Aareal Bank Group (ARLN) Q4 2023 earnings summary

Executive summary

• 2023 consolidated operating profit was €149 mn vs. €239 mn in 2022; net income was €48 mn vs. €153 mn. 2024 operating profit target: €300–350 mn.

• Income rose 31% to just under €1.3 bn, while risk provisions and investment charges weighed on earnings.

• CET1 ratio edged up to 19.4% despite portfolio growth.

Financial highlights

• Net interest income rose 39% to €978 mn and net commission income rose 11% to €307 mn, both record levels.

• Aggregate risk provisions, including FVPL valuation adjustments, totalled €510 mn; €360 mn related to US office property financings.

• Banking operations generated €221 mn operating profit vs. €242 mn in 2022; Q4 consolidated operating profit was -€6 mn and net income was -€56 mn.

• Administrative expenses rose to €645 mn from €571 mn, including €96 mn of non-recurring Aareon investment expenses.

• Net income included €101 mn of tax deductions, including a write-off of Aareon loss carryforwards in connection with the Atlantic BidCo takeover.

Outlook and guidance

• 2024 consolidated operating profit target: €300–350 mn, despite continued above-average risk provisions.

• Banking operations operating profit target: €250–300 mn; SPF lending portfolio target: €33–34 bn, with €8–9 bn of new business.

• Banking & Digital Solutions average deposit volumes expected to remain stable at ~€13 bn in 2024.

• Aareon 2024 targets: revenue of €440–460 mn, adjusted EBITDA of €160–170 mn and EBT of -€50 mn.