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Favourable developments in costs and profitability make extended promotional activities possible

9 May 2006

  • First quarter 2006: Continuing increased demand for promotional loans; issue activities at high level; operating result and net interest income once again slightly higher than the previous year
  • Business year 2005: New commitments for special loans almost 30 % higher than the previous year, portfolio of medium and long-term promotional loans grew by 6.2 %; cost-income ratio decreased to 17.1 % together with improved profitability


Details of Rentenbank's outstanding A$ issues:

Dr. h.c. Uwe Zimpelmann, Chairman of the Board of Managing Directors of Landwirtschaftliche Rentenbank, Frankfurt am Main, showed his satisfaction with the course of the financial year 2006 so far. At the press conference presenting the business activities and the annual accounts for 2005, Uwe Zimpelmann stated: "Promotional activities as well as profitability in the first quarter of 2006 tied up the very good results of the financial year 2005." Demand for promotional loans for agriculture and rural areas has once again performed dynamically in the first quarter. Accordingly, the promotional bank for agriculture and rural areas increased the portfolio of medium and long-term promotional loans in the balance sheet to € 34,5 bn (32.8) at the end of the first quarter. Impulses for growth came from special loans granted at particularly favourable interest rates for specific promotional purposes and assistance measures as well as from standard promotional loans. Rentenbank was able to approve € 708.9 m (557.1) of special loans for the first three months, € 125.8 m thereof for promotion of renewable energies. New business in medium and long-term promotional lending, including standard promotional loans for agriculture and rural areas as well as securitised lending, reached € 3.6 bn (3) for the first quarter of 2006.

Uwe Zimpelmann was also very satisfied with the results of the promotional bank's new issue business for the first quarter: "At € 4.7 bn in the first three months, we have already been able to raise almost half of the total anticipated requirement for medium and long-term issues (maturities of more than two years) of € 10 bn for 2006." With an operating result of € 46.4 m (44.6), profitability performed better once again than in the first quarter of the previous year, also due to further favourable refinancing conditions. "This positive trend should continue as the year progresses", stated Uwe Zimpelmann. "We are therefore confident that we will once again achieve the good results of 2005, which will enable us to extend our promotional activities for agriculture and rural areas when required."
Net profit for the year 2005: € 10 m for the promotion of agriculture
In 2005, Rentenbank increased the operating result before risk provisions and net valuation adjustments by 5.6 % to € 182.1 m (172.4). General administrative expenses grew slightly to € 35.8 m (35.3). The improved profitability and a tight cost management led to a further decrease of cost-income ratio to 17.1 % (17.8). Net income for the year was reported in the profit and loss account 2005 at € 40 m (38). After allocating of € 30 m (28.5) to revenue reserves, net profit for the year amounted to € 10 m (9.5). This amount will be used for promoting agriculture whilst protecting the public interest, of which one half is allocated to the Special Purpose Fund and the other half to the Promotional Fund. The emphasis of the Promotional Fund in 2005 was the promotion of agriculture-related research and the advanced training for agricultural professionals.
Portfolio of medium and long-term promotional loans 6.2 % above the previous year's level
Due to increased promotional business, total assets grew by 6.8 % (7.9) to € 77 bn (72.1) in 2005. The portfolio of medium and long-term promotional loans was valued at € 34.2 bn (32.2) at year end, 6.2 % (4.9) above the previous year's level. The portfolio of special loans increased by 18.6 % (14.4) to € 10.5 bn (8.8) and showed again an above-average growth. The share of these special loans which enjoy particularly favourable interest rates and are offered for specific promotional purposes and assistance measures increased to 30.6 % (27.4) from the total medium and long-term promotional lending. Due to a higher demand in securitised lending, the securities portfolio also contributed to the growth in total assets. This balance sheet item grew by 16.8 % (5.5) to € 20.2 bn (17.3).
Above-average growth in promotional lending for financing of renewable energies
Total new business including securitised lending, loan commitments and prolongations amounted to € 12.9 bn (11.7) in 2005. € 2.8 bn (2.2) thereof accounted for special loans. The above-average growth in new business in that promotional area reflects the particularly higher demand for financing of renewable energies. Promotional loans for this purpose amounted to € 689.6 m (525) in 2005.
Continuing favourable conditions for issue activities in international financial markets
On the liability side of the balance sheet, the high-level issue activity in the financial year 2005 led again to an above-average growth of securitised liabilities. This item increased by 7.3 % to € 57.4 bn (53.5). Liabilities to banks were valued at € 12.3 bn (10.9) at year end. In total, medium and long-term external funds amounted to € 62.6 bn (57.6) on the balance sheet date.

During the financial year 2005, the bank raised new capital market funds with medium and long-term maturities of € 10 bn (11.3), of which € 5.7 bn (6.5) were raised within the framework of the Euro Medium Term Note Programme (EMTN). Including money-market related and short-term issues, the promotional bank placed € 10.9 bn (11.9) through the EMTN Programme. From the total medium and long-term issues, € 2.6 bn (2.7) was raised through three global bonds registered with the U.S. Securities and Exchange Commission (SEC). At an amount of € 1.2 bn (1.1), the Australian Dollar Medium Term Note Programme contributed again significantly to medium and long-term funding. With a figure of € 15.8 bn (17.7), 92 % of short-term funding was raised through the Euro Commercial Paper Programme (ECP). Newly raised external funds in 2005 including short-term and money-market related funding reached a total amount of € 31 bn (35.2).
Improved capital ratios
Total capital in the balance sheet 2005 reached € 2,624.7 m (2,733.1). Due to allocating € 30 m from the net income for the year, the revenue reserves increased to € 624.7 m (594.7). € 90 m were allocated to the fund covering general banking risks which increased to € 890 m (800), accordingly. Due to maturities, subordinated loans decreased to € 975 m (1,203.4). The total capital ratio of 15.9 % (14.3) and also the core capital ratio of 10.1 % (9) exceed the previous year's levels. Both figures are well above the legal requirement of 8 % and 4 %, respectively.
Forward-Looking Statements:
This press release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of Rentenbank's management and currently available information. Such statements include, in particular, statements about our plans, strategies and prospects. Words such as "expects", "anticipates", "intends", "plans", "believes", "seeks", "estimates", variations of such words and similar expressions are intended to identify forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. Except as required by law, Rentenbank does not have any intention or obligation to update publicly any forward-looking statements after they are made, whether as a result of new information, future events or otherwise.

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