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Rentenbank funding plans for 2022 amount to EUR 11 billion

Rentenbank - scheduled funding volume 2021

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Germany's development agency for agribusiness and rural areas

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Rentenbank funding plans for 2022 amount to EUR 11 billion

16 December 2021

Frankfurt. For 2022, Landwirtschaftliche Rentenbank expects its funding volume with maturities of more than two years to be around EUR 11 billion.

Rentenbank Schriftzug

The focus will be on benchmark bonds denominated in euros and US dollars

Germany’s development agency for agribusiness and rural areas intends to raise up to 50% of its medium-term and long-term funding through benchmark bonds denominated in euros and US dollars. These strategic issuances are to be supplemented by further liquid issuances and private placements in various currencies, specifically euros, US dollars, pound sterling and Australian dollars.

“The transition to a climate-neutral economy and rising social requirements are creating an enormous need for investment within the agricultural sector. We therefore consider it likely that Rentenbank will be involved in further federal programs focusing on the transformation of the agricultural sector in the coming years. Our planning takes into account the potential increase in the level of required funding that this will entail,” says Nikola Steinbock, designated Chairwoman of the Management Board at Rentenbank as of January 1, 2022. “With regard to the financial instruments that will be used to raise funds, our primary objective in 2022 will once again be to increase the volume of green bond issuance.”

 

Euro most important issuance currency in 2021

In the year to date, Rentenbank has raised around EUR 10.7 billion in the capital markets. The funding activities included two issues of euro benchmark bonds with maturities of five and ten years. The five-year euro benchmark bond, which was issued as a green bond, contributed to the further expansion of the green bond curve. The average maturity of the issuances was 6.5 years (2020: 7.3 years).

Rentenbank raised funding in seven currencies. Issuances denominated in US dollars accounted for 25% of the total volume (2020: 47%) while the proportion of placements denominated in euros increased to 62% (2020: 42%). The proportion of issuances in pound sterling remained almost unchanged at 4% (2020: 5%).

 

US dollar dominant in the ECP Programme

Rentenbank issued notes with maturities of up to 364 days in six different currencies under its Euro Commercial Paper Programme (ECP Programme). The US dollar remained the most important issuance currency in the programme with a share of 71%. The average ECP Programme utilization was EUR 10.8 billion (2020: EUR 7.3 billion).

 

 

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

This press release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of the Management Board and information currently available to it. These statements include, in particular, statements about our plans, business 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 obliged to update forward-looking statements after their publication.

 

This press release as PDF

Rentenbank first half 2021 - robust demand for loans in the Agriculture and Renewable Energy promotional lines

11 August 2021

Frankfurt. Rentenbank saw a significant increase in demand for promotional loans in its Agriculture promotional line in the first six months of 2021. This can be attributed to the Agriculture Investment Programme which Rentenbank set up on behalf of the Federal Ministry of Food and Agriculture (BMEL). The programme combines special promotional loans for agriculture with grants from the BMEL for investments in environmentally and resource friendly technologies.

Rentenbank Schriftzug

“The agricultural sector is facing up to the key challenges of land cultivation which uses as few resources as possible as well as increased efforts to protect the environment and climate and to improve biodiversity. That’s why we are so pleased that the uptake of the federal programme set up for these purposes has been so good. We are using our established infrastructure to support agricultural enterprises in setting their requisite course,” said Horst Reinhardt, Chairman of the Management Board at Rentenbank.

Significant demand for promotional loans for machinery; demand for wind power financing almost tripled
 

In the first half of 2021, the demand for loans in the Agriculture promotional line increased strongly due to the newly launched Agriculture Investment Programme by a third to EUR 1,301 million (EUR 986 million in 2020, hereinafter, figures in brackets refer to the respective prior-year period or date). As a result, there was particularly strong demand for the funding of agricultural machinery. A share of around 40% of new business in this promotional line went to machinery.

New business in promotional loans in the Renewable Energy promotional line also increased sharply by about a third to EUR 443 million (EUR 341 million). The introduction of a new type of loan which has a fixed interest rate over 10 years in September 2020 was the contributing factor. Funding for wind power almost tripled as a result from EUR 109 million to EUR 291 million during the reporting period.

The COVID-19 pandemic had much less of an impact on large sections within agriculture than in other economic sectors. This was reflected in the demand for loans in Rentenbank’s Liquidity Assistance programme which had been opened to affected agricultural, horticultural and viticultural companies. In the first half of 2021, the volume of loans was EUR 19.1 million (EUR 18.1 million).

By contrast, new business in the Agribusiness promotional line fell. Due to a drop in demand for machinery and operational equipment, it was at EUR 432 million (EUR 540 million).

New business in the Rural Development promotional line also contracted in the first half of 2021 to EUR 587 million (EUR 1,124 million). This is due to the fall in demand by the federal states’ development banks (Landesförderinstitute) for global loans from Rentenbank, which typically are subject to significant fluctuations during the course of a year.

Overall, new business in promotional loans in the first six months of 2021 amounted to EUR 2.9 billion, which was below the level of the first six months of 2020 (EUR 3.1 billion). In contrast, the number of approved loans increased by 54% to 13,432 (8,724) due to the high demand for promotional loans from the federal programmes.

The euro becomes the main currency of issuance

In order to fund its promotional activities, Rentenbank raised funds on the capital markets with maturities of more than two years in the first six months of 2021 in the amount of EUR 6.5 billion (EUR 6.9 billion). As such, the Bank already achieved more than half of its planned issuance volume of EUR 11 billion for 2021. The most important currency of issuance was the euro. Its share of the funding volume increased to 51% (25%). This comprises a 10-year green bond amounting to EUR 1 billion. The share of US dollars fell to 40% (56%). Commercial banks and central banks continued to be the most important investors with a 50%-share (51%) and a 24%-share (37%) of the funding volume respectively.

Operating profit decreases

Operating profit before provision for loan losses and valuation amounted to EUR 94.1 million in the first half of 2021, below the corresponding level of the previous year of EUR 102.2 million. Besides slightly lower interest income, the drop in earnings is essentially caused by higher administrative costs in the amount of EUR 42.6 million (EUR 35.9 million). The increase in costs can be attributed to the execution of the federal programmes, the leasing of an interim office building since October 2020 and expedited IT projects. Counted against this increase are reimbursement claims of approx. EUR 4 million for the execution of the federal programmes which are booked under other operating income.

Capital ratios up at a high level

Rentenbank’s capital ratios based on the EU Capital Requirements Regulation (CRR) remained strong to the 2021 half-year end. The Tier 1 capital ratio was at 31.8% (31.0%) and the total capital ratio at 32.1% (31.5%).

 

Key figures - first half 2021 (PDF)

 

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

 

This press release as PDF

Rentenbank - significant demand for promotional loans

28 April 2021

- New impetus from programmes for agriculture and forestry, instigated by the Federal Ministry of Food and Agriculture (BMEL)

- Green Bond Benchmark makes its debut

- Rentenbank enhances its resilience despite pandemic

Rentenbank Annual Report 2020

Frankfurt. Rentenbank saw sustained high demand for promotional loans in 2020. New business in low interest special promotional loans, which Rentenbank provides to end borrowers via their local banks on a competitively neutral basis (on-lending), remained steady at EUR 6.0 billion. Overall, Rentenbank increased its new promotional business by 3.5% to EUR 11.2 billion (EUR 10.8 billion in 2019; hereinafter, figures in brackets refer to the respective prior-year period or date). The development agency created momentum for sustainable investments by setting up two programmes for agriculture and forestry commissioned by the Federal Ministry of Food and Agriculture (BMEL). Promoting innovation also experienced significant growth.

‘Agribusiness is not only of systemic importance during times of crisis but also an important problem solver in our quest for a sustainable economy and society. We are providing the solid financial conditions in which much needed innovation and investment can be made,’ said Horst Reinhardt, Chairman of the Management Board at Rentenbank.

2020 fiscal year sees new business in special promotional loans remaining stable

With new business in special promotional loans of EUR 2.1 billion (EUR 2.2 billion), the Agriculture promotional line remained Rentenbank’s most important promotional line in 2020. While there was increased demand for funding for machinery, the demand for special promotional loans for buildings and land purchases slumped.

Rentenbank’s Rural Development promotional line experienced growth. New business here increased by 7.1% to EUR 1.9 billion (EUR 1.7 billion), as the federal states’ development banks (Landesförderinstitute) called for more global loans from Rentenbank. These loans are mainly used for financing infrastructure projects in rural areas.

New business in the Agribusiness promotional line reached EUR 1.1 billion (EUR 1.2 billion). While funding for machinery was in higher demand too in this line, the demand for special promotional loans for buildings and operational equipment lessened.

In the Renewable Energy promotional line, new business was steady at EUR 0.9 billion (EUR 0.9 billion). A greater demand for wind power financing compensated for a decline in loans for photovoltaic and biogas power plants.

Rentenbank launches BMEL programmes

In March 2020, Rentenbank opened its Liquidity Assistance Programme to support enterprises operating within agribusiness which had been adversely affected by the COVID-19 pandemic. From April 2020, Rentenbank has additionally been providing guaranteed liquidity assistance loans on behalf of the Federal Ministry of Food and Agriculture (BMEL). Overall, Rentenbank provided EUR 55.2 million in Liquidity Assistance loans (EUR 10.2 million). Rentenbank also started the ‘Grants towards Digitalisation and Technology for Sustainable Forestry Management’ programme on behalf of BMEL in November 2020. The aim is to maintain forests and make adjustments for climate change. ‘Through this programme, we are supporting a sector which is both suffering from climate change and making a major contribution to climate protection,’ said Horst Reinhardt.

Promoting Innovation expanded significantly

Within Promoting Innovation, the number of projects funded and the promotional volume increased significantly. In the year under review, Rentenbank supported 90 project partners with grants in the amount of EUR 24.1 million. In 2019, the Bank supported 61 project partners with EUR 14.4 million. Furthermore, it approved additional funds in the amount of EUR 2.7 million (EUR 0.6 million) for on-going projects which had been initiated in previous years.

Q1 2021: huge demand for BMEL Agriculture Programme

New business in the Agriculture, Forestry and Renewable Energy promotional lines performed very well in the first quarter of 2021. The two promotional programmes which Rentenbank is commissioned to implement by the BMEL provided for agriculture and forestry. There was a tremendous demand for the Agriculture Investment Programme which Rentenbank set up on behalf of the BMEL. The programme started in January 2021. A total of EUR 816 million is available for grants up to 2024. The aims are to promote more environmentally-friendly techniques for land cultivation, to protect the environment and climate and to improve biodiversity. The programme allows for a grant amounting up to 40% of the sum invested to be combined with a Rentenbank low-interest promotional loan to finance the remaining amount. In the first quarter of 2021, Rentenbank’s overall new business in low-interest promotional loans was at EUR 1.3 billion (EUR 1.6 billion), below the corresponding prior-year level. This drop was particularly due to typically volatile new business in the Rural Development line.

Launch of Rentenbank’s first Green Bond Benchmark attracts high demand

In order to fund its promotional loans, Rentenbank raised medium to long-term capital market funds in 2020 in the amount of EUR 11.4 billion (EUR 10.3 billion) on the capital markets. This comprises Rentenbank’s first public Green Bond in ‘benchmark’ format with an issuance volume of EUR 1.75 billion. It is backed by a loans portfolio in renewable energy which, at the point of issuance, comprised more than 2,000 wind power funding projects and around 21,500 photovoltaic projects. Rentenbank had previously issued Green Bonds as private placements.

In the first three months of 2021, Rentenbank raised EUR 4.8 billion in medium and long-term funds on the capital markets. This means that 44% of Rentenbank’s planned funding business has already been achieved for 2021.

Steady operating profit

Net interest income in 2020 was at EUR 296.9 million and thus around the prior-year level (EUR 300.6 million). This was despite the fact that DZ Bank did not pay a dividend, following the ECB’s recommendation to banks not to do so because of the uncertainty caused by the pandemic. Administrative expenses increased to EUR 75.9 million (EUR 72.9 million), primarily due to IT projects being expedited and increased personnel costs. Operating profit before provision for loan losses and valuation reached EUR 208.9 million, about the level of the previous year (EUR 210.1 million).

Rentenbank allocated EUR 175.4 million (EUR 177.6 million) to its contingency reserves. Net income increased from EUR 32.5 million to EUR 33.5 million. After allocating EUR 16.7 million to the principal reserve (Hauptrücklage), distributable profit, which Rentenbank also uses completely for promotional purposes, amounted to EUR 16.8 million, slightly above the previous year’s level of EUR 16.3 million.

Key indicators further improved

Rentenbank increased its Tier 1 capital ratio to 31.0% (30.1%) and the total capital ratio to 31.5% (31.1%) to year-end. ‘Despite the COVID-19 pandemic of 2020, we have made Rentenbank even more resilient. With a capital ratio of above 30%, a cost/income ratio of below 30% and a collateralisation ratio for our loans portfolio of over 90%, we were able to maintain the ‘perfect proportions’ of a development agency even in times of hardship,’ said Reinhardt in closing.

Key Figures 2020 (PDF)
Annual Report 2020 (PDF)

 

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

This press release contains forward-looking statements that are based on current expectations, estimates, forecasts and projections of the Management Board 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 required to update forward-looking statements after their publication.

 

This press release as PDF

News

Rentenbank Schriftzug

16 December 2021

Rentenbank funding plans for 2022 amount to EUR 11 billion

Rentenbank Schriftzug

11 August 2021

Rentenbank first half 2021 - robust demand for loans in the Agriculture and Renewable Energy promotional lines

Rentenbank Annual Report 2020

28 April 2021

Rentenbank - significant demand for promotional loans

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