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KfW's access to global capital markets pays off
Frankfurt am Main (ots) -
- Funding volume remains stable at EUR 55-60 billion in 2015 - Issuance in foreign currencies to rise - Extension of 'Green Bonds - Made by KfW' to other markets - KfW plans to build up own Green Bond portfolio - Continuation of SME financing via capital markets
KfW plans to fund EUR 55-60 billion in international capital markets in the coming year. Given the persistent low interest rate environment in the Euro zone, issuance in foreign currencies is anticipated to rise. While the demand for liquid and low-risk bonds in Euros remains intact, as demonstrated by the recent 3-year 3 billion Euro Benchmark with a coupon of only 0.05%, investors increasingly seek investment opportunities in higher yielding markets. "In order to fulfill our promotional mandate at best, we have to optimize funding costs. Our long standing established access to global debt capital markets enables us to flexibly react to shifts in investor demand. So if it makes sense economically, we can really get a move on in a certain currency to optimally fund our promotional business", said Dr Günther Bräunig, member of the Executive Board of KfW, at a press briefing on the bank's capital market activities held today in Frankfurt.
Year-to-date, KfW has raised a total of EUR 55.4 billion in 13 different currencies and close to 250 single transactions. In the second half of 2014 the bank observed a significant rise of demand for foreign currency bonds which made up 76% of issuance (vs. 47% in the first half of 2014). This was clearly exemplified by a USD bond issued in November which turned out to be the largest ever USD 10-year Global of a European issuer with a volume of USD 5 billion. "We expect this trend to continue into 2015, the USD market in particular is attractive for investors globally. We will thus operate flexibly to achieve the best results for our loan business", Bräunig added.
KfW projects increased importance of Chinese Renminbi (RMB)
In April 2014, KfW's has issued the first RMB bond with listing on the Frankfurt Stock Exchange. "That was a milestone for us. We are convinced that the Renminbi will develop to a global currency. As an issuer, we want to take part and support Frankfurt as a financial center for RMB", Bräunig explained the leading role of the promotional bank.
Green Bonds - KfW favors quality over quantity
Predominantly due to their high standards with respect to transparency and impact measurement, the inaugural 'Green Bonds - Made by KfW' in EUR and USD issued in the second half of the year have been very well received by socially responsible investors. And they have sparked the interest of rather traditional institutional investors. KfW's EUR Green Bond has most recently been awarded 'SRI Bond of the Year' by the renowned International Financing Review (IFR).
In 2015, KfW will expand its Green Bond approach: In addition to liquid bonds in the core currencies EUR and USD, new currencies like AUD or GBP, for instance, as wells as new products like private placements will be offered. KfW expects to see good demand given that the high standards of 'Green Bonds - Made by KfW' will also apply to new products: Also in the future, investors will be provided with information on the impact of their investment in terms of greenhouse gas reductions as the bond proceeds are linked to KfW's environment investment programme "Renewable Energies". The promotional bank expects an issuance volume equating to approx. EUR 3 billion in the next year.
KfW aims to actively contribute to climate protection with its Green Bonds. Furthermore, KfW will make use of its reputation and expertise and step up its efforts to raise awareness for 'sustainability in capital markets' in dialogue with market participants. The bank will be a vocal advocate for the further development of minimum standards in the still new market segment. "The Green Bond market has seen considerable growth in 2014 which was necessary to attract interest from investors worldwide. What we need now is qualitative growth - that's what we pursue with our approach to the market in 2015", explained Bräunig.
KfW plans to establish its own Green Bond portfolio in order to further promote the market segment. "To enter the market as an investor would be the logical complement to our holistic sustainability approach. We look into this very carefully and particularly focus on adequate standards we demand from potential issuers", commented Bräunig. The project's assessment is anticipated to be finalized in the first quarter of 2015.
KfW promotes financing for SMEs via capital markets
KfW will continue its longstanding activities in the securitization market in 2015: providing access to financing for small- and medium-sized companies via capital markets by investing in SME securitizations (ABS and ABCP). Furthermore, KfW considers extending its promotional activities to European SME securitizations. As in 2014, the targeted volume for promotional investments for 2015 amounts to EUR 800 million.
KfW has emphasized the importance of capital markets for financing the real economy in general and SMEs in particular for many years, a position that is increasingly shared by others. "It is good to see securitization being increasingly perceived as something positive, an assessment that is justified by low default rates of European ABS. Current initiatives on a European level to develop a so-called 'High Quality ABS segment' are a great chance to re-establish the image of securitization, which was damaged during the financial crisis. It is now essential to define the segment in a proper manner and to recognize its characteristics in regulatory treatment", Bräunig said.
Service: For further information on 'Green Bonds - Made by KfW' please go to: www.kfw.de/KfW-Group/Investor-Relations/KfW-Green-Bonds/
More detailed facts and figures on KfW's funding may be found here: http://ots.de/FuvQD