Third Quarterly Report 2008.

Transcription

1 Third Quarterly Report 2008.

2 KFW BANKENGRUPPE. KfW Bankengruppe s financing business remained strong in the third quarter of 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, as expected, there was still very little activity in the field of securitisation (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 KfW IPEX-Bank, KfW Entwicklungsbank and DEG recorded clear growth rates.

3 KEY FIGURES. In EUR billions I. KfW Mittelstandsbank Financing Global loans to commercial banks and Europe Securitisations Advisory support (grants) II. KfW Förderbank Financing Global loans to commercial banks, Europe and general refinancing for promotional institutions of the federal states Securitisations Advisory support (grants) Investment finance Financing Securitisation III. KfW IPEX-Bank Industry, telecommunications, basic industries Power, renewables, water Transport and transport infrastructure Other (AKA export loans, grants) IV. KfW Entwicklungsbank V. DEG Total volume Financing Loans Financial guarantees Grants ABS SME portfolio Securitisations Advisory support (grants) Environmental and climate protection Funding Group balance sheet total The figures for the first three quarters of 2008 were computed on the basis of a new statistical concept introduced for KfW as at 30 September For this reason the figures for the first three quarters of 2007 are also stated according to both the old (non-comparable) and the new calculation method. 1 Calculated according to the old statistical method. 2 Calculated according to the new statistical method. 3 Advisory support included from 1 January 2008 onwards. Commitments made in previous years are not shown. 4 Included in the total volume as general promotional business of KfW Mittelstandsbank and KfW Förderbank. Differences in the totals are due to rounding.

4 KFW MITTELSTANDSBANK. KfW Mittelstandsbank. KfW Mittelstandsbank committed a total volume of EUR 11.8 billion in the first three quarters of 2008, down from EUR 16.1 billion in the same period in The fall was essentially due to the securitisations of SME loans decreasing from EUR 5.4 billion to EUR 1.6 billion in the difficult market environment. Despite the marked slowdown of the SME economy, at EUR 10.2 billion KfW Mittelstandsbank financing remained at approximately the same high level as in the previous year. Commitments in the classic promotional loan programmes for business start-ups, selfemployed people and small and medium-sized enterprises continued to increase. EUR 7.1 billion was committed under the KfW Entrepreneur Loan (the basic SME promotional programme), for example roughly 3 % more than in the same period in In the case of mezzanine finance, the level of commitments in the first three quarters of 2008 was just as high as in the same period in 2007, at EUR 1.0 billion. At EUR 0.2 billion, however, equity finance commitments were EUR 0.1 billion below the previous year s level. KfW improves financing offers for SMEs. As part of its Small SMEs initiative, KfW Mittelstandsbank is continuing to provide support for small and medium-sized enterprises. Since the beginning of July, SMEs with a turnover of up to EUR 50 million and no more than 250 members of staff have been able to obtain particularly favourable conditions in many KfW credit and mezzanine programmes, as the smaller the enterprise, the greater its financing difficulties often are. 2

5 Suitable promotional windows for small businesses with preferential rates of interest were therefore established in the areas of ERP regional and innovation promotion that are particularly important to promotional policy, as small businesses are to be given even stronger support through these financing programmes. In addition, a promotional window was set up in the case of the KfW Entrepreneur Loan in order to create a more attractive product range for SMEs as a whole. Here, too, it is essentially small businesses that benefit as these account for a share of approximately 80 % of the SMEs given support through the KfW Entrepreneur Loan. The key parts of the package of measures are as follows: Setting up special SMME promotional windows with favourable rates of interest, the aim being to gear the financing conditions more to the size of the business than has previously been the case. Extending the range of maturities in the loan programmes to include a five-year term and introducing a quarterly repayment pattern in the credit and mezzanine programmes. These measures will better tailor the promotional financing offered to the financing needs of SMMEs. Improving and simplifying the mezzanine finance on offer in the Entrepreneur Capital family of programmes, especially by reducing prices more heavily in the first component, ERP Start-up Capital. 3

6 KFW FÖRDERBANK. Increasing the overall transparency of the programme landscape. For example, previously independent variants of the Entrepreneur Loan will be integrated into the KfW Entrepreneur Loan and special rules in the mezzanine programmes will be abolished. The further development of the KfW Entrepreneur Loan is also to be seen in the context of the current amendments to EU funding law. Only by introducing the SME promotional window is KfW able, on the one hand, to offer attractive interest rate conditions in its broad promotional activities and, on the other, to ensure that the KfW Entrepreneur Loan is a flexible financing instrument available for a large range of investment and resources for businesses of almost all sizes and in sectors outside the SME promotional window. Notable increase in KfW Förderbank s financing commitments. In the first three quarters of 2008, KfW Förderbank provided EUR 23.9 billion in finance for the environment, housing, infrastructure and education. With an increase of 1 %, this was thus slightly up on the previous 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. In the field of the environment, however, the number of financing commitments was up 6 % on the previous year, which is equivalent to a volume of EUR 4.9 billion. In the promotional housing programmes, too, the volume of financing commitments went up by around 4 % to EUR 12.1 billion. 4

7 KfW continues to focus on promoting energy-efficient building and rehabilitation. In the first three quarters of 2008, KfW Förderbank approved housing investment loans amounting to EUR 12.1 billion. The focus was again on financing energy-efficient construction and rehabilitation. As part of the promotional initiative Housing, Environment, Growth, EUR 3.3 billion was provided for energy-saving and CO 2 reduction measures in existing housing alone. This represents an increase of some 57 % on the same period in In addition to the promotional loans subsidised by federal funds, grants totalling EUR 20 million for energy upgrading in single-family and two-family houses as well as private apartments were made available through the KfW CO 2 Building Rehabilitation Programme. In addition to the promotional measures for existing residential buildings, the Ecological Construction programme provided support for the erection of energyefficient buildings by making loan commitments amounting to EUR 2.0 billion in the first three quarters of As a result of these financing commitments, over 185,000 residential units were made more energy-efficient in the first nine months of In addition, some 45,000 KfW low-energy and passive houses were built and existing housing units fitted with state-of-the-art heating technology based on renewables. As a result, sustainable savings of roughly 634,000 tonnes of CO 2 p.a. can be achieved in this year alone, with the investments generating a lasting reduction in CO 2 emissions of roughly 2,240,000 tonnes a year. The sustainability of the CO 2 reduction effects is evident as they occur regularly every year following financing and can be increased by further investment. The investments also have an extremely positive impact on the labour market. The promoted investments lead to an increase in the demand for both investment and consumption. So far in 2008 it has therefore been possible to create or safeguard around 183,000 jobs for one year. 5

8 These promotional results show two things. First, the increase in the energy efficiency of buildings is becoming more and more important to German property owners as heating costs rise. Second, these programmes are making considerable inroads into achieving a sustainable reduction in CO 2 emissions throughout Germany, thus making a significant contribution to meeting the German climate protection objectives. The programmes also have an effect on the economy, benefiting SMEs in particular. Against this backdrop, we welcome the German Government s decisions to continue these KfW promotional programmes, in which interest rates are reduced by the Government, over the long term and at a high level and, in addition, to support the promotional volume up to 2011 with a corresponding increase in budget funds. Despite slowdown in housing construction, high level of financing commitments for residential property and home upgrades. In its Home Ownership Programme, KfW Förderbank approved over EUR 3.7 billion in promotional loans in the first three quarters of the year, financing new construction as well as the purchase and modernisation of 65,000 privately-owned houses and apartments. In addition, KfW Förderbank also promoted other measures to maintain and modernise existing homes in the standard variant of the Housing Modernisation Programme by approving over EUR 2.9 billion in loans. These commitments also counteract the slowdown in home construction. Given the rise in interest rates for home construction loans, the impending economic downturn and the associated uncertainty over jobs and income, housing construction is increasingly putting a brake on the economy. The low-interest promotional loans enable builders to secure finance at attractive conditions. 6

9 Municipal infrastructure promotion. In the field of municipal infrastructure, KfW Bankengruppe promoted over 1,100 projects with a total volume of EUR 1.9 billion in the first three quarters of Particularly worth highlighting are the KfW Municipal Loan and the Municipal Investment programmes, which contributed financing commitments amounting to EUR 0.9 billion and EUR 0.5 billion respectively to the overall result. Promotion of education and further training. In the first three quarters of the year, KfW approved 10,000 student loans, including more than 4,100 in the third quarter alone. The KfW Student Loan is offered solely at a variable rate of interest (currently 6.5 % per annum). The programme offers students a choice of a wide range of flexible structures in terms of maturity and amount as well as repayment of the loan and can give them access to low-interest individual study finance in the future, too. More than 9,000 Meister-BaföG loans to promote further career enhancement and professional advancement were approved in the third quarter of 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 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 With a total commitment volume of EUR 40.9 million, a contribution was made to the long-term promotion of education. BAföG and student loans totalling around EUR 400 million have so far been provided in

10 All in all, KfW Bankengruppe had entered into education financing commitments amounting to over EUR 0.8 billion by 30 September Environmental protection investment. For the financing of commercial environmental investment and the use of renewable energies, KfW Förderbank provided a total volume of EUR 4.9 billion in the first three quarters of 2008 (up 6 % on the same period in 2007). The promotion of renewables accounted for around EUR 3.3 billion of this sum. With the reopening of the KfW Renewable Energies Programme on 1 September 2008, KfW further extended the promotion of measures to promote the use of renewables in the heating market. Instead of the previous four project types, eight are now eligible for finance through low-interest KfW loans with repayment subsidies coming from federal funds. Financing is available for plants to burn solid biomass, equipment for the use of deep geothermics, district heating networks, large-scale solar heat collectors, large heat reservoirs, equipment to upgrade biogas to natural gas quality and biogas pipes for unprocessed biogas. 8

11 KFW IPEX-BANK. KfW IPEX-Bank. By the end of the third quarter of 2008 KfW IPEX-Bank had acquired EUR 14.2 billion in new business. Given the generally high tension in the global economic environment and the current crisis in the international financial sectors, the bank considers this an excellent interim result. However, the prospects for further business development are being hampered by a rise in refinancing costs. As many banks in the international project and export financing business are strictly curtailing their customer and country limits, it has also become considerably more difficult to arrange joint finance for major projects. However, KfW IPEX-Bank was still able to successfully structure a number of larger transactions, which significantly contributed to the high volume of new business. Financing transactions in Germany accounted for EUR 3.3 billion, in the rest of Europe for EUR 6.4 billion and, in non-european areas, for EUR 4.5 billion, with North America accounting for the lion s share (EUR 2.2 billion). As in the earlier part of the year, particularly high individual contributions were made by finance for shipping, manufacturing, basic industries, rail and road transport and power, renewables and water. However, the newer products developed for trade finance business have also become well established. The energy projects include another wind farm in Taiwan. In the field of air and sea ports, the bank was involved in financing Berlin- Schönefeld airport. Also financed was expansion investment on routes connecting to the Channel Tunnel. 9

12 KFW ENTWICKLUNGSBANK AND DEG. KfW Entwicklungsbank and DEG. KfW Entwicklungsbank further increased its financial cooperation activities in the course of the year. At the end of the third quarter of 2008, new financing commitments amounted to EUR 1.6 billion, marking a rise of almost 26 % compared with the end of the same period in The share of KfW s own funds, which it raised on the capital market, was 57 %. KfW thus supplements the budget funds provided and gives the Government considerable support in meeting its international development cooperation commitments. For 2008 as a whole, commitment developments are expected to remain positive. EUR 50 million for the peace process in the Democratic Republic of Congo. The war in the Democratic Republic of Congo is one of the costliest conflicts since the Second World War, with over 3.8 million fatalities and almost as many refugees. The country s financial and social infrastructures have been destroyed and reconstruction work is making slow progress. In order to support the democratic peace process, the German Government, in cooperation with the Congolese Ministry of Planning, has set up a peace fund for reconstruction projects proposed by local and international non-governmental organisations; the fund is being designed and implemented by KfW. In 2006 democratic elections took place again after a lapse of over 40 years. The Congolese people have high expectations of their government: there should now be a rapid improvement in their living conditions. The challenges facing the government are enormous and disappointed hopes could lead to renewed violence. This is where the peace fund comes in. Congolese nationals can find paid work, such as rebuilding roads and bridges, markets, schools or health centres. Preventing land erosion and irrigating fields as well as disposing of 10

13 refuse or maintaining sewers in Kinshasa are also financed by the fund. The first phase of the programme, for which the German Government has approved up to EUR 50 million in funds over three years, was launched in July Locally represented organisations are very interested in the peace fund and submit additional project proposals. The more people there are earning money, the faster local economic cycles will recover. In addition, the restored infrastructure will make the actual benefits of peace clearly visible. With reconstruction and peace development projects, KfW Entwicklungsbank is investing in Afghanistan, Sri Lanka, Columbia, Burundi, Côte d Ivoire, the Democratic Republic of Congo, Liberia, Sierra Leone, Nepal, East Timor, the Balkans and the Palestinian Territories, to name just some of the places in which the bank is active. 11

14 FUNDING. Funding. In the first nine months of 2008 KfW raised long-term resources worth EUR 61.8 billion in the international capital markets. That is more than 82 % of the volume of approximately EUR 75 billion planned for the year as a whole. The financial market crisis, which began in 2007 and has developed into a crisis of confidence among the banks, is also affecting KfW s funding activities. In the first nine months of the year, for example, KfW 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 to the dollar than to the euro. KfW expects the crisis in the global financial markets to continue and significantly define For 2008 as a whole, KfW plans to issue just over a dozen benchmark bonds for the first time these are highly liquid euro or US dollar bonds from first-class issuers with an issue volume of three to five billion in each case. By comparison, KfW issued eight benchmark bonds in record year This means that the share of funds raised through the first of KfW s three funding pillars will gain further significance. In the first nine months of the year, it was 54 %. The second pillar of KfW s funding activities, other public bonds, accounted for 38 % of the resources raised. Demand for bonds in pounds sterling is clearly slowing compared with 2007, whereas there has been a marked demand for bonds in Australian dollars. The remaining 8 % of KfW's funding was raised by means of privately placed KfW 12

15 bonds, which are tailored to the individual needs of institutional investors, although they were less in demand in the first nine months of the year. KfW concluded 313 individual transactions in the first nine months of the year. Owing to the enhanced focus on large-volume benchmark bonds, the number of individual transactions was down on the same period in 2007 (456 transactions) despite the increased funding volume. 13

16 KfW Bankengruppe Palmengartenstrasse 5 9, Frankfurt am Main, Germany Tel , Fax , infocenter@kfw.de,