Aareal Bank has brought the financial year 2003 to a successful conclusion. Group net income before special measures amounted to € 98 million (2002: € 87 million), thus exceeding expectations. The bank continued to expand its international business. The core capital ratio was strengthened notably. At the same time, Aareal Bank took special measure in preparation for the impending consolidation process among German property banks.
In 2003, the bank strove consistently to strengthen its capital base. This is evident in the core capital ratio increase from 7.4% at year-end 2002 to 8.3% as at 31 December 2003, and in the rise from 11.2% to 13.4% in the own funds ratio. When measured according to BIS rules, the bank improved its core capital ratio to 7.0% (2002: 6.3%) and its total capital ratio to 11.5% (2002: 9.5%).
With international business accounting for 82% of total new commitments in 2003, Aareal Bank once again underscored its strong international focus. Thanks to Aareal Bank Group’s presence in 14, and business activities in 21 countries, international business now accounts for more than half of all property loans under management by Aareal Bank Group.
Based on the positive operating performance of the 2003 financial year and with a view towards the emerging consolidation trend among German property banks, the Management Board agreed on special measures of € 100 million. Aareal Bank is thus preparing itself for active participation in the forthcoming process of consolidation. As a result of this measure, group net income amounts to € 38 million.
Structured Property Financing
Aareal Bank’s Structured Property Financing segment reported a rise of 25.3% in net income before special measures over the previous year (€ 79 million), to € 99 million. This corresponds to a net return on equity of 12.3%. Net interest income also performed well, rising by 38.2%. As mentioned previously, the provisions for loan losses of € 148 million reflect the difficult economic environment in Germany. The one-off provisioning measures of € 100 million were created largely in preparation for the forthcoming consolidation process amongst German property banks.
Consulting / Services
In the Consulting / Services segment, last year’s deficit of € 16 million was reduced significantly to € 3 million. This segment is dominated by Aareon AG, whose activities continue to be greatly influenced by the development of the new Blue Eagle software generation. Aareon’s significant resources are currently involved in preparing the market launch of this important new software generation, scheduled for the end of 2004. After a two-year investment phase and reorganisation, the Aareon sub-Group concluded the 2003 financial year with an EBIT of € 11 million (2002: € 0), and is expected to achieve an EBIT margin of around 15% in the medium term.
Property Asset Management
For 2003, operations in the Property Asset Management segment were defined by launch of the “Aareal EuroLogistics Fund” during the reporting year. Start-up costs for the fund burdened the segment result during that quarter, but nevertheless a pre-tax profit of € 4 million was recorded for the year as a whole, after the subsidiary achieved a break even in 2002.
Comments by the Chairman of the Management Board
In the opinion of Karl-Heinz Glauner, Chairman of the Management Board of Aareal Bank AG, this result once again confirms the success of the bank’s business model after its second year as an independent group. “Our operating performance in the financial year under review was positive. We again demonstrated the vast potential of our business model in difficult economic conditions. Furthermore, we achieved additional important milestones in the realignment of the Aareal Bank Group”, he commented on the results, adding that the bank 'plans to further increase profitability in 2004.” The Management Board forecasts net income of just under € 100 million for the 2004 financial year. This will represent a major ste