
year is planned for 2014, depending on market conditions

- Dr Wolf Schumacher, Chairman of the Management Board: We
achieved all of our main objectives during the past year. After
a good start into 2013, we look ahead with confidence. We are in
a position to continue with our positive development, despite a
changed framework."

Wiesbaden, 20 February 2013 - Aareal Bank Group once again posted
good results for the previous financial year, in a market environment
that remained very challenging for long periods of time. On the basis
of preliminary and unaudited figures, consolidated operating profit
amounted to EUR 176 million and, as announced, was therefore down
only slightly on the previous year's very good figure of EUR 185
million, in spite of the uncertainty that persisted during the year.
Similarly, consolidated net income of EUR 85 million was down only
slightly on the high figure from 2011 (EUR 93 million). The months
between October and December were successful, too. With consolidated
operating profit of EUR 46 million (Q4 2011: EUR 47 million), the
fourth quarter was in fact the strongest quarter of the year.

At EUR 106 million, allowance for credit losses in the 2012
financial year was not only lower than the previous year's figure of
EUR 112 million but also developed more favourably than expected. The
bank's own forecasts on new business in the Structured Property
Financing segment were also exceeded: at EUR 6.3 billion, the volume
of new business clearly exceeded the upper end of the projected range
of EUR 4.5 billion to EUR 5.5 billion. At EUR 358 million,
administrative expenses were significantly lower than the previous
year (EUR 382 million) and within the projected range of EUR 350
million to EUR 360 million.

Dr Wolf Schumacher, Chairman of the Management Board, commented on
the success of the past year: "We continued to remain on track in
2012, in a sometimes difficult environment, and delivered on our
promises again. We achieved all of our main objectives for the year,
even exceeding some of them. We consistently took advantage of market
opportunities that arose, whilst further strengthening our capital
base and liquidity. After a good start into 2013, we look ahead with
confidence. We are in an excellent position to continue our positive
performance going forward, and to further strengthen our leading
market position in both segments."

Financial year 2012: Sound performance in a volatile market
environment

Net interest income for the 2012 financial year was EUR 486
million after EUR 547 million last year. In particular, this figure
reflects the low interest rate environment and the cautious
investment strategy pursued by Aareal Bank during the financial year
just ended, in view of the high degree of uncertainty generated by
the European sovereign debt crisis and the regulatory requirements,
many of which are not yet clarified.

Allowance for credit losses of EUR 106 million was lower than the
previous year's figure of EUR 112 million and the EUR 110 million to
EUR 140 million range projected for the financial year.

Net commission income of EUR 169 million increased significantly
(2011: EUR 144 million), mainly due to lower costs (EUR 3 million;
2011: EUR 21 million) for the bonds guaranteed by the German
Financial Markets Stabilisation Fund (SoFFin), which matured during
the past financial year.

Net trading income/expenses and the net result on hedge accounting
of EUR -14 million (previous year: EUR 20 million) were primarily
attributable to the measurement of derivatives used to hedge interest
rate and currency risk, and to unrealised changes in value from the
sale of hedges for selected EU sovereign countries.

At EUR 358 million, administrative expenses were down on the
previous year (EUR 382 million). This was mainly due to measures
taken to optimise structures and processes initiated during the 2011
financial year and implemented during the financial year under
review. The previous year's figure included related non-recurring
effects of EUR 12 million recognised in the fourth quarter of 2011.

After deduction of net other operating income/expenses of EUR -7
million (2011: EUR -14 million), consolidated operating profit for
the financial year 2012 amounted to EUR 176 million after EUR 185
million in 2011. Taking into consideration taxes of EUR 52 million
and non-controlling interest income of EUR 19 million, net income
attributable to shareholders of Aareal Bank AG amounted to EUR 105
million (2011: EUR 114 million). After deduction of the EUR 20
million net interest payable on the SoFFin silent participation,
consolidated net income stood at EUR 85 million (2011: EUR 93
million).

The positive results mean that Aareal Bank will service all of its
subordinated refinancing vehicles for the 2012 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. Having concentrated initially on its funding activities
during the first six months, it consistently pursued the available
opportunities for attractive new business during the remainder of the
year.

The volume of new business amounted to EUR 6.3 billion in 2012
(2011: EUR 8.0 billion), so that the bank clearly exceeded its
projected target range of EUR 4.5 billion to EUR 5.5 billion. The
share of newly-originated loans in total new business was 47 per cent
(2011: 62 per cent). A comparison with the previous year must take
into account that new business in the 2011 financial year benefited
from the capital increase that was conducted in the second quarter of
2011.

Net interest income in this segment stood at EUR 463 million
(2011: EUR 508 million). The decline was attributable mainly to the
low interest rate environment, and to a cautious investment strategy,
according to which considerable amounts of liquidity were deposited
with the Bundesbank and the European Central Bank.

At EUR 191 million, administrative expenses were below the
previous year's level (EUR 217 million).

The result from investment properties of EUR 5 million mainly
comprises rental income. The decline over the previous year (EUR 10
million) was due especially to the loss of rental income in
conjunction with the sale of a property in the second quarter of
2012.

Taking into account net other operating income and expenses of EUR
-9 million (2011: EUR -17 million), operating profit in the
Structured Property Financing segment amounted to EUR 170 million,
after EUR 165 million the year before. After deduction of income
taxes of EUR 51 million and EUR 17 million in non-controlling
interest income, the segment result was EUR 102 million (2011: EUR
102 million).

Sales revenues in the Consulting/Services segment amounted to EUR
194 million in the 2012 financial year (2011: EUR 203 million). The
decline resulted mainly from the low interest rate environment, which
burdened the margins generated from the deposit-taking business that
are reported under sales revenues.

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, and one 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
relation to the changing regulatory framework, Aareal Bank sees this
business as offering a particular competitive advantage.

Against this background, the development of deposit volumes from
institutional housing industry clients developed very favourably. In
the 2012 financial year, Aareal Bank succeeded in further improving
on the already high average level of EUR 4.7 billion in the previous
year, to EUR 5.6 billion. The figure for the end of the year was EUR
6.3 billion (2011: EUR 4.8 billion).

The business activities of the Aareon AG subsidiary were on
schedule during the 2012 financial year. The good development of the
Wodis Sigma product generation that Aareon launched in 2009 continued
in 2012, too. 477 clients have already opted for Wodis Sigma since
the launch; 102 in the 2012 financial year alone. Aareon's
international business has also developed positively: the share in
Aareon Group's total revenue increased to 28.7 per cent (2011: 27.4
per cent). The total revenue amounted to EUR 165 million.

On balance, the Consulting/Services segment generated operating
profit of EUR 6 million (2011: EUR 20 million). After deduction of
taxes (EUR 1 million) and non-controlling interest income (EUR 2
million), the segment result stood at EUR 3 million (2011: EUR 12
million).

Successful funding activities - ECB repo funds to be repaid

Aareal Bank Group successfully carried out its funding activities
as planned during the 2012 financial year. Owing to the strong demand
for Pfandbriefe and unsecured issues from solid issuers, all of the
measures could be implemented as planned, and the refinancing targets
for the full year were already achieved during the third quarter.

During the period under review, Aareal Bank raised a total of EUR
4.5 billion of medium- and long-term funds on the capital market.
Unsecured issues totalled EUR 2.1 billion, EUR 0.1 billion was
accounted for by subordinated debt. Mortgage Pfandbriefe made up EUR
2.3 billion of the total volume. This highlights how very important
the Pfandbrief remains to Aareal Bank's funding mix.

Thanks to its good liquidity situation, the bank has decided to
fully repay EUR 1 billion provided by the European Central Bank
within the scope of its three-year Long-Term Refinancing Operation
(LTRO) on 28 February 2013, and thus on the earliest possible date.

Aareal Bank remains very solidly financed. The bank's comfortable
Tier 1 ratio of 16.7 per cent as at 31 December 2012 (up from 16.3
per cent at year-end 2011) is also good by international standards.
The core Tier 1 ratio was 11.6 per cent (2011: 11.3 per cent). The
capital ratios stated are based on full accumulation of retained
profit generated during the 2012 financial year, as reported in
accordance with the German Commercial Code (HGB). The Management
Board believes this is still necessary, given the risks that persist
in relation to potential disruptions on the markets and the financial
system.

Notes on the preliminary Income Statement for the fourth quarter
of 2012

At EUR 46 million, Aareal Bank Group's consolidated operating
profit in the fourth quarter of 2012 was down slightly year-on-year
(Q4 2011: EUR 47 million).

According to preliminary figures, net interest income in the final
quarter of 2012 stood at EUR 116 million (Q4 2011: EUR 146 million),
and was therefore down EUR 3 million on the corresponding figure for
the previous quarter (EUR 119 million). Compared with the same period
of the previous year, net interest income was burdened in particular
by the low interest rate environment as well as by the bank's prudent
investment strategy. Moreover, the previous year's figure included
positive non-recurring effects of EUR 9 million. The volume of new
loans granted during the quarter under review was significantly
higher compared with the previous quarters. Since a large proportion
of these loans were disbursed at the end of the financial year or the
start of the new financial year, as expected, these loans only
impacted marginally in net interest income for the fourth quarter.

EUR 39 million in allowance for credit losses was recognised
during the fourth quarter (Q4 2011: EUR 34 million).

At EUR 50 million, net commission income was above the
corresponding quarter of the previous year (Q4 2011: EUR 45 million),
which still included charges of EUR 3 million for the bonds
guaranteed by SoFFin.

Net trading income/expenses and the net result on hedge accounting
totalled EUR 10 million in the final quarter (Q4 2011: EUR 4
million). The result was largely influenced by unrealised changes in
value from the sale of hedges for selected EU sovereign countries.

Consolidated administrative expenses amounted to EUR 88 million
during the fourth quarter (Q4 2011: EUR 102 million). This figure
also reflects the measures to optimise structures and processes that
were initiated in the 2011 financial year. The previous year's figure
included related non-recurring effects of EUR 12 million.

Consolidated operating profit for the fourth quarter thus totalled
EUR 46 million (Q4 2011: EUR 47 million). Taking into consideration
income taxes of EUR 19 million and minority interest income of EUR 4
million, net income after non-controlling interest income amounted to
EUR 23 million. After deduction of the net interest payable on the
SoFFin silent participation, consolidated net income stood at EUR 18
million (Q4 2011: EUR 24 million).

Outlook for 2013: The environment is expected to improve slightly

In view of the decisions reached in recent months at EU level as
well as in the crisis states, the sovereign debt crisis is expected
to ease further. Even though a sustainable solution to the crisis has
not yet been found and a renewed escalation cannot be ruled out,
latest developments on the capital markets suggests that market
participants believe the worst is overcome.

Against this background, Aareal Bank - which celebrates its 90th
anniversary this year - has started this year on a cautiously
optimistic note. Despite the challenges that still exist - especially
the recessionary trend in some European countries and prevailing
uncertainty surrounding future regulatory measures - the Management
Board forecasts a slight improvement in Aareal Bank's business
environment.

Aareal Bank had therefore already started to adjust its previously
very cautious investment strategy in mid-2012. The Management Board
will continue along these lines in 2013 and may further reduce the
funds deposited with the ECB and the Bundesbank. However, the
prevailing low interest rate environment has a negative impact on
these investments, and on the deposit-taking business. The good
margins achieved on the lending side are offset in part by these
effects, so that net interest income in 2013 is expected to come in
only slightly above the previous year's figure.

Planning in relation to allowance for credit losses reflects the
developments on the property markets worldwide. Aareal Bank expects
allowance for credit losses to be in a slightly adjusted range of EUR
110 million to EUR 150 million, particularly in view of the
recessionary trends in Italy, Spain and the Netherlands, as well as a
growing loan portfolio; from today's perspective however, the
Management Board expects allowance for credit losses to be at the
lower end of the range. Aareal Bank expects a stable trend for net
commission income in 2013, at between EUR 165 million and EUR 175
million.

Thanks to the measures implemented to optimise structures and
processes, administrative expenses are also expected to rise slightly
(if at all) compared with 2012, to between EUR 360 million and EUR
370 million.

Notwithstanding a still-challenging environment, the Management
Board believes there is a good chance the bank's consolidated
operating profit will match the level of 2012; there is even
potential to reach the very good level achieved in 2011.

The positive trend should also remain intact in relation to the
new business originated in the Structured Property Financing segment.
Aareal Bank therefore raised the target corridor for its new business
in the current year, to between EUR 6 billion and EUR 7 billion.

In the Consulting/Services segment, the Aareon subsidiary expects
a stable result before taxes in the region of EUR 27 million, despite
rising investments.

Medium-term objectives specified

From a medium-term perspective, Aareal Bank believes it is
well-positioned for the permanently changed framework in commercial
property financing - higher capital requirements, stricter liquidity
rules and the resulting lower expectations of profitability.

In the Structured Property Financing segment, in view of the new
business environment, the bank plans - amongst other things - to
focus its lending operations to an even greater extent on high-margin
business, on markets with low LTV ratios of 60 to 70 per cent, and on
exposures eligible for inclusion in cover asset pools, as well as
intensifying cooperations with other providers within the scope of
club deals and syndications. In the Consulting/Services segment,
Aareon plans to significantly increase its contribution to results in
the medium term, by investing in new as well as existing products.
The deposit volumes from institutional housing industry clients is
intended to be increased from approximately EUR 6 billion at present
to around EUR 7 billion by 2015.

The bank targets a cost/income ratio in the Structured Property
Financing segment of around 40 per cent by 2015, thus keeping it at
today's levels for the medium term.

For the Tier 1 ratio in accordance with Basel III, the bank aims
at achieving a level of 11.5 per cent by 1 January 2016. In this
context, Aareal Bank will continue to focus on optimising its capital
base over the years to come.

Depending on market conditions, the bank plans to resume an active
dividend policy in 2014 for the 2013 financial year.

Overall, Aareal Bank's activities are geared towards achieving
returns on equity before taxes of 12 per cent, assuming a favourable
development of the business environment, by 2015 - but not later than
2016.

Dr Schumacher, Chairman of the Management Board, summarised: "Our
strategy also works in what is being referred to as the 'new normal'.
On the basis of our pronounced strengths and with our strict
management of costs, risks and capital, we will be in a position to
achieve a solid performance, and to increase the bank's sustainable
enterprise value in the future."

Aareal Bank

Aareal Bank AG, whose shares are traded in Deutsche Börse's MDAX
segment and which celebrates its 90th anniversary this year, is a
leading international property specialist. The bank concentrates its
business activities on the Structured Property Financing and the
Consulting/Services segments. The Structured Property Financing
segment encompasses all of Aareal Bank's property financing and
funding activities. In this segment, the bank facilitates property
investment projects for its domestic and international clients,
within the framework of a three-continent strategy covering Europe,
North America and Asia. In the Consulting/Services segment, Aareal
Bank offers the institutional housing industry services and products
for managing residential property portfolios and processing payment
flows.

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