Aareal lifts new business in Q3

Wiesbaden-based Aareal Bank reported new lending surged to EUR 3 bn in the third quarter of 2011, boosting the total of new business originated so far this year to EUR 6.2 bn. This marks an increase of more than 50% over the EUR 4.1 bn generated in the year-earlier period.

New loans by far exceeded renewals: while the total volume of extensions slipped slightly in the first nine months to EUR 2.47 bn, new business totalled EUR 3.69 bn. This is more than twice as much as a year ago.

Consolidated operating profit in the three-month period to end-September rose 42% year-on-year to EUR 47 mln, boosting the figure for the first nine months to EUR 138 mln. This is EUR 4 mln higher than the full-year figure for 2010.

‘During the third quarter, we were again able to exploit opportunities for high-margin new business, and to further strengthen our market position,’ said CEO Wolf Schumacher. Aareal Bank is not exposed to Greek government bonds and is therefore not affected by the Greek debt reduction agreed upon at the special summit in Brussels at the end of October, he added. ‘Thanks to its good business development during the year to date, Aareal Bank is in a position to take adequate measures, if required, to respond to any renewed escalation of the market situation within the framework of its active portfolio management - and thus to strictly contain the impact of the European sovereign debt crisis on the bank,’ Schumacher explained.

Last week, German banking giant Commerzbank announced it was suspending new business at its property lending arm Eurohypo until end-June 2012. The move is aimed at meeting the additional capital requirements of the European Banking Authority (EBA), which has said Commerzbank needs to fill a EUR 2.94 bn capital shortfall. Commerzbank has until end-June 2012 to raise its core Tier 1 capital ratio to 9%.

In the third quarter, Aareal lifted its Tier 1 ratio to 16.6% from 15.8% at the mid-year point. The core Tier 1 ratio - defined as the Tier 1 ratio excluding hybrid capital and the remaining Soffin silent participation - stood at 11.5%, well above the required level of 9%. In July, Aareal repurchased the remaining EUR 2 bn guaranteed bond issued by the German bank stabilisation agency.

For the full year, Aareal expects new business within the upper half of the forecast range of between EUR 7-8 bn. It added, however, that the European sovereign debt crisis is likely to remain at the top of the agenda on the financial and capital markets during the remainder of the 2011 financial year. ‘It is thus fair to expect that market volatility will remain high for the time being, and that the resulting risks in the financial system will persist.’