Fiscal year 2010: continued strong demand for promotional loans, financial performance returns to normal level

Financial performance in 2010: operating result slightly above prior-year level despite lower net interest income

In fiscal year 2010, the group's operating result before profit and loss from fair value measurement and hedge accounting determined under IFRS tied in with the high prior-year level, amounting to €296 million (2009: €293 million), though net interest income declined to €351 million (2009: €381 million). After deducting the result from fair value measurement and from hedge accounting, Rentenbank reports a group's net income of €152 million (2009: net loss of €77 million) in its income statement. Besides, measurement losses of €230 million (2009: measurement gains of €267 million) were not recognized in the measurement result, but directly in the revaluation reserve. These measurement losses largely reflect higher credit spreads for securities. "As a non-trading book institution (Nichthandelsbuchinstitut), we pursue a buy-and-hold strategy. Provided that no counterparty defaults, these measurement losses will solely be of a temporary nature as they will be reversed in subsequent years in form of measurement gains through changes in market prices, reductions of remaining terms to maturity or redemption," said Hans Bernhardt, responsible for finance within the Board of Managing Directors. Rentenbank has accounted for the high volatility of the measurement results reported under IFRS by recognizing appropriate provisions for loan losses and by increasing reserves.


Net profit used for promotional purposes

Appropriation of profits is based on the HGB financial statements. The operating result under HGB amounted to €366 million (2009: €347 million) in 2010. After deducting promotional contributions for special promotional loans and additions to reserves, net income for the year under HGB amounted to €47 million (2009: €45 million). The net profit of €11.8 million (2009: € 11.3 million) is utilized exclusively for promotional purposes. One half of the net profit is transferred to the Special Purpose Fund (Zweckvermögen) and the other half to the Promotional Fund (Förderungsfonds). In fiscal year 2010, benefits for agriculture-related research projects as well as advanced training measures for people employed in the agricultural sector were the main focus of the Promotional Fund. In addition, Rentenbank used an amount of €79 million (2009: €82 million) from its income to reduce the interest rates of its special promotional loans. Furthermore, the capital of Edmund Rehwinkel Foundation was increased by €2 million from Rentenbank's income. Thus, total promotional benefit of the bank financed from its own income came to €93 million (2009: €95 million).


Portion of special promotional loans in loan portfolio exceeds 50% for the first time

As a result of very brisk new business, which grew at double digit rates, the portfolio of special promotional loans in fiscal year 2010 grew above average in the balance sheet, too. These loans, which are offered for specific promotional purposes and assistance measures at very favorable interest rates, amounted to €23.0 billion (2009: €19.6 billion), representing an increase of 17.3% above the prior year. For the first time, the share of these loans in the total medium and long-term loan portfolio exceeded 50%. In total, the portfolio of medium and long-term promotional loans in the balance sheet amounted to €42.6 billion (2009: € 41.8 billion). Despite slight growth in new business in securitized lending, the securities portfolio declined slightly compared to the prior year to €27 billion (2009: €28 billion). The promotional lending volume as reported in the balance sheet grew by 1.1% to a total of €66.5 billion (2009: €65.8 billion).


Central banks buy more Rentenbank issues

Securitized liabilities amounted to €62.1 billion (2009: €61.6 billion), representing the largest liability item of the balance sheet. In 2010, Rentenbank raised funds in the amount of €10.6 billion (2009: €10.0 billion) in order to refinance its medium and long-term lending business, with international investors accounting for a share of 82% (2009: 48%). Almost one third of the issue volume is attributable to central banks and other public-sector institutions, which had played a significantly less prominent role in the prior-year with a share of 12%. The issue volume placed with banks also exceeded the prior-year level, climbing from 42% to 47%. In contrast, insurance companies, corporations and pension funds invested fewer funds in Rentenbank issues. At 42% (2009: 21%), the U.S. dollar took the first rank again, followed by the euro, which accounted for a share of 35% (2009: 65%) of the issue volume. The Euro Medium Term Note (EMTN) program remained the most important refinancing instrument with an issue volume of €7.0 billion (2009: €5.8 billion). Funds raised through two global bonds totaled €2.0 billion. Issues under the Australian Dollar MTN program ranked in third place. Rentenbank is the third-largest issuer in this market with an outstanding volume of AUD 7.4 billion. Rentenbank mainly uses the Euro Commercial Paper (ECP) program to refinance its short-term lending activities. Average program utilization for the year under review was €10.3 billion (2009: €8.9 billion).


Solid capital base: ratios increase once more

Regulatory capital including subordinated liabilities of €0.8 billion (2009: €1.1 billion) amounted to €3.2 billion (2009: €3.0 billion). Both the total capital ratio (2010: 24.5%; 2009: 23.8%), which is calculated pursuant to the German Solvency Regulation, and the core capital ratio (2010: 15.5%; 2009: 15.3%) are well above the legal requirements. "We therefore are well positioned to fulfill the increasing requirements under Basel III," commented Horst Reinhardt.