Aareal Bank Group today confirmed the preliminary figures published on 7 March 2005, showing a â¬ 124 million net loss for the financial year 2004, due to additional risk provisioning set aside in August 2004. The bank expects clearly positive results for 2005, based on the expedited reduction of its Germany legacy portfolio, and the continued expansion of its international business.
The core capital ratio in accordance with the German Banking Act rose from 6.7% (as at 30 Sep 2004) to 8.2%. The total capital ratio improved from 12.2% to 14.3% over the same period. When measured according to BIS rules, the core capital ratio increased from 5.6% to 6.9% during the fourth quarter, and the total capital ratio rose from 10.4% to 12.1%. The bank will continue to strengthen its capital base during the course of 2005, thanks to reinvesting profits and the sustained reduction of risk-weighted assets.
Aareal Bank concentrates on the continued expansion of its successful strategic business, cutting back its German legacy portfolio at the same time. During 2004, Aareal Bank reduced its portfolio of German property loans under management by â¬ 1.5 billion, to â¬ 13.9 billion. During the same period, however, the bank generated new German business â" in line with its strategic requirements â" to the tune of â¬ 1 billion. Therefore, the bank disposed of legacy German business in excess of â¬ 2 billion during 2004. The international property lending portfolio grew by 10%, to â¬ 12.6 billion at year-end. With â¬ 4.6 billion, international new business accounted for more than 80% of new loan commitments totalling â¬ 5.7 billion.
Structured Property Financing
The â¬ 184 million operating loss sustained by the Structured Property Financing division predominantly reflects the additional risk provisioning for the German legacy portfolio. Nevertheless, Aareal Bank continued to strengthen its profitable new business by pursuing its internationalization strategy during the year under review, and opened two new international offices in Switzerland and Singapore â" expanding into Asia for the first time. Aareal Bank was awarded 'Best Provider of Property Finance in 2004' by the Central & Eastern European Real Estate Guide, in recognition of its active presence in the region. Around 50% of Aareal Bank's loan portfolio is now attributable to international business, whereas the relevance of the German legacy business is steadily declining. Aareal Bank continued to expand its securitization and syndication activities throughout the 2004 financial
year, placing just under â¬ 1.2 billion with the Global Commercial 3 transaction, and syndicating a total lending volume of â¬ 1.0 billion.
Consulting / Services
The result before taxes in the Consulting / Services segment deteriorated slightly, to â¬ â"1 million. Aareon AG's EBIT improved to â¬ 12.3 million (2003: â¬ 11.4 million), making further progress towards its medium-term target EBIT margin of around 15%. Aareal Bankâs other subsidiaries also performed largely according to budget during the 2004 financial year.
Property Asset Management
Aareal Bankâs third business segment Property Asset Management was close to break-even for the year. Given the performance-related structure of the funds managed by Aareal Bank, up to 50% of commission generated from a fund will only accrue at maturity. During the period under review, Aareal Bank launched the â¬ 250 million Aareal Nordic Fund, the bankâs first special fund under German investment law (Spezialfonds), and pursued with the investment phase of other funds under management.
Outlook for 2005
Aareal Bank will continue to focus on expanding its new German business during the current financial year, driving ahead with the internationalization of its business profile and reducing its legacy German exposure. Given the growth in its profitable and relatively low-risk strategic portfolio, Aareal Bank envisages clearly positive business results. Aareal Bank will continue to strengthen its