First quarter of 2018: good start to KfW's new promotional year

Frankfurt/Main (ots) -

- Total promotional business volume of EUR 18.9 billion
- Domestic promotion up to EUR 14.9 billion
- High level of interest in SME financing continues
- Commitments at KfW IPEX-Bank increase to EUR 3.3 billion
- Consolidated profit of EUR 228 million

In the first three months of 2018, the promotional business of KfW
Group reached a total volume of EUR 18.9 billion (prior-year period:
EUR 18.2 billion). As at the first quarter, domestic promotion
achieved a commitment volume of EUR 14.9 billion and is thus
consistent with the high level last year (EUR 14.6 billion). Strong
demand for SME financing in particular made a significant
contribution to this development. New commitments for international
business rose to EUR 3.8 billion (EUR 3.3 billion), with KfW
IPEX-Bank making a key contribution of EUR 3.3 billion (EUR 2.1
billion). Two large-volume individual contracts resulted in this
increase in commitments. KfW Development Bank ended the first quarter
EUR 0.4 billion below the previous year's level, which had been
marked by one-off effects. In the first quarter, DEG committed
financing amounting to EUR 0.1 billion. For all of 2018, KfW
Development Bank and DEG once again anticipate a financing volume
similar to the previous year's high level.

"The first quarter is a strong start to the new promotional year.
The demand for KfW promotion is reflecting the solid economic growth
in Germany," says Dr Günther Bräunig, Chief Executive Officer of KfW
Group.

At EUR 228 million, consolidated profit was lower compared to the
previous year (EUR 421 million), as anticipated. Developments in the
first quarter were slightly above plan due to the low loan loss
provisioning requirements typical for this period of the year.
Consolidated profit before IFRS effects from hedging pertinent to
KfW's management amounted to EUR 238 million previous year: EUR 434
million) and was only slightly negatively impacted by EUR 11 million
from the valuation of derivatives.

"KfW's earnings position in the first quarter of 2018 developed on
a lower level as expected, but still exceeded our expectations," says
Dr Bräunig, Chief Executive Officer of KfW Group.

The operating result before valuation (before promotional expense)
was EUR 374 million (EUR 500). Net interest income (before
promotional expense) remained the main source of KfW's income at EUR
600 million (EUR 709 million). The decline in interest income is due
in particular to lower prepayment fees, and to changes in the
recognition of fees paid by the Federal Government for the management
of promotional programmes which following a contract amendment have
been recognised under Commission income instead of Net interest
income since the second half of 2017. Net interest income had still
be-nefited from these fees in Q1 2017 with income of EUR 28 million.

Promotional expense - largely interest rate reductions in new
business - of EUR 84 million is slightly above the prior-year level
(EUR 63 million) despite the continuing limited scope for reductions
in the current interest rate environment. This development is largely
due to the high commitment volume in the ERP Digitalisation and
Innovation programme.

At EUR 0, risk provisions for lending business were once again at
a plea-singly low level (previous year: charge of EUR 2 million). The
group's equity investment and securities portfolio yielded a negative
result of EUR 11 million (EUR +19 million) due to the weaker
development of the US dollar.

The interim financial statements as of 31 March 2018 were prepared
applying the new IFRS 9 for the first time. The first-time
application effect due in particular to the new rules on risk
provisions and the categorisation of securities resulted in a
reduction in equity of EUR 218 million at the beginning of the year.
For the first quarter of 2018, a negative effect of EUR 44 million
resulted from the application of the new reporting standards to the
earning's position, which is recognised in the valuation result.

The group's regulatory capital ratios remain healthy despite the
effects of the transition to IFRS 9. The total capital ratio amounted
to 20.8% (31 December 2017: 20.6%).

Details on the business sectors' promotional activities

At the end of the first quarter, KfW repositioned its domestic
promotional business, structuring it into two new business sectors:
"Mittelstandsbank & Private Kunden ("SME Bank & Private Clients") and
"Individualfinanzierung & Öffentliche Kunden" ("Customised Finance &
Public Clients"). This was undertaken to align KfW's promotion more
consistently with the needs of its customers.

The SME Bank & Private Clients business sector generated a
promotional volume of EUR 12.7 billion (EUR 12.2 billion) in the
first quarter.

The SME Bank segment, at EUR 6.3 billion, was significantly above
the previous year's level (EUR 5.6 billion) in the first quarter of
2018. This was mainly due to the development of the energy transition
and innovation priority areas.

With a promotional business volume of EUR 2.4 billion, the
innovation priority area reported a significantly higher figure than
in the same quarter of the previous year (EUR 96 million); this can
be primarily attributed to the ERP Digitalisation and Innovation
Loan. Demand for the programme, which kicked off to a very successful
start in 2017, increased again significantly in the first months of
2018. To be able to continue to make this important financing offer
available, structural changes to the programme are currently being
made.

The promotional business volume in the start-ups and corporate
investments priority areas totalled EUR 1.9 billion (EUR 2.7
billion). The reason for this is the decline in the KfW Entrepreneur
Loan (EUR 0.6 billion; previous year: EUR 1.6 billion). The area of
start-up financing did particularly well at EUR 1.1 billion,
surpassing the already very strong figure from the previous year (EUR
1.0 billion).

In the energy efficiency and renewables priority area, the
commercial KfW Energy Efficiency programmes in particular have
experienced high demand in recent months. The Energy-efficient
Construction and Refurbishment part of the programme in particular,
with a promotional volume of EUR 1.0 billion, was up on the same
quarter of the previous year (EUR 0.9 billion). At EUR 0.6 billion,
the commitments in KfW's Renewable Energy Programme, on the other
hand, fell short of the record figures from the previous year (EUR
1.4 billion).

The Private Clients segment generated a promotional business
volume of EUR 6.3 billion (EUR 6.6 billion) at the end of the
quarter. A high level of interest in real estate finance was
generated by the positive underlying conditions, which were in turn
the result of the strong conditions in the construction sector and
the favourable interest climate.

A significant contribution was made by the energy efficiency and
renewables priority area in this segment, too, with a promotional
business volume of EUR 4.7 billion. Here, especially demand for the
Energy-efficient Construction and Refurbishment programme remained
high.

The previous year's level (EUR 1.4 billion) was almost maintained
in the housing & living priority area with a promotional business
volume of EUR 1.2 billion. The education priority area also recorded
steady development with a result of EUR 0.5 billion at the end of the
quarter (EUR 0.5 billion).

The Customised Finance & Public Clients business sector started
the financial year with a commitment volume of EUR 2.2 billion,
putting new business EUR 0.2 billion below the comparable figure for
the previous year.

At EUR 0.7 billion, the promotional business volume of municipal
and social infrastructure financing declined slightly year-on-year
(EUR 1.1 billion), which reflects, among other things, the improved
financial situation of the municipalities. Specifically, basic
funding made a major contribution of EUR 0.5 billion to the total
promotional business volume. In addition, funding for
energy-efficient construction and refurbishment at municipal level
accounted for a significant share at EUR 0.2 billion.

With a contract volume of EUR 1.5 billion, individual financing
for banks was up on the previous year (EUR 1.3 billion). This
development was driven in particular by brisk demand for global loans
for leasing investments and refinancing of export credit loans
covered by federal guarantees.

Commitments of EUR 21 million in customised financing for
corporates were at a low level in the first quarter, which is typical
for the time of year. New commitments of EUR 17 million were made
within the ERP venture capital fund investments. In future, the
equity financing business, which, among other things, also includes
the ERP venture capital fund investments, will be spun off into a
subsidiary.

KfW IPEX-Bank, who is responsible for the Export and project
finance business sector within the group, achieved a total volume of
new commitments of EUR 3.3 billion (EUR 2.1 billion) in the first
quarter of 2018. New commitments focused on the business segments
Maritime Industry (EUR 0.9 billion; prior-year period EUR 0.3
billion), Basic Industries (EUR 0.4 billion, prior-year period EUR
0.02 billion) and Financial Institutions and Trade Finance (EUR 0.4
billion; prior-year period EUR 0.4 billion).

The commitment volume for the Promotion of developing countries
and emerging economies business sector totalled EUR 0.5 billion (EUR
1.2 billion). As of the first quarter of 2018, KfW Development Bank
had committed EUR 0.4 billion for projects in developing countries
and emerging economies and is thus below the previous year's figure
(EUR 1.1 billion). At that time, two large projects in India had
contributed to the unusually high commitment volume at the beginning
of the year. Over 80% of commitments went to countries in Africa and
the Middle East. However, the business area is expecting to achieve a
financing volume similar to the previous year for 2018 as a whole.
For 2018, DEG expects to be in demand as a development financier and
consultant for private companies in persistently challenging market
conditions. In the first quarter, it committed EUR 54 million (EUR
155 million) to financing corporate investments in emerging and
developing countries. Current requests for financing point to more
dynamic development in the second quarter.

Investments totalling roughly EUR 185 million (EUR 270 million)
were made in the Financial markets business sector in the first
quarter of 2018. Some EUR 117 million of this (EUR 170 million) were
accounted for by investments in securitisation transactions in the
area of capital market-oriented support for SMEs. For the green bond
portfolio KfW invested roughly EUR 68 million (EUR 100 million) in
two securities to promote climate action and environmental protection
projects.

In the first quarter of 2018, KfW raised EUR 23.3 billion on
international capital markets to fund its promotional business and
had a successful start to its refinancing activities. KfW plans a
refinancing volume of EUR 70 - 75 billion for all of 2018.

** The full press release including an overview table of the key
financial figures can be found here:
https://www.kfw.de/KfW-Group/Newsroom/

Pressekontakt:
KfW, Palmengartenstr. 5 - 9, 60325 Frankfurt
Communication, Sybille Bauernfeind
Phone: +49 (0)69 7431 4683, Fax: +49 (0)69 7431 3266,
E-Mail: Sybille.Bauernfeind@kfw.de, Internet: www.kfw.de

Original-Content von: KfW, übermittelt durch news aktuell