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Aareal Bank posts YOY drop in Q2 net income, affirms FY'18 forecast

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Aareal Bank posts YOY drop in Q2 net income, affirms FY'18 forecast

Aareal Bank AG reported second-quarter consolidated net income attributable to shareholders of the bank of €41 million, down from the reclassified €66 million a year earlier.

Operating profit amounted to €62 million, down from the year-ago €109 million, which the bank noted was within expectations.

Net interest income declined on a yearly basis to €136 million from €151 million, while net commission income increased to €51 million from €49 million. Net gain from derecognition was €5 million, compared to the year-ago €7 million.

Loss allowance amounted to €19 million, down from €25 million in the second quarter of 2017. Administrative expenses came in at €109 million, compared to €129 million a year ago.

For the first half, the German lender's attributable consolidated net income fell 22% year over year to €84 million from €108 million.

EPS for the half was €1.27, compared to €1.68 in the prior-year period.

After-tax return on equity stood at 6.1% in the first half, compared to 8.0% a year earlier.

The bank's common equity Tier 1 ratio stood at 19.9% as of June 30, compared to 19.6% at the end of 2017. The Basel IV estimated CET1 ratio was 13.5% at June-end, compared to 13.4% as of Dec. 31, 2017. Subject to regulatory changes, the bank said it considers a target CET1 ratio post-finalization of the Basel III framework, dubbed Basel IV – of around 12.5% to be appropriate for 2018.

Despite anticipating the challenging business environment to prevail in 2018, Aareal Bank affirmed its full-year forecasts for key indicators, with an expected consolidated operating profit of between €260 million and €300 million.

"We are satisfied with our overall performance during the second quarter. Our operating performance continues to be robust, and we are making good progress with the transformation we have initiated with 'Aareal 2020,'" CEO Hermann Merkens said.

"At the midyear point, we therefore remain on track not only to meet our earnings target for the current year, but also our medium- to long-term strategic goals," he said.