KfW’s funding team is walking the talk

• Central register securities to become the standard for the issuance of new KfW EUR benchmark bonds from 2025
• EUR 65 to 70 billion to be raised in the capital market in 2025
• Approx. EUR 10 billion of this will be ‘Green Bonds – Made by KfW’

Today KfW presented its plans and focus areas for the funding of its business activities at its annual capital market press conference. On the basis of KfW’s group business sector planning, and taking into consideration its comfortable liquidity position, KfW plans to raise EUR 65 to 70 billion in the capital market next year, of which some EUR 10 billion is to be raised via green bonds. It owes its good liquidity position at the end of the year to, among other things, lower than expected demand for promotional loans in the current year as a result of the economic slowdown and weaker forecasts for the year 2025. In light of Germany’s economic slowdown and political uncertainties at home and abroad, KfW expects subdued loan demand. As always, KfW will conduct a reassessment of its liquidity needs in the middle of the year and communicate any necessary revision.

“We have a tried and tested funding strategy and abundant experience to efficiently navigate through the expected challenges posed by geopolitical and economic risks. Our ability to identify optimal windows for issuances, however, will probably become more important than ever before”,

said Tim Armbruster, Treasurer of KfW Group, with confidence. What investors need most of all is liquidity, which KfW will provide particularly with its benchmark bonds in euros and US dollars, including, for the first time, through taps of outstanding euro benchmark bonds to as much as EUR 8 billion.

KfW is placing a particular focus on the digitalisation of its issuance activities. It has already set milestones in the issuance of central register and crypto securities pursuant to the German Electronic Securities Act (eWpG) and is planning further digitalisation activities in 2025.

With regard to crypto securities, KfW wants to continue its learning journey in 2025 and build on the achievements of the past year with further issuances. The bank also intends to adopt the investor perspective and invest in corresponding bonds from other issuers. Regarding central register securities, however, which have already proven themselves in practice through several successful transactions, the focus will lie on upscaling and transferring them into regular operation.

The integration of new technologies into the promotional bank’s trading processes will become a further focal area of the coming year.

“The aim of all digitalisation measures that we have already implemented and will initiate in the future is to achieve a fully automated issuance process that reduces media discontinuities and interaction effort”,

explained the Treasurer. For KfW, the scalability of the instruments to be developed is the main criterion in the digitalisation of its processes as this allows the existing process excellence to not only be maintained but also expanded and strengthened in the future.

“Our pioneering approach underscores our attractiveness as an employer, which is important especially against the backdrop of demographic change. It also strengthens Germany’s position as a financial hub. But we want to convince not just financial market actors to go digital, but the real economy too, as this is essential for safeguarding economic competitiveness”,

added Armbruster.

Funding in 2024: EUR 78.1 billion achieved as at end of November

KfW completed its funding activities for this year already in November. As of 30 November 2024, Germany’s largest promotional bank generated net proceeds in the equivalent of around EUR 78.1 billion in international capital markets through the issuance of more than 140 bonds in euros and a total of 7 foreign currencies. Among them were 9 transactions of ‘Green Bonds – Made by KfW’ in 7 currencies. With a EUR 12.2 billion equivalent, their volume is within the target range of 10 to 13 billion euros set by KfW at the beginning of the year.

“I am most satisfied with this year’s international capital market activities, which include the privatisation transactions of Deutsche Post AG and Telekom AG. We have guided our funding activities optimally through phases of great uncertainty and built up a very comfortable liquidity position at the end of the year. We have also taken successful and innovative steps in the digitalisation of our funding operations”,

explained Armbruster.

The market environment was characterised by many political uncertainties again in 2024. Central banks’ interest rate decisions also created uncertainty with regard to the choice of windows for issuance and market participants’ price expectations. The combination of expanding bond offerings within the corresponding (SSA) market segment and decreasing demand from the ECB as a result of the winding-down of the purchase programme will lead to a new balance.

With a share of 62%, the euro is the strong anchor currency of KfW’s funding activities (previous year: 54%). The issue volume of approx. EUR 48 billion makes KfW the second largest EUR issuer in the SSA segment (after the EU). Funding in US dollars did not provide any major funding advantages this year for issuers who swapped USD issue proceeds to euros, particularly because KfW was able to fund its operations in euros at very favourable terms. The greenback therefore had a slightly lower share of 25% (previous year: 29%) in KfW’s funding, with a nominal volume of USD 21 billion. The currencies contributing most to our currency diversification in 2024 were the pound sterling (around GBP 5.6 billion) and the Australian dollar (approx. AUD 2.7 billion), making KfW the largest GBP issuer after the UK Government and a top 3 kangaroo issuer.

KfW celebrates 10-year anniversary in green segment

This year, KfW is celebrating its 10-year anniversary of market entry with its ‘Green Bonds – Made by KfW’. It has completed 136 transactions with an issue volume of EUR 82.8 billion since 2014. “Our particular strength is that we offer large-volume, liquid green bonds in euros. Green euro bonds from KfW are currently circulating in a volume of EUR 46 billion, and we offer a liquid curve with long maturities, which institutional investors value in particular”, explained Petra Wehlert, Head of Capital Markets at KfW Group.

The project category ‘biodiversity’, which was newly added to the ‘Green Bond Framework’ in 2024, was also met with a very good response from international investors. Besides, for the first time, international financing operations can also be attributed to KfW Green Bonds. First international biodiversity projects have already been identified here in the KfW Development Bank business sector.

“Our Green Bonds thus continue to be an important instrument with which we sensitise and win over capital market participants for sustainability and the protection of biodiversity”,

added Wehlert.

Digitalisation: KfW’s funding team is walking the talk

KfW was particularly busy digitalising its funding operations this year. It issued several bonds, including two euro benchmarks, as central register securities in accordance with the German Electronic Securities Act (eWpG), contributing a total volume of EUR 8.5 billion to Clearstream’s D7 post-trade platform. In this frictionless procedure scalability is now achievable, so that the central register security is to become the standard for the issuance of KfW EUR benchmark bonds from 2025.

Two blockchain-based digital bonds followed as crypto securities in accordance with the eWpG in the second half of 2024. In the first issuance in July, KfW placed special emphasis on involving as many market participants as possible, particularly investors, in order to “take them along on the learning journey”. In the second issuance in August, the focus was on the technical implementation of DLT-based central bank money using the Deutsche Bundesbank’s Trigger Solution during the ECB exploratory work.

“We are capitalising on our market position and relevance in order to take the lead as a driver of innovation and contribute to shaping promising trends of the future”,

said Armbruster, summarising the experience so far gathered. KfW sees particular upscaling potential in the central bank eligibility of blockchain-based digital securities and in establishing secondary market liquidity of these securities.

Service:

Please find more detailed facts and figures on KfW’s funding activities in the capital market as of 30 November 2024 here(PDF, 2 MB, non-accessible) .