Press Release from 2020-01-28 / Group
2019 – a successful year for promotion at KfW
- Total business reaches a volume of EUR 77.3 billion
- Domestic business generates EUR 43.4 billion
- Export and project financing increases to EUR 22.1 billion
- Promotion of developing countries and emerging economies at EUR 10.6 billion
- 2020: Support for the German Federal Government in implementing its Climate Action Plan 2030
- New SME programme for climate protection investments starts at zero interest
In 2019, KfW’s total business volume rose to EUR 77.3 billion (2018: EUR 75.5 billion). Promotion for businesses, private customers and municipalities in Germany amounted to EUR 43.4 billion (2018: EUR 46.0 billion). While due to the low-interest environment and generally positive financing conditions, demand for promotional loans declined on the whole, commitments developed differently in the individual programmes. The Baukindergeld grant scheme introduced in September 2018 continued to experience high demand in 2019. KfW’s Home Ownership Programme recorded a significant rise in commitments, which made a substantial contribution to promoting home ownership in Germany. In the area of corporate financing, the commitment volume rose for the KfW Entrepreneur Loan and the KfW Renewable Energies Programme. KfW Capital – the group’s subsidiary responsible for expanding venture capital financing – committed investments in the amount of EUR 156 million in its first full year in business.
The commitment volume in the Export and project finance business sector, which provides financing in the interests of the German and European economy, rose by around 25% to a record value of EUR 22.1 billion (2018: EUR 17.7 billion). This is primarily due to the growth in bank refinancing from the CIRR ship and ERP export financing programmes, which are instruments for promoting foreign trade. Promotion of developing countries and emerging economies retained the previous year’s high value of EUR 10.6 billion. EUR 8.8 billion of this amount was accounted for by KfW Development Bank and EUR 1.8 billion by DEG. At KfW Development Bank, the regional focus was on Africa and the Middle East with 43% of commitments (close to EUR 3.5 billion).
The qualitative benchmarks that play a major role for KfW’s promotional activities developed well on a stable trajectory. For instance, promotion for climate and environmental protection amounted to 38% (“environment ratio”) while promotion for SMEs made up 40% (“SME ratio”).
Dr Günther Bräunig, Chief Executive Officer of KfW, said, “As anticipated, 2019 once again was a good promotion year for KfW. The outstanding rise in new commitments in our export and project financing business reflect the further increasing significance of our financing offers for the German economy and its globally-oriented business. And importantly, we also reached some key milestones last year, enabling us to embed national and international sustainability targets as binding benchmarks in our work.”
As regards 2020, Dr Bräunig added: “One of our focuses for the new year will be supporting the German Federal Government in implementing its Climate Action Programme 2030. As early as March, we will be supporting SMEs as they evolve to provide better protection for the climate, environment and resources by offering a new promotional loan for climate protection investments. The programme will start with effective interest rates beginning at 0% for the borrower. Working closely with the government, we are also preparing further initiatives in the fields of transport, buildings and energy. In addition, KfW is currently working with the German Ministry for Economic Affairs and Energy and the German Ministry of Finance to implement the coalition decision on the establishment of an equity fund of up to EUR 10 billion to promote future-oriented technologies, particularly in the areas of digitalisation and climate technology. A possible component will be an umbrella fund for growth capital helping to further improve the financing situation of young and growing companies.”
Details on the business sectors' promotional activities
The SME Bank & Private Clients business sector generated a total promotional volume of EUR 36.0 billion in 2019 (2018: EUR 36.3 billion). Demand was thus at a similar level to the previous year despite the economic slowdown and low interest levels.
The SME Bank segment contributed a promotional business volume of EUR 15.3 billion (2018: EUR 17.2 billion) while the Private Clients segment recorded a volume of EUR 20.6 billion (2018: EUR 19.1 billion).
The promotional priority area of Start-ups and general corporate finance recorded a promotional volume of EUR 6.8 billion (2018: EUR 6.7 billion). The KfW Entrepreneur Loan contributed EUR 3.1 billion of this total, which is significantly above the previous year’s level (2018: EUR 2.5 billion). Owing to a slowdown in business start-up activity in Germany, demand for KfW’s entrepreneurship products has decreased slightly. For instance, the commitment volume for the ERP Start-up Loan fell to EUR 2.9 billion in 2019 (previous year: EUR 3.5 billion).
With a commitment volume of EUR 0.4 billion, the promotional focus area of Innovation was significantly lower than the record value of EUR 3.1 billion from 2018. This is due to the low-interest scenario which does not (yet) allow for higher interest rate reductions to be implemented. To improve the promotional impact, February 2020 will see KfW launch a promotional grant to supplement the ERP Digitalisation and Innovation Loan.
In the priority area of Energy Efficiency & Renewables, KfW committed EUR 8.1 billion to businesses (2018: EUR 7.4 billion). The KfW Renewable Energies Programme achieved substantial growth (EUR 2.9 billion; previous year EUR 1.8 billion).
The Private Clients segment exceeded the previous year’s level with a promotional volume of EUR 20.6 billion (2018: EUR 19.1 billion). At EUR 11.2 billion (2018: EUR 12.0 billion), over half of the volume is accounted for by the priority area of Energy Efficiency & Renewables with the loan programme “Energy-efficient Construction and Refurbishment”. Demand for the “Energy-efficient Construction” section of the programme remained at a high level (EUR 7.6 billion; previous year EUR 7.7 billion).
Developments in the Housing & Living priority area were particularly positive. With its work in this area, KfW supports one of the German Government’s core issues: the creation of living space and the promotion of home ownership. Overall, the promotional volume could be increased from last year’s level of EUR 5.0 billion to EUR 7.6 billion. In addition to improvements to the programme conditions, the launch of the Baukindergeld scheme in September 2018 also contributed to this pleasing result. Under the Baukindergeld scheme, over 120,000 applications with a volume of around EUR 2.7 billion were approved in 2019 (185,000 in total since the start of the programme). Volume in the KfW Home Ownership Programme also grew significantly in 2019 (EUR 4.4 billion compared to EUR 3.5 billion in the previous year).
With a commitment volume of EUR 1.9 billion, the Education priority area was slightly lower than the previous year (2018: EUR 2.1 billion). KfW supported over 83,000 people with their academic and professional development.
With its flagship project TUMO Berlin, KfW pursues new paths in promoting digital education. It is planning a digital learning centre for teenagers in Germany’s capital, based on the model of the very successful TUMO project in Armenia.
The Customised Finance & Public Clients business sector generated a commitment volume of around EUR 7.2 billion by the end of 2019, which means that new business was lower than the previous year (EUR 9.5 billion).
At almost EUR 3.9 billion, the business volume for Municipal & Social Infrastructure significantly exceeded the prior-year figure of EUR 3.5 billion. In addition to basic funding for general infrastructure investments for municipalities and municipal and social enterprises, programmes to support the energy transition at municipal level at EUR 0.9 billion also contributed significantly to the positive development. For the first time, grants under the new “Smart Cities Pilot Projects” promotional approach were committed with a value of EUR 120 million.
Committing EUR 3.1 billion, Individual financing for Banks & Promotional institutions of the federal states was unable to reach the previous year’s high figure (EUR 5.9 billion). One decisive factor in this development is the fall in demand from financial institutions as a result of the persisting low-interest environment. In contrast, the global loans business for lease financing reached a commitment volume of EUR 1.5 billion, thus staying at the previous year’s level (EUR 1.5 billion).
The commitment volume for Customised corporate finance totalled EUR 0.3 billion at the end of the year (previous year: EUR 0.2 billion). Contracts for the newly introduced KfW Loan for Growth were a decisive factor in this development.
In 2019, KfW Capital issued total investment commitments in the amount of EUR 156 million. With support from the ERP Special Fund, the KfW subsidiary was able to achieve its plans to increase the volume of ERP VC fund investments by around 25% to EUR 155 million (2018: EUR 124 million) in its first full financial year; KfW Capital invested in a total of ten VC funds. KfW Capital’s goal is to strengthen the VC market by investing in funds, thus enabling innovative tech companies in Germany to enjoy better access to venture capital during the start-up and growth phase. Over a period of ten years, KfW Capital will invest around EUR 2 billion in German and European VC funds.
Dr Günther Bräunig commented: “KfW Capital’s first full financial year was very successful and shows that the German Federal Government and KfW made the right decision in setting up a subsidiary like this. In a short time, KfW Capital has established itself as a sought-after investor for venture capital funds and, as expected, is helping to improve the access to growth capital for innovative technology businesses in Germany.”
The commitment volume at KfW IPEX-Bank – which is responsible for the Export and project finance business sector and provides financing to support German and European businesses on the global markets – rose to EUR 22.1 billion. New commitments are EUR 4.4 billion or almost 25% higher than the previous year (EUR 17.7 billion). At EUR 3.5 billion, a key driving force behind this growth is the volume requested by third party banks under the refinancing programmes for export financing covered by federal guarantees, known as the CIRR ship and ERP export financing programmes (previous year: EUR 0.7 billion). All business segments contributed to the new business in equal measure. At EUR 3.2 billion, the Power, Renewables and Water business segment again accounted for the largest share (previous year: EUR 3.4 billion). This included a series of projects in the field of renewables, such as wind power and photovoltaic systems, which emphasises KfW IPEX-Bank’s commitment to protecting the environment and climate.
KfW Development Bank was able to slightly increase its commitments in comparison to the previous year. In 2019, KfW provided around EUR 8.8 billion in financing to developing countries and emerging economies on behalf of the German Federal Government (2018: EUR 8.7 billion). Around 60% was earmarked for climate change mitigation and environmental protection projects. As a result of these new commitments, greenhouse gas emissions will be reduced by 8 million t of CO2e (CO2 equivalents) every year. In 2019, KfW Development Bank began implementing the initiatives under the G20 Compact with Africa initiative. A total of around EUR 744 million was committed for this purpose, EUR 98 million of which was earmarked for the new special education and employment initiative set up by the German Ministry for Economic Cooperation and Development (BMZ) and EUR 100 million for the new AfricaGrow umbrella fund. The aim of these initiatives is to promote important economic reforms and create permanent jobs, primarily in the private sector.
In 2019, DEG was able to commit EUR 1.8 billion for investments by private companies in developing countries and emerging economies and thus nearly reached the previous year’s record figure (EUR 1.9 billion). A further EUR 280 million could be mobilised from private investors. DEG provided EUR 429 million of its own capital for German business (2018: EUR 399 million), i.e. for direct investments by German businesses as well as investments made by local companies who purchase German machinery, for example. At EUR 1.1 billion, DEG commitments for SME investments broke the billion-euro benchmark for the first time (2018: EUR 967 million). In contrast, exits from existing equity investments declined.
The Financial markets business sector invested a total of around EUR 1.4 billion in the promotional business via the capital markets in 2019. Around EUR 1.1 billion of this total was used in securitisation transactions to promote SMEs. KfW supported climate change mitigation and environmental protection by investing EUR 325 million in green bonds. For 2020, KfW plans to make a new investment of EUR 400 million for the green bond portfolio.
To fund its promotional business, KfW in 2019 raised funds amounting to EUR 80.6 billion in the international capital markets. A total of 157 bonds were issued in 12 currencies. Making up 10% of the refinancing, ten “Green Bonds – Made by KfW” contributed EUR 8.1 billion, more than ever before. In comparison to the previous year, KfW emitted around EUR 5 billion less in euro (52% share) and substituted the volume with other currencies, in particular the British pound. With a share of 25.7%, the US dollar was the second most important currency and continued to play an important role for KfW.
KfW is planning to borrow EUR 75 billion in the capital market in 2020. Its diversification of products and currencies guarantees continuity and flexibility so that it can achieve the best possible funding results for its promotional business. As of 27 January 2020, the funding volume had already reached EUR 13.8 billion (18.4% of the planned volume for 2020).
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