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Article Excerpt
JUERGEN JUNGINGER, MD, IR, AAREAL BANK AG: Ladies and gentlemen, welcome to our annual analysts' meeting. I'd like to welcome all the people I see here in front of us and I think for an [SDAX] company it's quite a lot of people which came to see us and ask questions to our Board. I'd like as well to thank all the people which have dialed into this conference call.
I think we would have just a brief presentation because we know all the facts due to the SoFFin announcement in February. That's why I think we don't have to discuss the same things again. And I would like to have later a very intensive Q&A which I think we would start here in Frankfurt and later switch over to the people which have dialed in.
I'd like to welcome here on my right side Dr. Wolf Schumacher, our CEO, and Hermann Josef Merkens, our CFO. And both will be taking your questions later on. So Wolf, it's over to you, please.
DR. WOLF SCHUMACHER, CEO, AAREAL BANK AG: Ladies and gentlemen, I'd like to welcome everyone here in the room and at the telephone line to our Analysts' Conference 2008. The presentation, there are a lot of information where you are very familiar. It's a lot of things are completely similar what we said five weeks ago. And therefore, as Juergen said, I will give you some quite remarks, short remarks, concerning our results. And I think it's more interesting to start a question and answer session.
Let's start with page number two. You're familiar with these figures. The most important issue, we had a very solid operating performance last year despite this very challenging market. And even if you see the fourth quarter, we had black results in the fourth quarter of EUR11m before tax. Taking to account this changing environment and taking account our results, I think that's excellent results, even if you see a comparison to our competitors on the international banking world.
Let's go further to page number -- to the pages where we have some remarks concerning our quality of assets. Page number 13. What we see in the markets right now, that the crisis in the economy, the recession in the economy gets much harder than it was predicted two, three or four months ago. And we can't see any light at the end of the tunnel. And what we see, that the crisis is coming into the real economy. And that's the reason that we are very cautious concerning our forecast for next year. But we stay to the forecast. Concerning the risk costs, we have a range of EUR90m up to EUR150m and I would say it's quite too optimistic to say under these circumstances that we are at the lower range of these figures.
And let's start and have a little overview about the quality of our assets in the different regions. And let's start with page number 13, that's the overview, review of all our portfolio, the total property finance portfolio at the end of last year. By regions you can see on the left side at the top we are highly diversified. And you can see that stake of Germany is about 20%.
And we are so convinced that this high diversification by region, if you take into account that Germany is the world championship leader in exports, that means on the other hand that Germany will have a much harder hit coming from the recession. And therefore we think that the strategic view, it's much better to have a very reduced German stake in the structured real estate financing segment.
And if you see, we are not focused on one or two countries. We are highly diversified. We are even highly diversified by property type, you can see it on the top on the right side. And on the left side at the bottom it's one competitive advantage we are focusing on senior lending and the most important focus is investment finance. 85% of our portfolio is invested in buildings where we have tenants with a stable cash flow, and with this cash flow the customer can pay back his credit.
Developments, 13%. That's a very conservative view. We are looking for high pre-sales and pre-letting clauses.
Concerning loan to values, on the right side at the top -- at the bottom, you can see up to now 60% has loan to value, 84% of the whole portfolio has a loan to value of 60% and less. Here will be a change during the next 12 months. And you can see in a lot of markets that the prices are coming down. That means we have a change in the loan to values.
On the other hand, for investors with a high potential of equity in the background, this market situation offers excellent opportunities to step in back into the markets. And as you can see, a lot of insurance companies, especially the bigger ones, they have strategic issues to reinvest their money in real estate. And you can see a lot of potential investors, they just started or just they're waiting in line and viewing the market, when is the best time to step into the market.
Let's go further to the next page. Let's start, and I would like to give you a short overview about our different markets. That's the German credit portfolio at the end of last year. And the total volume outstanding EUR4.8b, and you can see investment finance is 89%, 10% on development. That means here, the most important focus is investment. And as I explained last year, we stopped in the middle of last year, you can say it was in springtime last year, we stopped on a strategic point of view to finance German developers for housing, residential housing. We don't do the so-called German Bautragergeschaft.
On object type on the right side you can see residential is the biggest part. But here in the background there are commercial companies. And the performance side, the biggest part of non-performing loans is in German portfolio at 7%. 93% are highly performing. Loan to value range, 73% have loan to value of 60% and less.
Next slide. Western Europe. If we talk about Western Europe, it's the portfolio without Germany, and Western Europe is Belgium, France, UK, Netherlands, Switzerland. Here you can see the investment grade finance stake is 87%. By object type, highly diversified, a huge estate in office, and the performings by 99%. And these [stayed as] absolute state of the art. By loan to values 85% have a loan to value of 60% and less. Next slide, please.
Southern Europe, that's Italy and Spain. By project type, 68% are invested in investment finance, developments are 28%. By object type, highly diversified with a huge stake in office and shopping center and 100% is performing. By loan to values, 89% have a loan to value of 60% and less. 10% have a loan to value of 60% up to 80%.
Northern Europe. Northern Europe are the countries Denmark, Finland, Norway and Sweden. You can see a high portion of investment finance of 91%. Diversification by object type is highly diversified. Non-performing loans 1%, 99% performing. Loan to value ranges, 80% have a loan to value of 60% or less.
Eastern Europe, it's very important that we are not invested in some specific countries where you can see a high risk like Romania, like Ukraine, like Bulgaria. We are not invested in these countries. And if we talk about investments...
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