Aareal Bank increases its operating result
Dhe Wiesbaden commercial real estate financier area defied the deteriorating economic situation in the past second quarter and is looking to the second half of the year with – cautious – optimism. “We are on course to achieve our targets for the year,” said CEO Jochen Klösges in a conference call to present the second-quarter results. Between April and June, Aareal Bank grew in all business areas. The consolidated operating result between April and June rose by around 50 percent compared to the previous year and reached 61 million euros.
The growth was supported by an increase in net interest income of 20 percent to EUR 171 million and a 15 percent increase in net commission income to EUR 68 million. The software subsidiary Aareon also increased its revenue by 11 percent to EUR 75 million. Aareal shareholders are left with a quarterly profit of EUR 39 million after EUR 11 million a year earlier.
However, Klösges repeatedly issued a warning about the optimism that the annual target would be achieved. “However, the potential impact of the war in Ukraine – both in terms of the bank’s limited exposure to Russia and the economic fallout from the imposed sanctions and escalated geopolitical tensions – remains very difficult to assess at this stage.” the head of the real estate financier added that one was “prepared as best as possible”.
This ambivalence is also reflected in risk provisioning. The institute from Wiesbaden booked 58 million euros for this item, more than the 33 million euros in the same quarter of the previous year. “In the second quarter, we weighted the adverse scenarios significantly higher in our parameters,” said Klösges. On the other hand: In the second quarter, no further non-performing loans were added, as CFO Marc Hess said. In general, the situation has eased, especially in the hotel real estate sector, and the negative effects of the corona pandemic are abating.
But Aareal Bank’s involvement in Russia also took its toll. The institute financed two commercial properties in Moscow. In the second quarter, Aareal Bank set aside a further EUR 23 million in case of a possible total default, in addition to the EUR 60 million in the first quarter , the customer is cooperative,” says Klösges. But the sanctions imposed by Russia and not by the EU against Russia are preventing the debt from being serviced. “Compared to other banks, we don’t have to hide our risk provisioning,” emphasized Klösges.
In this environment, Aareal Bank shares lost more than one percent at times to around EUR 31 on Wednesday. The S-Dax of German stock corporations with a small market capitalization itself, in which this paper is included, was hardly changed.