13.07.2009 – 12:30
KfW optimistic about its capital market activities in the second half of 2009
Over EUR 50 bn refinanced under difficult market conditions in the first two quarters Simply structured securitisations still important for the credit supply of SMEs
"Although funding via capital markets in the first half of 2009 was not a walk in the park even for big international issuers, the last six months show how well KfW is positioned in the global markets", says Dr Günther Bräunig, member of the Managing Board of KfW Bankengruppe on the occasion of the half-yearly press conference on the capital market activities of the major German promotional bank, which is held in London today.
Particularly the first three months were more than challenging. Numerous state-guaranteed bonds issued by banks pushed onto the market and the issue of government bonds rose sharply as well. At the same time, many central banks - typical core investors of KfW - had fewer reserves to invest as a result of the financial crisis and a number of institutional investors took time out to reassess their risk appetite. In the first quarter this led to a new, significantly higher price level also for sovereign, quasi-sovereign and supranational issuers. The situation eased in the second quarter, however, as investors were increasingly willing to invest, also because the supply of new government-guaranteed bonds did not flood the market to the extent expected.
KfW successfully refinanced its promotional business even under these difficult circumstances. In the first half of the year KfW raised EUR 51.2 billion in the international capital markets - two thirds of the volume announced for 2009. Over 220 issues in altogether 15 different currencies were placed in the market. The euro (43%) and the US dollar (39%) accounted for the biggest shares while the pound sterling took 7% and the Japanese yen 5%.
KfW was the only issuer in its segment to issue large-volume bonds in all benchmark maturities (three, five and ten years). So far the bank has raised equivalent of EUR 29.5 billion under its benchmark programmes (eight new issues and two increases). "Our issuing activity in long maturities is all the more noteworthy as in volatile times, risk-conscious investors tend to look for paper with short maturities. We nonetheless succeeded in issuing ten-year benchmark bonds in a record volume of EUR 6 billion and USD 3 billion - impressive evidence of the confidence which institutional investors have in KfW's issuance strategy and credit quality!", emphasises Bräunig.
This success was helped by the fact that KfW has reorganised its marketing for large-volume Euro benchmark bonds. The investor relations activities in Germany and Europe, for example, were expanded. Moreover, banks with particularly strong regional distribution power were increasingly contracted as syndicate members. As a result, the share of domestic investors more than doubled against 2008 in the first half of 2009. A similar trend could be observed for US dollar bonds. The average share of US investors has also doubled. "It pays to regularly and comprehensively inform our core investors and to woo new investors. We continue to offer highly liquid bonds, and this is of high importance to them", says Bräunig.
What was initially cautious demand for public and foreign currency bonds outside the benchmark programmes as well as for structured securities picked up noticeably in the second quarter. Investors have been showing greater willingness to take risks in regard to currency, maturity and issue structure; however, they continue to keep a close eye on the issuer's credit quality.
The promotional bank is holding on to the funding volume of around EUR 75 billion announced in January for 2009. For the latter half of the year it maintains its forecast of an occasionally uncertain and volatile market environment. "The past months have shown, however, that our market presence enables successful issues even in a very difficult environment", Bräunig comments with satisfaction. "KfW has asserted itself excellently in the international capital markets. So there is every reason to look forward to the second half of 2009 with optimism".
As for the securitisation market, Bräunig considers a transaction concluded with Postbank through KfW's securitisation platform PROVIDE in June as a "positive signal". A portfolio of German housing loans in a volume of roughly EUR 1.5 billion was securitised under the deal.
Bräunig does not conceal the fact that massive undesirable developments have occurred in some sub-segments of the international securitisation market but advocates a differentiated view of this market. After all, securitisations based on granular loan receivables and which originate from the banks' existing portfolio have shown themselves to be fundamentally robust even during the crisis. The losses from such transactions average less than 1% in Europe and even less than 0.1% in KfW's platform transactions, which indicates the high quality on average of the securitised portfolios.
"Simply structured securitisations, which the banks use primarily as a means to refinance their core business and reduce their capital charge, will remain important in the future as well, particularly to ensure the credit supply for SMEs", says the board member of Germany's biggest promotional bank. "They are an economically useful instrument, and for this reason we will continue to offer our securitisation platforms and our expertise in order to support the lending operations of banks for SMEs and for private housing construction", emphasises Bräunig.
For more detailed information on KfW's capital market activities click on the menu item "Press" in the English version of KfW's website at www.kfw.de.
Original content of: KfW, transmitted by news aktuell