Aareal Bank has best-ever year, resumes dividend
A very buoyant Dr. Wolf Schumacher, the long-time CEO of Wiesbaden-based property financier Aareal Bank, took pains at the recent analyst press conference to drive home three key messages about his bank, which he described as emerging from a challenging period, but which was facing the future from a healthy equity base which more than exceeds the bank’s current needs.
The first was that the bank celebrated its 90th birthday last year with its best ever results. The second was that the bank is returning to “an active policy of dividend payouts” after an absence of five years. Thirdly, the bank is well on its way to achieving its stated goal of 12% return on equity by 2015/16.
In fairness, Aareal Bank has come through the financial crisis in better shape than many of its rivals, largely due to its extremely conservative approach to risk and property lending. The bank posted a profit of €93m in 2013, up from the previous year’s €85m, and helped by a significant rise in its lending profits from €486m to €527m. Margins improved, as did refinancing costs, while repayments were higher than expected.
The bank wrote new business of €10.5bn, up from €6.3bn in 2012, which was the highest lending of any year since 2007. It had expected to lend €8bn, and for this year expects to lend €9bn. Last year’s pure new lending was €6.5bn, while extensions amounted to €4bn.
A dividend of €0.75 will be paid out to investors for 2013, while Dr. Schumacher announced that, “in addition a dividend policy, by which around 50% of group net profit calculated on the basis of IFRS should be paid out from now on, so long as such payouts are in line with a long-term oriented and sustainable business development.” Aareal is targeting a return on equity of 12% by 2015/16, up from 8% in 2013 and well above the 7.2% earned in 2012.
The bank raised €4.1bn in fresh capital last year, and was an active issuer in the Pfandbrief markets, which Dr Schumacher said helped the bank raise even more equity and Tier 1 capital than strictly needed under the new banking regulations. These now give Aareal about 15% more capital than its loan book, while it has a Tier 1 capital ratio of 15%, including the remaining bailout funds it is still repaying to the German government.
The acquisition of Frankfurt-based commercial mortgage bank Corealcredit Bank from US private equity investor Lone Star is expected to close at the end of the first quarter, with its results expected to be accretive immediately after that, Dr. Schumacher said.