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Fiscal year 2008: Positive promotional business trend in spite of financial market crisis - Rentenbank exceeds prior-year result

29 January 2009

In the fiscal year 2008, Landwirtschaftliche Rentenbank, Frankfurt am Main, Germany, expanded its promotional business activities while significantly improving earnings. In spite of the financial market crisis, the volume of promotional business grew by €4.4 billion to €63.5 billion (2007: €59.1 billion), while total assets as reported under the German Commercial Code (HGB, Handelsgesetzbuch) decreased only slightly. Net interest income and operating result climbed to new record levels both under HGB and IFRS as a result of the very favorable refinancing conditions that were temporarily available to issuers of highest credit quality. The Board of Management of Landwirtschaftliche Rentenbank is thus very satisfied with the performance of the promotional business in fiscal year 2008. "Our strategy, which is based on sustainability and stability, has proven its value in these difficult times full of uncertainties. As a promotional bank, we made an important contribution to stabilization during the financial market crisis." said Dr. Marcus Dahmen, spokesman of the Board of Management of the promotional bank for the agribusiness.

New financings, including renewals and interest rate adjustments, reached a total volume of €20.1 billion in 2008 (2007: €17.2 billion), of which €8.3 billion (2007: €7.1 billion) related to standard promotional loans for the agricultural sector and rural areas as well as to promotional loans for special purposes. Growth was mainly fuelled by special promotional loans, which are granted at particularly low interest rates. The volume of loans granted in this business segment rose by 48.1% to €4.0 billion (2007: €2.7 billion), with demand from farmers for financing of land purchases and farm buildings increasing in particular. In addition, the German federal state promotional banks (Landesförderinstitute) made increasing use of Rentenbank's products to refinance promotional activities in the agricultural sector. The share of renewals in new business volume amounted to €8.1 billion (2007: €5.6 billion).

As in the previous year, Rentenbank raised funds in the amount of €11.2 billion on domestic and international markets in order to refinance its medium and long-term lending business. The funding costs improved for almost all currencies and maturities in the first nine months. In the fourth quarter, however, political measures taken to manage the financial market crisis resulted in rising costs for issues. On the other hand, this also led to a reduction of measurement losses recognized under IFRS. In contrast to the trend in recent years, demand for registered securities issued by Rentenbank increased in the fourth quarter, since the demand from German insurance companies was particularly high. Accordingly, funds raised through domestic financial instruments tripled to €1.0 billion. Issues off the Euro Medium Term Note (EMTN) program accounted for €7.7 billion in fiscal year 2008 (2007: €7.9 billion). The issue volume of Global bonds registered with the U.S. Securities and Exchange Commission (SEC) remained unchanged at €2.0 billion.

Net interest income reached record levels under both HGB at €392.8 million (2007: €238.7 million) and IFRS at €353.1 million (2007: €199.5 million), mainly due to the excellent refinancing conditions. Operating profit before measurement effects, net of administrative expenses, also significantly exceeded prior-year levels under both HGB and IFRS. Under HGB, this figure grew by 74.2% to €350.4 million (2007: €201.2 million) and under IFRS by 43.6% to €210.1 million. Due to a net measurement gain, profit after measurement effects as calculated under IFRS amounted to approx. €570 million (2007: €46.9 million). According to IFRS regulations, measurement losses amounting to €-396.9 million (2007: €-76.1 million) were recognized directly in equity via the revaluation reserve and not in the bank's income. The Board of Management intends to account for the financial market crisis and the high volatility of the results under both IFRS and HGB by recognizing appropriate provisions for loan losses and increasing reserves, and expects net income under HGB to amount to €43.0 million (2007: €42.0 million). The Board plans to distribute €10.8 million of this figure (2007: €10.5 million) for promotional purposes.

Total assets (HGB) in fiscal year 2008 were also influenced by the financial market crisis. According to initial calculations, total assets amounted to €87.9 billion (2007: €88.8 billion), of which €53.3 billion (2007: €61.1 billion) accounted for loans and advances to banks. Since Rentenbank generally extends its loans via the borrowers' principal banks, loans and advances to customers, which amounted to €6.7 billion (2007: €1.6 billion), continue to play a minor role. The securities portfolio had a year-end volume of €27.7 billion (2007: €25.9 billion). Total capital as reported in the HGB balance sheet for fiscal year 2008 totaled €3.0 billion (2007: €2.9 billion), of which €1.1 billion (2007: €1.0 billion) are subordinated liabilities. Both the core capital ratio at 12.3% (2007: 10.6%) and the total capital ratio at 19.1% (2007: 16.5%) continue to well exceed the regulatory minimum requirements of 4% and 8%, respectively.

 

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