Aareal Bank lifts profit as new lending grows

Aareal Bank Group reported consolidated operating profit rose 44% in Q2 2014 year-on-year, but warned that the market environment remained 'challenging'.

The Wiesbaden-based bank generated a consolidated operating profit of €65 mln in Q2 compared to €45 mln in the same period a year ago. New business originated in the Structured Property Financing segment increased 60% to €2.6 bn compared to the previous quarter.

The share of newly originated loans remained at a high level of 63.6% following a decline in the volume of loans set for renewal. At € 2.7 bn, the volume of new loans originated during the first half of 2014 was up slightly year-on-year (H1 2013: €2.5 bn).

The strong profit growth partly reflected the enlarged credit portfolio following the acquisition of CorealCredit Bank from 31 March this year. In addition, Aareal Bank's second-quarter net interest income also benefited from the effects of early loan repayments. Overall, consolidated net interest income in the second quarter of 2014 rose over 30% year-on-year to €169 mln.

Despite the positive results, the market environment is still ‘challenging’ and characterised by further intensified competition, management board chairman Wolf Schumacher said. ‘The year-to-date business development shows that Aareal Bank Group has been holding a steady course - despite the still subdued economic development, increasing geopolitical imponderabilities, the persistent low-interest rate environment and intensified competition in commercial property financing. Our business model is robust and provides a viable foundation for our ongoing success.’

After seeing first-half profit grow to €217 mln, the group is forecasting full-year consolidated operating profit will be slightly higher than expected, at €380-400 mln. However, the first-half figures are only comparable to the previous year to a limited extent due to factors including the non-recurring negative goodwill of €152 mln from the acquisition of CorealCredit Bank which was acquired on 31 March this year.