Financial Report 2020 As a bank committed to responsibility, KfW promotes sustainable prospects for people, companies, the environment and society. KfW is one of the world’s leading promotional banks. It applies its decades of experience to improve economic, social and environmental living conditions across the globe on behalf of the Federal Republic of Germany and the federal states. In the Covid year 2020, KfW recorded a promotional business volume of EUR 135.3 billion. Of this total, EUR 50.9 billion were provided for measures to mitigate the economic impact of the coronavirus pandemic in Germany and abroad. KfW has no retail branches and does not hold any customer deposits. To fund its business activities, KfW raised EUR 66.4 billion in the international capital markets. As part of the KfW Special Programme 2020, it accessed additional funding sources via the Economic Stabilisation Fund and TLTRO III, thereby raising funds totalling EUR 52.4 billion. In Germany, KfW Group has offices in Frankfurt am Main, Berlin, Bonn and Cologne. Its global network includes around 80 local and representative offices. Key figures of KfW Group Promotional business volume 2020 2019 EUR in billions EUR in billions 135.3 77.3 Key figures of the income statement 2020 2019 EUR in millions EUR in millions Net interest income (before promotional expense) 2,601 2,484 Net commission income (before promotional expense) 584 512 Administrative expense (before promotional expense) 1,330 1,320 Operating result before valuation (before promotional expense) 1,855 1,677 Risk provisions for lending business –777 –174 Net gains/losses from hedge accounting and other financial instruments at fair value through profit or loss –412 –10 Net gains/losses from securities and investments and from investments accounted for using the equity method 25 10 Operating result after valuation (before promotional expense) 691 1,503 Net other operating income or loss –2 46 Profit/loss from operating activities (before promotional expense) 688 1,549 Promotional expense 88 159 Taxes on income 76 23 Consolidated profit 525 1,367 Consolidated profit before IFRS effects 633 1,447 Cost-income ratio (before promotional expense)1) 41.8% 44.0% 1) Administrative expense (before promotional expense) in relation to adjusted income. Adjusted income is calculated from net interest income and net commission income (in each case before promotional expense). Key figures of the statement of financial position 31 Dec. 2020 31 Dec. 2019 EUR in billions EUR in billions Total assets 546.4 506.0 Volume of lending 543.1 486.2 Volume of business 673.8 610.7 Equity 31.8 31.4 Equity ratio 5.8% 6.2% Key regulatory figures 31 Dec. 2020 31 Dec. 2019 EUR in billions EUR in billions Risk position 124.2 138.8 Tier 1 capital 29.9 29.5 Regulatory capital 30.1 29.5 Tier 1 capital ratio 24.1% 21.3% Total capital ratio 24.3% 21.3% Employees of KfW Group1) 2020 2019 7,382 6,705 1) Average number of employees during the financial year Contents Letter from the Executive Board 4 Executive Board, Directors and Managing Directors of KfW Group 16 Report of the Board of Supervisory Directors 17 Members and tasks of the Board of Supervisory Directors 20 Corporate Governance Report 22 Group management report 28 Basic information on KfW Group 30 Economic report 35 Risk report 48 Forecast and opportunity report 76 Declaration of compliance 83 Non-financial statement 83 Consolidated financial statements 85 Consolidated statement of comprehensive income 88 Consolidated statement of financial position 89 Consolidated statement of changes in equity 90 Consolidated statement of cash flows 92 Notes 95 Attestations 207 Statement by the Executive Board 208 Independent auditor’s report 209 The figures in tables were calculated exactly and added up. Figures presented may not add to totals because of independent rounding. Actual zero amounts and amounts rounded to zero are presented as EUR 0 million. Letter from the Executive Board Fast and effective support CRISIS AID EUR 50.9 billion for short-term coronavirus aid measures in Germany and abroad 4 | KfW Financial Report 2020 Letter from the Executive Board Dr Günther Bräunig Letter from the Executive Board Dear readers, demonstrated what special value a promotional system that has been developed over many In the course of its seven decades of existence, decades has for our society in times of crisis. KfW has helped overcome crises time and Alongside our fight against the impacts of the again. The coronavirus year 2020 will go down pandemic, we have not wavered in our commit- in KfW’s history as a time of unprecedented ment to sustainable development, digitalisation challenges for our financial, human and techni- and innovation. cal resources. This extraordinary year has also KfW Financial Report 2020 Letter from the Executive Board | 5 Tackling challenges PROMOTION SYSTEM Loans, grants and other financings totalling EUR 106.4 billion for one million beneficiaries in Germany 6 | KfW Financial Report 2020 Letter from the Executive Board PROMOTION SYSTEM Dr Ingrid Hengster Commitments in 2020 At EUR 16.6 billion, the commitment volume in the Export and project finance business sec- In the year 2020, the total volume of business tor was significantly less than in the record grew to a record high EUR 135.3 billion. KfW year 2019 because of the global coronavirus committed around one million loans, grants crisis but remained within the range of the pre- and other financings in the amount of vious years. Commitments in the KfW Capital EUR 106.4 billion in Germany alone. The SME business sector amounted to a total of Bank & Private Clients business sector contrib- EUR 871 million in 2020, including commit- uted the most to this growth. Driven by KfW’s ments made under the German Federal coronavirus aid, its commitment volume rose Government’s coronavirus package of meas- nearly two and a half-fold to EUR 86.3 billion. ures for start-ups. In spite of the pandemic, The promotional programmes in the area of commitments under the ‘ERP Venture Capital energy-efficient construction and refurbishment Fund Investments’ programme were increased in the housing segment also made a strong as planned by around 19% to EUR 184 million. contribution, with commitments climbing The business sector Promotion of developing 140% to EUR 26.8 billion. A major success was countries and emerging economies increased the grant scheme launched in late November its business volume by 16% to EUR 12.4 billion. to promote the installation of charging infra- Some EUR 11 billion of this amount was structure for electric cars on private premises. accounted for by KfW Development Bank and For this, KfW approved around 137,000 grant EUR 1.4 billion by DEG. applications by the end of the year. KfW Financial Report 2020 Letter from the Executive Board | 7 Taking reponsibility ANNUAL REVIEW Promotional business volume at historical high of EUR 135.3 billion due to coronavirus aid programmes 8 | KfW Financial Report 2020 Letter from the Executive Board Bernd Loewen Our result in 2020 This was caused by net charges from risk pro- visions for lending business in the sum of The global coronavirus pandemic has had a EUR 777 million and a negative contribution of substantial impact on KfW’s income, financial the equity investment portfolio in the amount position and assets. With a consolidated profit of EUR 281 million. IFRS effects from hedging of EUR 0.5 billion, the earnings position there- in the amount of EUR 109 million weighed fore was much lower than in the previous year additionally on the valuation result. (EUR 1.4 billion). By contrast, the operating result before valuation (before promotional Consolidated total assets rose by expense) was EUR 1.9 billion as a result of EUR 40.4 billion to EUR 546.4 billion in finan- higher net interest and commission income cial year 2020. This is mainly the result of and nearly unchanged administrative expenses, increased net loan receivables under the exceeding both the previous year’s level KfW Special Programme 2020. (2019: EUR 1.7 billion) and expectations. The valuation effects of the coronavirus pandemic weighed on the valuation result, reducing consolidated profit by EUR 1.2 billion (2019: EUR -0.2 billion). KfW Financial Report 2020 Letter from the Executive Board | 9 Establishing effective aid programmes COOPER ATION Efficient collaboration between Federal Government, KfW and financing partners, to quickly implement aid measures 10 | KfW Financial Report 2020 Letter from the Executive Board Dr Stefan Peiß KfW coronavirus aid factor was the performance capability of our IT systems, which were indispensable for the When the severe economic impact of the automated processing of a large number of coronavirus pandemic became foreseeable at loan applications. This shows that the modern- the end of the first quarter of 2020, we suc- isation of our IT infrastructure has borne fruit. ceeded within a very short time in setting up By the end of the year, KfW had committed an effective support programme. There were more than 100,000 loans in a volume of around only a few days between the announcement EUR 46 billion. Small and medium-sized busi- of KfW’s coronavirus aid and the start of nesses were the recipients of 97% of all applications. This would not have been pos- commitments. KfW’s coronavirus aid has thus sible without the very efficient collaboration effectively strengthened the backbone of the between the Federal Government, KfW and German economy. the financing partners. Another decisive KfW Financial Report 2020 Letter from the Executive Board | 11 Automating processes DIGITA LISATION Efficient IT systems were able to manage 100,000 loan applications by the end of the year 12 | KfW Financial Report 2020 Letter from the Executive Board Melanie Kehr Agenda DNA a climate-neutral economy.