04.11.2010 – 12:42
Third quarter: continued strong demand for KfW financing
Overall commitment volume of almost EUR 60 billion (+43%)
Focus on SMEs and climate protection
Consolidated profit of almost EUR 1.5 billion (+90%)
KfW Bankengruppe made total promotional commitments of EUR 59.8billion in the first three quarters of 2010, an increase of 43% compared with EUR 41.8 billion as at 30 September 2009.
Domestic promotional volume rose by 50% to about EUR 50 billion (same period last year: EUR 33.1 billion). In the business area KfW Mittelstandsbank, the volume of commitments increased by more than 50%, with the focus here on promoting enterprises and in particular SMEs through the KfW Special Programme and the KfW Entrepreneur Loan, as well as promoting renewable energies. For climate and environmental protection in Germany, KfW allocated EUR 16.9 billion (EUR 10.9 billion) in total across all business areas. Promotion for private individuals also increased (KfW Privatkundenbank business: + 38%), with much interest shown in the support for energy-efficient rehabilitation and construction. In the business area KfW Kommunalbank, the positive annual trend continued with an increase of more than 50%, with infrastructure financing accounting for a substantial part.
"This extraordinary performance shows that in these economically strained times KfW's promotional funding has provided the right stimulation and important impulses for the German economy," said Dr Ulrich Schröder, CEO of KfW Bankengruppe. "Since KfW operates on the principle of subsidiarity, however, we expect the financing volume to decline again once the economic climate returns to normal."
In the international business, commitments were made amounting to EUR 8.5 billion (EUR 7.4 billion). Of this, EUR 5.3 billion was allocated for export and project finance and EUR 3.2 billion for the promotion of developing and transition countries. In both business areas the focus was on climate and environmental protection.
With a consolidated profit of EUR 1,481 million (EUR 781 million) as at 30 September 2010, KfW Bankengruppe has managed to successfully continue the positive performance trends of the first half of 2010 into the third quarter.
Based on a continued strong operating result, the development has been particularly favoured by the much improved valuations reflecting the brighter economic prospects and the tangible improvement in the risk situation.
"KfW is well positioned strategically and operationally. The earnings will strengthen the capital base, enabling KfW to continue pursuing an active promotion policy even under the anticipated stricter regulatory requirements in future," said Dr Schröder. "Despite the stable operating income, it is, however, too early to forecast the annual result based on the available figures. Nevertheless, in 2010 KfW expects to make the highest consolidated profit in its history."
The operating result before valuation is only insignificantly less than the very good figure for the same period in the previous year and remains at a high level of EUR 1,713 million. The main result component is net interest income amounting to EUR 2,033 million which continues to be supported by the very favourable refinancing terms and conditions due to KfW's first-class credit rating.
Due to the improved economic climate in the third quarter provisions for risk in lending business could be significantly reduced by EUR 285 million, whereas high allocations of EUR 593 million still had to be made in the same period last year.
Altogether, the equity and securities portfolio has also contributed EUR 182 million to profits, directly attributable to the general economic recovery and the brighter outlook on the financial markets.
Given the development of the underlying market parameters in the third quarter of 2010, the valuation of derivatives led to a decrease in the result of EUR 754 million as at 30 September 2010. Despite their sole use for hedging purposes, derivatives must be valued under IFRS to fair value. Due to the rigid IFRS regulations, only limited account can be taken of counterbalancing valuation effects of underlying hedged transactions in the balance sheet which thus have temporary, economically unfounded effects on earnings. These offset each other in total over the whole term of the hedged positions. For increasing transparency, KfW has since the introduction of IFRS and in addition to "consolidated profit" shown "consolidated profit before IFRS effects from hedging", which is adjusted for these economically unfounded effects on the result and thus conveys an undistorted picture of earnings from operations.
The balance sheet total increased considerably by EUR 45.7 billion to EUR 445.8 billion. This large increase is attributable on the one hand to strong promotional business but also to exchange rate changes compared with 31 December 2009.
Results of the individual group activities
In the business area KfW Mittelstandsbank, volume increased by 57% from EUR 13.8 billion to EUR 21.7 billion. Under the KfW Special Programme launched as part of the German Government's economic stimulus packages, KfW granted promotional loans of EUR 5.4 billion (EUR 2.9 billion) as at 30 September 2010. Altogether, commitments made since the beginning in 2009 to 29 October 2010 amount to EUR 12.7 billion. Recently there is, however, a discernible steady decline in demand for the KfW Special Programme, often in favour of renewed strong interest in the KfW Entrepreneur Loan. Under the KfW Entrepreneur Loan programme, KfW granted loans worth EUR 5.4 billion (EUR 4.4 billion). This indicates that credit supply to enterprises is returning to normal in Germany. The promotional focus on the environment has developed very well, with commitments of EUR 8.5 billion, exceeding by 118% the previous year's figure of EUR 3.9 billion. This increase is largely due to keen demand for the KfW Renewable Energies Programme. KfW thus remains the leading promoter of renewable energies in Germany.
The volume of commitments in the business area KfW Privatkundenbank totalled EUR 15.5 billion (EUR 11.2 billion) in the first three quarters. For assistance in energy-efficient rehabilitation and construction, loans and grants were issued amounting to EUR 7.8 billion (EUR 6.6 billion). The programmes make a major contribution to attaining the climate protection targets of the Federal Government in residential buildings. In the KfW Home Ownership and Housing Modernisation Programmes, commitments rose altogether to EUR 5.7 billion (EUR 3.4 billion). In education, the KfW student loan was the main contributory factor to the 32% increase of financing volume to EUR 1.4 billion.
A large increase in financing volume was recorded in the business area KfW Kommunalbank. After the first three quarters of 2010, it amounts to EUR 12.7 billion (EUR 8.1 billion). A major factor here includes global loan business with the promotional institutions in the federal states (Landesförderinstitute - LFIs), due to the very high demand by LFIs for general refinancing, reaching a volume of more than EUR 8.8 billion (EUR 6.8 billion). In infrastructure financing, lending volume almost tripled to EUR 3.5 billion (EUR 1.3 billion).
In the business area of export and project finance, which KfW IPEX-Bank is responsible for within the KfW Bankengruppe, new business commitments were made totalling EUR 5.3 billion (also EUR 5.3 billion in the equivalent period). The third quarter of 2010 saw a distinct increase in new commitments compared with the first two quarters. Finance for energy and environment accounted for the largest share, followed by transport and social infrastructure.
At EUR 2.6 billion, new commitments by KfW Entwicklungsbank in the promotion of developing and transition countries well exceeded the previous year's figure of EUR 1.6 billion. In addition to funds from the federal budget, KfW mobilised its own funds of EUR 1.8 billion (EUR 1.1 billion) for Financial Cooperation. Amounting to EUR 0.6 billion, the funding volume of DEG after the first three quarters of 2010 exceeded that for the same period last year of EUR 0.5 billion. Projects in the pipeline indicate continued robust development.
With its activities, KfW supports the revitalisation of the securitisation market, because these must function as an important means of supplying credit to the economy. As an anchor investor, KfW participated up to the end of the 3rd quarter in securitisation transactions focusing on SMEs worth EUR 0.7 billion.
In 2010, Greece was granted a loan of EUR 22.3 billion. As special business on behalf of the Federal Government, this is not included in the total financing volume of KfW.
Up to 30 September 2010, KfW raised long-term funds on the international capital markets equivalent to EUR 65.8 billion. For the whole of 2010, KfW anticipates a refinancing volume of about EUR 75 billion.
Service: An overview of the business and financial figures of KfW Bankengruppe is available for download at www.kfw.de under Press/Materials for the press/Presentations.
Original content of: KfW, transmitted by news aktuell