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Considerable gains in the Rural Development and Renewable Energy lines

In 2022, the Rural Development line accounted for the largest share of new special promotional loans, the volume of such loans rising by 71.1% to EUR 2.1 billion (2021: EUR 1.2 billion). The main reason for this development was the considerable increase in demand for Rentenbank’s global loans by the German states’ development banks. They use the loans particularly to finance infrastructure projects in rural areas. There was also a substantial increase in the volume of new promotional loans granted in the Renewable Energy line again, which rose by 47.6% to EUR 1.6 billion (2021: EUR 1.1 billion), particularly as a result of strong demand for wind power financing. In the Agriculture line, on the other hand, the volume of new promotional loans fell to EUR 2.0 billion (2021: EUR 2.5 billion).

“We are especially pleased with the strong increase in our Renewable Energy line,” said Nikola Steinbock, Chairwoman of Rentenbank’s Management Board. “That is because these loans make an important contribution to environmental and climate protection, as well as the security of energy supplies. To further incentivise the agricultural sector to invest in climate and environmental protection measures, we have offered loans at even more preferential terms under our “Areas of Future Development” programme since November 2022”, Nikola Steinbock said. The programme is currently divided into four areas of future development across Rentenbank’s promotional lines, which have been identified as being especially worth of promotion on the basis of the social and political discourse of our time. These four areas of future development are the expansion of regional food production, the increased use of agrivoltaic systems, environmentally friendly land use including a transition phase to ecological farming, and the establishment of agroforestry and paludiculture systems. The programme supports the transformation of the agricultural and food sector to make it more sustainable. For this reason, the areas of future development are continuously being expanded and adapted. This way, new ideas and approaches to solutions should be implemented more quickly in practice.

Euro is the most important currency of issuance

To fund its promotional lending business, Rentenbank raised about EUR 11.8 billion (2021: EUR 10.7 billion) in medium- and long-term funds in the capital market in the 2022 financial year. The euro was the most important currency of issuance, accounting for 65% (2021: 62%) of the total issuance volume, followed by the US dollar at 19% (2021: 25%). The British pound accounted for 6% (2021: 4%) of total issuance volume. The biggest investor groups were still commercial banks and central banks, together accounting for 84% (2021: 74%) of the total volume placed.

Lower operating profit

The operating profit before provision for loan losses/valuation came to EUR 157.8 million (2021: EUR 187.7 million). Net interest income declined to EUR 268.8 million (2021: EUR 285.7 million). Compared to the previous year, Rentenbank extended EUR 17.6 million more interest rate grants for its special promotional loans, which reduced the bank’s net interest income. Administrative expenses rose to EUR 112.5 million (2021: EUR 90.0 million), particularly as a result of higher expenses for employee pensions and extensive IT investments. The cost/income ratio came to 36.7% (2021: 32.9%).

Capital ratios nearly unchanged

At the end of 2022, Rentenbank’s capital ratios calculated on the basis of the EU Capital Requirements Regulation (CRR) were nearly unchanged from the previous year. The Common Equity Tier 1 capital ratio was 31.7% (2021: 31.8%) and the total capital ratio was 31.7% (2021: 32.0%). Both capital ratios are well above the regulatory minimum requirements applicable to Rentenbank.

CFO Marc Kaninke said the following about Rentenbank’s results and balance sheet structure: “We are proud and satisfied to have generated such a good result in an extremely challenging environment. Moreover, our capital base is strong enough that we have an ample cushion for additional promotional lending to the agricultural sector” even in turbulent times.

Key figures 2022

Background:

Landwirtschaftliche Rentenbank is Germany’s development agency for agribusiness and rural areas. Its promotional mandate covers not only agriculture and forestry, but also the entire food value chain, the increased use of energy from renewable sources, and the promotion of bio-economy solutions. Rentenbank attaches particular importance to the promotion of innovation, including research and development in universities, the early-stage financing of agriculture-related start-ups, and the market introduction and practical use of new technologies and products. Rentenbank’s promotional instruments are subsidies, subordinated loans, and special promotional loans. The special promotional loans are granted via the local banks of the ultimate borrowers on a competitively neutral basis. Rentenbank provides funding to banks, savings banks, and local authorities operating in rural areas. The Bank is a federal institution under public law whose capital stock was formed by contributions from the German agriculture and forestry sectors. It is subject to the German Banking Act (KWG) and is regulated by the Federal Financial Supervisory Authority (BaFin) and the Bundesbank. As one of the few triple-A rated institutions in Germany, Rentenbank raises funds in the capital markets.

This press release contains certain forward-looking statements that are based on current expectations, estimates, forecasts and projections of the Management Board and on the information currently available to it. These statements include, in particular, statements about our plans, strategies and prospects. Such forward-looking statements are identified by words such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’ and similar expressions. These statements are not to be understood as guarantees of future performance; instead, they are dependent on factors that involve risks and uncertainties and are based on assumptions that may prove to be incorrect. Unless required by law, we assume no obligation to update forward-looking statements after the publication of the present press release.

Emphasis on benchmark bonds in euros and US dollars

Germany’s development agency for agribusiness and rural areas plans to raise up to 50% of its medium-term and long-term funding volume by issuing benchmark bonds denominated in euros and US dollars. These strategic issues will be supplemented by other liquid issues and private placements in various currencies, especially in euros, US dollars, British pounds, and Australian dollars. A benchmark issue under the ICMA Green Bond Framework is also planned.

“The further expansion of renewable energy is an indispensable prerequisite for making energy supplies in Germany more sustainable and independent. And agribusiness in particular has a key role to play in this regard. The necessary increase in the investment needs of this sector is fuelling the growth of our sustainable promotional lending activities and enlarging the loan portfolio of our Green Bond Framework. Moreover, we are currently seeking to incorporate biogas plants into the Green Bond Framework, in addition to wind power and photovoltaic plants. These two factors together can be expected to increase our potential for additional green bonds in 2023 and enable us to broaden our investor base further”, said Rentenbank Chairwoman Nikola Steinbock.

Euro the most important issue currency in 2022

Rentenbank has raised approximately EUR 11.8 billion in the capital markets so far in 2022. This included Rentenbank’s largest euro benchmark bond to date, with a volume of EUR 2 billion. The order book for the 5-year bond reached a record level of approximately EUR 8 billion. Rentenbank also issued a 10-year euro benchmark bond in the form of a green bond and a US dollar benchmark issue with a term of 5 years. The average term of the bank’s issues increased to 7.0 years (2021: 6.5 years).

Rentenbank raised funds in seven currencies. While the percentage of euro issues rose to 65% (2021: 62%), the percentage of US dollar issues fell to 19% (2021: 25%). At 6%, the percentage of issues denominated in British pounds was slightly higher than in the previous year (2021: 4%).

ECP Programme dominated by US dollar issues

Under its Euro Commercial Paper Programme (ECP Programme), Rentenbank issued bonds with terms of up to 364 days in seven different currencies. The most important issue currency in the ECP Programme was still the US dollar, with a share of 75%. The average utilisation of the ECP Programme was EUR 13.3 billion (2021: EUR 11.1 billion).

Background:

Landwirtschaftliche Rentenbank is Germany’s development agency for agribusiness and rural areas. Its promotional mandate covers not only agriculture and forestry, but also the entire food value chain, the increased use of energy from renewable sources, and the promotion of bio-economy solutions. Rentenbank attaches particular importance to the promotion of innovation, including research and development in universities, the early-stage financing of agriculture-related start-ups, and the market introduction and practical use of new technologies and products. Rentenbank’s promotional instruments are subsidies, subordinated loans, and special promotional loans. The special promotional loans are granted via the local banks of the ultimate borrowers on a competitively neutral basis. Rentenbank provides funding to banks, savings banks, and local authorities operating in rural areas. The Bank is a federal institution under public law whose capital stock was formed by contributions from the German agriculture and forestry sectors. It is subject to the German Banking Act (KWG) and is regulated by the Federal Financial Supervisory Authority (BaFin) and the Bundesbank. As one of the few triple-A rated institutions in Germany, Rentenbank raises funds in the capital markets.

This press release contains certain forward-looking statements that are based on current expectations, estimates, forecasts and projections of the Management Board and on the information currently available to it. These statements include, in particular, statements about our plans, strategies and prospects. Such forward-looking statements are identified by words such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’ and similar expressions. These statements are not to be understood as guarantees of future performance; instead, they are dependent on factors that involve risks and uncertainties and are based on assumptions that may prove to be incorrect. Unless required by law, we assume no obligation to update forward-looking statements after the publication of the present press release.

“Renewable Energy” promotional line more than doubles the volume of new loans granted

The volume of new loans granted in the “Renewable Energy” promotional line soared to EUR 1 billion (EUR 443 million). Special promotional loans granted to finance wind power increased the most, rising from EUR 291 million to EUR 750 million. Biogas financing loans doubled to EUR 105 million (EUR 52 million). The introduction of a new loan variant featuring fixed interest-rate periods in excess of 10-years in September 2020 continued to yield positive effects in the “Renewable Energy” promotional line. As of early April 2022, Rentenbank now offers loans with long fixed interest-rate periods in all its promotional lines.

Thanks to stronger demand for machinery and equipment financing, the volume of new loans granted in the “Agribusiness and Food” promotional line also increased substantially to EUR 613 million (EUR 432 million).

The “Rural Development” promotional line likewise experienced very dynamic growth, with the volume of new loans rising to EUR 914 million (EUR 587 million). This increase is attributable to stronger demand for Rentenbank’s global loans on the part of the German federal states’ development banks.

The volume of new loans granted in the “Agriculture” promotional line amounted to EUR 1,104 million in the first half of 2022, that being slightly less than the year-ago comparison figure (EUR 1,301 million). In particular, agricultural enterprises demanded fewer special promotional loans for farm buildings.

The total volume of special promotional loans granted by Rentenbank rose by 31.6% to EUR 3.8 billion in the first half of 2022 (EUR 2.9 billion).

Increased promotion of innovation and start-ups

Rentenbank promotes innovation in all stages from development to practical implementation and dissemination of pioneering methods and products. It promotes the early-stage financing of specifically agriculture-related start-ups from the “Special-Purpose Fund of the Federal Republic of Germany,” which is managed by Landwirtschaftliche Rentenbank. Subordinated loans totalling EUR 1.3 million and EUR 0.1 were granted in the form of Innovation Vouchers to two start-ups in the first half of 2022. Rentenbank also promoted seven project partners with grants totalling EUR 1.6 million from its Innovation Fund.

In February 2022, Rentenbank contributed EUR 25 million to the European Circular Bioeconomy Fund (ECBF). This fund initiated by the European Commission invests in innovative, fast-growing bio-economy enterprises with the goal of reducing the use of fossil fuels, promoting a bio-based circular economy, and contributing to climate-neutral economic development. Funds totalling EUR 3.6 million were already drawn down through the end of June.

Besides providing financial support to agriculture-related start-ups, Rentenbank also supports the entire start-up ecosystem in order to speed up the market introduction of innovative and sustainable ideas. In collaboration with the German Federal Ministry of Food and Agriculture (BMEL), for example, Rentenbank has considerably expanded its offering of special promotional loans in connection with the “Growth Alliance”-Boot Camp. “By participating in the ‘Growth Alliance’ programs, the start-ups to which we already provide financial support enhance their market prospects considerably. And the programs connect us, in turn, with additional, highly promising start-ups to which we can provide financial support”, said Nikola Steinbock, Chairwoman of Rentenbank’s Management Board, with regard to the holistic approach to promoting ag-tech and food-tech start-ups.

Euro remains the most important issue currency

To fund its promotional activity, Rentenbank raised EUR 8.2 billion (EUR 6.5 billion) in the capital markets by issuing bonds with terms of more than two years in the first half of 2022. Thus, the Bank has already achieved three quarters of the EUR 11 billion issue volume planned for 2022. The most important issue currency was the euro, the share of which rose to 70% (51%) of the total issue volume. This includes a 5-year bond for EUR 2 billion, Rentenbank’s largest euro area benchmark offering to date. The share of the US dollar fell to 12% (40%). Commercial banks are still the most important investors, accounting for 69% (50%) of the total issue volume. Rentenbank placed 15% (24%) of its bonds with central banks.

Lower operating result

The operating result before loan-loss provisions and valuation effects amounted to EUR 74.3 million in the first half of 2022, that being less than the corresponding figure for the first half of last year (EUR 94.1 million). The decrease resulted particularly from the higher level of interest rate subsidies granted in connection with Rentenbank’s special promotional loans, which led to lower net interest income. In addition, administrative expenses rose to EUR 45.6 million (EUR 42.6 million), primarily due to higher investments in IT systems.

Capital ratios remain at high levels

Rentenbank’s capital ratios calculated on the basis of the EU Capital Requirements Regulation (CRR) remained at high levels at the end of the first half of 2022. The Common Equity Tier 1 capital ratio came to 30.6% (31/12/2021: 31.8%) and the total capital ratio came to 30.7% (31/12/2021: 32.0%).

Key figures - first half 2022 (PDF)

Background:
Landwirtschaftliche Rentenbank is Germany’s development agency for agribusiness and rural areas. Its promotional mandate covers not only agriculture and forestry, but also the entire food value chain, the increased use of energy from renewable sources, and the promotion of bio-economy solutions. Rentenbank attaches particular importance to the promotion of innovation, including research and development in universities, the early-stage financing of agriculture-related start-ups, and the market introduction and practical use of new technologies and products. Rentenbank’s promotional instruments are subsidies, subordinated loans, and special promotional loans. The special promotional loans are granted via the local banks of the ultimate borrowers on a competitively neutral basis. Rentenbank provides funding to banks, savings banks, and local authorities operating in rural areas. The Bank is a federal institution under public law whose capital stock was formed by contributions from the German agriculture and forestry sectors. It is subject to the German Banking Act (KWG) and is regulated by the Federal Financial Supervisory Authority (BaFin) and the Bundesbank. As one of the few triple-A rated institutions in Germany, Rentenbank raises funds in the capital markets.