Third quarter 2024: Private Clients increasingly focus on energy efficiency and renewables

• New commitment volume in the Private Clients department increases above previous year’s level
• Roadmap consistently implemented: Heating system replacement is open to all private and commercial applicant groups – around 144,000 commitments with a commitment volume of EUR 2.0 billion as of 31 October
• KfW IPEX-Bank continues very good year in supporting the transformation of its costumers
• Solid result of EUR 1.3 billion
• Wintels: “Strong financial position is important for effectively supporting the economy and society”

Frankfurt am Main – The climate transition is becoming more important for households in Germany, as demonstrated by KfW Group’s new promotional figures. In the Private Clients segment, the volume of new commitments at the end of September was around EUR 15.3 billion, about EUR 3 billion above the prior-year figure (01-09/2023: EUR 12.3 billion). The increase was largely driven by higher new commitments amounting to EUR 9.5 billion in the priority area of energy efficiency and renewable energies (01-09/2023: EUR 7.5 billion).

Stefan Wintels, Chief Executive Officer of KfW:

“Even under challenging conditions, KfW supports private individuals, companies and municipalities in their sustainable transformation with its programmes and financing. The high demand from private clients for financing for energy efficiency and renewables is remarkable. The public are on board with the energy transition.”

KfW Group closed the first three quarters of 2024 with consolidated profit of EUR 1,284 million. This significantly exceeded expectations, and the previous year by EUR 60 million.

“Our consolidated earnings show a positive trend. This is important, as a strong financial position is essential for us to continue supporting the economy and society effectively in the future,”

said Wintels.

However, KfW Group’s overall promotional business volume fell to EUR 53.9 billion in the first nine months of 2024 (01-09/2023: EUR 80.8 billion). The decrease was particularly evident in domestic promotion: Here, the commitment volume as of 30 September was EUR 31.0 billion – compared to EUR 57.9 billion in 2023. The decisive factors were the discontinuation of special programmes such as emergency aid and the price brake for gas and heat (01-09/2023: EUR 10.8 billion), and absence of special financing in the energy sector as of 30 September 2024 (01-09/2023: EUR 11.5 billion).

Demand for financing for commercial and municipal companies was affected by external factors: on the one hand, the weak economic situation, and on the other, the persistently high EU reference rate (until 30/09/2024: 5.11% in the best price class A). This has resulted in less attractive conditions in the state aid-free programmes. By contrast, the building subsidy programmes again recorded increased demand in the third quarter, particularly Climate-friendly Construction, Federal Funding for Energy-efficient Buildings including heating system replacement, and the home ownership programme.

KfW IPEX-Bank posted further growth in export and project financing. At EUR 19.2 billion, it achieved a volume almost as high as in the previous year (01-09/2023: EUR 20.7 billion).

Promotion of development cooperation grew to EUR 4 billion (01-09/2023: EUR 3 billion). Of this, KfW Development Bank committed a pleasing EUR 2.8 billion (01-09/2023: EUR 2.1 billion). At EUR 1.2 billion, DEG's commitments recorded a year-on-year increase of around 40% (01-09/2023: EUR 0.9 billion).

KfW’s profit of EUR 1,284 million was based on a continued strong operating result. At EUR 1,440 million (09/2023: EUR 1,320 million), it came in significantly above the previous year’s level and benefited from an increased interest income. Higher income from interest on own funds and from the lending business in the export and project finance business sector contributed to the growth in net interest income. Net interest income (before promotional expense) amounted to EUR 2,152 million (09/2023: EUR 1,978 million) and remained the group’s main source of income. At EUR 477 million, net commission income (before promotional expense) exceeded the previous year’s figure of EUR 445 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 1,190 million. This was primarily due to inflation and the implementation of new promotional programmes (09/2023: EUR 1,102 million).

Promotional expense in domestic business – primarily interest rate reductions for new business – amounted to EUR 279 million. It thus significantly exceeded the prior-year figure (09/2023: EUR 261 million). In the environment of high interest rates, interest rate reductions continue to be possible to a greater extent than in the previous year. However, the high level of the EU reference rates severely limits the scope in state aid-free commercial promotional programmes.

The positive risk provision result in lending business totalled EUR 129 million (09/2023: EUR 165 million) and resulted in particular from reversals of general loan loss provisions – mainly due to the continued very good risk situation in KfW Group’s credit book, as well as to methodological developments.

The valuation result from the investment portfolio of EUR -2 million (September 2023: EUR +7 million) was mainly affected by the results from the DEG and KfW Capital business sectors. At DEG, declining market valuations in Asia led to a negative valuation result, which was reinforced by the weaker US dollar. KfW Capital’s slightly positive portfolio result benefited from good performance in the German and European venture capital markets. KfW Development Bank’s investment portfolio also developed positively.

Income tax expenses of EUR 184 million (09/2023: EUR 131 million) related to current tax expenses of EUR 107 million due to the strong earnings performance of the taxable subsidiaries and to deferred tax expenses of EUR 77 million.

At EUR 551.8 billion, total assets were slightly below their level as at the end of the previous year (EUR 560.7 billion). The decline resulted in particular from a downturn in the volume of lending, mainly from to the coronavirus special programme, and from the repayment of credit lines in the’ package of measures for energy suppliers.

With a total capital ratio of 30.9% and a (common equity) tier 1 capital ratio of 30.8% (30/06/2024: both 29.9%), the regulatory capital ratios remained at a very good level. The increase in capital ratios was due mainly to the accrued comprehensive income for the first half of 2024.

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 23.9 billion as of 30 September 2024 (01- 09/2023: EUR 26.5 billion).

SME Bank

New commitments of more than EUR 8.6 billion were made at the SME Bank as of 30 September 2024 (01-09/2023: EUR 14.2 billion). The downturn compared to the prior-year period resulted in part from a generally lower demand for start-up and corporate financing, with new commitments of EUR 4.5 billion (01-09/2023: EUR 6.2 billion) due to the reluctance to invest as a result of the current economic situation. An additional reason was the decline in commitments in the area of climate change and environment, amounting to EUR 3.1 billion (01-09/2023: EUR 6.8 billion). This was due to the limited leeway in terms and conditions, which continues to result from the combination of aid requirements and the current interest rate situation.

Private Clients

In the Private Clients segment, new commitments as of 30 September at EUR 15.3 billion came in significantly above the prior-year level (01-09/2023: EUR 12.3 billion). The result was largely driven by higher new commitments in the amount of EUR 9.5 billion in the priority area of energy efficiency and renewable energies (01-09/2023: EUR 7.5 billion). With new commitments of more than EUR 4.2 billion, a significant share of this was attributable to the Climate-friendly Construction programme (01-09/2023: EUR 2.9 billion). Heating system replacement funding also enjoyed good growth. It has been offered to both private and commercial beneficiaries since 27 August 2024 with the opening of the third group of applicants. As of 31 October 2024, commitments had already been put in place here for around 144,000 grant applications with a volume of around EUR 2.0 billion.

In addition, the Residential and Housing sector significantly exceeded the prior-year level, with new commitments of more than EUR 4.6 billion (01-09/2023: EUR 3.3 billion). The decisive driver was the residential ownership programme with new commitments of EUR 3.8 billion (01-09/2023: EUR 3.2 billion). On 3 September 2024, KfW also launched the Homeownership for families – existing buildings (“Young Buys Old”) programme, which promotes the purchase of residential properties in need of renovation by families on behalf of the German Federal Government.

2. Customised Finance and Public Clients

At EUR 6.3 billion, total new commitments in the Customised Finance & Public Clients business sector were largely generated by activities from the core business in the first three quarters of 2024, in contrast to the prior-year period dominated by mandated transactions (01-09/2023: EUR 29.7 billion).

Customised Finance Corporates

In the customised corporate finance segment, no special financing in the energy sector had been carried out, which amounted to EUR 11.5 billion in the same period of the previous year. Activities from the core business operations achieved a commitment volume of EUR 331 million at the end of the quarter (01-09/2023: EUR 234 million).

Municipal and social infrastructure

The Municipal and Social Infrastructure segment also normalised, with new commitments of EUR 3.3 billion (01-09/2023: EUR 14.3 billion) after being heavily marked by disbursements from the Federal Government’s emergency aid for the price brake on gas and heat in the previous year. As off 30 September 2023, these amounted to EUR 10.8 billion alone and fell to close to EUR 700 million as of 30 September 2024. Regardless of this, the current EU reference interest rate issue presents a challenge for promotional business in state aid-free support programmes for municipal and social enterprises. Reduced commitment volumes resulting from this and also from the termination of the Energy-efficient Urban Rehabilitation programme were partially offset by increases in the municipal direct loan business. The grant product ‘Nature-based Climate Action in Municipalities’ proved popular: As of 30 September 2024, close to EUR 150 million had already been committed.

Individual financing for banks and promotional institutions of the federal states

With a business volume of EUR 2.7 billion, individual financing for banks and promotional institutions of the federal states was below the previous year’s figure of EUR 3.6 billion. This was primarily due to the reluctance of promotional institutions of the federal states to utilise general funding by KfW due to the unfavourable interest rate environment.

3. KfW Capital

Commitments in the KfW Capital business sector amounted to around EUR 812.4 million as at the third quarter of 2024 (01-09/2023: EUR 1.8 billion). The high volume of the prior-year period was due in part to the one-off commitment to the European Tech Champions Initiative of EUR 800 million and the commitment to the Deep Tech and Climate Fund (both building blocks of the Future Fund) of EUR 215 million. Under the ERP (European Recovery Programme) venture capital fund investments programme, KfW Capital committed around EUR 127 million in the first nine months of 2024 (01-09/2023: EUR 160 million). Further investment commitments of EUR 185 million were made via the components of the German Future Fund/European Investment Fund Growth Facility, whose funds are managed by KfW and KfW Capital in a fiduciary capacity, the ERP Future Fund Growth Facility, the Green Transition Facility, and the Emerging Manager Facility. In addition, KfW Capital made a one-off provision of EUR 500 million from funds from the Future Fund for the newly introduced HTGF Opportunity Fund in June 2024. KfW Capital’s investment pipeline is well stocked until the end of the year.

As an investment advisor, KfW Capital is also active in the Growth Fund Germany, one of the largest venture capital umbrella funds in Europe, with a total volume of EUR 1 billion. The fund, which had its final closing in November 2023, was able to raise substantial private capital (comprising two-thirds of the total). In the first nine months of 2024, the umbrella fund invested EUR 252 million (EUR 542 million in total) in venture capital funds.

4. KfW IPEX-Bank

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 continued to have a very good year: at EUR 19.2 billion at the end of the third quarter, its new commitments were only slightly below the exceptionally high level of the previous year (01-09/2023: EUR 20.7 billion). All sector departments contributed to new business. The Mobility business area, which bundles the segments of rail transport, maritime industries, and aviation, recorded more than one third of the total commitments of EUR 6.9 billion (01-09/2023: EUR 5.4 billion). For example, financing was provided in the third quarter for the S-Bahn fleet in the Rhineland, new electric multiple units in Austria, services related to company bicycles as part of Germany's mobility transition, as well as a flagship solar and battery storage project in Uzbekistan and energy-efficient data centres in the USA and Australia, through which KfW IPEX-Bank is supporting the transformation process worldwide.

5. Promotion of developing countries and emerging economies

KfW Development Bank

The KfW Development Bank business sector committed a total of EUR 2.8 billion in new financing (01-09/2023: EUR 2.1 billion). The focus is on overcoming global challenges: More than half of the financing committed, EUR 1.5 billion, contributes to the fight against climate change. The largest single commitment in the third quarter was a loan to Indonesia to reduce marine litter amounting to EUR 400 million.

DEG

DEG’s new business continued its dynamic growth in the third quarter of 2024. New commitments from own funds for investments by private companies in developing countries and emerging economies reached a record high of around EUR 1.2 billion. As a result, they were around 40 percent above the previous year’s figure (01-09/2023: EUR 856 million). Regional focal points of DEG commitments in the form of loans and investments were Latin America at EUR 349 million and Africa and the Middle East at EUR 302 million, followed by commitments for Asia, Europe and supra-regional projects. DEG invested EUR 100 million in African pharmaceutical production. To shape a sustainable and economically successful transformation, DEG continues to focus on high-impact projects and advises German and international companies on their transformation processes.

6. Financial markets

KfW raised funds of around EUR 68 billion on the international capital markets to fund its promotional business during the period from January to September 2024 (01-09/2023: EUR 75 billion). The majority (around EUR 45 billion) of the planned funding volume of EUR 80 billion for 2024 as a whole was procured by issuing large-volume benchmark bonds in euros and US dollars. Net revenue amounting to EUR 11 billion was attributable to the issue of green bonds, a strategically important funding instrument for KfW. In addition to the euro, which contributed 64% to capital market funding, the US dollar also made an important contribution at 22%. In total, KfW issued bonds in eight currencies, including British pounds (9%) and Australian dollars (2%).

In recent months, KfW has implemented several digitalisation projects to automate its financial market activities, including the issue of several digital bonds as fixed-income central register securities via the D7 digital post-trade platform of the German Stock Exchange and the issue of two blockchain-based bonds in July and August. With these successful pilot transactions, the bank achieved important milestones on its digitalisation journey, which also serve to strengthen Germany as a financial centre and help further improve competitiveness.

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.

An overview of the business and promotional figures is available in table form at:
Business and Promotional Figures | KfW

KfW Annual Report online:
Reporting Portal | KfW