Aareal Bank Group records net income of € 24 million for the first three months of the current year (Q1 2003: € 24 million), corresponding to a return on equity after taxes of 9.7% (Q1 2003: 9.8%). This result underlines the forecast for Group net income of just under € 100 million for 2004.
Compared with the first quarter of 2003, Aareal Bank further enhanced its capital base and continues to demonstrate stable growth. At the same time, thanks to the reduction of some € 1 billion in risk-weighted assets, the core capital ratio improved from 7.4% to 7.8%. Aareal Bank consequently achieved a significant improvement in results in qualitative terms, and was also able to sustain the excellent overall result that it achieved in the first quarter of 2003. In the words of Karl-Heinz Glauner, Chairman of the Management Board of Aareal Bank: “The first quarter has been very satisfactory in spite of market conditions. The result also shows that, despite the rumours circulating a few weeks ago, we are well on track.”
The international property financing portfolio increased by 6.1% in the first three months of the current year to € 12.1 billion, after € 11.4 billion for the corresponding quarter of 2003. The German portfolio was down by a net 1.8%, even taking into account new lending commitments. International lending accounts for a 52% share of the lending business in Aareal Bank Group’s books, and for as much as 70% of the commercial business.
First quarter new business, which generally tends to be more subdued compared to subsequent quarters, climbed 42.8% to a good € 1 billion compared with € 0.7 billion for the first quarter of 2003. New commitments outside Germany, which accounted for just under 90% of this figure, underline the international focus of Aareal Bank’s lending business.
At € 115 million, net interest income for the first quarter of 2004 was unchanged from the same period of the previous year. This reflects above all the high-quality new business, and the steady improvement in refinancing costs. The bank allocated a net € 30 million (previous year: € 29 million) to provisions for loan losses in the first three months, allowing for the difficult situation that still prevails on the German property market.
Net commission income declined by € 3 million against the same period of the previous year, to € 34 million. Higher income from the Consulting / Services segment only partially compensated for higher securitisation costs and lower income generated from the management of the declining portfolio still held in DEPFA’s accounts.
Net trading income, which was unchanged at -€ 2 million, was primarily affected by the valuation of derivative financial instruments, and loans and advances held for trading, alongside the costs arising from securitisation deals. Profit from nontrading assets of € 8 million (Q1 2003: € 9 million) was attributable mainly to the sale of securities.
Administrative expenditure was reduced by 7.6% from € 92 million in the first quarter of 2003, to € 85 million. This is a clear indication of the cost-cutting measures and process optimisations which the bank introduced in 2003, and also reflects investments that were not appropriated equally to all quarters. Including net other operating income and expenses of € 5 million (Q1 2003: € 8 million), net operating profit amounted to € 45 million (Q1 2003: € 46 million).
Taking into account amortisation of goodwill of € 1 million (Q1 2003: € 2 million), unchanged income taxes and minority interest income at € 15 million and € 5 million respectively, Group net income for the first quarter of 2004 was € 24 million, the same as the corresponding quarter of the previous year. This corresponds to a net return on equity of 9.7%, after 9.8% for the first quarter of 2003.
Structured Property Financing
The segment result before taxes of € 42 million in the first quarter equates to a return on equity before taxes of 21.1%. Net interest income was unchanged at € 103 million. The