KfW's 2008 business result marked by impacts of IKB rescue and financial market crisis

Frankfurt (ots) -

- Financing volume reached a record volume
- Strong operating result despite increased interest rate
reductions
- Charges incurred from IKB risk protection and financial market
crisis led to net loss for the year of EUR 2.7 billion
- Dr Schröder: "KfW's operations continue to go strong, and the
bank will carry on its promotional activities at a high level.
In 2009 the main priority will be the Federal Government's
economic stimulus packages."

In what is becoming an increasingly difficult economic
environment, KfW Bankengruppe has successfully continued its
intensive promotional activities at a high level, reaching an overall
volume of EUR 70.6 billion. The volume of financing commitments even
rose by 3.6% to a record EUR 69.0 billion (comparative period EUR
66.6 billion). Securitisations, on the other hand, plummeted to EUR
1.6 million (comparative period EUR 19.0 billion) as the markets for
such products had dried up.

The increase in new financing business is also reflected in the
KfW Group's financial statements, which were prepared according to
the rules of the International Financial Reporting Standards (IFRS).
Owing to intense demand for credit, the business volume increased by
8.9% to EUR 454.1 billion over 31 December 2007 (EUR 417.0 billion),
while the balance sheet total even increased by 11.5% to EUR 394.8
billion.

The interest rate reductions offered by KfW were further increased
by 5.8% to EUR 606 million in the 2008 financial year. Despite the
increase in financing operations, the operating result before
valuation of EUR 1.6 billion developed positively over the
comparative period (EUR 1.4 million), thus remaining the solid basis
for sustainable continuation of the high level of promotional
activities. The risk situation in the core business has turned out to
be stable even though the level of promotional lending is clearly on
the rise, and appropriate provisions were already made in 2008 to
account for the particular risks posed by the spreading financial and
economic crisis.

The Chairman of the Managing Board of KfW Bankengruppe, Dr Ulrich
Schröder, said: "In spite of the accelerated cyclical downturn and an
attendant critical situation in the financial markets, KfW has
successfully continued its promotional activities at a high level.
The balance sheet result is heavily marked by the impacts of the risk
protection for IKB and by the direct and indirect consequences of the
massive disruptions in the financial markets. Nevertheless, KfW's
operations continue to go strong, and this provides the bank with a
firm basis on which to carry on its promotional activities at a high
level. As the economy continues to cool off, in 2009 we will
initially be focusing on swiftly implementing the economic stimulus
packages of the Federal Government, thereby responsibly fulfilling
our functions as Germany's biggest promotional bank. To meet the
planned funding requirements of EUR 75 billion we will use our tried
and tested mix of diverse instruments."

The comprehensive income of the KfW Group was affected by
extraordinarily high charges in 2008 as well. As in the previous year
they were caused, firstly, by the risk protection measures for and
the sale of KfW's interest in IKB, which had run into existential
difficulties. Secondly, the financial market crisis which was
triggered by the US subprime crisis in 2007 and further worsened in
the course of the year, led to massive market disruptions by the end
of 2008, resulting in negative impacts on the securities portfolio
and the purely IFRS-induced earnings effects.

- In connection with the risk protection for and the sale of KfW's
interest in IKB, charges totalling EUR 1.2 billion arose in
2008. The risks still remaining with KfW are limited.

- In the course of the worsening financial market crisis,
significant valuation losses had to be reported across nearly
all investment categories despite a conservative investment
policy. In KfW's portfolio of approximately EUR 43 billion, the
impact on earnings resulting from this amounted to a total of
EUR 1.5 billion.

- In addition, negative consequences from the Lehman Brothers
insolvency and the Iceland moratorium amounted to EUR 0.7
billion.

- Furthermore, the market disruptions resulted in EUR -0.6 billion
in purely IFRS-induced effects in the context of the valuation
of derivatives used exclusively for hedging purposes in closed
risk positions. These earnings effects are economically
unfounded and should therefore be disregarded in the assessment
of the results.

The consolidated loss reported as of 31 December 2008 despite
strong income from current operations was EUR 2.7 billion
(comparative period: EUR -6.2 billion). The consolidated loss
adjusted for the economically unfounded charges amounted to EUR 2.1
billion.

***You will find the complete Press Release on our homepage
www.kfw.de***

Originaltext: KfW
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