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Rentenbank starts the year 2007 with a high promotional volume and favourable cost and profitability development

25 April 2007

  • First quarter 2007: Demand for promotional loans at a high level; brisk issuing activity; profitability improved once again
  • Business year 2006: Medium and long-term promotional loan portfolio grew by 5.3 %; operating result and net interest income slightly above the previous year; cost-income ratio at 17.2 %

Dr. Uwe Zimpelmann, Chairman of the Board of Managing Directors of Landwirtschaftliche Rentenbank, the promotional bank for agriculture and rural areas based in Frankfurt am Main, presented a positive balance sheet for both the financial year 2006 and the first quarter 2007. At the press conference, Uwe Zimpelmann introduced the business activities and the annual accounts for 2006, stating: "After the very good results of the financial year 2006, the positive development of promotional activities and profitability carried on continuously in the first quarter of 2007." Demand for promotional lending for agriculture and rural areas once again performed dynamically in the first quarter. Accordingly, the portfolio of medium and long-term promotional loans in the balance sheet increased to € 36.7 bn (34.5) at the end of the first quarter. Of this, € 12.1 bn (10.8) concerned special loans granted at particularly favourable interest rates for specific promotional purposes and assistance measures. Total new business for medium and long-term promotional lending including securitised lending reached € 3.6 bn (3.6) for the first quarter of 2007. Uwe Zimpelmann was also very satisfied with the promotional bank's new issue business: "In the first three months, we have already been able to raise € 5.4 bn (4.7) of the total anticipated requirement for medium and long-term issues (maturities of more than two years) of € 11 bn for 2007." With an operating result of € 51.3 m (46.4), profitability once again performed better than in the first quarter of the previous year, not least due to further favourable funding conditions. "This positive trend should continue as the year progresses", stated Uwe Zimpelmann. "We are therefore confident that we will once again achieve the good results of 2006 which will enable us to extend our promotional activities for agriculture and rural areas when required."

Net profit for the year 2006: € 10.3 m for the promotion of agriculture

In the financial year 2006, Rentenbank reached an operating result before net valuation adjustments of € 185.2 m (182.1). Though general administrative expenses grew slightly to € 36.9 m (35.8), cost-income ratio at 17.2 % (17.1) remained on a very low level due to improved profitability. In the profit and loss account 2006, net income for the year was reported at € 41 m (40). After allocating € 30.75 m (30) to revenue reserves, net profit for the year amounted to € 10.25 m (10). This amount will be used for promoting agriculture in the public interest, one half of which is allocated to the Special Purpose Fund and the other half to the Promotional Fund. The main emphasis of the Promotional Fund in 2006 was once again the promotion of agriculture-related research and advanced training for agricultural professionals.

Portfolio of medium and long-term promotional loans 5.3 % above the previous year's level

In 2006, total assets grew by 7.1 % (6.8) to € 82.5 bn (77). The portfolio of medium and long-term promotional loans was valued at € 36 bn (34.2) at year end, 5.3 % (6.2) above the previous year's level. The portfolio of special loans increased by 14.2 % (18.6) to € 11.9 bn (10.5) and showed again an above-average growth. Accordingly, the share of these special loans which enjoy particularly favourable interest rates and are offered for specific promotional purposes and assistance measures increased to 33.1 % (30.6) of total medium and long-term promotional lending. The securities portfolio also contributed to the growth in total assets. This balance sheet item grew by 7.9 % (16.8) to € 21.8 bn (20.2) due to higher new business in securitised lending. Total new business including securitised lending, loan commitments and prolongations amounted to € 14.5 bn (12.9) in 2006. € 2.7 bn (2.8) thereof accounted for special loans and € 4.2 bn (3.4) for standard loans promoting agriculture and rural areas.

Continuing favourable conditions for issue activities in international financial markets

In the financial year 2006, the high-level issue activity led once again to an above-average growth of securitised liabilities on the liability side of the balance sheet: At € 65.5 bn (57.4), this item was 14.1 % (7.3) higher than in the previous year. Liabilities to banks became less important again and were valued at € 9.4 bn (12.3) at year end. In total, medium and long-term external funds amounted to € 67.5 bn (62.6) on the balance sheet date.

During the financial year 2006, the promotional bank raised new capital market funds with medium and long-term maturities of € 9.9 bn (10), thereof € 5.5 bn (5.7) within the framework of the Euro Medium Term Note Programme (EMTN). EMTN issues were also important within the short-term issuance programme. Including money-market related and short-term issues, the agency placed € 10.7 bn (10.9) through the EMTN Programme. From the total medium and long-term issues, € 3 bn (2.6) was raised through three global bonds registered with the U.S. Securities and Exchange Commission (SEC). Furthermore, an amount of € 0.8 bn (1.2) was raised through the Australian Dollar Medium Term Note Programme. Short-term funding was carried out mainly through the Euro Commercial Paper Programme (ECP) with a share of 94 %. At an average programme utilisation of € 4.4 bn (3.5), € 23 bn (15.8) was issued under the ECP Programme. Newly raised external funds in 2006 including money-market related and short-term funding reached a total amount of € 38.9 bn (31).

Total capital increases to € 2.8 bn (2.6)

Total capital in the balance sheet 2006 reached € 2,842.7 m (2,624.7). Thereof, € 1,071.2 m (975) accounted for subordinated liabilities. € 91 m was allocated to the fund covering general banking risks which increased to € 981 m (890). Due to allocating € 30.8 m from the net income for the year, revenue reserves increased to € 655.5 m (624.7). The total capital ratio of 16.1 % (15.9) and the core capital ratio of 10.2 % (10.1) slightly exceed the previous year's levels. Both figures are well above the legal requirement of 8 % and 4 %, respectively.

 

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.

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