First quarter of 2019: KfW makes good start to new promotional year
Press Release from 2019-05-08 / Group
- Total promotional business volume of EUR 16.9 billion
- Domestic promotion totals EUR 10.9 billion
- Significant interest in start-up and investment financing
- International financing grows to EUR 5.8 billion
- Consolidated profit rises to EUR 295 million
In the first three months of 2019, the promotional business of KfW Group reached a total volume of EUR 16.9 billion (prior-year period: EUR 18.9 billion). With a commitment volume of EUR 10.9 billion, domestic promotion fell short of the previous year's high level (EUR 14.9 billion), as expected. This is attributable to the high-volume non-recurring effects (in global loan business, for example) in the first quarter of 2018, and to the persistently good financing conditions for private and commercial investors in the current the low interest environment in Germany. KfW’s international financing increased to EUR 5.8 billion (EUR 3.8 billion). KfW IPEX-Bank made a significant contribution to this growth after making a very good start to 2019 (EUR 4.8 billion; previous year EUR 3.3 billion). At EUR 0.8 billion (EUR 0.4 billion), the KfW Development Bank business area also contributed to the growth of international business, as well as DEG with EUR 0.2 billion (EUR 1.0 billion).
"KfW has made a good start to the new promotional year. The demand for KfW promotion reflects the current macroeconomic situation: demand in Germany is more subdued with financing conditions remaining positive, while there is strong interest in international financing in spite of the more difficult overall conditions. This demonstrates that KfW is making an important contribution with its financing offers", said Dr Günther Bräunig, Chief Executive Officer of KfW Group.
With a consolidated profit of EUR 295 million, KfW's earnings position evolved well compared to the previous year (EUR 228 million). This stems from the good valuation result, which in turn was due to the persistently low need for credit risk provisions and a positive equity investment result. The consolidated profit before IFRS effects from hedging, relevant for managing KfW, came in at EUR 317 million (EUR 238 million).
"KfW's earnings developed very well in the first quarter of 2019. One highlight was the stability of operating income before valuation", said Dr Bräunig.
The operating income before valuation (before promotional expense) totalled EUR 392 million (EUR 374 million). Net interest income (before promotional expense) of EUR 597 million was almost the same as the previous year (EUR 600 million) and continues to be the main source of income for KfW. Administrative expense amounted to EUR 312 million (EUR 312 million), the same as the previous year. Commission income contributed EUR 107 million to the result after EUR 86 million in the previous year.
Promotional expense – mainly interest rate reductions for new business – totalled EUR 58 million and remains at a low level in the current interest environment (EUR 84 million).
The effect on earnings from risk provisions in the lending business totalled EUR -14 million (EUR 0 million) for the first quarter, a satisfyingly low result again. The private equity and securities portfolio for the group had a slight positive effect of EUR 21 million (EUR -11 million), especially due to the positive development of the US dollar.
Total assets increased to EUR 508.8 billion (compared to EUR 485.8 billion as of 31 December 2018), mainly because of an increase in liquidity held due to the high funding in the first quarter.
The group's regulatory capital ratios are still adequate. At 20.0% (31 December 2018: 20.1%), the total capital ratio remains almost unchanged as of 31 March 2019.
Details on the business sectors' promotional activities
The SME Bank & Private Clients business sector generated a promotional volume of EUR 9.1 billion (EUR 12.7 billion) in the first quarter of 2019.
The SME Bank segment contributed EUR 4.8 billion, less than the previous year (EUR 6.3 billion).
The innovation priority area generated a volume of EUR 106 million (EUR 2.4 billion). In the first few months of 2018, the ERP Digitalisation and Innovation Loan recorded a marked increase. In an effort to meet the high demand and continue making this important financing offer, the funding conditions have been focused more strongly in the meantime. This means the commitments have been available under modified programme conditions since June 2018, which goes hand in hand with a lower promotional business volume in this area.
Start-ups & corporate finance meanwhile recorded a promotional business volume of EUR 2.2 billion, higher than the same quarter of the previous year (EUR 1.9 billion). This is largely attributable to much higher demand for the KfW Entrepreneur Loan (EUR 1.0 billion; prior-year period: EUR 0.6 billion).
The priority area of energy efficiency & renewables generated a promotional business volume totalling EUR 2.4 billion (EUR 2.0 billion). The promotion of commercial energy efficiency in particular is higher than the previous year. The KfW Renewable Energies programme contributed EUR 0.4 billion to this priority area.
The Private Clients segment achieved a promotional business volume of EUR 4.3 billion (EUR 6.3 billion) by the end of the quarter. This is due to the currently good credit supply of private clients in Germany.
Following record figures in the same period of the previous year, the promotional business volume in the priority area of energy efficiency & renewables in the afore-mentioned segment totalled EUR 2.4 billion (EUR 4.7 billion).
The housing & living priority area made a significant contribution with a promotional business volume of EUR 1.4 billion, surpassing the prior-year's figure (EUR 1.2 billion). The reason for this, among others, is the Baukindergeld help-to-buy scheme launched in the previous year.
The education priority area remained stable again with a volume of EUR 0.5 billion at the end of the quarter (EUR 0.5 billion).
The Customised Finance & Public Clients business sector generated a commitment volume of EUR 1.7 billion in the first quarter of 2019, which means new business was lower than in the prior year that was marked by a large individual transaction (EUR 2.2 billion).
At roughly EUR 700 million, the commitment volume for municipal and social infrastructure is the same as the previous year. In addition to basic funding for general infrastructure investments of municipalities, municipal and social companies, the promotion of energy-efficient construction and refurbishment at municipal level also accounted for a significant share at EUR 200 million.
With a contract volume of just under EUR 900 million, the individual financing for banks & promotional institutions of the federal states fell well short of the previous year (EUR 1.5 billion), which was marked by a large individual global loan transaction for lease financing. General funding of promotional institutions of the federal states recorded a contract volume of EUR 880 million, slightly exceeding the previous year’s figure (EUR 786 million).
The commitment volume for customised corporate finance amounted to EUR 140 million in the first quarter (EUR 21 million). The first contracts for the newly introduced KfW Loan for Growth were concluded here.
In the first three months of the year, the KfW Capital business sector committed EUR 33 million to three ERP VC fund investments (compared to EUR 17 million in the prior-year period). The new KfW subsidiary has thus made a successful start to its first full financial year. In the next ten years and supported by the ERP Special Fund, KfW Capital aims to invest roughly EUR 2 billion into venture capital funds to improve the access to growth capital for young, innovative technology companies in Germany.
The Export and project finance business sector, for which KfW IPEX-Bank is responsible, enjoyed a good start to the year, and its new commitment volume of EUR 4.8 billion is significantly more than in the same period in the previous year (EUR 3.3 billion). The priority areas of the new commitments are the sector departments of Maritime Industries with EUR 1.4 billion (EUR 0.9 billion), Infrastructure with EUR 0.8 billion (EUR 0.4 billion), Financial Institutions and Trade Finance with EUR 0.8 billion (EUR 0.4 billion) as well as Power, Renewables and Water with EUR 0.8 billion (EUR 0.4 billion).
The commitment volume for the Promotion of developing countries and emerging economies business sector amounted to EUR 1 billion (EUR 0.5 billion). In the first quarter of 2019, KfW Development Bank committed EUR 0.8 billion (EUR 0.4 billion) for projects in developing countries and emerging economies. Based on a multi-year comparison, the development of the commitment volumes in the first three months confirms the long-term upwards trend. More than 80% of the commitments in 2019 so far have gone to countries in Africa and the Middle East. In the first quarter of 2019, DEG committed EUR 156 million to financing corporate investments in emerging economies and developing countries (EUR 54 million). More than half of these funds are earmarked for private companies in Africa, especially local banks. This way they can lend to local small and medium-sized enterprises and close financial gaps. Commitments for project financing are also developing well at EUR 69 million, mostly for financing renewable energy projects.
Investments totalling roughly EUR 321 million (EUR 185 million) were made in the Financial markets business sector in the first quarter of 2019. EUR 298 million of this (EUR 117 million) was accounted for by securitisation transactions in the area of capital market-oriented SME promotion. For the green bond portfolio, KfW invested roughly EUR 24 million (EUR 68 million) in two securities to promote climate change mitigation and environmental protection projects.
In the first quarter of 2019, KfW raised EUR 35 billion on the international capital markets to fund its promotional business and thus enjoyed a successful start to its funding activities. KfW plans a funding volume of EUR 80 billion for the whole of 2019.
|Key figures of the income statement|
(EUR in millions)
|01/01/2019 - 31/03/2019||01/01/2018 - 31/03/2018|
|Operating result before valuation|
(before promotional expense)
|Consolidated profit before IFRS effects from hedging||317||238|
|Key figures of the statement of financial position (EUR in billions)||31/03/2019||31/12/2018|
|Volume of business||613.2||590.7|
|Key regulatory figures |
|(Core) tier 1 capital ratio||20.0%||20.1%|
|Total capital ratio||20.0%||20.1%|
1) The capital ratios shown do not take into account the interim results of the first quarter of 2019 (capital ratio as of 31 March 2019) and of the second half-year of 2018 (capital ratio as of 31 December 2018). KfW records no material tier 2 capital in its equity, meaning that the (core) tier 1 capital ratio and the total capital ratio are virtually the same.