Aareal boosts margins through US new business

German bank Aareal has seen an increase in average gross margins of new loans underwritten during the second quarter of 2017, mainly driven by its expansion into the US market.

German bank Aareal has seen an increase in average gross margins of new loans underwritten during the second quarter of 2017, mainly driven by its expansion into the US market.

Average gross margins after currency costs of newly-originated loans went up by over 18 percent to more than 260 basis points from April to June, compared with the previous quarter. Loan-to-value ratios in Q2 remained moderate, the bank said.

The key driver of higher margins was the “continued business expansion into high-margin markets such as North America”, it noted.

Aareal said it is on course to exceed average gross margins for the year, expected to range from 200 to 210 bps, even as the share of North American exposures in total new business volumes is likely to decline during the second half.

The bank’s structured property finance division generated €2 billion of new business, up approximately 11 percent on the previous quarter.

Newly-originated loans accounted for around 75 percent of new business in the quarter. Around 56 percent of new business was originated in Europe, with the remainder coming from North America.

The division had an operating profit of €115 million, down 10 percent from the same time a year ago, amid a “very challenging” business environment that continues to be “highly competitive”, the bank said.

Overall, Aareal reported a consolidated operating profit of €109 million for April to June, down 9.16 percent year-on-year.

During Q2, the German bank concluded the integration of rival property lender WestImmo, which it bought for €350 million in June 2015. Aareal is now focused on servicing the loan portfolio transferred from WestImmo.

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