Aareal Bank Group consolidated net income after minority interests was €25 million for the first three months of 2006, up 25% from the same period of the previous year. The results clearly confirm our projections: we are on course to restore the banks ability to pay dividends", said Dr. Wolf Schumacher, Chairman of the Management Board of Aareal Bank AG.
Profit before taxes amounted to €39 million - up 18.2% on the first quarter of the previous year. Consolidated net income after €9 million in income taxes, and after minority interests, was €25 million, equivalent to a 9.7 % return on equity (after taxes and minority interests).
Net interest income was €98 million during the period under review, remaining almost unchanged from the fourth quarter of 2005 (97 million). Provisions for loan losses amounted to €22 million for the first quarter. Overall, net interest income after net loan loss provisions was up 4.1% on the previous quarter, to €76 million. This clearly indicates sustained stability in the banks earnings, Schumacher added.
Net commission income of €36 million was also in line with the same period of the previous year. In this context, it is worth noting that the previous years figure included roughly €5 million commission income generated by the Aareal Hypotheken- Management GmbH and Aareal Hypotheken Vermittlung GmbH subsidiaries; following their disposal, this was compensated by higher income from the bank's core business.
Administrative expenses declined to €89 million, compared to €95 million for the first quarter of 2005 and 1€05 million for the fourth quarter. This figure reflects initial progress achieved through the initiative to optimise processes within Aareal Bank, plus the effects from deconsolidation of the Aareal Hypotheken-Management and Aareal Hypotheken Vermittlung subsidiaries, following their disposal.
Overview of the business segments:
Structured Property Financing
New business generated during the first three months of the current year grew to €2,0 billion, up 43,6% on the first quarter of 2005. As a result of the disposal of nontarget business, which was in line with the banks strategy, segment net interest income declined to €88 million, compared to €101 million in the first quarter of 2005 and €89 million in the fourth quarter. Net loan loss provisions of €22 million for the first quarter are in line with the €80 to €90 million range projected for the year 2006 as awhole.
Initial progress achieved regarding the strategic realignment of Aareal Bank was reflected in administrative expenditure: at €47 million, it was €3 million lower compared to the same period of the previous year.
Aareal Bank sold a third portfolio of non-performing loans, with an aggregate volume of approx. €345 million (including €80 million in interest and fees) to Shinsei Bank Limited during the first quarter of 2006. This transaction reduced the residual volume of the banks NPL portfolio, to approximately €1.8 billion as at 31 March 2006.
Aareal Bank issued its first Jumbo mortgage bond at the end of January 2006. The €1 billion bond with a benchmark maturity of five years was three times oversubscribed. Having made the first step towards a structural shift in the banks refinancing mix, during the current financial year, Aareal Bank has now positioned itself as a regular Jumbo Pfandbrief issuer.
The merger of Aareal Hyp AG into Aareal Bank AG proceeded according to schedule: it was entered in the Commercial Register on 3 March 2006, with retrospective effect from 1 January 2006. As a result of the merger, Aareal Bank AG has also acquired a license to issue Pfandbriefe (asset-covered bonds). Schumacher pointed out that this
will allow us to continuously improve our refinancing structure, and to better utilise the opportunities presented by the new German Pfandbrief Act.
Aareal Bank Group continued its successful capital market activities during the fi