Aareal Bank expects €8b of new lending in 2014

German lender Aareal expects to underwrite some €8 bn of new business in 2014.

The figure represents a 20% decline compared to a volume of €10.5 bn in 2013, when higher-than-expected liquidity and a more active transaction environment led to the group's highest level in new lending since 2007, CEO Wolf Schumacher said at a presentation during the MIPIM trade fair.

Schumacher said that the bank showed its commitment to grow in the commercial property financing segment with the purchase just before Christmas last year of Corealcredit, a small commercial property bank. 'The bank was acquired for a very smart price below the bank’s IFRS capital. This means that we have a lucky punch in our operating profit for this year. This shows that we are very close to our clients,’ Schumacher noted.

Aareal achieved the best operating profit ever in the history of the bank in 2013, reporting €198 mln in consolidated operating profit in 2013, up 12% year-on-year compared to €176 mln in 2012. For the first time in five years, Aareal was able to pay dividends again, an indication of the long-term sustainability of the business model, added Schumacher. The bank is proposing a dividend for 2013 of €0.75 per share. ‘We are one of the first banks in Europe that have been able to completely fulfil the requirements of Basel III. This means that we are completely fit, we can do business with you and we do not need to reshape our business model,’ he commented.

In the first 10 weeks of 2014, Aareal was able to fund over €1.5 bn through bond issues. ‘We are proud to mention that in the last issue, we opened the book for 15 minutes and we have €2.8bn on the book. It was quite a success,’ commented management board member Thomas Ortmanns.

‘We funded more than €4 bn last year, with the most important funding product being the covered bonds, which represented €3 bn,’ he noted, adding that this financing structure allows the bank to remain attractive in terms of margins amid an increasingly competitive market.

In addition, the lender has doubled the volumes of deposits of the housing industry in the past four-five years, and they currently stand at roughly €8 bn. ‘Next to the wholesale market, private placement of securities and covered bonds, this is for us a very important source for a stable, long and attractive funding.’