Aareal Bank AG CEO Hermann Merkens said the bank is "on track" to meet its earnings target for full year 2018 despite its third-quarter income falling year over year.
The German lender reported third-quarter consolidated net income attributable to ordinary shareholders of €45 million, down 12% from the year-ago €51 million. Earnings per ordinary share also dropped year over year to 70 cents from 78 cents.
Net interest income decreased to €131 million from €144 million a year ago, while net commission income rose to €51 million from €48 million a year before. Net derecognition gains amounted to €5 million in the quarter, lower than the year-ago €20 million.
The bank noted that the decline in net interest income is mainly due to the portfolio reduction in the previous year, while the decrease in net derecognition gains was due to lower effects from early loan repayments.
The bank's administrative expenses clocked in at €107 million, compared to €120 million incurred a year ago.
For the nine months ended Sept. 30, Aareal Bank's attributable net income declined by 19% on a yearly basis to €129 million from €159 million. Earnings per ordinary share for the nine months amounted to €1.97, compared to €2.46 a year earlier. After-tax return on equity also dipped over the same period to 6.3% from 7.8%.
Aareal Bank's common equity Tier 1 ratio was 20.8% as of Sept. 30, compared to 19.6% as of Dec. 31, 2017. Calculated based on the estimated Basel IV ratio, the CET1 ratio stood at 13.4% as of September-end, unchanged compared to that as of 2017-end.
The bank affirmed its earnings forecast for full year 2018, which it had raised in September, in light of its acquisition of Düsseldorfer Hypothekenbank AG. Operating profit for the year is expected to fall between €312 million and €352 million, on the expectation that if the acquisition were completed within the year, it would result in a €52 million one-off gain.
