Against the background of a market environment that continued to be challenging, Aareal Bank Group maintained its robust business development and once again generated a solid positive result - as it has done in every quarter since the outbreak of the financial markets crisis in summer 2007.
The Group's profit before taxes and appropriation/attribution of results for the period from July to September was 25 million, after 25 million in the second quarter and 17 million in the first three months of the current year. The corresponding figure for the third
quarter 2008 was 31 million.
"Clearly, we have been holding our course during the current financial year. The fact that we posted another set of satisfactory results - in a challenging market environment - once again emphasizes the coherence, sustainability, and crisis-proof performance of our business model, incorporating the two strong pillars of Structured Property Financing and Consulting/Services. The Group's profitability remains high enough, not only to absorb the various difficulties thrown up by the financial markets crisis and the consequences of the weak economy but also to bear the additional costs incurred within the scope of the agreement with SoFFin," said Dr Wolf Schumacher, Chairman of the Management Board of Aareal Bank AG.
Structured Property Financing: sustainable business policy continues to bear fruit
Aareal Bank's Structured Property Financing segment once again posted a solid positive result, in spite of the continued challenges on the commercial property markets. At 19 million, (Q3 2008: 20 million), the segment's operating profit was slightly higher than in
the previous quarter (18 million).
Aareal Bank's approach to lending from July to September remained very risk-aware, as it has been in the past. New business amounted to 2.4 billion in the first nine months of 2009. Within the scope of new business, Aareal Bank continued to focus on its existing client base and particularly on loan extensions for existing financing projects.
Net interest income, which accounts for the most important share of segment income, amounted to 98 million in the third quarter of 2009, after 99 million in the comparable period of the previous year and 101 million in the second quarter of 2009. Higher margins in the lending business continued to have a positive effect. Given the volatile market environment, the bank has maintained a very comfortable level of liquidity reserves: this had a slightly negative effect on net interest income, owing to extremely low short-term
Despite the impact of the economic crisis, allowance for credit losses remained at a clearly manageable level: the 36 million recognized during the third quarter of 2009 was lower than in the previous quarter (42 million), and remains within projections. Expected at 150 million for the current financial year, it is therefore at the upper end of the forecasted target corridor, as has been communicated to date. Given the prevailing market environment, it is however impossible to fully exclude unexpected losses.
"In the third quarter, Aareal Bank Group once again proved that the commercial property finance business is profitable, even in the most severe economic crisis experienced for decades provided that it is conducted in a sustainable and prudent manner. This clearly confirms our approach, and we will maintain our conservative business policy. This also applies to our tried and tested three-continent strategy to ensure regional diversification of our business: in particular, we have no plans to cut back our international branch network. Our local presence plays a key role in the segment's success," Schumacher noted.
Consulting/Services: robust segment result
Against a background of difficult general economic conditions, the segment's performance was satisfactory. Despite the low interest rate level that was very unfavorable for the deposit-taking business, the segment posted a positive result for the third quarter as well.