The FINANCIAL -- KfW has continued its previously announced strategic focus on
products and programmes of high promotional quality.
The financing of environmental and climate protection under the KfW Action Plan to support the energy turnaround is a priority of this strategy. In the first half of 2012, 41 % of the promotional business volume, or EUR 12.1 billion, went to the promotion of environmental and climate protection. For the year 2012 as a whole, the bank anticipates an environment quota of 36 % – a significant increase over the 32 % of the year 2011.
"In implementing the project of the century, the energy turnaround, KfW has taken responsibility as a promotional bank. In the next five years we intend to extend loans totalling EUR 100 billion for renewable energies and energy efficiency", said Dr Ulrich Schröder, Chief Executive Officer of KfW Bankengruppe. As well as supporting enterprises in developing and implementing new technologies, KfW has lowered interest rates in many programmes of the "Energy Turnaround Action Plan" to a historic low of 1 %."
The total financing volume fell to EUR 29.9 billion (EUR 40.6 billion). This trend, however, is due not only to the strategic focus but to the changes in the methodology of general refinancing of promotional institutions of the federal states from annual to quarterly agreements, as a result of which the overall commitment volume for 2012 is distributed across the individual quarters. As at today, this results in a decline of EUR 6.2 billion (1st half of 2011: EUR 8.4 billion; 1st half of 2012: EUR 2.2 billion).
KfW continued the favourable income trend. In the first half, it earned a consolidated profit of EUR 992 million (EUR 1,764 million). The purely IFRS-related effects from the valuation of derivatives used for hedging purposes overdraw the income situation only to a minor degree by EUR 52 million. Last year this had still been a major factor (EUR 592 million) in the group's significantly higher consolidated profit. The consolidated profit before IFRS effects from hedging*, which is relevant for the management of KfW's business, was EUR 940 million, below the very high volume of the previous year (EUR 1,173 million).
The operating result before valuation was EUR 1,132 million (EUR 982 million). This positive development was due primarily to net interest income of EUR 1,431 million (EUR 1,224 million), which increased again as KfW Bankengruppe's main source of income. KfW continues to benefit from favourable funding conditions based on its first-class credit quality in what is again an improved interest environment. At EUR 267 million, the interest rate reductions granted in the promotional lending business were only slightly below the previous year's level (EUR 280 million).
"In what is again an improved interest environment, KfW achieved a high net interest income. We are very satisfied with the income situation in the first half of 2012, which continues to be significantly above the long-term potential and our expectations. Given the renewed increase in uncertainty on the financial markets and the possible consequences this has for the real economy, the result for the year cannot be extrapolated on this basis", Dr Schröder added.
KfW has consistently pursued its conservative risk policy and taken into account the more negative risk situation, particularly in the business segment shipping within export and project finance, increasing its risk provisions for lending business to EUR 166 million. In the previous year, KfW was still able to reverse risk provisions in the amount of EUR 169 million.
Of the result from the private equity and securities portfolio in the sum of EUR 89 million (EUR 8 million), EUR 41 million was from equity and fund financing operations under promotional policy, the rest was from securities.
As KfW reported, total assets increased by EUR 21.7 billion to EUR 516.5 billion, particularly as a result of rising derivative market values due to exchange rates and higher cash collateral taken in, while net loans and advances rose moderately to EUR 363.9 billion (31 December 2011: EUR 360.1 billion).
The positive development of the result leads to a further improvement of the regulatory ratios. With a tier 1 ratio of 17.3 % (31 December 2011: 15.4 %) and 14.2 % under Basel III, KfW already meets the new regulatory requirements significantly.
In the business area KfW Mittelstandsbank the volume of new business was EUR 10.6 billion (EUR 11.6 billion). In the area of business start-ups and general corporate finance, the volume of commitments decreased as planned from EUR 5.8 billion to EUR 5.3 billion. This decrease is mainly due to the closing of the economic stimulus programmes, in particular the KfW Special Programme. Remaining commitments had still been made under this programme in the first half of 2011. A significant increase to EUR 4.9 billion was achieved in the promotional area of environmental protection (EUR 4.1 billion).
Commitments under the KfW Renewable Energies Programme in particular developed positively, reaching EUR 3.8 billion (EUR 2.8 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. KfW is involved in considerations aimed at improving the financing situation of offshore project grid connection and further grid expansion.
In the business area KfW Privatkundenbank the volume of commitments was EUR 7.7 billion, slightly below the previous year's level (EUR 8.4 billion). This is due to the strategic focus of promotion on the energy turnaround and demographic change. The Housing Modernisation Programme was terminated and the maximum financing amount under the KfW Home Ownership Programme was reduced in this context. Commitments and investment grants under the housing programmes totalled EUR 6.7 billion (EUR 7.5 billion). Especially under the Energy-efficient Construction and Refurbishment programmes, an increase of more than 50 % over the previous year was achieved, with commitments totalling EUR 4.5 billion (EUR 2.9 billion). This trend was supported by the continuing favourable loan conditions (from 1 % effective annual interest rate). In education finance KfW also made higher commitments than in the first half of the previous year, at EUR 959 million (EUR 886 million).
In the business area KfW Kommunalbank, EUR 1.1 billion was committed to the financing of infrastructure. This volume is EUR 0.8 billion lower than the volume of the same period last year (EUR 1.9 billion), which was characterised by particularly high demand. Now demand is lower mainly in the financing of general investment projects (basic promotion). In contrast, the development in the environment and climate protection relevant promotional programmes has remained positive. Commitments in this area have more than doubled over the previous year to reach EUR 95 million (EUR 37 million). Commitments for the general refinancing of promotional institutions of the federal states were as expected, at EUR 2.2 billion. The drop below last year's level (EUR 8.4 billion) is primarily due to the changeover in the methodology from annual to quarterly agreements.
In the business area of capital market-related financings the volume of new business was EUR 1 billion (EUR 0.2 billion). Demand was particularly high in the programme for the refinancing of export loans covered by federal guarantees, reaching EUR 577 million (EUR 53 million). A further EUR 424 million (EUR 130 million) was made available to leasing companies and credit institutions for the financing of 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 5.7 billion (EUR 8.4 billion). The change against the same period last year is fundamentally due to the decline in demand for funding for banks under the CIRR for ship financing, which IPEX is conducting as agency business for the Federal Republic. The original lending business developed positively, and all business segments have contributed equally to this trend. The regional distribution of new commitments is equally balanced across Germany, Europe and the rest of the world.
KfW Entwicklungsbank committed a total of EUR 983 million (EUR 1.6 billion) in the business area Promotion of Developing and Transition Countries. The decline in the volume of commitments is due to the fact that commitments for some large-scale projects will not be finalised before the second half of the year. More than half the funds, EUR 457 million, were committed to the partner countries for projects in the area of "social infrastructure". After its positive start of the year 2012, DEG continued its high commitment volume in the second quarter. At EUR 579 million the financing volume was again significantly higher than in the same period last year (EUR 411 million). New commitments to German enterprises developed particularly well. They received EUR 88 million (EUR 22 million) from DEG for private investments in developing and industrialising economies.
As at 31 July 2012, KfW raised long-term funds for the equivalent of EUR 55.0 billion in the international capital markets. For the overall business year KfW is planning a funding volume of around EUR 80 billion.