Strong first quarter demand for KfW financing

Frankfurt (ots) -

- Economic recovery spurs demand for classic KfW promotional loans
for SMEs
- Dr Schröder: "We are preparing to support the energy
turnaround."

In the first quarter of 2011, KfW Bankengruppe committed funds
totalling EUR 22.7 billion (first quarter 2010: EUR 17.8 billion). Of
this volume, EUR 19.2 billion (EUR 15.6 billion) was committed for
the promotion of industry, environmental protection, housing and
education in Germany. In the promotion of small and medium-sized
enterprises, as expected the scheduled phasing out of the economic
stimulus programmes led to a lower volume of commitments than in the
previous quarter. At the same time, driven by the economic recovery,
demand for classic promotional loans for SMEs increased. The result
of the business area KfW Privatkundenbank, with the promotional areas
of housing and education, remained stable on the same level. The
result of the business area KfW Kommunalbank was characterised by a
pull-forward effect. The framework agreements on the general
refinancing of state promotional banks were already concluded in the
first quarter. In 2010, however, these agreements were concluded in
the first five months and, thus, in the second quarter as well. As a
result, the volume of commitments of this business area was
substantially higher than in the previous period, at nearly EUR 8
billion against EUR 3.1 billion. Without this effect, the volume of
KfW's new business would reach roughly the previous year's level.
KfW's international business also developed positively, with
commitments totalling EUR 3.6 billion (EUR 2.0 billion). Spurred by
the economic recovery, export and project finance picked up again
considerably.

"Demand for KfW promotional loans is developing very positively.
We see enterprises and private borrowers seizing the upswing amid
continuing low interest rates as an opportunity to invest in
machinery and housing again", said Dr Ulrich Schröder, Chief
Executive Officer of KfW Bankengruppe. "As a promotional bank
dedicated to environmental and climate protection, we are currently
preparing to support enterprises, institutions and citizens in
initiating the energy turnaround with special promotional schemes."

With a consolidated profit before IFRS effects from hedging* of
EUR 588 million (EUR 628 million) as at 31 March 2011, KfW
Bankengruppe successfully continued the positive development of
results from the 2010 financial year. The consolidated profit after
IFRS effects even exceeded the previous year's result of EUR 575
million, reaching EUR 1,021 million.

"The development of the first quarter of 2011 is encouraging, but
these results cannot be extrapolated to the annual result,
particularly in the lending area, because of the exaggerating effects
of IFRS and the positive valuation result again in the first
quarter", Dr Schröder added.

The operating result before valuations was EUR 509 million, which
was below the previous year's very good result of EUR 567 million,
but nevertheless still at a good level. Net interest income as the
main source of income dropped slightly below the previous year's
level, but continued at a historically high level of EUR 624 million
(EUR 665 million) owing to the continuing very low interest rates,
particularly in the short-term segment. Interest rate reductions
continued unchanged against the previous year at EUR 139 million.

Risk provisions for lending business were reduced by a net total
of EUR 71 million as a result of the continuing recovery of
individual business segments. In the same period in the previous
year, charges of EUR 123 million were still incurred.

The group's private equity and securities portfolio yielded a
positive effect of EUR 23 million in total (EUR 125 million).
Furthermore, hidden obligations under securities reduced
substantially by EUR 162 million to EUR 733 million against 31
December 2010.

The purely IFRS-related effects from the valuation of derivatives
used for hedging purposes amounted to EUR 433 million (expenses of
EUR 53 million), increasing the valuation result considerably. The
reasons for this lie in reversal effects from the previous years, the
weak US dollar and rising interest rates.

Results of the activities of the individual business areas The
promotional business volume of KfW Mittelstandsbank was EUR 5.6
billion, a planned reduction against the same quarter in the previous
year (EUR 7.3 billion). This was mainly due to the phasing out of the
economic stimulus programmes of the Federal Government at the end of
2010. The continuing economic recovery, however, had a positive
impact on demand for regular promotional loans. Thus, for example,
demand for the KfW Entrepreneur Loan increased from EUR 1.6 billion
to EUR 2.4 billion. Overall, the volume of commitments in the
promotional area of business start-ups and general corporate finance
decreased from EUR 4.6 billion to EUR 3.2 billion. The same applies
to the promotional area of environmental protection, in which
commitments totalled EUR 1.9 billion (EUR 2.6 billion). The reduction
in this area is mainly due to the expiration of the complementary
programme for renewable energies, which was also a component of the
Federal Government's economic stimulus programmes.

In the business area KfW Privatkundenbank, the volume of
commitments was EUR 4.5 billion, slightly below the level of the
first quarter of 2010 (EUR 4.6 billion). The continuing high demand
under the Energy-efficient Construction programme, which reached EUR
1.0 billion (EUR 0.9 billion) was another positive result. The volume
of commitments in education finance increased to EUR 478 million (EUR
441 million), with the KfW Student Loan again taking the biggest
share.

In the business area KfW Kommunalbank, the volume of commitments
increased from EUR 3.7 billion to EUR 9 billion. Infrastructure
finance increased significantly by 72% to EUR 1.1 billion (EUR 0.6
million). After the Investment Offensive Infrastructure (a component
of the Federal Government's Economic Stimulus Package I) expired in
December 2010, demand for promotional loans for municipal and social
infrastructure, with interest rates reduced from KfW's own funds,
increased again. In the ongoing year, the agreements under global
loan business for general refinancing were concluded earlier than in
the previous year.

In the business area of export and project finance, which KfW
IPEX-Bank handles within KfW Bankengruppe, new business commitments
totalled EUR 2.8 billion (EUR 1.3 billion).

This increase was mainly due to the fact that transactions
initiated in the previous year were deferred to the new year. The
first quarter was characterised in particular by a high volume of
commitments in the aviation and railroad transport sectors.

In the business area promotion of developing and transition
countries, KfW Entwicklungsbank committed promotional funds of EUR
0.7 billion in the first quarter of 2011. The financing volume thus
exceeded the previous year's level of EUR 0.6 billion. In addition to
the funds from the federal budget, KfW raised additional funds
totalling EUR 445 million. DEG committed a total of EUR 136 million
(EUR 104 million). The financial sector accounted for a major portion
of new commitments, and the regional focus was on Latin America.

In the securitisation market, the moderate recovery that set in
last year is continuing. In the first quarter, KfW participated with
EUR 0.1 billion in a securitisation of German leasing receivables. In
2011, KfW will mainly support SME and leasing transactions to
strengthen the financial basis of small and medium-sized enterprises
as the economy recovers.

In the first quarter of 2011, KfW raised long-term funds for the
equivalent of EUR 26.8 billion in the international capital markets.
Large-volume benchmark bonds (in euros or US dollars), which
accounted for 59% of the funding volume, made a significant
contribution to this funding result. Overall, bonds in ten different
currencies were successfully placed with investors in and outside
Germany under 120 individual transactions. Adding to the stable and
reliable investor demand from Europe (including Germany),
non-European central banks also significantly increased their
investment in KfW bonds again.

* Explanation of consolidated profit before IFRS effects from
hedging: Under IFRS, derivatives must be recognised at fair value in
the balance sheet even if they are not used for trading, as in the
case of KfW, but to hedge interest and currency risks. The opposing
valuation effects of the underlying on-balance transactions thus
hedged can be reported only inadequately under IFRS and therefore
lead to economically inappropriate temporary earnings effects in
KfW's income situation. These effects offset each other in total in
the course of the overall maturity of the hedged items.

Pressekontakt:
KfW, Palmengartenstraße 5-9, 60325 Frankfurt
Kommunikation (KOM)
Tel. 069 7431-4400, Fax: 069 7431-3266,
E-Mail: presse@kfw.de, Internet: www.kfw.de