Interview with Hermann J. Merkens

Mr Merkens, digitalisation is taking hold in every aspect of our lives and every sector. What do you think about this development and what is Aareal Bank Group’s approach to the digital transformation?

We see digitalisation as the source of a lot of potential and new opportunities for us. We want to take advantage of them and so have positioned ourselves accordingly. Our range of services has already made us a pioneer in digital solutions in our markets. We want to strengthen this position, and continue to expand it over the years to come. In order to make that goal a reality, we've done things like developing a digital road­map, equipping our IT landscape to cope with new challenges – making sure that we have the right tools to continue to be a success story in the digital age.

How do you see the past financial year as a whole? What challenges did you encounter? How was the business environment?

The business environment has continued to be very challenging. It's been influenced by many uncertainties and strong competition. Despite that, however, we were able to continue our positive business development. In 2017, we generated a consolidated operating profit of € 328 million, reaching our goals for the past financial year. Taking into account the difficult conditions overall, such as the low interest rate levels, regulatory uncertainty and strong competition, this is a good result. On the whole, we are very pleased with how the financial year went.

What in particular sets Aareal Bank Group apart from its competitors? What are your USPs?

Aareal Bank Group specialises in things related to property and property investment. Our focus, long-standing experience and a broad range of services means we can offer extensive and unique expertise. It also enables us to identify trends and developments in our market early on, and help our clients to benefit from them. In both of our business segments, we are equal partners and a reliable support for our clients. In particular, our USPs in the Structured Property Financing segment are cross-border financings, extensive structuring expertise and a profound understanding of local markets and sectors. In the Consulting/Services segment, we offer a one-of-a-kind combination of banking and IT solutions, extensive digitalisation expertise and a deep-rooted knowledge of processes and systems in the property sector and related industries.

Let’s turn to the future: where do you think Aareal Bank Group’s opportunities and potential lie in the years to come?

In our two business segments, we see a variety of different opportunities to tap into new markets and clients. In the Structured Property Financing segment, we want our expansion in attractive markets to be even more robust and we'd like to develop new digital business opportunities along the value creation chain. In the Consulting/Services segment, we see potential for growth in strong product cross-selling and more fully taking advantage of economies of scale, in enlarging our housing and utilities sector ecosystem, in developing existing platform products for housing companies' B2C business, as well as expanding payment and IT products, and our client base. We are well positioned to take advantage of these market opportunities. Our profitability and financial performance enable us to act from a position of strength. 

The “Aareal 2020” strategic programme was launched roughly two years ago. Where do things stand currently?

Our “Aareal 2020" strategic programme is designed to realise additional revenue potential by developing the business model, and to ensure our Company is positioned to succeed in future. In this context, and across all Group entities, opportunities arising from investment in digitalisation will be consistently exploited. At the same time, processes and structures are being optimised to make Aareal Bank Group even more efficient and flexible. The programme's implementation is well underway. As planned, we developed the operating business, advanced our transformation and further optimised our processes and structures.

And what are your expectations for the 2018 financial year? What areas are you focusing on?

In 2018 we are going to speed up the implementation of "Aareal 2020". We want to grow the foundation of our future success in both business segments, with significant forward­looking investments in our business, our IT and expanding our digital solutions. In addition, we are continuing to work on optimising our processes and structures. We are consistently working towards the challenge we've set for ourselves: to be the leading provider of smart financing, software products and digital solutions for the property sector and related industries. So the 2018 financial year will be very challenging, but also very exciting.