Successful financial year 2017 boosts KfW promotion

Frankfurt (ots) -

- KfW promotional volume reaches EUR 76.5 billion
- Consolidated profit of EUR 1.4 billion
- Slight decline in total assets to EUR 472.3 billion

KfW Group slightly scaled back its 2017 promotional business as
planned, recording a total volume of EUR 76.5 billion (2016: EUR 81.0
billion, -6%). Given the strong economic performance and the
sustained positive financing environment for commercial and private
investors, KfW decreased its domestic promotional business to EUR
51.8 billion (2016: EUR 55.1 billion, -6%). Activities focused on
innovation, start-ups and business energy efficiency, all of which
recorded a significant increase. International financing with a total
business volume of EUR 23.5 billion (2016: EUR 24.9 billion, -6%) was
marked by a considerable increase in commitments for Financial
Cooperation with developing countries and emerging economies (EUR 8.2
billion; 2016: EUR 7.3 billion, +12%). Export and project finance
achieved a business volume of EUR 13.8 billion (2016: EUR 16.1
billion, -14%) in a highly competitive environment. Financial year
2017 was a successful one for DEG. As in 2016, it committed around
EUR 1.6 billion for financing investments by private companies in
developing countries and emerging economies (2016: EUR 1.6 billion).

KfW achieved a very satisfactory result in financial year 2017,
generating a consolidated profit of EUR 1,427 million (2016: EUR
2,002 million). As expected, consolidated profit came in below the
high prior-year figure, which had been boosted by non-recurring
effects. This performance was primarily due to a decrease in net
interest income and a lower valuation result year on year. Moreover,
the purely IFRS-related effects from the valuation of derivatives
used for hedging purposes overstated the earnings position by EUR 235
million (2016: EUR 233 million). At EUR 1,192 million consolidated
profit before IFRS effects from hedging - which is relevant to the
management of KfW - was considerably below that of the previous year
(EUR 1,769 million).

"This year's consolidated profit remains above long-term earnings
potential despite having decreased," commented Dr Günther Bräunig,
Chief Executive Officer of KfW Group. "With this result, KfW is
improving its important capital base amid what is still a difficult
interest environment and against the backdrop of increased regulatory
requirements."

At EUR 1,661 million (EUR 1,898 million), the operating result
before valuation (before promotional expense) was slightly below
expectations. Net interest income (before promotional expense) based
on continued very favourable funding conditions for KfW remained the
main source of income. At EUR 2,579 million (EUR 2,802 million), it
recorded a slight decline. Administrative expense was in line with
targets despite more stringent regulatory requirements and
investments in modernisation.

Promotional expense - largely interest rate reductions in new
business in 2017 - of EUR 213 million is again slightly below the
prior-year level (EUR 230 million) due to the limited scope for
reductions in the persistent low interest rate environment.

The effects on earnings from risk provisions for lending business
were moderate at EUR 209 million. This figure was significantly below
the standard risk costs but above the level of the previous year (EUR
-150 million). Both the need for valuation adjustments of the Export
and project finance business sector and income from recoveries of
loans previously written off decreased.

The equity investment and securities portfolio yielded a negative
result of EUR 12 million (EUR +107 million). This result is due to
DEG's equity investment result, in which the equity investment
portfolio's positive performance did not fully offset negative
effects induced by exchange rates.

The purely IFRS-induced effects from the valuation of derivatives
which are used exclusively for hedging purposes in risk positions of
EUR 235 million (EUR +233 million), made a positive contribution to
the valuation result.

Total assets of EUR 472.3 billion are considerably below the level
of 31 December 2016 (EUR 507.0 billion), primarily due to
interest-rate and exchange-rate-induced fair value changes.

The regulatory capital ratios of 20.6% at year-end 2017 remain
healthy, despite the slight year-on-year decline (31 December 2016:
22.3%). As planned, KfW received an initial partial approval as of 30
June 2017 to calculate the regulatory capital ratios in accordance
with the advanced IRBA. The aim is to obtain additional approval for
other portfolio segments by 2022. The decline in capital ratios was
largely due to the transition to the regulator-approved IRBA
application. The temporary application of the more capital-intensive
credit risk standard approach to the portfolio segments not yet
approved for IRBA application, in addition to changes in valuation
methods in the domestic promotional business, were factors in the
decrease in capital ratios.

**The full press release including an overview table of the key
financial figures is available in our newsroom at
https://www.kfw.de/KfW-Group/Newsroom/

For further information:
Press Office
Sybille Bauernfeind
Phone: +49 69 7431 2038
Sybille.Bauernfeind@kfw.de

KfW Group
Palmengartenstrasse 5-9
60325 Frankfurt
GERMANY

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