Third quarter: continued strong demand for KfW financing

Frankfurt (ots) - Overall commitment volume of almost EUR 60
billion (+43%)

Focus on SMEs and climate protection

Consolidated profit of almost EUR 1.5 billion (+90%)

KfW Bankengruppe made total promotional commitments of EUR
59.8billion in the first three quarters of 2010, an increase of 43%
compared with EUR 41.8 billion as at 30 September 2009.

Domestic promotional volume rose by 50% to about EUR 50 billion
(same period last year: EUR 33.1 billion). In the business area KfW
Mittelstandsbank, the volume of commitments increased by more than
50%, with the focus here on promoting enterprises and in particular
SMEs through the KfW Special Programme and the KfW Entrepreneur Loan,
as well as promoting renewable energies. For climate and
environmental protection in Germany, KfW allocated EUR 16.9 billion
(EUR 10.9 billion) in total across all business areas. Promotion for
private individuals also increased (KfW Privatkundenbank business: +
38%), with much interest shown in the support for energy-efficient
rehabilitation and construction. In the business area KfW
Kommunalbank, the positive annual trend continued with an increase of
more than 50%, with infrastructure financing accounting for a
substantial part.

"This extraordinary performance shows that in these economically
strained times KfW's promotional funding has provided the right
stimulation and important impulses for the German economy," said Dr
Ulrich Schröder, CEO of KfW Bankengruppe. "Since KfW operates on the
principle of subsidiarity, however, we expect the financing volume to
decline again once the economic climate returns to normal."

In the international business, commitments were made amounting to
EUR 8.5 billion (EUR 7.4 billion). Of this, EUR 5.3 billion was
allocated for export and project finance and EUR 3.2 billion for the
promotion of developing and transition countries. In both business
areas the focus was on climate and environmental protection.

With a consolidated profit of EUR 1,481 million (EUR 781 million)
as at 30 September 2010, KfW Bankengruppe has managed to successfully
continue the positive performance trends of the first half of 2010
into the third quarter.

Based on a continued strong operating result, the development has
been particularly favoured by the much improved valuations reflecting
the brighter economic prospects and the tangible improvement in the
risk situation.

"KfW is well positioned strategically and operationally. The
earnings will strengthen the capital base, enabling KfW to continue
pursuing an active promotion policy even under the anticipated
stricter regulatory requirements in future," said Dr Schröder.
"Despite the stable operating income, it is, however, too early to
forecast the annual result based on the available figures.
Nevertheless, in 2010 KfW expects to make the highest consolidated
profit in its history."

The operating result before valuation is only insignificantly less
than the very good figure for the same period in the previous year
and remains at a high level of EUR 1,713 million. The main result
component is net interest income amounting to EUR 2,033 million which
continues to be supported by the very favourable refinancing terms
and conditions due to KfW's first-class credit rating.

Due to the improved economic climate in the third quarter
provisions for risk in lending business could be significantly
reduced by EUR 285 million, whereas high allocations of EUR 593
million still had to be made in the same period last year.

Altogether, the equity and securities portfolio has also
contributed EUR 182 million to profits, directly attributable to the
general economic recovery and the brighter outlook on the financial
markets.

Given the development of the underlying market parameters in the
third quarter of 2010, the valuation of derivatives led to a decrease
in the result of EUR 754 million as at 30 September 2010. Despite
their sole use for hedging purposes, derivatives must be valued under
IFRS to fair value. Due to the rigid IFRS regulations, only limited
account can be taken of counterbalancing valuation effects of
underlying hedged transactions in the balance sheet which thus have
temporary, economically unfounded effects on earnings. These offset
each other in total over the whole term of the hedged positions. For
increasing transparency, KfW has since the introduction of IFRS and
in addition to "consolidated profit" shown "consolidated profit
before IFRS effects from hedging", which is adjusted for these
economically unfounded effects on the result and thus conveys an
undistorted picture of earnings from operations.

The balance sheet total increased considerably by EUR 45.7 billion
to EUR 445.8 billion. This large increase is attributable on the one
hand to strong promotional business but also to exchange rate changes
compared with 31 December 2009.

Results of the individual group activities

In the business area KfW Mittelstandsbank, volume increased by 57%
from EUR 13.8 billion to EUR 21.7 billion. Under the KfW Special
Programme launched as part of the German Government's economic
stimulus packages, KfW granted promotional loans of EUR 5.4 billion
(EUR 2.9 billion) as at 30 September 2010. Altogether, commitments
made since the beginning in 2009 to 29 October 2010 amount to EUR
12.7 billion. Recently there is, however, a discernible steady
decline in demand for the KfW Special Programme, often in favour of
renewed strong interest in the KfW Entrepreneur Loan. Under the KfW
Entrepreneur Loan programme, KfW granted loans worth EUR 5.4 billion
(EUR 4.4 billion). This indicates that credit supply to enterprises
is returning to normal in Germany. The promotional focus on the
environment has developed very well, with commitments of EUR 8.5
billion, exceeding by 118% the previous year's figure of EUR 3.9
billion. This increase is largely due to keen demand for the KfW
Renewable Energies Programme. KfW thus remains the leading promoter
of renewable energies in Germany.

The volume of commitments in the business area KfW
Privatkundenbank totalled EUR 15.5 billion (EUR 11.2 billion) in the
first three quarters. For assistance in energy-efficient
rehabilitation and construction, loans and grants were issued
amounting to EUR 7.8 billion (EUR 6.6 billion). The programmes make a
major contribution to attaining the climate protection targets of the
Federal Government in residential buildings. In the KfW Home
Ownership and Housing Modernisation Programmes, commitments rose
altogether to EUR 5.7 billion (EUR 3.4 billion). In education, the
KfW student loan was the main contributory factor to the 32% increase
of financing volume to EUR 1.4 billion.

A large increase in financing volume was recorded in the business
area KfW Kommunalbank. After the first three quarters of 2010, it
amounts to EUR 12.7 billion (EUR 8.1 billion). A major factor here
includes global loan business with the promotional institutions in
the federal states (Landesförderinstitute - LFIs), due to the very
high demand by LFIs for general refinancing, reaching a volume of
more than EUR 8.8 billion (EUR 6.8 billion). In infrastructure
financing, lending volume almost tripled to EUR 3.5 billion (EUR 1.3
billion).

In the business area of export and project finance, which KfW
IPEX-Bank is responsible for within the KfW Bankengruppe, new
business commitments were made totalling EUR 5.3 billion (also EUR
5.3 billion in the equivalent period). The third quarter of 2010 saw
a distinct increase in new commitments compared with the first two
quarters. Finance for energy and environment accounted for the
largest share, followed by transport and social infrastructure.

At EUR 2.6 billion, new commitments by KfW Entwicklungsbank in the
promotion of developing and transition countries well exceeded the
previous year's figure of EUR 1.6 billion. In addition to funds from
the federal budget, KfW mobilised its own funds of EUR 1.8 billion
(EUR 1.1 billion) for Financial Cooperation. Amounting to EUR 0.6
billion, the funding volume of DEG after the first three quarters of
2010 exceeded that for the same period last year of EUR 0.5 billion.
Projects in the pipeline indicate continued robust development.

With its activities, KfW supports the revitalisation of the
securitisation market, because these must function as an important
means of supplying credit to the economy. As an anchor investor, KfW
participated up to the end of the 3rd quarter in securitisation
transactions focusing on SMEs worth EUR 0.7 billion.

In 2010, Greece was granted a loan of EUR 22.3 billion. As special
business on behalf of the Federal Government, this is not included in
the total financing volume of KfW.

Up to 30 September 2010, KfW raised long-term funds on the
international capital markets equivalent to EUR 65.8 billion. For the
whole of 2010, KfW anticipates a refinancing volume of about EUR 75
billion.

Service: An overview of the business and financial figures of KfW
Bankengruppe is available for download at www.kfw.de under
Press/Materials for the press/Presentations.

Originaltext: KfW
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Contact:
Eske Ennen
KfW, Palmengartenstraße 5-9, 60325 Frankfurt
Kommunikation (KOM)
Tel.: +49 (0)69 7431-9766, Fax: 069 7431-3266,
E-Mail: eske.ennen@kfw.de, Internet: www.kfw.de