- 1st quarter of 2009: Volume of low-interest special promotional loans granted remains high, new promotional offers available to ensure liquidity in the agribusiness, new issuing business with stronger focus on domestic banks and insurance companies, double-digit growth in operating result
- Fiscal year 2008: Lending volume and operating result surpass record year of 2007, favourable margin trend enables significantly higher promotional business, cost-income ratio at 10.9%
At the press conference on the 2008 financial statements, Dr. Marcus Dahmen, Spokesman of the Board of Managing Directors of Rentenbank, the German development agency for agribusiness based in Frankfurt/Main, expressed great satisfaction with fiscal year 2009 to date. "In the first quarter of 2009, both promotional lending volume and earnings performance exceeded the very good results of fiscal year 2008. Despite declining investment sentiments in the agriculture, promotional loans for the agribusiness continued to be in high demand during the first quarter," said Dahmen. He added that the volume of medium and long-term promotional loans increased again on the Bank's balance sheet rising to €65.1 billion in the first quarter (Q1 2008: €63.5 billion). Dahmen also remarked on the good new issuing business: "We noted a major increase in demand for our issues from banks." According to Bank information, the operating result in accordance with German Commercial Code (HGB) grew by €44.3 million to €106.9 million in the first three months. The IFRS result also showed a positive trend, although this result is considered to be very volatile. In addition to a significant rise in the operating result, financial performance was also affected by substantial measurement gains. Dahmen does not expect to continue this rate of increase over the year as a whole "since the market parameters continue to show exceptionally high volatility. Fair value measurement would therefore lead to unpredictable results." He is nonetheless optimistic regarding performance in the course of the current year: "Should demand continue to rise, we will increase our promotional activities, thus making an important contribution to stabilizing loan availability in the agribusiness. With respect to earnings performance, we anticipate a normalization of the situation. Earnings will be below those of 2008, which was an exceptional year, but will surpass the past years levels."
Expanded range of promotional loans ensures low-interest and stable financing conditions
With a view to the economic and financial crisis, Rentenbank just recently expanded its range of promotional loans to include liquidity assistance loans for dairy farmers. In addition, the Bank now enables agricultural businesses as well as other enterprises in the agricultural and food sectors to improve their liquidity situation via low-interest follow-up financing for operating expenditures already made. By the end of 2008, Rentenbank had already improved its range of lending programs for farmers and had enhanced its promotional activities to small and medium-sized enterprises (SMEs) in upstream and downstream sectors.
A total of €86 million provided to the agriculture in 2008
In fiscal year 2008, Rentenbank achieved a record operating result in accordance with both HGB and IFRS. The operating result amounted to €349.6 million under HGB (2007: €201.2 million) and €202.3 million under IFRS (2007: €145.9 million). Due to a positive measurement result, Group's net income for the year amounted to €463.4 million (2007: €51.0 million) according to IFRS. Negative measurement results of €-396.9 million (2007: €-76.1 million) were recognized in the revaluation reserve. Rentenbank has taken into account the financial market crisis and the high volatility of the IFRS results by recognizing adequate risk provisions and making transfers to reserves. The net profit of €10.8 million (2007: €10.5 million) will be distributed for promotion of the agriculture respecting a general public interest. Half will be transferred to the Special Purpose Fund and half to the Promotional Fund. In fiscal year 2008, the Promotional Fund focused on grants to agricultural research projects and advanced training in agricultural professions. Rentenbank transferred €74.6 million of its income in favor of the low-interest special promotional loans. Moreover, €1 million was added to the capital of the Edmund Rehwinkel Foundation from Rentenbank's income. Promotional benefits funded by Bank's income thus reached €86 million.
Slight drop in total assets, increase in promotional loan volume
Total assets under HGB fell slightly from €88.8 billion in 2007 to €87.9 billion as of year-end 2008 against the background of the financial market crisis. However, the portfolio of medium and long-term promotional loans grew by 8.0% to €40.4 billion (2007: €37.4 billion). Special promotional loans again showed above-average growth of 20.3% to €16.0 billion (2007: €13.3 billion). Of the total medium and long-term loan volume, the share of promotional loans earmarked for specific purposes and assistance measures and offered at particularly favorable conditions rose accordingly to approximately 40% (2007: 35.6%). The securities portfolio also made a positive contribution to growth. This item increased by 6.9% (2007: 18.8%) to €27.7 billion (€25.9 billion) due to new securitized lending business. All in all, the volume of medium and long-term promotional loans in the HGB balance sheet increased by 7.4% over the previous year to €63.5 billion (2007: €59.1 billion).
Refinancing costs increase in the fourth quarter due to financial market crisis
Medium and long-term borrowings totaled €60.9 billion as of December 31, 2008 (December 31, 2007: €65.5 billion). As in the previous year, Rentenbank borrowed €11.2 billion in 2008 to refinance its medium and long-term lending business. In the first three quarters, the Bank was able to issue at much better conditions than in 2007 for nearly all currencies and maturities. In the fourth quarter, however, the funding spreads worsened. The Euro Medium-Term Note Program (EMTN) remained the most important refinancing instrument with a new issue volume of €7.7 billion (2007: €7.9 billion), followed by the global bonds registered with the U.S. Securities and Exchange Commission (SEC), which accounted for €2.0 billion (2007: €2.0 billion). Short-term issues related primarily to the Euro Commercial Paper Program (ECP). The average annual utilization for the ECP program again grew significantly to €13.6 billion (2007: €8.9 billion). With a share of €54.3% (2007: 34.0%), the U.S. dollar remained the most important issue currency. The euro share fell to €19.7% (2007: 30.7%). A total of 57% (2007: 48%) of new issues were placed with central banks. The share of insurers, companies, and pension funds rose to 19% (2007: 11.0%).
Comfortable equity base: ratios well above required levels
In the 2008 HGB balance sheet, total capital is reported at €3.0 billion (2007: 2.9 billion). This figure contains subordinated liabilities of €1.1 billion (2007: €1.0 billion). Reserves and the fund for general banking risks account for €1.8 billion (2007: €1.7 billion). Both the Tier 1 ratio and the total capital ratio - at 12.3% (2007: 10.6%) and 19.1% (2007: 16.1%), respectively - are well above the regulatory requirements of 4% and 8%, respectively.
Key Figure
Service: Landwirtschaftliche Rentenbank is Germany's agency for agribusiness. As partner to an important growth sector with global responsibility, the bank promotes this sector with various programmes. The bank mainly raises funds in international capital markets and is Triple A rated by the three major rating agencies. With total assets of €87.9 billion, Rentenbank is among the 20 largest German banks.
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.