Commitments in 2021
KfW’s new business reached a volume of EUR 107 billion in 2021. This is below the level of the pandemic year 2020 but also considerably higher than the average of the pre-COVID years. The decline is fortunately due in particular to the considerable drop in demand for coronavirus aid both in Germany and in the internationally oriented business areas. In contrast, our business has been boosted by strong demand in the areas of climate change and the environment.
Business in Germany, with a volume of EUR 82.9 billion, accounted for the lion’s share of our new commitments. These include some 1.3 million individual commitments for loans or grants that we issued in Germany, which underscores that our funding reaches a broad range of recipients.
This is further evidenced by a promotional business volume of EUR 43.4 billion in the Private Clients segment, constituting an all-time high. At EUR 34.5 billion, the majority went to the promotion of energy-efficient residential buildings. In the first few weeks of 2022, the huge and growing demand for Federal Funding for Efficient Buildings resulted in the earmarked budgetary resources being exhausted ahead of schedule, thus forcing KfW to temporarily halt the programme. At the same time, the Federal Government and KfW commenced in-depth talks on the redesign and prompt continuation of funding.
The business segment Mittelstandsbank (SME Bank) achieved new business volume of EUR 29.6 billion. It is particularly encouraging to note that promotion of investments in the areas of climate change, the environment and sustainability has received a strong boost.
We felt the impact of the coronavirus pandemic and the difficult political and economic environment in our internationally oriented business areas. However, although the new business volume of both KfW IPEX-Bank and the promotion of developing countries and emerging economies was lower than in 2020, the two business sectors have proven they are stable and reliable partners for export companies and international projects.
KfW coronavirus aid
When KfW launched its coronavirus aid programmes in collaboration with policymakers and the German banking industry on 23 March 2020, few would have expected them still to be necessary in spring 2022.
KfW provided assistance to around 140,000 businesses to mitigate the impact of the pandemic from programme launch until the end of 2021. Nearly all of these were small and medium-sized enterprises. During this period, KfW committed around EUR 57 billion to businesses, non-profit organisations and students.
KfW coronavirus aid commitments amounted to EUR 10.1 billion in 2021, just a good 20% of the previous year’s volume.
KfW continued to support the Federal Ministry for Economic Cooperation and Development (BMZ) in mitigating the consequences of the pandemic for developing countries and emerging economies. By the end of the year, around EUR 2.7 billion had been mobilised through KfW for the implementation of the Emergency COVID-19 Support Programme.
Our result in 2021
The earnings position improved substantially in financial year 2021 after the effects of the COVID-19 pandemic the year before, recording a consolidated profit of EUR 2,215 million (2020: EUR 525 million).
The operating result before valuation (before promotional expense) of EUR 1,712 million was below the previous year (2020: EUR 1,855 million) – despite higher net commission income – due to lower net interest income and higher administrative expenses.
The valuation result largely recovered from the extraordinarily great impact of the coronavirus pandemic, contributing EUR 829 million to consolidated comprehensive income (2020: EUR -1,166 million). This was due to reversals of impairment losses after the effects of the COVID-19 pandemic the year before, and to further valuation gains on the equity investment portfolio.
At EUR 188 million, promotional expense was considerably higher in 2021 than in the previous year (EUR 88 million), primarily due to the increase in interest rate reductions. The main reasons for this increase were passing on negative funding rates to KfW financing partners from the third quarter 2021 onwards, and the resultant increase in demand for promotional loans at reduced rates.
Consolidated total assets rose by EUR 4.6 billion to EUR 551.0 billion in 2021 (2020: EUR 546.4 billion). This was due in particular to higher net loans and advances of EUR 14.9 billion, offset by the decline in value adjustments from macro hedging (separate line item) of EUR 7.6 billion.
Decade of decision
In order to be able to fulfil our promotional mandate both effectively and efficiently in the future, we need to revise our standards. Our promotional success will be measured more by the impact it generates. This is imperative given the huge challenges we face. The decade ahead will determine how future generations deal with the challenges of climate change and whether democracy’s promise of prosperity will be fulfilled for them too.
We want to make an effective contribution to ensuring that the necessary transformation of the economy and society is successful. We therefore place top priority on delivering this contribution to transformation policy. Our main focus in this regard is on four issues: climate action as a key task for the future, innovation and digitalisation, dealing with the profound societal changes, and securing the energy supply.
In order to achieve all of this, we will also undergo transformation ourselves and develop KfW into a digital and transformative promotional bank. To this end, we rely on our highly motivated and qualified staff. We would like to take this opportunity to thank them for their excellent work over the past year and let them know we are counting on their continued commitment in the year ahead.
Watershed moment
Shortly before publication of this annual report in spring 2022, we are experiencing a war in Europe sparked by Russia’s invasion of Ukraine and marking a watershed moment. KfW was founded in 1948 not least to overcome the consequences of hatred, war and violence. Since then, it has been our aim to effectively contribute to improving living conditions in Germany, Europe and around the world. We are therefore all the more appalled by the war in Ukraine. The people there are experiencing unimaginable suffering. Our thoughts and our solidarity go out to them. We sincerely hope that reason and humanity will prevail and that peace and security will be restored in Europe as soon as possible.
