Full Interview

We are a company with a mid-sized structure and two strong segments. On the one hand, our Structured Property Financing segment provides clients from the commercial property industry with financing solutions that precisely fit their needs. And the Consulting / Services segment on the other hand provides clients from the property industry – in particular from the housing and commercial property industries – with payment transaction solutions and IT services, the latter via our subsidiary Aareon AG. In both segments, we are determined to be the best provider, both in terms of quality and in terms of client focus. Aareal Bank Group also stands for solidity, reliability and predictability – on the inside, to our employees, and on the outside, with regard to the capital markets. This is evident not least in our promise to shareholders. We want them to participate in the Bank’s economic success, on a sustainable basis, by paying an attractive dividend.

The banking sector as a whole – including Aareal Bank, of course – is operating in a challenging environment, marked by several trends: competition has intensified and increased pressure on margins. Then there is technological change, which also changes the needs of our clients. The level of volatility prevailing in the financial markets remains high, and there are more and more geopolitical conflicts. And, last but not least, we need to cope with historically low interest rates and further tightened regulation. The challenge is dealing with all of these imponderabilities and uncertainty factors at the same time – this is what we need to be prepared for. In this highly dynamic environment, it is all the more important that we pay attention to our tried-and-tested risk management approach, which will continue to define the guiding lines for our business in the future.

It is, but it is not only the environment shaping our future, but also us defining our future in this environment. We believe that where there are challenges, there are opportunities – at least for those organisations that are willing to change and know how to play to their strengths. Aareal Bank is that kind of organisation. We are in a robust shape, as shown, amongst other things, with another set of excellent results in the past financial year. We are powerful and fully capable of taking strategic action. Our sustainable business model provides a strong foundation. It has allowed us to assume leadership positions for both of our segments over recent years. What is just as important as a strong business model, however, are the people. We are fortunate enough to work with a team that knows how to spot opportunities – and is ready to seize them when they present themselves. A team that is willing to change, and able to deliver the highest quality for our clients, and our shareholders. That is why I am confident that, even in a more challenging environment, we will continue to be successful and seize the opportunities that will arise in the years ahead.

First of all, we already are a very successful company! And our ”Aareal 2020 – Adjust. Advance. Achieve.” programme for the future will help us ensure that we will continue to be successful. But we also know that, against the background I just described, it is not going to be easy. However, that does not mean that we need to reinvent ourselves. Instead, our programme will develop our business model further. We want to leverage digitalisation and seize the opportunities this trend entails for our business and for our clients. We will unlock new growth potential in attractive markets, in particular for Aareon, our IT subsidiary. And although we already are fast and efficient, we will continue to improve our structures and processes, and shift gear going forward. With Aareal 2020, we are safeguarding the success of our Bank in the future – in the interests of our employees, our clients, and – of course – our shareholders. With a return on equity of approximately 12 % – a mark we are even aiming to slightly exceed in the long term – and a dynamic distribution policy, Aareal Bank will continue to be an attractive investment. For the coming years, we are planning to gradually increase dividends and distribution ratios, provided that the economic environment does not deteriorate drastically – or offer such big opportunities that would require us to increase investments in our own business in order to create value for our shareholders.

As I said, there is no need to reinvent ourselves. With Aareal 2020, we will hold on to what makes us strong and at the same time leverage new potential in the environment of both segments. In our Structured Property Financing segment, for example, we aim at reinforcing its expansion in growing markets that offer an attractive risk-return profile, managing our portfolio more actively, and gaining balance sheet relief through increasing placements. We also plan to create new digital business opportunities. The goal of these measures is to ensure that the Structured Property Financing segment remains the Group’s solid foundation. In our Consulting/Services segment, we want to leverage the solid foundation it has built over recent years for future growth – through increased cross-border sales activity, additional products for ERP systems and digital offerings for the housing industry. The business with utilities, which we have been building quite successfully for some time now, is set for expansion. The Consulting/Services segment will be developed as the growth driver of our Group.

Digitalisation is a buzz word, often meaning everything or nothing at all. We are monitoring the effects of digital trends very closely – how they affect society, but also the banking sector and our own business. Digitalisation should not be an end in itself, and that is why the question we ask ourselves is not one of technical feasibility, but of sense: what makes sense for our clients, and for our processes? Bearing this in mind, digitalisation may mean very different things for us as well. Our take on commercial property finance, for instance, is usually a highly specialised and customised solution for a particular case, based on specific expertise. This requires intensive discussions and negotiations with the client – on a personal, not a digital level. Still, when interacting with a client, digitalisation may be a good opportunity to increase efficiency for both sides. And digital solutions may help us generate additional commission income as we apply our specific know-how to new offerings along the financing value chain.

Things are different here. In this segment, digitalisation is part of our DNA. Here it is more about promoting digital developments – with issues such as managing the handover of flats, smart metering, or services covering electronic billing and payment transactions. Our goal is to leverage the benefits of digitalisation to support our clients in streamlining internal processes, whilst enhancing and broadening connectivity with their customers. This means creating benefits and optimising our own processes. Overall, with ”Aareal 2020”, we want to leverage the Group’s excellent foundation for future growth, to generate new business opportunities and unlock fresh revenue potential.

Our goal is clear: we want to continue writing the success story for Aareal Bank. Nothing more, and nothing less. And with the record results of the past years, a consistent client focus – which has helped us gain our leadership position in the market – and the ”Aareal 2020” programme for the future, we have created ideal preconditions for achieving that goal. I am convinced that by the time 2020 comes around, the general outline of Aareal Bank Group will not have changed. But it will be a more innovative Bank, even more agile than it is today – because we see change as creating opportunity. And – as we have consistently done in the past – we shall pursue those opportunities as and when they present themselves. This year’s Annual Report outlines how we want to leverage the strong foundation of our two business segments to go forward. And we invite you to join us on this journey.