KfW promotional business volume in the first half year of 2024:

• KfW is providing EUR 34.7 billion in domestic and international funding at the level of the pre-crisis years
• Significant interest among private customers in financing for energy efficiency measures and renewable energies
• New heating subsidy as of 31 July with 77,600 commitments amounting to EUR 1.1 billion
• Very encouraging profit before tax of EUR 1.1 billion at the mid-year mark
• Tier 1 capital ratio remains at a very robust level of 29.9%

Frankfurt – In the first half of 2024, KfW Group recorded a promotional business volume/new business totalling EUR 34.7 billion (first half 2023: EUR 58.7 billion). This corresponds to the level of the pre-crisis years (first half 2019: EUR 33.6 billion) and reflects the normalisation of the ordinary promotional business following the coronavirus pandemic and energy aid from 2020 to 2023, indicating that the knock-on effects of the years of crisis are over.

The normalisation effects were particularly evident in domestic promotion (first half 2024: EUR 20.6 billion; first half 2023: EUR 42.8 billion; first half 2019: EUR 20.8 billion). The downturn was largely due to the discontinuation of special programmes such as emergency aid, the price brake on gas and heat (first half 2023: EUR 7.0 billion) and the discontinuation of special financing in the energy sector (first half 2023: EUR 11.5 billion).

Demand for corporate financing also declined sharply, partly due to EU aid schemes. The decisive factor here is the high EU reference rate, which is currently 5.11% in the best price class. EU state aid regulations oblige KfW not to offer interest conditions below the EU reference rate in its on-lending programmes that are free of aid. The energy efficiency and renewable energy programmes for private customers, on the other hand, experienced increased demand.

“The healthy demand from private customers for climate-friendly new buildings and heating subsidies is especially gratifying. Our consolidated result is developing very positively. This is important in view of the major challenges associated with the transformation of the economy and society. Our strong financial strength is a prerequisite for acting reliably as a bank committed to responsibility,”

stated Stefan Wintels, Chief Executive Officer of KfW, in Frankfurt am Main on Wednesday.

KfW IPEX-Bank continued its very strong start to the year in export and project finance. At EUR 12.3 billion, it almost reached the very high commitment volume of the previous year (first half 2023: EUR 14.4 billion; first half 2019: EUR 10.0 billion).

At EUR 1.4 billion, commitments at KfW Development Bank were roughly on a par with the previous year (first half 2023: EUR 1.5 billion; first half 2019: EUR 1.7 billion). As in the previous year, DEG committed around EUR 0.6 billion in financing (first half 2023: EUR 0.6 billion; first half 2019: EUR 0.4 billion).

KfW Group closed the first half of 2024 with profit after tax of EUR 932 million, exceeding expectations and the previous year’s figure (first half 2023: EUR 885 million). This result was based on a very strong operating result (EUR 965 million) and also benefited from a positive valuation result (EUR 286 million). Promotional expense and taxes impacted the half-year result with a total of EUR 320 million.

At EUR 965 million, the operating result before valuation (before promotional expense) significantly exceeded the prior-year figure (first half 2023: EUR 829 million) and benefited from a sharply rising interest result. Higher income from interest on own funds and from the lending business in the Export and project finance business sector contributed to the positive development of net interest income. Net interest income (before promotional expense) amounted to EUR 1,438 million (first half 2023: EUR 1,256 million) and remained the group’s main source of income. At EUR 314 million, net commission income (before promotional expense) exceeded the previous year’s figure of EUR 294 million and was generated in particular from the remuneration of promotional activities on behalf of the Federal Government. Administrative expense (before promotional expense) exceeded the previous year’s level, reaching EUR 786 million. This was primarily due to inflation and the implementation of new promotional programmes (first half 2023: EUR 721 million).

Promotional expense in domestic business – primarily interest rate reductions for new business – amounted to EUR 181 million. It thus significantly exceeded the previous year’s figure (first half 2023: EUR 141 million). In the environment of rising interest rates, interest rate reductions continue to be possible to a greater extent. However, the high level of the EU reference rates severely limits the scope at the present time in some commercial promotional programmes.

Following the reversal of risk provisions for lending business - mainly due to further methodological developments in the risk models and – in the case of non-performing loans – the ongoing very good risk situation in KfW Group’s loan portfolio, the group recorded a positive risk provision result in lending business of EUR 155 million (first half 2023: EUR 109 million).

The valuation result from the investment portfolio ( EUR 118 million; first half 2023: EUR -30 million) is marked by the DEG and KfW Capital business sectors. KfW Capital’s portfolio result benefits from a positive performance in the German and European venture capital market, particularly in the life sciences sector. For DEG, the positive effects from the translation of foreign currency exposures due to the strong US dollar contributed primarily to the positive result from equity investments. KfW Development Bank’s investment portfolio also developed positively.

Income taxes of EUR 139 million (first half 2023: EUR 83 million) comprise current tax expenses of EUR 70 million due to the strong earnings development of the taxable subsidiaries, and deferred tax expenses of EUR 69 million.

At EUR 558.8 billion, total assets were at approximately the same level as at the end of 2023 (EUR 560.7 billion).

With a total capital ratio and a (common equity) tier 1 capital ratio of 29.9% (31 March 2024: 28.6% and 28.5%), the regulatory capital ratios remain at a very good level. The increase in equity ratios is primarily due to rating improvements of business partners in the on-lending business and adjustments to the risk measurement methods.

Details on the business sectors’ promotional activities

1. SME Bank and Private Clients

In the SME Bank and Private Clients business sector, the promotional business volume amounted to EUR 16.2 billion as of 30 June 2024 (first half 2023: EUR 18.0 billion).

SME Bank

New commitments of more than EUR 5.7 billion were made at the SME Bank as of 30 June 2024 (first half 2023: EUR 10.1 billion). The downturn compared to the prior-year period is primarily due to a generally lower demand for start-up and corporate financing, with new commitments of EUR 2.9 billion (first half 2023: EUR 4.0 billion) and lower commitments in the climate change and environment sector of EUR 2.2 billion (first half 2023: EUR 5.2 billion). The reason for the significant decline in demand is due in part to the reluctance to invest in light of the current economic situation, which is mainly affecting two programmes: the Climate Action Campaign for Corporates and the ERP Promotional Loan for SMEs. In addition, the high EU reference rate had a diminishing effect on demand, particularly in the Renewable Energies Standard programme.

Private Clients

At EUR 10.5 billion, new commitments in the Private Clients segment at the end of June exceeded the prior-year level (first half 2023: EUR 8.0 billion). This result was driven by higher commitments (first half 2024: EUR 6.8 billion) in the priority area of energy efficiency and renewable energies (first half 2023: EUR 5.3 billion). With new commitments of more than EUR 3.6 billion, a significant share of this was attributable to the Climate-friendly Construction programme (first half 2023: EUR 1.9 billion). The heating subsidy, which started on 27 February, should also be highlighted as a positive development. As of 31 July 2024, commitments had already been put in place for around 77,600 grant applications with a volume of around EUR 1.1 billion. Demand developed very positively in the second quarter, with around 5,000 commitments per week.

In addition, the Residential and Housing sector significantly exceeded the previous year’s level, with new commitments of more than EUR 2.8 billion (first half 2023: EUR 1.7 billion).

2. Customised Finance and Public Clients

At EUR 3.7 billion, the total volume of new commitments in the Customised Financing & Public Clients sector normalised compared to the exceptional previous year (first half 2023: EUR 23.4 billion), which was dominated by mandated transactions in the energy sector and disbursements from the gas and heat price brake.

Customised Finance Corporates

At the end of the first half of the year, the Customised Finance for Corporates segment recorded a commitment volume of around EUR 181 million, while the prior-year period with EUR 11.7 billion continued to be heavily influenced by the aforementioned special financing in the energy sector.

Municipal and social infrastructure

The volume of business for municipal and social infrastructure was significantly lower than the previous year, with new commitments of close to EUR 2.2 billion (first half 2023: EUR 9.5 billion). This development is mainly the result of the expected sharp decline in disbursements from the Federal Government’s emergency aid/price brake for gas and heat. In addition, the current EU reference rate problem makes promotional business more difficult in state aid-free promotional programmes, such as the Investment Loan for Municipal Enterprises.

Individual financing for banks and promotional institutions of the federal states

With a business volume of EUR 1.3 billion, individual financing for banks and promotional institutions of the federal states was below the previous year’s figure of just under EUR 2.2 billion. This is primarily due to the reluctance of state promotional institutions to make use of general funding by KfW due to the unfavourable interest rate environment.

3. KfW Capital

Commitments in the KfW Capital business sector amounted to approximately EUR 679 million in the first half of 2024 (first half 2023: EUR 1.4 billion). The high volume of the prior-year period was due in part to the one-off commitment to “ETCI”, the European Tech Champions Initiative (a building block of the Future Fund) of EUR 800 million and the commitment to the Deep Tech and Climate Fund (another building block of the Future Fund) of EUR 215 million. Through the ERP (European Recovery Programme) Venture Capital Fund Investments programme, KfW Capital committed around EUR 47 million in the first half of 2024 (first half 2023: EUR 107 million). Investment commitments of EUR 131.2 million were made by 30 June 2024 via the Future Fund building blocks GFF/EIF Growth Facility (German Future Fund/European Investment Fund Growth Facility), whose funds KfW/KfW Capital disburses on a fiduciary basis, and the Green Transition Facility. In addition, KfW Capital – also acting on a fiduciary basis for the German Federal Government – provided a one-off amount of EUR 500 million in funds from the Future Fund in June 2024 for the HTGF Opportunity Fund (High-Tech Start-up Opportunity Fund), which was newly launched in June. KfW Capital’s investment pipeline is well stocked.

KfW Capital also acts as an investment advisor for the "Growth Fund Germany", one of the largest venture capital umbrella funds in Europe, with a volume of EUR 1 billion. The fund, which had its final closing in November 2023, was able to raise substantial private capital. In the first half of 2024, the umbrella fund invested EUR 82 million (EUR 371 million in total) in venture capital funds.

4. KfW IPEX-Bank

The upward trend from the beginning of the year continued at KfW IPEX-Bank, which is responsible for the export and project finance business sector and provides financing to support German and European businesses in the global markets: at EUR 12.3 billion at the end of the half-year mark, its new commitments were only slightly below the exceptionally high level of the previous year (first half 2023: EUR 14.4 billion). All business sectors contributed to new business. The Mobility business area, which bundles the segments of rail transport, maritime industries and aviation, with EUR 4.9 billion recorded more than 40% of total commitments. In the second quarter, financing was provided, for example, for charging infrastructure for electric vehicles in the United Kingdom and Germany, for the production of low-carbon, high-performance batteries for e-mobility in France, and for high-speed electric propulsion trains for sustainable travel in Europe, with which KfW IPEX-Bank is supporting the transformation process.

5. Promotion of developing countries and emerging economies

KfW Development Bank

In the first half of 2024, the KfW Development Bank business sector committed EUR 1.4 billion for projects in developing countries and emerging economies (first half 2023: EUR 1.5 billion). Climate and energy projects accounted for around 65% of commitments, amounting to EUR 937 million. The Ukraine Recovery Conference in Berlin in June this year sent a clear signal of solidarity with Ukraine. On behalf of the German Federal Government and the EU, KfW Development Bank concluded contracts worth around EUR 185 million in the areas of energy, vocational training and municipal infrastructure.

DEG

At the end of the second quarter of 2024, DEG's new commitments for investments by private companies in developing countries and emerging economies reached EUR 588 million, roughly the same level as in the previous year (first half 2023: EUR 609 million). Financing commitments for companies in Latin America and Africa accounted for around one third each, followed by commitments in Europe/Caucasus and Asia. DEG was able to commit its first financing for a green hydrogen production project with a loan of USD 25 million. New financing went to providers of telecommunications services in order to expand digital services in partner countries and strengthen economic development. A good 20% of the newly committed funds in the first half of the year were intended for foreign investments by German companies.

6. Financial markets

As part of the regular review of its funding requirements at the end of the first half of the year, KfW reduced its funding target for 2024 from EUR 90 to 95 billion to EUR 80 billion. The reasons behind are the lower-than-expected funding requirement for transactions mandated by the Federal Government and, in particular, the downturn in domestic promotional business due to lower demand for corporate financing, which must be offered without state aid.

In the first half of 2024, KfW raised EUR 55.0 billion in the international capital markets (first half 2023: EUR 53.7 billion). This means it has achieved around 69% of the new funding target (EUR 80 billion). The funding share in the domestic currency, the euro, was 60% in the first six months. In addition, strategically important US dollar issues accounted for 27% of the total funding volume. In addition to the two core currencies, KfW issued bonds in five other currencies, including British pound sterling and the Australian dollar, which contributed around 8% and 3%, respectively, to the funding mix. The share of green bonds in the total issue volume was 13%, or EUR 7.2 billion.

_{1) The capital ratios stated take into account the eligible interim results according to Art. 26 (2) of the Capital Requirements Regulation, which deviate from the respective annual results in accordance with IFRS.}

A tabular overview of the business and promotional figures is available at: www.kfw.de/geschaeftszahlen

KfW Annual Report online: www.kfw.de/berichtsportal