Aareal Bank Group consolidated net income after minority interests was 30 million for the first six months of 2005, up 15.4% from the same period of the previous year.
"The results for the first half of 2005 are characterised by a noticeable pickup in new business, and by the first sale of a non-performing loan portfolio", Dr Wolf Schumacher, Chairman of the Management Board of Aareal Bank, commented when presenting the six-month figures. He added that "the realignment of Aareal Bank to which there is no alternative will continue to have a significant impact on developments during the remainder of this year."
Consolidated net income after taxes amounted to a total of 40 million, including 10 million in income attributable to minority shareholders.
New commitments of 2.9 billion in the first half of the year with international business accounting for an 84% share exceeded the very good result achieved in the corresponding period of the previous year by 6.3%.
For the first time, Aareal Bank sold a portfolio of German non-performing loans (NPL), with a total volume of 690 million (including 107 million in interest and fees) during the period under review, thereby reducing its overall NPL portfolio by more than 20%.
Overview of the results:
Net interest income, Aareal Bank Group's most important mainstay of earnings, amounted to 227 million in the first half of 2005, down 3.4% from the first half of 2004. Risk-weighted assets were reduced by 8.3% compared to 30 June 2004. Provisions for loan losses amounted to 60 million.
Net commission income for the first six months totalled 78 million, an increase of 4.0% from the same period of the previous year.
Net trading income of 23 million was determined partly by expenditure arising from synthetic securitisation transactions and partly from the measurement of derivatives, especially those deployed as foreign exchange hedges. Expenditure incurred in this context is offset by corresponding interest income.
Results from non-trading assets of 21 million were largely attributable to the disposal of fixed income securities from the available-for-sale portfolio.
Administrative expenditure rose by 13.4% to 195 million over the previous year, reflecting ongoing investment in the bank's IT environment, and for the improvement of internal processes.
After taking into account net other operating income and expenditure of 11 million, profit before taxes amounted to 57 million. Income taxes were 17 million. Consolidated net income after taxes thus amounted to a total of 40 million, including 10 million in income attributable to minority shareholders.
The core capital ratio according to the German Banking Act improved to 8.2% (30 June 2004: 7.7%), and the total capital ratio rose to 14.2% (30 June 2004: 13.1%). When measured according to BIS rules, the core capital ratio was 7.0% (30 June 2004: 6.6%), and the own funds ratio rose to 12.4% (30 June 2004: 11.4%). These increases reflect the reduction in risk-weighted assets, in line with Aareal Bank's strategy.
Overview of the business segments:
Structured Property Financing
At 47 million, the segment result after taxes in the first half of the year represents a 20.5% improvement over the corresponding period of the previous year. The net return on equity before minority interests was 13.1%. Loan loss provisioning was 60 million compared with 100 million for the same period of the previous year. Net commission income fell from 11 million to 6 million. The aforementioned effects of the realignment (in particular) led to an increase of 17.4% in administrative expenditure in this segment, to 101 million.
At 2 million, the result after taxes in this segment was unchanged from the same period last year. Net commission income rose by 4.8%, to 88 million, while administrative expenses also increased, by 6 million, to 90 million.
Property Asset Management
The slightly negative result after taxes of 1 million refl