Aareal Bank’s provision against risky property loans has climbed to €167 mln after the bank made a further €61 mln provision in Q3.
The German real estate bank is one of the biggest lenders in Europe to hotels, a sector suffering particularly severely due to the Covid pandemic.
Profit before tax for Q3 was €11 mln, slightly up on €2 mln in Q2 and taking profit so far in the first nine months to €24 mln. The bank cut its full year guidance from a mid-to-high double-digit euro million range to ‘a middle double-digit euro million range’. In 2019 profits in the third quarter alone were €64 mln and €248 mln for the full year.
The bank reported that Q3 was ‘all about coping with the challenges arising from the Covid-19 pandemic.’ Chief Financial Officer Marc Hess said: “The burdens from the Covid-19 pandemic are manageable, and we are definitely in a position to cope with them.’
New business in the nine months of the year to end of September was €4.2 bn compared to €6.1 bn in the 9m 2019.
Like peer Pbb Deutsche Pfandbriefbank which reported yesterday, Aareal highlighted that it was seeing ‘continued good margins and low loan-to-value ratios’ in the deals it is securing. At 220 bps its average margin is higher than Pbb’s.
As well as real estate lending, the bank operates a housing consulting business and has diversified into IT and digital banking services.
In August it agreed the sale of a minority stake in IT subsidiary Aareon to private equity investor Advent International and the €180 mln gain will be recognised in the full year results.
Hotels make up the largest segment in its €26.1bn book, accounting for €8.6 bn in outstanding loans.
