KfW profit at a high level again in 2011

Frankfurt (ots) -

- Consolidated profit of EUR 2.1 billion strengthens capital base
and secures sustainable promotional capacity
- Robust economic development and excellent standing on capital
markets foster positive result

In 2011 KfW Bankengruppe committed a total financing volume of EUR
70.4 billion, which was more than the originally expected EUR 66
billion. KfW's promotional business is now returning to a path of
moderate and long-term qualitative growth after a volume of EUR 63.9
billion in 2009 and an expanded promotional volume of EUR 81.4
billion in 2010 as part of the economic stimulus programme. Almost a
third of the promotional volume in 2011 went to climate and
environmental protection.

KfW Bankengruppe successfully completed the financial year 2011
with a very good result and a consolidated profit of EUR 2.1 billion
(previous year: EUR 2.6 billion). Consolidated profit before IFRS
effects from hedging* relevant for the management of KfW is EUR 1.9
billion, below the record result of the previous year. Overall the
consolidated profit is the second best profit in the history of KfW.

"KfW can look back on a very good 2011. The robust economy in
Germany combined with the good financing opportunities provided very
favourable conditions. As expected the profit is below that of the
exceptional year 2010, however significantly above long-term
expectations and the average historical earnings level", said the
Chief Executive Officer of KfW Bankengruppe, Dr Ulrich Schröder, on
the occasion of the press conference on annual results held Wednesday
in Frankfurt am Main. "With the consolidated profit there was a
sustained improvement in the capital base in 2011, which helps secure
KfW's promotional capacities for the long-term and prepare for
stricter Basel III capital requirements."

The operating result before valuation was EUR 1,869 million (EUR
2,302 million) and thereby once again above the sustainable earnings
potential. Despite this decline, net interest income as the main
source of income for KfW Bankengruppe remained high with EUR 2,399
million (EUR 2,752 million) and was decisive for this very good
result. As in previous years, KfW benefited from good financing
opportunities resulting from its first-class credit rating and the
generally favourable interest rate environment with very low
short-term rates. At EUR 557 million, the interest rate reductions
granted in the promotional lending business remained at the same
elevated level as the previous year (EUR 558 million).

The risk situation has also developed encouragingly in 2011. This
is due in particular to Germany's robust economic situation. Risk
provisions for lending business were reduced by EUR 185 million (EUR
424 million in income) while continuing a conservative risk policy.
In particular, collective impairments for latent risks were reversed.
These impairments were recognised to account primarily for those
sectors and countries that were particularly hard-hit by the
recession.

The negative result from the equity investment and securities
portfolio amounting to EUR -201 million (EUR 270 million in income)
is primarily due to charges from Greek government bonds, with a
nominal volume of EUR 251 million, which were written down by EUR 183
million to their market value (at prices as at 31 December of an
average 27%).

The purely IFRS-related effects from the valuation of derivatives
used for hedging purposes amounted to EUR 167 million (expenses of
EUR 431 million), improving the valuation result. This was impacted
particularly by reversal effects from the previous years and the
development of interest rates in 2011.

KfW continued its - also in comparison with other banks -
conservative valuation policy in the financial statements for 2011.

The consolidated total assets increased considerably by EUR 53.1
billion to EUR 494.8 billion. The increase amounting to EUR 29.5
billion is primarily attributable to market value changes in
derivatives used for hedging purposes and to increased liquidity
maintenance. Lending business led to an increase in the balance-sheet
total of EUR 20.1 billion. The core business of KfW accounted for
only EUR 10.9 billion of this, while loan disbursements to Greece
under the special mandate by the Federal Government made up EUR 9.2
billion.

The positive development of results led to significantly improved
regulatory capital ratios. With a Tier 1 ratio of 15.4% (12.4%), KfW
is well prepared to meet the requirements under Basel III.

*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.

***The complete key financial figures of the KfW Group could you
find on our homepage www.kfw.de/press.***

Pressekontakt:
KfW, Palmengartenstraße 5-9, 60325 Frankfurt
Kommunikation (KOM), Eske Ennen,
Tel. 069 7431-9766, Fax: 069 7431-3266,
E-Mail: eske.ennen@kfw.de, Internet: www.kfw.de/newsroom