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Aareal Bank Q4'17 income rises 30% YOY

Aareal Bank AG reported preliminary fourth-quarter 2017 net income attributable to shareholders of €48 million, up 30% from €37 million in the year-ago period.

Operating profit for the quarter fell 22% year over year to €66 million from €85 million. EPS was 74 cents, compared to 55 cents a year earlier.

Fourth-quarter net interest income came in at €148 million, down from the year-ago €169 million, while net commission income rose to €61 million from €56 million. The allowance for credit losses fell 12% on a yearly basis to €29 million.

For full year 2017, attributable net income dipped 4% to €207 million from €215 million in 2016. Operating profit declined 10% year over year to €328 million, which the bank said is still within its target range of €310 million to €350 million.

Return on equity before taxes reached 11.9%, down from 13.2% in 2016.

At 2017-end, the bank's fully phased-in common equity Tier 1 ratio stood at 18.9%. Assuming the full implementation of revised Basel III capital requirements, the CET1 ratio was 13.4%, which Aareal Bank said is significantly above regulatory requirements.

The bank's supervisory and management boards will propose at the May 23 annual general meeting a 50-cent increase in 2017 dividends to €2.50 per share, representing a distribution ratio of 78%, close to the upper end of the bank's overall target range of between 70% and 80% for the year.

Looking forward, Aareal Bank said it expects consolidated net interest income for 2018 to be between €570 million and €610 million and net commission income between €215 million and €235 million. It forecasts pretax ROE of between 9.5% and 11.0% for 2018 and EPS of between €2.60 and €3.00. For the medium term, the lender's target ROE is around 12% before taxes.

In addition, the bank is targeting new business between €7 billion and €8 billion for 2018, with a continued focus on the high-margin U.S. market.