15.08.2013 – 11:16
First half of 2013: Increase in demand for KfW financing
- EUR 1 billion more for SME financing - Increase in municipal infrastructure finance of EUR 1.2 billion - 39% of promotional activity relates to environmental and climate protection - Consolidated profit of EUR 498 million plus EUR 311 million to substitute public promotional financings - Profit trend corresponds to expected decline - Tier 1 ratio under Basel III: 16.7%
The KfW Group generated a total financing volume of EUR 31.5 billion in the first half of 2013, up from EUR 29.9 billion in the same period of 2012. The domestic promotional business accounted for most of this figure with a volume of EUR 24.3 billion (previous year EUR 21.6 billion). The volume of commitments in environmental and climate protection programmes came to EUR 10.4 billion in the first half of 2013 and exceeded the high level recorded in the same period of 2012 (EUR 9.9 billion). Across the Group, total commitments in the area of environmental and climate protection account for 39% of all commitments. In addition to supporting Germany's energy turnaround, KfW increased its contribution to SME financing by EUR 1 billion.
"The persistently high level of demand for our promotional products shows that KfW is providing appropriate and long-term promotional offerings in the current economic climate", said Dr Ulrich Schröder, Chief Executive Officer of the KfW Group. "In particular, demand for SME finance has risen. We see this as a positive signal indicating that the willingness of SMEs to invest is picking up again. This secures and creates employment and competitiveness."
The income situation developed as expected in the first half of 2013, with a consolidated profit of EUR 498 million (EUR 992 million in the same period of 2012), once again exceeding KfW's sustained income potential. Consolidated profit includes KfW's additional efforts from the public promotional financings taken over this year (up to EUR 311 million for 2013 as a whole) for the promotional activities financed by KfW from the Energy and Climate Fund. The purely IFRS-related effects from the valuation of derivatives used for hedging purposes lowered the income situation by EUR 65 million. Against this backdrop, consolidated profit before IFRS effects from hedging*, which is relevant for the economic management of KfW's business, remains high at EUR 563 million (EUR 940 million).
"We can be very pleased with KfW's income performance in the first half of the year, which already includes in full additional promotional efforts from the substitution of federal funds. As projected, it is down on the previous year but above KfW's sustained income potential. Despite an expected further decline in net interest income and the uncertainties surrounding the performance of risk provisions, in particular, we are looking forward to a highly satisfactory result for the year," Dr Schröder continued.
The operating result before valuation (and before promotional activities) was EUR 1,207 million (EUR 1,399 million). KfW's very good funding conditions and a favourable interest rate environment continued to have a positive impact on net interest income as KfW's main source of income. Net interest income (before promotional activities) came to EUR 1,525 million (EUR 1,697 million). At EUR 277 million (EUR 267 million), promotional activities - essentially in the form of interest rate reductions - were slightly higher than in the same period of the previous year. The charges resulting from risk provisions in the lending business were slightly lower than expected at EUR 139 million (EUR 166 million). They resulted, in particular in the first half of 2013, from the maritime industry business segment within export and project finance.
Of the pleasing result from the private equity and securities portfolio totalling EUR 84 million (EUR 89 million), about half resulted from DEG's private equity business and from the increase in the value of securities.
Total assets decreased substantially by EUR 28.6 billion to EUR 483.0 billion. This performance is largely the result of changes in market value in connection with hedging transactions. Net loans and advances remained virtually unchanged at EUR 364.0 billion (31.12.2012: EUR 364.8 billion) despite high levels of non-scheduled repayments.
The regulatory ratios remained at a consistently high level (Tier 1 ratio: 20.2%; total capital ratio: 22.8%). Under Basel III the Tier 1 ratio is currently 16.7%.
The results of the group's activities
New business in the business area KfW Mittelstandsbank came to EUR 11.6 billion in the first half of 2013, a significantly higher volume of commitments than in the same period of 2012 (EUR 10.6 billion). This increase resulted from higher commitments in all areas of promotion. In the area of Business Start-Ups and General Corporate Finance commitments increased from EUR 5.3 billion to EUR 5.9 billion against the first half of 2012. This growth was driven by commitments under the KfW Entrepreneur Loan, which accounted for EUR 4.2 billion (EUR 3.7 billion). At just under EUR 1.4 billion, programmes for the promotion of business start-ups also exceeded the figure recorded in the same period of the previous year (EUR 1.2 billion).
As a result of the positive development under the ERP Innovation Programme, the volume of commitments in the area of Innovations increased by more than EUR 0.1 billion against the first half of 2012 to EUR 0.5 billion. Volumes in the area of Environmental Financing increased as well, to EUR 5.1 billion, exceeding the level recorded in the first half of 2012 (EUR 4.9 billion). Two opposing trends were observed: at EUR 2.2 billion, commitments for projects in the area of Renewable Energies showed a markedly weaker performance than in the first half of 2012 (EUR 3.8 billion). This is attributable, in particular, to the decline in the financing of photovoltaic plants. On the other hand, demand for loans for Energy Efficiency Measures developed considerable momentum. After EUR 0.9 billion in the first six months of 2012, loans totalling EUR 2.5 billion have already been committed so far this year. In the business area Offshore Wind Energy, following the standstill in 2012 new projects have been initiated by investors. Commitments in this area came to EUR 0.2 billion.
With a promotion volume of EUR 12.7 billion in the first half of 2013 the business area Kommunalbank and Privatkundenbank/ Credit Institutions substantially increased the figure for the same period of the previous year (EUR 11.9 billion). The increase stems mainly from high commitments in Infrastructure Finance for municipalities and municipal and social enterprises. At EUR 2.3 billion, their volume doubled when compared with the same period of the previous year (EUR 1.1 billion). With a new business volume of EUR 7.2 billion, the promotional focus on Housing also provides substantial growth stimuli (previous year EUR 6.7 billion). Commitments in climate and environment relevant programmes Energy-efficient Construction and Refurbishment came to EUR 4.6 billion and were similar to the previous year's level (EUR 4.5 billion); at the same time, subsidies in the Energy-efficient Refurbishment programme doubled to nearly 30,000 commitments. The volume of the programme to promote home ownership increased by just under EUR 200 million to EUR 2.2 billion during the same period.
Commitments for Education Finance showed a positive development to EUR 1.1 billion (EUR 959 million). At 1.2 billion, commitments in the General Refinancing of Promotional Institutions of the Federal States were below the previous year's level (EUR 2.2 billion) as drawdowns fell short of expectations. However, the volume is expected to increase in the second half of the year. Commitments in the business area Individual Financing Banks, which focuses on the promotion of SMEs through global loans to leasing companies (EUR 400 million) and the programme to refinance export loans covered by federal guarantees (approx. EUR 350 million), came to EUR 904 million (previous year EUR 827 million).
In the business area of Export and Project Finance, handled by KfW IPEX-Bank, new business commitments totalled EUR 5.6 billion. The volume of new business commitments is thus virtually unchanged over the previous year (EUR 5.7 billion). New commitments focused on the business segments financial institutions and trade and commodity finance with EUR 1.1 billion as well as maritime industry and aviation & rail with EUR 0.9 billion each.
New commitments in the business area Promotion of Developing and Transition Countries came to EUR 1,570 million in the first half of 2013 and were thus at the level of the previous year (EUR 1,562 million). Around two-thirds of new commitments are accounted for by KfW Entwicklungsbank, which essentially operates in the public sector. At EUR 515 million, around half of the funds are deployed in Asia while EUR 230 million go to sub-Saharan Africa. 63% of commitments benefit climate and environmental protection. The stable trend of new business at DEG continued: as at 30 June 2013 it committed a total EUR 549 million for the financing of private investment in developing emerging economies (EUR 579 million). Commitments for climate and environmentally friendly investments were particularly gratifying; at EUR 320 million they were more than 20% above the previous year's level (EUR 297 million). In regional terms, at EUR 260 million (EUR 221 million) most funds went to Asia.
As at 31 July 2013 KfW raised long-term funds for the equivalent of EUR 44.2 billion in the international capital markets in 13 different currencies. This corresponds to around 65% of the funding requirement for 2013, which was recently reduced to EUR 65-70 billion on account of high levels of non-scheduled repayments in the lending business.
In the first half, EUR 173 million were made available to banks and leasing companies via securitisation instruments to finance SMEs.
Key financial figures (IFRS)
An overview of the business and financial figures in table format is available for download at www.kfw.de/geschaeftszahlen.
*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