16.05.2011 – 12:07
Strong first quarter demand for KfW financing
- Economic recovery spurs demand for classic KfW promotional loans for SMEs - Dr Schröder: "We are preparing to support the energy turnaround."
In the first quarter of 2011, KfW Bankengruppe committed funds totalling EUR 22.7 billion (first quarter 2010: EUR 17.8 billion). Of this volume, EUR 19.2 billion (EUR 15.6 billion) was committed for the promotion of industry, environmental protection, housing and education in Germany. In the promotion of small and medium-sized enterprises, as expected the scheduled phasing out of the economic stimulus programmes led to a lower volume of commitments than in the previous quarter. At the same time, driven by the economic recovery, demand for classic promotional loans for SMEs increased. The result of the business area KfW Privatkundenbank, with the promotional areas of housing and education, remained stable on the same level. The result of the business area KfW Kommunalbank was characterised by a pull-forward effect. The framework agreements on the general refinancing of state promotional banks were already concluded in the first quarter. In 2010, however, these agreements were concluded in the first five months and, thus, in the second quarter as well. As a result, the volume of commitments of this business area was substantially higher than in the previous period, at nearly EUR 8 billion against EUR 3.1 billion. Without this effect, the volume of KfW's new business would reach roughly the previous year's level. KfW's international business also developed positively, with commitments totalling EUR 3.6 billion (EUR 2.0 billion). Spurred by the economic recovery, export and project finance picked up again considerably.
"Demand for KfW promotional loans is developing very positively. We see enterprises and private borrowers seizing the upswing amid continuing low interest rates as an opportunity to invest in machinery and housing again", said Dr Ulrich Schröder, Chief Executive Officer of KfW Bankengruppe. "As a promotional bank dedicated to environmental and climate protection, we are currently preparing to support enterprises, institutions and citizens in initiating the energy turnaround with special promotional schemes."
With a consolidated profit before IFRS effects from hedging* of EUR 588 million (EUR 628 million) as at 31 March 2011, KfW Bankengruppe successfully continued the positive development of results from the 2010 financial year. The consolidated profit after IFRS effects even exceeded the previous year's result of EUR 575 million, reaching EUR 1,021 million.
"The development of the first quarter of 2011 is encouraging, but these results cannot be extrapolated to the annual result, particularly in the lending area, because of the exaggerating effects of IFRS and the positive valuation result again in the first quarter", Dr Schröder added.
The operating result before valuations was EUR 509 million, which was below the previous year's very good result of EUR 567 million, but nevertheless still at a good level. Net interest income as the main source of income dropped slightly below the previous year's level, but continued at a historically high level of EUR 624 million (EUR 665 million) owing to the continuing very low interest rates, particularly in the short-term segment. Interest rate reductions continued unchanged against the previous year at EUR 139 million.
Risk provisions for lending business were reduced by a net total of EUR 71 million as a result of the continuing recovery of individual business segments. In the same period in the previous year, charges of EUR 123 million were still incurred.
The group's private equity and securities portfolio yielded a positive effect of EUR 23 million in total (EUR 125 million). Furthermore, hidden obligations under securities reduced substantially by EUR 162 million to EUR 733 million against 31 December 2010.
The purely IFRS-related effects from the valuation of derivatives used for hedging purposes amounted to EUR 433 million (expenses of EUR 53 million), increasing the valuation result considerably. The reasons for this lie in reversal effects from the previous years, the weak US dollar and rising interest rates.
Results of the activities of the individual business areas The promotional business volume of KfW Mittelstandsbank was EUR 5.6 billion, a planned reduction against the same quarter in the previous year (EUR 7.3 billion). This was mainly due to the phasing out of the economic stimulus programmes of the Federal Government at the end of 2010. The continuing economic recovery, however, had a positive impact on demand for regular promotional loans. Thus, for example, demand for the KfW Entrepreneur Loan increased from EUR 1.6 billion to EUR 2.4 billion. Overall, the volume of commitments in the promotional area of business start-ups and general corporate finance decreased from EUR 4.6 billion to EUR 3.2 billion. The same applies to the promotional area of environmental protection, in which commitments totalled EUR 1.9 billion (EUR 2.6 billion). The reduction in this area is mainly due to the expiration of the complementary programme for renewable energies, which was also a component of the Federal Government's economic stimulus programmes.
In the business area KfW Privatkundenbank, the volume of commitments was EUR 4.5 billion, slightly below the level of the first quarter of 2010 (EUR 4.6 billion). The continuing high demand under the Energy-efficient Construction programme, which reached EUR 1.0 billion (EUR 0.9 billion) was another positive result. The volume of commitments in education finance increased to EUR 478 million (EUR 441 million), with the KfW Student Loan again taking the biggest share.
In the business area KfW Kommunalbank, the volume of commitments increased from EUR 3.7 billion to EUR 9 billion. Infrastructure finance increased significantly by 72% to EUR 1.1 billion (EUR 0.6 million). After the Investment Offensive Infrastructure (a component of the Federal Government's Economic Stimulus Package I) expired in December 2010, demand for promotional loans for municipal and social infrastructure, with interest rates reduced from KfW's own funds, increased again. In the ongoing year, the agreements under global loan business for general refinancing were concluded earlier than in the previous year.
In the business area of export and project finance, which KfW IPEX-Bank handles within KfW Bankengruppe, new business commitments totalled EUR 2.8 billion (EUR 1.3 billion).
This increase was mainly due to the fact that transactions initiated in the previous year were deferred to the new year. The first quarter was characterised in particular by a high volume of commitments in the aviation and railroad transport sectors.
In the business area promotion of developing and transition countries, KfW Entwicklungsbank committed promotional funds of EUR 0.7 billion in the first quarter of 2011. The financing volume thus exceeded the previous year's level of EUR 0.6 billion. In addition to the funds from the federal budget, KfW raised additional funds totalling EUR 445 million. DEG committed a total of EUR 136 million (EUR 104 million). The financial sector accounted for a major portion of new commitments, and the regional focus was on Latin America.
In the securitisation market, the moderate recovery that set in last year is continuing. In the first quarter, KfW participated with EUR 0.1 billion in a securitisation of German leasing receivables. In 2011, KfW will mainly support SME and leasing transactions to strengthen the financial basis of small and medium-sized enterprises as the economy recovers.
In the first quarter of 2011, KfW raised long-term funds for the equivalent of EUR 26.8 billion in the international capital markets. Large-volume benchmark bonds (in euros or US dollars), which accounted for 59% of the funding volume, made a significant contribution to this funding result. Overall, bonds in ten different currencies were successfully placed with investors in and outside Germany under 120 individual transactions. Adding to the stable and reliable investor demand from Europe (including Germany), non-European central banks also significantly increased their investment in KfW bonds again.
* Explanation of consolidated profit before IFRS effects from hedging: Under IFRS, derivatives must be recognised at fair value in the balance sheet even if they are not used for trading, as in the case of KfW, but to hedge interest and currency risks. The opposing valuation effects of the underlying on-balance transactions thus hedged can be reported only inadequately under IFRS and therefore lead to economically inappropriate temporary earnings effects in KfW's income situation. These effects offset each other in total in the course of the overall maturity of the hedged items.
Original content of: KfW, transmitted by news aktuell