12.12.2001 – 13:33
KfW 2002: Benchmarks in Euro and US-Dollar
established as a Bund surrogate
"KfW has been successful this year in repositioning itself in the capital markets through the use of innovative financial products and issuing programmes, which met with an outstanding acceptance in the markets and in giving a major impetus to the promotion of small and medium-sized enterprises (SMEs)", said Hans Reich, Chairman of the Board of Managing Directors of KfW, on the occasion of a press conference to which KfW had invited in order to present the results of its activities in the capital markets this year and to explain its strategic orientation for the next year. Record volume in the funding business and successful launching of the EURO-Benchmark Programme
The Chairman of KfW's Board of Managing Directors gave detailed information about KfW's funding activities. At the beginning of the year the promotional bank had reset the course for its presence in the capital market. The first step was the conclusion of a funding agreement with Deutsche Ausgleichsbank (DtA) in January 2001 which was the basis for the joint appearance as a single issuer in the capital markets with an expected issue volume of about EUR 40 billion. Following the acquisition of Deutsche Entwicklungsgesellschaft (DEG) KfW also took over the funding for this German Development Agency. In 2001 KfW and KfW International Finance raised long-term funds in the record amount of EUR 38.3 billion in the international capital markets. 48% of this amount was raised in euros (2000: 38%) mainly under the newly established EURO-Benchmark Programme. Under this programme KfW issued three benchmark bonds of EUR 5 billion each with maturities of three, five and ten years. Thus it has been able to establish a complete yield curve already in the first year. All issues were 100% oversubscribed and have shown an excellent outperformance, especially in comparison with other government bonds issued in the Euro zone. "The establishment of the EURO-Benchmark Programme and its acceptance in the international capital markets as an alternative to sovereign bonds is definitely the outstanding achievement in our capital market activities this year", said Reich. "The market has clearly honoured our concept of transparency, consistence and liquidity - and we are somewhat proud of this."
The main focus of funding in foreign currencies, which amounted to a total of approx. EUR 19.9 billion, was the US dollar, accounting for 37% or USD 12.6 billion (2000: USD 7.6 billion or 24%), mainly the result of comparatively favourable funding conditions. Accordingly, funding in Pounds sterling declined to 8% (29% in 2000) due to a less attractivemarket situation for KfW. In 2001 KfW was extremely active in the Japanese market. At a total of 219 private placements issued this year the already large number of 56 private placements issued in the year 2000 was again clearly exceeded. For short-term borrowing Reich emphasized that KfW was again able to confirm its position as one of the most prominent issuers in the Euro commercial paper market. Under the Euro Commercial Paper Programme KfW has effected 271 transactions in a total volume of EUR 24 billion in 2001 so far and the presence of KfW International Finance in the US commercial paper market has been equally successful.
Outlook for KfW-funding in 2002
Next year KfW plans to continue the EURO Benchmark Programme and to further strengthen the outstanding position achieved thus far. Already in October KfW had announced that it intends to launch EURO benchmark issues of at least EUR 15 billion in 2002, including one five-year and one ten-year bond. Depending on investor demand and the market situation, there will be additional issues either with different benchmark maturities or to increase outstanding Euro benchmark bonds. In addition, the Chairman of KfW's Board of Managing Directors announced the following strategic orientation: "On the basis of the excellent position we have achieved in Europe and Asia we also want to make our presence in the US dollar capital markets more transparent. For this purpose we are considering to make a reliable proposal to the US market early next year to issue at least two global bonds with benchmark maturities of a minimum size of USD 3 billion each." Further information regarding the time of issue will be announced by KfW after thorough preparation. KfW will be the first non-US issuer to commit to a transparent dollar funding.
Successful implementation of KfW's securitization platforms PROMISE and PROVIDE
The Chairman explained that KfW has reacted fast and in line with market requirements to the changes which have occurred in the lending business and which required a new orientation in SME promotion by making ample use in 2001 of the securitization programme PROMISE, which had been introduced at the end of 2000. Altogether 5 transactions for the securitization of SME loans in a total volume of EUR 6.15 billion were concluded under PROMISE in the course of one year only. "I am very glad that PROMISE has had such an excellent reception and is being intensively used by all market participants. Moreover, it was a pleasure for us to react swiftly to the request from market participants to provide a similar platform for the securitization of housing loans", said Reich. Under this new programme named PROVIDE KfW has already concluded two transactions in the total amount of EUR 2.5 billion in the second half of 2001. The purpose of both securitization platforms is to ease the capital charge of the commercial banks involved by transferring the default risk of their loan portfolios to the capital market. This will create new scope for granting SME and housing loans - thus the lending business will be stimulated and the large-scale provision of loans will be ensured on a sustained basis. Next year KfW will expand the volume and structure of its securitization programmes. On the basis of the growth forecast for 2002 KfW expects to launch securitization transactions in a volume of EUR 10 billion to 12 billion, whereby PROMISE will continue to be the more intensely used programme. In this context Reich also announced the first "multi-seller transaction" scheduled for the first quarter of 2002. "We are not leaning back idle in view of this year's success but are continuing to develop our securitization programmes in order to make the platforms attractive for small and medium-sized banks as well. The multi-seller transactions developed by KfW will enable us to repackage the SME portfolios of several banks and to securitize them in a joint transaction."
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