| Third quarter 2008: KfW continues its high level of financing activities despite economic slowdown |
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07/11/2008 05:01 (378 Day 21:09 minutes ago) | |||||
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The FINANCIAL -- KfW Bankengruppe’s financing business remained strong in the third quarter of 2008. Although the financial crisis placed an additional burden on the already slowing economic momentum, the total volume of KfW’s financial commitments increased by around 8% to EUR 50.9 billion.
By contrast, market drought meant that there was still very little activity in the field of securitisation, as expected (EUR 1.6 billion; 2007: EUR 10.0 billion). This was the sole reason why KfW’s total volume in the first three quarters of 2008 was in the region of EUR 52.5 billion (2007: EUR 57.2 billion). KfW Förderbank and KfW Mittelstandsbank maintained the record level of financing activity achieved in 2007. KfW IPEX-Bank, KfW Entwicklungsbank and DEG recorded clear growth rates.
KfW Bankengruppe’s CEO, Dr Ulrich Schröder stated, “Despite the continued worsening of the situation in the capital markets and the further economic slowdown, KfW has continued its high level of promotional activities. We will also continue to be available as a key financing partner and will fulfil our tasks as Germany’s leading promotional bank during the financial crisis. Our aim is to contribute to counteracting potential negative effects in lending, for example.”
With financing transactions worth EUR 10.2 billion, KfW Mittelstandsbank almost maintained the high promotional level of 2007 (EUR 10.7 billion) in the first three quarters of 2008 – despite the growing economic slowdown since the second quarter of 2008. By contrast, the ongoing difficulties in the market environment meant that securitisation of SME loans decreased from EUR 5.4 billion to EUR 1.6 billion, with the result that, at EUR 11.8 billion, KfW Mittstandsbank’s total volume failed to match the 2007 figure of EUR 16.1 billion.
In the classical promotional loan programmes for business start-ups, self-employed people and small and medium-sized enterprises, KfW Mittelstandsbank was even able to improve its position. Under the KfW Entrepreneur Loan (the basic SME promotional programme) it committed EUR 7.1 billion, for example – roughly 3% more than in the same period in 2007.
In the first nine months of 2008 KfW Förderbank provided EUR 23.9 billion in finance in the field of the environment, housing, infrastructure and education. With an increase of just over 1%, this was thus slightly up on the previous (record) year. Owing to the still parched securitisation market, KfW Förderbank’s total volume of promotional financing was lower overall than in the same period in the previous year (EUR 28.2 billion). Clear growth figures were recorded in the field of environment, where the volume of new commitments increased on the year by nearly 6% to EUR 4.9 billion, and in the promotional housing programme. The volume of new financing transactions went up by around 4% to EUR 12.1 billion. In the government-backed programmes under the promotional initiative Housing, the Environment, Growth, EUR 3.3 billion was provided for energy-saving and CO2 reduction measures in existing housing. This is an increase of some 57% on the same period in 2007.
In the field of education, KfW Bankengruppe provided more than EUR 0.8 billion in finance in the period up to 30 September 2008. A key element was the KfW Student Loan. In the first three quarters of the year, KfW approved 10,000 loans, including more than 4,100 in the third quarter alone. The KfW Student Loan is offered solely at a variable rate of interest. This gives students a choice of a wide range of flexible structures in terms of maturity and amount as well as repayment of the loan and gives them access to low-interest individual study finance in the future, too. In the Meister-BaföG more than 9,000 loans to promote career advancement and further training were approved in the third quarter of 2008. Just under 27,900 loans have been approved since the start of the year, around 7% more promotional loans than in the same period in 2007. The educational loan, which provides financial support for schoolchildren and students at the end of their courses, recorded an increase of around 29% in loan commitments in the first nine months of 2008 to approximately 8,200 borrowers.
KfW Entwicklungsbank further expanded its Financial Cooperation activities during the course of the year. At the end of the third quarter of 2008 commitments amounted to EUR 1.6 billion, an increase of virtually 26% on the year. The share of KfW’s own funds raised in the capital market was 57%. KfW thus tops up the budget funds provided and gives vital support to the German federal government in meeting its international commitments in the field of development cooperation.
By the end of the third quarter of 2008 KfW IPEX-Bank had acquired EUR 14.2 billion in new business and thus again recorded strong growth (2007: EUR 10.9 billion). Given the generally high tension in the tense global economic environment and the current uncertainty in the international financial markets, the bank considers this a very successful business performance, providing support for the German and European economy. Financing transactions in Germany accounted for EUR 3.3 billion, in the rest of Europe for EUR 6.4 billion and for non-European areas for EUR 4.5 billion. As in the earlier part of the year, particularly high individual contributions were made by financing for shipping, manufacturing, basic industries, rail and road transport and the field of energy and the environment.
This result established KfW IPEX-Bank more firmly as a leading address in international project and export finance and makes a substantial contribution to KfW Bankengruppe’s promotional activities. In order to give KfW IPEX-Bank a sound basis so that it can sustain a strong market presence in the years ahead, KfW plans to take steps to increase its capital. Capital injections of this kind were part of KfW IPEX-Bank’s business plan from the outset. On the day it became independent, 1 January 2008, KfW IPEX-Bank took only part of its EUR 25 billion in business concluded since 1 January 2004 onto its own balance sheet. Its previous portfolio of around EUR 40 billion remained on the KfW balance sheet and will slowly decrease over the next few years to an expected volume of some EUR 10-15 billion. As that portfolio decreases and the IPEX portfolio is expanded, KfW’s need for capital declines while KfW IPEX-Bank’s capital needs increase until the target portfolio of around EUR 50-55 billion has been achieved. For reasons related to the profitable use of capital, this growth process is to be underpinned by the progressive injection of additional equity.
For the purpose of refinancing its promotional activities, KfW raised long-term resources worth EUR 61.8 billion in the international capital markets in the first nine months of the 2008. That is more than 82% of the volume of approximately EUR 75 billion planned for the year as a whole. It benefited from the fact that liquid capital market bonds of first-class issuers – such as KfW with its AAA/Aaa/AAA rating – and denominated in the major capital market currencies, the euro and the US dollar, are in particular demand from investors; in the third quarter this applied even more true to the dollar than to the euro. All in all, 313 individual transactions have been concluded since the start of the year. Owing to the enhanced focus on large-volume benchmark bonds, the number of individual transactions fell from the figure for the same period in 2007 (456 transactions) while the volume of refinancing increased (2007: EUR 53 billion).
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