08.11.2012 – 12:50
Business and financial figures for September 2012: KfW continues intensive promotion in priority area of environmental and climate protection
- Environment quota of 40 % again well above target for the year (36 %) - Supporting the energy turnaround is a central theme of domestic finance - Consolidated profit of EUR 1.7 billion
In the third quarter of 2012 KfW continued to concentrate its financing activity on the themes of environment and climate, demographic change and globalisation. By 30 September of this year, KfW's financing commitments for environmental and climate protection alone amounted to EUR 19.1 billion. This is a share of 40.0% of the overall promotional business volume and significantly higher than the target of 36% planned for the year as a whole. In domestic financing, the focus is on supporting the energy turnaround with financing offers to enterprises, private individuals and municipalities for energy efficiency improvements, expansion of renewable energies and innovations in the areas of energy, climate and environment.
"In designing its promotion, KfW ensures that its financing offers make an effective contribution to addressing the major social challenges. We are currently doing this with our successful Energy Turnaround Action Plan. But in no way does this mean losing sight of our original promotional functions, such as supporting the SME sector. In fact, we allocated EUR 17.3 billion or 49% of our domestic financing commitments to SMEs", said Dr Ulrich Schröder, Chief Executive Officer of KfW.
The total financing volume in the first three quarters was EUR 48.2 billion against EUR 52.9 billion in the same period of 2011. The drop is mainly due to the changes in the methodology of general refinancing of promotional institutions of the federal states from annual to quarterly agreements, and to delays in contractual commitments for some major projects in the promotion of developing and transition countries. With a consolidated profit of EUR 1,739 million (EUR 1,806 million in the same period of 2011), the positive development of our earnings situation continued in the third quarter. As in the previous year, however, the purely IFRS-related effects from the valuation of derivatives used for hedging purposes overstate the income situation with EUR 227 million (EUR 258 million). The consolidated profit before IFRS effects from hedging*, which is relevant for the management of KfW's business, was EUR 1,512 million, matching the very high volume of the previous year (EUR 1,548 million).
"KfW continued the favourable income trend of the first half of 2012 in the third quarter as well. So we remain well above the long-term potential of EUR billion 1.0 to EUR 1.2 billion per year. Looking ahead to the end of the year, we currently expect a consolidated profit before IFRS effects that is slightly below that of the previous year, although of course risks remain from the uncertainties over the further economic trend", said Dr Schröder.
The operating result before valuation was EUR 1,717 million (EUR 1,411 million). This significant improvement was due primarily to net interest income, which was again higher at EUR 2,175 million (1,783 million) as KfW's main source of income. KfW continues to benefit from very favourable funding conditions based on its first-class credit quality and the favourable interest environment. At EUR 401 million (EUR 421 million), the interest rate reductions granted in the promotional lending business remained on a high level.
KfW has consistently pursued its conservative risk policy and increased its risk provisions for lending business significantly by EUR 210 million. At the same time in the previous year, it was able to reverse its risk provisions in the amount of EUR 260 million. The need for risk provisions is mostly a result of the more negative risk situation in the shipping segment of Export and Project Finance.
Of the positive result from the private equity and securities portfolio in the sum of EUR 118 million, EUR 81 million was from securities as a result of the general market recovery, while the rest resulted from the positive development of individual commitments in equity finance operations under promotional policy.
Total assets increased by EUR 23.0 billion to EUR 517.9 billion. While net loans and advances rose moderately to EUR 363.4 billion (31 December 2011: EUR 360.1 billion), this development was due in particular to rising derivative market values due to exchange and interest rates and higher cash collateral taken in.
The regulatory ratios remain stable on a high level (tier 1 ratio: 17.1%, total capital ratio 19.5%). Under Basel III the tier 1 ratio is currently 14.1%.
The results of the group's activities
In the business area KfW Mittelstandsbank the volume of new business was EUR 17.3 billion (EUR 16.4 billion). Commitments in the promotional area environment rose substantially to EUR 8.4 billion (EUR 6.9 billion). Commitments under the KfW Renewable Energies Programme in particular developed positively, reaching EUR 6.0 billion (EUR 4.4 billion). In the Offshore Wind Energy Programme KfW has not yet made any commitments in 2012, although interest in the programme remains at an invariably high level. However, given the delays in the grid connection of offshore wind farms, further projects have been postponed for the time being. In the area of business start-ups and general corporate finance the volume of commitments increased from EUR 7.6 billion to EUR 8.2 billion. The main driver was the high demand for the KfW "Entrepreneur Loan".
In the business area KfW Privatkundenbank the volume of commitments was EUR 12.3 billion, higher than in the third quarter of 2011 (EUR 11.4 billion). Especially the Energy-efficient Construction and Refurbishment programmes, which make a key contribution to achieving the environmental and climate protection targets, achieved a significantly higher commitment volume than in the same period last year, at EUR 6.9 billion (EUR 4.1 billion). This trend was supported by the continuing favourable loan conditions (from 1% effective annual interest rate and repayment bonuses of up to 12.5%), which was made possible by additional funds provided from the federal budget in 2012.
Commitments in education finance reached EUR 1.6 billion, also exceeding the previous year's level of EUR 1.4 million.
The development of commitments in the business area KfW Kommunalbank shows a split picture in regard to infrastructure finance. While the number of applications increased noticeably by 28% to 1,661 commitments, the total financing volume of EUR 2.3 billion remained below the very strong volume of the previous year (EUR 2.9 billion). The special environmental and climate protection relevant financing programmes showed a very positive development. Here the volume of commitments in the first three quarters increased from EUR 83 million in the previous year to now around EUR 159 million. Commitments for the general refinancing of promotional institutions of the federal states were in line with expectations at around EUR 3.5 billion.
In the business area of capital market-based financing, the volume of new business amounted to some EUR 1.5 billion in the first nine months (EUR 0.4 billion). At EUR 900 million, the KfW promotional programme for the refinancing of export loans covered by federal guarantees took the lion's share (EUR 73 million). Some EUR 600 million (EUR 316 million) was made available to leasing companies and credit institutions through the products of asset securitisation and global loans to finance investment projects by SMEs.
In the business area of export and project finance, which KfW IPEX-Bank handles within KfW Bankengruppe, new business commitments totalled EUR 8.5 billion, the same level of the previous year. The focus was on export and investment finance in the markets that are relevant for the German economy. Supporting German enterprises in the big industrialising countries and financing projects that are relevant for protecting the environment and the climate and securing the supply of raw materials for industry continue to play an important role. The business area therefore continues to be a reliable partner of German industry, particularly as long-term large-volume financings become scarce.
In the business area of Financial Cooperation, commitments totalled EUR 1.6 billion (EUR 2.6 billion). The volume of commitments is lower than in the same period last year because unlike in the year 2011 some major projects will not be contractually committed until the end of the year. KfW used EUR 1.0 billion from funds it raised in the capital market.
Regionally, Asia/Oceania accounted for the greatest share of the funds at EUR 730 million. By sector, the highest volume of commitments was made in the area of "social infrastructure" which received EUR 645 million. The priority areas are water supply and sanitation projects and education and health sector programmes.
For DEG the positive trend continued in the third quarter as well. At EUR 941 million, new business commitments were almost 50 per cent higher than in the same period last year (EUR 650 million). Commitments to food and agribusiness enterprises developed particularly positively. In this sector DEG committed EUR 142 million (EUR 55 million) for private investments in developing and industrialising economies in the third quarter. The region that received the highest volume of commitments was Latin America, at EUR 381 million.
As at 31 October 2012, KfW raised long-term funds for the equivalent of EUR 76.7 billion in the international capital markets. KfW is planning a funding volume of around EUR 80 billion for the overall business year.
*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.
Service: An overview of the business and financial figures of KfW Bankengruppe is available for download at www.kfw.de/businessfigures.
Original content of: KfW, transmitted by news aktuell