"For Aareal Bank Group, 2005 is going to be a year characterised by strategic decisions with long-term impact", says Dr Wolf Schumacher today in his statement at the Annual General Meeting of Aareal Bank AG in Wiesbaden. Pooling and leveraging all of its strengths, the bank will conduct a strategic review and realignment (where appropriate) of its Structured Property Financing, Consulting / Services and Property Asset Management units.
Under the leadership of Dr Wolf Schumacher, who assumed the post of new Chairman of the Management Board on 1 April, Aareal Bank has embarked upon a programme that calls for consistent expansion of its strategic target business, both on a national and international scale. He explains: "The complexity of the Aareal Bank Group will be reduced. We will simplify processes, remove unnecessary interfaces, and further enhance the bank's credit organisation in line with the regulatory framework. Furthermore, the bank's management structure will also be streamlined during the course of this year."
A new Management Board portfolio, covering core issues such as the bank's organisational structure and process organisation, the reduction of interfaces, and a realignment of its IT environment, is designed to expedite this process: "Our objective must be to establish powerful and modern organisational structures and workflows. We will further intensify the focus of individual Management Board portfolios to expedite these processes", Schumacher added. Thomas Ortmanns (44), who holds a BA in business management, has been nominated for the fifth Management Board portfolio. He is designated to join the Board as Chief Operations Officer.
A six-point programme has been launched to realign Aareal Bank. In particular, this includes the expansion of new business, together with a more pronounced regional diversification. As one visible example of this, a new branch office will open in Istanbul this summer. As another focal point, the bank will continue to leverage its mid-sized corporate structure by revising the bank's organisational structure and by reviewing all subsidiaries and joint ventures, to ensure that they are in line with Aareal Bank's core business focus.
Aareal Bank will emphasise the international focus of its corporate culture: initiatives include a targeted training campaign, as well as the sponsoring of an Assistant Professorship at the European Business School. Going forwards, more transparency in the bank's management will be realised by disclosing the remuneration of Management Board Members on an individual level, but also by including a new 'Workout' segment in Aareal Bank's segment reporting structure in the annual report 2005. Finally, the bank will expedite the reduction of its non-performing loan portfolio.
Initial progress has been made in this respect: a few days ago, Aareal Bank sold a portfolio of non-performing loans with an aggregate volume of approx. 690 million, reducing its overall portfolio in this area by more than 20%. Dr Schumacher reiterated the bank's determination to expedite further such reductions, when he said: "The know-how we have gained allows us to access the market, while at the same time, the freeing-up of capital resources will boost the expansion of our target business." In parallel, Aareal Bank is in the process of establishing a state-of-the-art workout organisation, which will focus on restructuring, property development, and the disposal of non-performing loans.
Aareal Bank's future funding strategy will leverage the bank's vast Pfandbrief know-how - thanks to its well-established market profile, Aareal Bank will rank among the major issuers of asset-covered bonds. The bank intends to exploit the possibilities of the new German Pfandbrief Act to significantly boost the structural portion of mortgage bonds in its funding mix, from currently 10% to between 40% and 60%. "As a first step, an inaugural Jumbo Pfandbrief issue is scheduled for the second half of 2005. This will optimise and diversify our funding mix," Dr Schumacher added.
