Press Release from 2021-02-02 / Group
Promotional year 2020: Coronavirus aid programmes boost KfW’s business volume to an all-time high
- Promotional business volume rises by 75% to EUR 135.3 billion
- EUR 50.9 billion for special coronavirus measures at home and abroad
- Promotion of developing countries and emerging economies reaches new high of EUR 12.4 billion
- One million promotional commitments in Germany
- High growth in the priority areas of digitalisation, energy efficiency and education
KfW’s promotional business reached a record high of EUR 135.3 billion (+75%) in 2020. The main drivers of the strong growth were the measures to mitigate the economic impacts of the coronavirus pandemic in Germany and abroad, which totalled EUR 50.9 billion (after cancellations and waivers for commitments of EUR 10.8 billion) and thus made up 38% of the total business volume. In Germany alone, KfW committed around one million loans, grants and other financings for a total amount of EUR 106.4 billion last year. The promotional programmes in the area of energy-efficient construction and refurbishment, which in the housing segment recorded an increase by 140% to EUR 26.8 billion, also contributed to the growth of promotional business volume in Germany. Commitments by KfW Capital amounted to EUR 871 million in 2020.
The business sector Promotion of developing countries and emerging economies increased its business volume by 16% to EUR 12.4 billion. Some EUR 11 billion of this amount was accounted for by KfW Development Bank and EUR 1.4 billion by DEG. The regional focus for KfW Development Bank was Africa and the Middle East, which made up 48% of commitments (nearly EUR 5.2 billion).
At EUR 16.6 billion, the commitment volume in the Export and project finance business sector, which provides financing in the interests of the German and European economy, was significantly below the 2019 record level (EUR 22.1 billion), but could be maintained at the level of the years before despite the impact of the coronavirus crisis on global trade.
The qualitative benchmarks relevant for managing KfW’s promotional activities continued to develop on a positive trajectory. Promotion for climate change mitigation and environmental protection (“environment quota”), for example, amounted to 33% (>50% after adjustment for the special coronavirus measures), while promotion for small and medium-sized enterprises (“SME ratio”) rose to 47% (2019: 40%), driven by the special coronavirus measures.
KfW’s CEO Günther Bräunig said: “2020 was a very special year for KfW. Never before have we faced these kinds of challenges as a promotional bank. KfW provided more than EUR 50 billion to support companies, start-ups, students and non-profit organisations in Germany, as well as its partners in developing countries and emerging economies, in their efforts to overcome the effects of the pandemic. At the same time, we have not wavered in our commitment to sustainable development, digitalisation and innovation.”
As for the outlook for 2021, Bräunig adds: “The year of the coronavirus 2020 will be followed by the year of the coronavirus 2021 – but under different auspices. It is encouraging that vaccinations are underway, but the coronavirus pandemic will continue to keep us busy in the new year, both with new and existing business. At the same time, we are confronted with new and important challenges: the establishment and implementation of the ten-billion-euro Future Fund is one of them. A functioning start-up culture is particularly important for post-crisis recovery. We will continue to support the economy in its transformation towards greater climate change mitigation, environmental protection and resource conservation and play a role in digitalising companies and expanding municipal infrastructure.”
Details on the business sectors’ promotional activities
With a promotional business volume of EUR 86.3 billion as of 31 December 2020, new business in the SME Bank & Private Clients business sector reached an all-time high (2019: EUR 36.0 billion). In this sector, the SME Bank segment posted an enormous increase in promotional volume to EUR 48.1 billion (2019: EUR 15.3 billion), which was mainly due to the coronavirus aid programmes on behalf of the German Federal Government. Companies received loans totalling EUR 34.2 billion to mitigate the economic effects of the coronavirus crisis.
The promotional priority area of Start-ups & Corporate investment recorded commitments of EUR 39.7 billion (2019: EUR 6.8 billion). The main drivers in this sector were also the coronavirus aid programmes: the KfW Entrepreneur Loan increased its volume almost tenfold and reported commitments of EUR 29.3 billion (2019: EUR 3.1 billion), of which EUR 28.3 billion came from the Coronavirus Special Programme, while the KfW Instant Loan generated commitments of EUR 5.9 billion.
In the priority area of Energy Efficiency & Renewables, which comprises programmes to support the German Federal Government’s climate targets, new commitments of EUR 7.6 billion remained approximately at the prior-year level (2019: EUR 8.1 billion). In particular, the increased commitment volume in KfW’s Renewable Energy Programme of EUR 3.7 billion (2019: EUR 2.9 billion) compensated for the discontinued Energy Efficiency Programme - Waste Heat (2019: EUR 1.0 billion).
The priority area of Innovation generated a promotional business volume of EUR 0.8 billion in 2020 (2019: EUR 0.4 billion). EUR 0.7 billion (2019: EUR 0.4 billion) of this amount was committed in the ERP Digitalisation and Innovation Loan.
The Private Clients segment also achieved a promotional volume of EUR 38.2 billion, which significantly exceeds the prior-year result (2019: EUR 20.6 billion). The largest contribution, with a commitment volume of EUR 26.9 billion (2019: EUR 11.2 billion), was accounted for by the priority area of Energy Efficiency & Renewables with the Energy-efficient Construction and Refurbishment product family. The improved promotional conditions at the beginning of 2020 for the Energy-efficient Construction and Refurbishment programmes, which support investments in the construction of energy-efficient new buildings and the energy-efficient refurbishment of existing ones, led to a significant increase in commitments to EUR 26.8 billion (2019: EUR 11.2 billion). In addition, the new investment grant for charging stations at residential buildings for electric cars (private charging infrastructure) introduced on 24 November 2020 was met with high demand. By the end of the year, around 140,000 commitments for a volume of EUR 0.1 billion had already been made. Despite the coronavirus crisis, demand in the housing sector (promotion for home ownership and age-appropriate conversion) also increased, with commitments of more than EUR 8.8 billion (2019: EUR 7.6 billion), consistent with strong ongoing activity in the construction sector. In the Baukindergeld grant scheme 124,731 applications have been approved for a total of EUR 2.6 billion.
The priority area of Education generated commitments of EUR 2.5 billion (2019: EUR 1.9 billion). The significant increase over the previous year is mainly due to adjustments to the KfW Student Loan (zero interest rate and expansion of the scope of applicants) as a coronavirus aid measure.
In the Customised Finance & Public Clients business sector, the commitment volume of EUR 19.2 billion was also significantly higher than the prior-year figure of EUR 7.2 billion, a trend that is also largely due to the commitments arising from the coronavirus aid programmes.
Customised corporate finance was marked by the high commitment volume of direct participation in syndicated financing under the Coronavirus Special Programme. Of a total commitment volume of EUR 9.3 billion (2019: EUR 0.3 billion), EUR 8.4 billion was committed to companies under the Special Programme. This does not include further loan commitments amounting to EUR 6.1 billion, which have already been repaid.
With a commitment volume of EUR 4.8 billion, promotional funding for Municipal & Social Infrastructure showed a significant increase over the prior-year level (2019: EUR 3.9 billion). A significant factor here was the coronavirus aid for non-profit enterprises, which was provided through promotional institutions of the federal states and generated a volume of EUR 0.5 billion. The Smart Cities Model Projects grant funding also experienced a significant increase and reached EUR 0.3 billion (2019: EUR 0.1 billion).
At around EUR 5.1 billion, Individual financing for Banks & Promotional institutions of the federal states experienced a considerable increase over the prior year (2019: EUR 3.1 billion). This is mainly due to the increase in demand for general refinancing by the promotional institutions of the federal states to EUR 3.2 billion (2019: EUR 1.3 billion), and global loans to promotional institutions of the federal states for start-ups (second pillar of the German Federal Government’s coronavirus package of measures for start-ups) under the coronavirus aid programmes amounting to EUR 0.6 billion.
Commitments in the KfW Capital business sector amounted to a total of EUR 871 million in 2020 (including commitments by the European Investment Fund (EIF) under the German Federal Government’s coronavirus package of measures for start-ups).
The commitment volume in the ERP Venture Capital Fund Investments programme, which KfW Capital is implementing with the support of the ERP Special Fund, was increased as planned by around 19% from EUR 155 million to EUR 184 million, despite the coronavirus pandemic. In the past year, a total of 12 VC funds received new commitments from the ERP VC programme.
In addition, in view of the pandemic, KfW Capital (together with the German Federal Government and KfW) developed the first pillar of the federal coronavirus package of measures for start-ups and has been implementing these together with the European Investment Fund since mid-May 2020. By the end of the year, around EUR 685 million had been contractually committed to VC funds (including EIF/High-Tech Start-up Fund (HTGF), excluding ERP Start-up Fund) under this pillar, which includes, for example, the Corona Matching Facility.
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 global markets – the effects of the coronavirus crisis on world trade and large parts of the entire global economy were, as expected, reflected in new business. While new commitments at EUR 16.6 billion were significantly below the 2019 record level of EUR 22.1 billion, they could nevertheless be maintained in the range of the preceding years.
All sector departments contributed to new business equally. At EUR 2.8 billion, the Power, Renewables and Water sector department again accounted for the largest share (2019: EUR 3.2 billion). This mainly included 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 mitigating climate change. Financing to expand digital infrastructure, such as fibre-optic projects or the construction of data centres, is playing an increasingly important role.
The business area KfW Development Bank was able to increase its commitments considerably compared to the previous year. In 2020, KfW provided around EUR 11 billion (2019: EUR 8.8 billion) in financing to developing countries and emerging economies on behalf of the German Federal Government. The increase is due to efforts to combat the coronavirus pandemic and its socio-economic repercussions. KfW helped the Federal Ministry for Economic Cooperation and Development (BMZ) to set up a comprehensive coronavirus emergency programme for the partner countries of German development cooperation within a few months. By the end of the year, a total of around EUR 4 billion had been mobilised through KfW for the implementation of the programme. The support is multifaceted: from the procurement of medical equipment and tests to food aid and securing jobs and liquidity for companies and countries.
In 2020, DEG committed around EUR 1.4 billion for investments of private companies in developing countries and emerging economies (2019: EUR 1.8 billion) – in an environment which was very difficult due to the COVID-19 pandemic. A further EUR 378 million was mobilised from private investors (2019: EUR 280 million). To overcome the effects of the pandemic, DEG provided short-term liquidity assistance to companies, for example, if needed. More than EUR 50 million was allocated to co-financing COVID-19 response measures. In regional terms, Asia accounted for the largest share of DEG’s new business with more than one third, followed by Africa and Latin America.
KfW’s Financial markets business sector supported climate change mitigation and environmental protection by investing EUR 400 million in green bonds. For 2021, KfW once again plans to make a new investment of EUR 400 million for the green bond portfolio.
To fund its promotional business, KfW raised funds of EUR 66.4 billion on the international capital markets in 2020. There was a total of 172 transactions in 14 different currencies. Making up 12.6% of the refinancing, 14 “Green Bonds – Made by KfW” contributed EUR 8.3 billion, more than ever before. In comparison to the prior year, KfW issued around EUR 700 million more in euros (64%). With a share of 24%, slightly below the 2019 level, the US dollar was the second most important currency and continued to play a key role for KfW.
As part of KfW’s Coronavirus Special Programme, new funding sources were tapped with access to federal auctions via the federal Economic Stabilisation Fund (WSF) and participation in the targeted longer-term funding of the Eurosystem via TLTRO III.
Long-term borrowing via the capital markets of EUR 70 to 80 billion is planned for 2021; the selected range is broader than in the past, as KfW’s participation in TLTRO in 2021 is still undecided. The use of additional funds from the ESF depends on the development of KfW’s Coronavirus Special Programme, which is expected to run until the end of June 2021.
The diversification of products and currencies guarantees continuity and flexibility to achieve the best possible funding results for KfW’s promotional business. As of 29 January 2021, the funding volume has already reached EUR 14.6 billion.