Aareal Bank resumes dividend payout, boosts new business

The Wiesbaden based property financier Aareal Bank is resuming its dividend payment to shareholders after a five-year hiatus, during which it was first prevented by the bailout bank SoFFin from paying dividends due to its ‘silent participation’, and then subsequently held back distributable reserves to bolster its balance sheet.

Shareholders, who have seen the bank’s shares double over the past year and rise nearly six-fold since the darkest days of the financial crisis, voted last week for a dividend payout of €0.75 for the full-year 2013, the first payment since the 2007 financial year.

The conservative Aareal Bank, which is more focused on foreign lending than many of its peer German banks, has come through the financial crisis stronger than many of its erstwhile competitors, many of whom are now being broken up. According to longtime CEO Dr. Wolf Schumacher at the bank’s recent AGM, “Today, we enjoy a very solid capitalisation, as measured by all applicable indicators and also in a sector-wide comparison. We have sufficient risk cushions to deal with all realistic scenarios. This has opened up a return to an active dividend policy, which we want to adhere to in the future”.

Dr Schumacher also re-affirmed forecasts for Aareal Bank’s performance over the current financial year, “against a background of mild economic recovery worldwide, and an increasingly intense competitive environment”.

For the first quarter of 2014 new business declined (€1.6bn versus €2.0bn in Q1 2013) but genuine new business (less extensions) rose from 59.5% to 67.4%. All in all, Aareal Bank said it is on target, despite the non-recurring effect from the acquisition of Corealcredit Bank (negative goodwill of €150m), to achieve consolidated operating profit of between €370 and €390 million for the 2014 financial year. Schumacher also affirmed the bank’s medium-term target for a pre-tax return on equity of 12%.