Aareal Bank weighing up takeover of Loan Star’s Corealcredit

The Wiesbaden-based Aareal Bank posted operating profits for the full year of 2012 down 5% to € 176m fro the previous year’s €1 85m, which it says was largely due to an extremely conservative lending policy, which saw it parking much of its surplus capital for safe keeping at the European Central Bank for lengthy periods.

The tight policy was loosened somewhat in the final quarter, the bank said, to take advantage of lending opportunities arising from the absence of traditional competitors, such as Eurohypo and Westimmo. In writing new business, the bank exceeded its targets; at 6 .3bn, of which nearly half were new loans, new business was well ahead of the targeted €5.5bn.Thisyearitishigheragainat € 7bn, including extensions.

For 2013, the company expects consolidated operating profit to match the level of 2012. Also, Aareal Bank specified its medium-term targets, which include a 12% return on equity before taxes by 2016 at the latest, along with the resumption of an active dividend policy for the 2013 financial year by 2014, after an absence of four years, depending on market conditions.

Meanwhile, a recent report by Reuters news agency said that Aareal Bank was weighing up a takeover of Frankfurt-based commercial real estate bank Corealcreditbank, a subsidiary of US private equity group Lone Star. According to Reuters, a deal could be based at least partially on a share swap, with Lone Star ending up with a stake in Aareal.

Lone Star has been looking for a suitable buyer for its Corealcredit subsidiary for several years now, after rehabilitating the bank which it saved from near bankruptcy in 2005 (when still known as AHBR Allgemeine Hypothekenbank Rheinboden). The bank was relaunched as a pure domestic commercial property financier after the rebuilding phase, and by end-2011 had a property loan book of € 5.4bn. Insiders have commented that Lone Star was hoping for a trade sale to a foreign bank keen to get a foothold in Germany, and indeed talks were held with French bank Societe Generale in 2011, but a deal failed to materialise.

Lone Star, which specializes in turnaround situations, has also been looking for a buyer for two of its other holdings – Düsseldorfer Hypothekenbank and IKB, a provider of finance to SMEs and private equity funds, but which got into deep trouble with its American sub-prime exposure. Despite the attractions of owning a Pfandbrief-issuing German bank, wider economic developments have conspired to make moving into German property financing less attractive for big foreign banks who – if anything – have been on the retreat from foreign adventures.

Given Aareal’s strong position in the sector, and the fact that it also had a look at Corealcredit in the past and is well familiar with the bank, it might find itself de facto at the centre of any reshuffling of strategic financing resources within the sector.