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Rentenbank expects 2019 funding volume of up to EUR 11 billion

Rentenbank – First half of 2018

Investor Presentation

 

Germany's development agency for agribusiness and rural areas

Promotional Activities

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Rentenbank expects 2019 funding volume of up to EUR 11 billion

December 7, 2018

Frankfurt. Landwirtschaftliche Rentenbank expects a total issuance of up to EUR 11 billion with maturities of more than two years in 2019. Germany’s development agency for agribusiness and rural areas plans to raise up to 40 % of its medium and long-term funding via benchmark bonds, with a minimum volume of EUR 1 billion or USD 1 billion each. The funding program will be complemented by other liquid issues and private placements in various currencies, especially in euros, US dollars, pound sterling, and Australian dollars.

© Romolo Tavani / Fotolia

In the year to date, Rentenbank has raised around EUR 11.2 billion in the capital markets, including two EUR benchmarks with maturities of 5 and 7 years, respectively. The bank also issued a 5-year USD global bond. The average maturity of the issues decreased to 6.2 years (2017: 8.4 years). The bank’s overall borrowing costs remained favorable, measured in terms of margin against 6-month Euribor.

“Due to the phasing out of the ECB’s asset purchase program in 2019, medium and long-term refinancing costs for euro bonds are expected to rise. This may affect the composition of our funding mix”, said Horst Reinhardt, Spokesman of Rentenbank’s Board of Managing Directors, responsible for treasury business.

Rentenbank raised funding in eight different currencies. While the share of EUR-denominated issues declined marginally to 54 % (2017: 57 %), the share of USD increased, accounting for 25 % of medium and long-term funding (2017: 19 %). Sterling issuance saw a slight increase to 9 % (2017: 7 %). Bond issues under the Kangaroo program decreased to 5 % (2017: 10 %).

Under the EMTN program, Rentenbank raised additional funds of approximately EUR 2.0 billion with maturities of less than two years. In this context, a USD bond with a volume of USD 2.0 billion and a maturity of almost two years was of particular interest to investors.

Under its Euro Commercial Paper (ECP) program, Rentenbank issued debt securities with maturities of up to 364 days in eight different currencies. With a share of 91 %, USD remained the program’s largest source of funding. As in the previous year, the average utilization of the ECP program amounted to EUR 7.8 billion.

 

Service:

Landwirtschaftliche Rentenbank is Germany’s development agency for agribusiness and rural areas. Under its statutory promotional mandate, the bank extends low-interest loans for agriculture-related investments via local banks on a competitively neutral basis. Rentenbank provides funding for banks, savings banks, and local authorities related to rural areas. The appropriation of profits is also subject to the promotional mandate. The bank is a public law institution whose capital stock was formed by contributions paid by the German agricultural and forestry sectors. The bank is one of the few triple-A rated institutions in Germany and raises funds in the capital markets.

This press release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of the Board of Managing Directors and information currently available to it. These statements include, in particular, statements about our plans, strategies and prospects. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, and similar expressions are intended to identify such forward-looking statements. These statements are not to be understood as guarantees of future performance, but rather as being dependent on factors that involve risks and uncertainties and are based on assumptions that may prove to be incorrect. Unless required by law, we shall not be obligated to update forward-looking statements after their publication.

 

This press release as PDF

Rentenbank: Promotional loans for machinery and buildings particularly in demand, wind energy financing faces headwinds

August 23, 2018

First half of 2018

Frankfurt. In the first half of 2018, Landwirtschaftliche Rentenbank extended low-interest special promotional loans of EUR 3.3 billion (H1 2017: EUR 3.6 billion). The decline was almost entirely attributable to a lower volume of wind turbine financing. In contrast, Germany’s development agency for agribusiness and rural areas saw growth in its Agribusiness and Rural Development promotional lines.

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“With our promotional activities, we support agribusiness and rural areas. Both are crucial to the balanced development of the German economy and society at large,” said Horst Reinhardt, Spokesman of Rentenbank’s Board of Managing Directors.

Slight decline in new promotional business

In the first half of 2018, new business in the Agriculture promotional line decreased by 5% to EUR 1.0 billion. While demand for machinery loans grew to EUR 288 million (H1 2017: EUR 279 million), the volume of financing for buildings remained nearly flat at EUR 377 million (H1 2017: EUR 380 million). In contrast, land financing dropped to EUR 237 million (H1 2017: EUR 271 million).

In the Agribusiness promotional line, new business increased significantly by 44% to EUR 637 million (H1 2017: EUR 443 million), mostly propelled by stronger demand for loans for machinery and buildings.

New business in the Rural Development promotional line was also considerably above the prior-year level, amounting to EUR 803 million (H1 2017: EUR 533 million). This was driven by higher demand from the promotional banks of the federal states for Rentenbank’s global loans, which are primarily used to finance rural infrastructure.

In contrast, new business in the Renewable Energy promotional line decreased as expected, dropping to EUR 669 million (H1 2017: EUR 1,481 million). Changes in the German Renewable Energy Sources Act (EEG) led to a significant decline in demand, especially for wind energy financing. New business of EUR 270 million (H1 2017: EUR 1,241 million) amounted to only about 22% of the volume achieved in the first half of 2017.

Compared with the first half of 2017, total new promotional business decreased by roughly 22% to EUR 5.2 billion. In addition to special promotional loans, this also includes funding for banks, savings banks, and local authorities related to rural areas through registered bonds, promissory notes, and securities.

EUR remains the major issuance currency

To refinance its promotional business, Rentenbank raised EUR 7.8 billion with maturities of more than two years in the capital markets in the first half of 2018 (H1 2017: EUR 7.2 billion). The funding volume thus covered more than two-thirds of the planned EUR 11 billion target for 2018. EUR remained the largest source of funding, continuing to account for 63% of total issuance. It was followed by USD and AUD, representing 22% (H1 2017: 12%) and 6% (H1 2017: 11%) of the funding volume, respectively. With a share of 37% (H1 2017: 43%), commercial banks remained the main investors, followed by central banks with a share of 31% (H1 2017: 41%).

Total assets virtually unchanged

Total assets stood at EUR 90.2 billion at the end of June 2018, almost reaching the level recorded at year-end 2017 (December 31, 2017: EUR 90.8 billion). Loans and advances to banks, including cash and balances with central banks, rose to EUR 60.8 billion (December 31, 2017: EUR 60.6 billion), accounting for 67% (December 31, 2017: 67%) of total assets. Securitized liabilities of EUR 76.1 billion (December 31, 2017: EUR 76.9 billion) were the largest item on the liability and equity side of the balance sheet, representing a share of 84% (December 31, 2017: 85%). Equity (excluding interim net income), including the fund for general banking risks, amounted to EUR 4,430.1 million as of June 30, 2018. It was thus EUR 15.3 million or 0.3% lower than at year-end 2017, attributable to the distribution of the bank’s net profit for 2017.

Earnings remain satisfactory

The operating profit before provision for loan losses and valuation amounted to EUR 104.1 million in the first half of 2018, down 7.5% compared with the corresponding figure in the first half of 2017 (EUR 112.5 million).

Net interest income decreased by 4.3% to EUR 146.2 million (H1 2017: EUR 152.8 million). This was mainly due to a decline in net interest income in the Capital Investment segment since the reinvestment rates of maturing own funds investments no longer achieved the level of returns generated by the previous investments. Administrative expenses increased slightly by 1.5% to EUR 34.6 million, driven primarily by higher expenses for personnel and banking supervision.

Interim net income of EUR 104.4 million (H1 2017: EUR 188.4 million) showed a significant year-on-year decline, since the corresponding figure in the first half of 2017 had been marked by positive one-off effects of EUR 75.9 million.

Further increase in capital ratios

Compared to year-end 2017, Rentenbank’s capital ratios in accordance with the Capital Requirements Regulation (CRR) continued to increase moderately in the first half of 2018. The tier 1 capital ratio strengthened to 28.4% (December 31, 2017: 27.8%) and the total capital ratio increased to 30.0% (December 31, 2017: 29.7%). Both ratios were thus well in excess of the regulatory requirements applicable to Rentenbank.

Key figures – first half of 2018

 

Service:

Landwirtschaftliche Rentenbank is Germany’s development agency for agribusiness and rural areas. Under its statutory promotional mandate, the bank extends low-interest loans for agriculture-related investments via local banks on a competitively neutral basis. Rentenbank provides funding for banks, savings banks, and local authorities related to rural areas. The appropriation of profits is also subject to the promotional mandate. The bank is a public law institution whose capital stock was formed by contributions paid by the German agricultural and forestry sectors. The bank is one of the few triple-A rated institutions in Germany and raises funds in the capital markets.

This press release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of the Board of Managing Directors and information currently available to it. These statements include, in particular, statements about our plans, strategies and prospects. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, and similar expressions are intended to identify such forward-looking statements. These statements are not to be understood as guarantees of future performance, but rather as being dependent on factors that involve risks and uncertainties and are based on assumptions that may prove to be incorrect. Unless required by law, we shall not be obligated to update forward-looking statements after their publication.

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Continued strong demand for Rentenbank’s promotional loans in 2017

April 23, 2018

- Fiscal year 2017: Wind energy booms

- First quarter of 2018: Growth in rural development loans, lower new business volume in wind energy

 

Annual Report 2017

The Board of Managing Directors of Landwirtschaftliche Rentenbank expressed its satisfaction with the bank’s performance in 2017 at the annual press conference in Frankfurt am Main. “Even during the current period of low interest rates, Rentenbank’s business model has proved its stability and continuity. Overall, our new promotional business remained at a high level. In particular, our wind energy financing enjoyed buoyant demand in rural areas,” said Horst Reinhardt, Spokesman of the Board of Managing Directors of Germany’s Development Agency for Agribusiness and Rural Areas.

In the fiscal year 2018, by contrast, demand for the bank’s promotional loans has been slower so far. A decline in wind energy financing as well as in the Agriculture promotional line could not be offset by significant growth in the Rural Development promotional line. In the first quarter of 2018, new business in special promotional loans totaled around EUR 1.6 billion and was thus below the prior year’s level (Q1 2017: EUR 2.0 billion). With EUR 3.7 billion in new issuance, Rentenbank was able to raise a third of its planned annual funding volume during the first three months of 2018.

New promotional business with EUR 11.9 billion stable at a high level in 2017

In 2017, Rentenbank’s new promotional business totaled EUR 11.9 billion (2016: EUR 12.4 billion) and thus once again reached a very high level. Of this volume, EUR 2.5 billion (2016: EUR 2.3 billion) was accounted for by registered bonds and promissory notes, EUR 1.9 billion (2016: EUR 2.5 billion) by securities, and EUR 7.4 billion (2016: EUR 7.7 billion) by special promotional loans. 

Special promotional loans: particularly strong demand for renewable energy

In the special promotional loan business, demand for renewable energy loans showed particularly strong growth, climbing to EUR 2.4 billion (2016: EUR 1.9 billion). The focus of this promotional line was on wind turbine financing which increased to EUR 1.7 billion (2016: EUR 1.5 billion). Of this volume, EUR 0.6 billion (2016: EUR 0.5 billion) was accounted for by new commitments for community wind farms.

In the Agriculture promotional line, Rentenbank finances mostly typical agricultural investments. The bank extended promotional loans of EUR 789 million (2016: EUR 814 million) for buildings (particularly livestock housing), EUR 558 million (2016: EUR 501 million) for machinery, and EUR 539 million (2016: EUR 626 million) for land purchases. The improved economic situation of many agricultural businesses resulted in a sharply reduced need for liquidity assistance loans. Overall, demand for financing decreased from EUR 2.4 billion to EUR 2.2 billion.

In 2017, Rentenbank committed EUR 1.8 billion to promote rural development (2016: EUR 2.4 billion). Within this promotional line, the bank finances primarily rural infrastructure projects, for example, through global refinancing agreements with the development agencies of the federal states.

New issuance: banks remain the leading group of investors

To refinance its promotional business, Rentenbank raised EUR 12.4 billion (2016: EUR 12.7 billion) in medium and long-term funding in the capital markets in 2017. Of this volume, 39 % (2016: 47 %) was placed with banks. Central banks and other official institutions were the second most important investor group. In 2017, their share was 34 %, a slight increase compared to the prior year (2016: 32 %).   

With a share of 57 % (2016: 32 %), EUR became Rentenbank’s largest source of funding in 2017, while USD accounted for only 19 % (2016: 50 %) of the issuance volume. AUD ranked third with a share of 10 % (2016: 4 %).

Balance sheet (HGB): steady growth in the share of special promotional loans

Total assets under HGB (German Commercial Code) stood at EUR 90.8 billion as of December 31, 2017 (December 31, 2016: EUR 86.3 billion). Since Rentenbank generally extends its promotional loans via other banks and savings banks in a competitively neutral way, loans and advances to banks make up a large proportion of the asset side of the bank’s balance sheet. As of year-end 2017, they amounted to EUR 60.5 billion (year-end 2016: EUR 57.8 billion), accounting for 67 % of total assets (2016: 67 %). The portfolio of special promotional loans continued to grow as disbursements exceeded redemptions. At year-end 2017, special promotional loans were valued at EUR 44.4 billion (2016: EUR 41.9 billion).

Securitized liabilities of EUR 76.9 billion (2016: EUR 70.0 billion) represent the largest item on the liability and equity side of the balance sheet. In 2017, they comprised medium term notes of EUR 53.2 billion (2016: EUR 49.8 billion), global bonds of EUR 12.0 billion (2016: EUR 14.0 billion), and euro commercial paper of 11.2 billion (2016: EUR 5.7 billion).

Pressure on operating profit

Due to the prevailing low interest rate environment, net interest income declined to EUR 305.6 million in 2017 (2016: EUR 318.7 million). At the same time, administrative expenses rose to EUR 69.3 million (2016: EUR 61.1 million), mainly driven by higher expenses for IT projects, personnel, and banking supervision. As a result, the operating profit before provision for loan losses and valuation (HGB) declined to EUR 223.8 million (2016: EUR 254.4 million). Within the framework of provision for loan losses, the bank’s capital was further strengthened by an increase in reported and hidden reserves.

Net income after provision for loan losses and valuation increased to EUR 61.0 million (2016: EUR 59.0 million). The distributable profit remaining after allocation to reserves amounted to EUR 15.3 million (2016: EUR 14.8 million). Rentenbank uses it fully for promotional purposes.

Promotional contributions virtually unchanged

In 2017, the promotional contributions of Germany’s development agency for agribusiness and rural areas totaled EUR 83.4 million (2016: EUR 84.2 million), including the distributable profit. It was used for interest rate reductions of special promotional loans, grants for the Research on Agricultural Innovation program as well as for other promotional purposes.

Strengthened capital base

The bank continued to strengthen its solid capital base. As of December 31, 2017, the Common Equity Tier 1 capital ratio in accordance with HGB was 27.8 % and the total capital ratio was 29.7 %. Starting from the fiscal year 2017, Rentenbank reports its financial results solely in accordance with HGB and no longer prepares its voluntary consolidated financial statements in accordance with IFRS. Consequently, these figures are comparable to those of the previous year only to a limited extent.

Key figures 2017 (PDF)


Service:

Landwirtschaftliche Rentenbank is Germany’s development agency for agribusiness and rural areas. Under its statutory promotional mandate, the bank extends low-interest loans for agriculture-related investments via local banks on a competitively neutral basis. Rentenbank provides funding for banks, savings banks, and local authorities related to rural areas. The appropriation of profits is also subject to the promotional mandate. The bank is a public law institution whose capital stock was formed by contributions paid by the German agricultural and forestry sectors. The bank is one of the few triple-A rated institutions in Germany and raises funds in the capital markets.

Forward-Looking Statements: This press release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of the Board of Managing Directors and information currently available to it. These statements include, in particular, statements about our plans, strategies and prospects. Words such as “expects”, “anticipates”, “intends”, “plans”, “believes”, “seeks”, “estimates”, and similar expressions are intended to identify such forward-looking statements. These statements are not to be understood as guarantees of future performance, but rather as being dependent on factors that involve risks and uncertainties and are based on assumptions that may prove to be incorrect. Unless required by law, we shall not be obligated to update forward-looking statements after their publication.

 

This press release as PDF

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