Strategy

On the right track for success

Aareal Bank Group determined strategic thrusts for the period following its successful "Aareal 2020" programme at the beginning of 2020 – just before the massive economic distortions caused by the coronavirus pandemic set in.


Whilst our general strategic orientation remains in place, we will develop the individual business activities in a targeted manner, in order to sharpen their own independent profiles, thus creating value for all stakeholders in an increasingly challenging environment.


For many years, Aareal Bank Group has been a success story in the German banking sector. During this story's current chapter, we have consistently – and very successfully – implemented the "Aareal 2020" programme for the future, launched in 2016.


In the Structured Property Financing segment, this has enabled us to materially increase our flexibility regarding regions, asset classes, structures, and exit channels, whilst driving the expansion of our business along the value creation chain, for example, with our investment in Mount Street.


Our Consulting/Services segment on the other hand, has been clearly geared towards growth – both regarding the Bank and especially our subsidiary Aareon, whose international business we have significantly strengthened within the scope of "Aareal 2020" – also by way of acquisitions. Furthermore, we have laid the foundation for Aareon to increasingly position itself as a digital solutions provider.


We have pursued numerous new initiatives in the start-up sector and increased our power to innovate in both Group segments, clearly enhancing the efficiency of structures and processes – and we have also invested heavily in our IT. For example, Aareal Bank was the first institution in Germany to fully migrate its core system to S/4 HANA – a milestone on our path towards a highly efficient organisation.


In the course of its final year, the "Aareal 2020" programme's results are gratifying. Our Bank has reinvented itself: in terms of content, organisation, and culture. Today, Aareal Bank Group performs better, is more robust, more efficient, more innovative and more agile than ever. This is something we can build upon when entering the next phase of our development.

The next development level –
Aareal Next Level

The challenges we – and the rest of the financial sector – are confronted with in these times of regulatory pressure, digitalisation and persistently low interest rates, are huge. To be prepared, we initiated a Group-wide strategic review process in 2018, the results of which are now available: under the guiding principle "Aareal Next Level", we will lift Aareal Bank Group onto the next development level over the medium term – and thus not only allow its business potential to take effect, but also to exploit new strategic options.


Our principal objective is to achieve an evolutionary development based on what we have already achieved; we see no need to fundamentally change our strategy in the near future, and the strategic beliefs which have guided us during the implementation of "Aareal 2020" remain viable.

However, starting points for further sharpening our strategic profile present themselves. Under the motto "Activate!" the main objective in our Structured Property Financing segment, the Group's backbone, is to safeguard the success achieved in the past years and our best-in-class position – even in an adverse environment: by systematically making use of the flexibility we have gained, a further expansion along the value creation chain, and improved efficiency.


In the Consulting/Services segment, we aim to reduce the overlaps and cross-dependencies between the Bank and Aareon, whilst strengthening the independence of the individual brands and business models – securing existing synergies at the same time. In specific terms, this means that Aareal Bank, as a leading provider of payment transaction services for the German housing industry, will reposition itself under the motto "Elevate!": in addition to the focus on deposit-taking, the Bank will evolve to become a provider of further innovative products and services, including an expansion into new related markets requiring specific payment transactions know-how.


Aareon, in turn, as an integral part of our refined Group strategy, is to significantly increase its growth rate ("Accelerate!"), developing a strong value perspective as a separately positioned software company independent of the parent. To this end, Aareon will consistently implement the programme it presented in 2019, which is expected to double earnings in the medium term, primarily through the further expansion of its digital business. Targeted M&A activities are expected to generate additional growth.


In line with the strategic orientation of sharpening the independent profiles of the individual business activities, segment reporting will also be adjusted, starting with the report for the first quarter of 2020, to comprise three segments (instead of two previously): Structured Property Financing, the Bank’s business with the housing sector and related industries, and Aareon. The strategic cornerstones defined with ”Aareal Next Level“ will gradually be backed by further measures and initiatives to be taken across the Group in the months ahead. Assuming a more positive environment, the initiatives undertaken in the context of ”Aareal Next Level“ will permit to achieve return on equity before taxes of around 12 % over the medium term.

12 percent

Return on equity before taxes

This can be achieved through ”Aareal Next Level“ over the medium term, assuming a more positive environment.

Strategic guidelines established for the future

We have established the strategic guidelines and made our ambitions clear. Now we must further specify "Aareal Next Level“ and drive Aareal Bank Group's evolutionary development – with courage and fervour.


We are aware of two facts: firstly, lasting success can only be achieved if we generate success for our clients. Secondly, in these volatile times we must be ready to adjust time and again, and to walk entirely new paths if so required.


If we manage to realise the existing potential step by step in the years to come, following the guiding principle of "Aareal Next Level“, then we will continue Aareal Bank Group's success story over the medium- to long-term – and thus beyond our 100th anniversary in 2023.

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