“As in other sectors in Germany, too little is being invested in agriculture. The latest results of our Rentenbank Agriculture Climate Indicator show that pessimistic expectations are the main reason why agricultural enterprises are reluctant to make new investments. This problem must be jointly tackled by government, trade associations, and financial institutions”, said Nikola Steinbock, Chairwoman of Rentenbank’s Management Board. “We at Rentenbank are doing our part by continually expanding the range of our promotional activities in order to help agricultural enterprises make their way to the future”. As the latest example, Rentenbank has been offering a subsidy programme, the “Action Programme Natural Climate Protection” (ANK), on behalf of the German Federal Ministry for Environment, Nature Conservation, Nuclear Safety, and Consumer Protection (BMUV) since July of this year. The purpose of this programme is to promote investments in machinery and equipment that enhance the carbon storage function of soil and increase biodiversity in agricultural areas.
“In March, we added a new area, ‘Rebuilding Stables to Improve Animal Welfare’, to our ‘Future areas in focus’ programme. We have already committed more than EUR 6.5 million to this, the seventh future area, which has therefore proved to be a successful addition to our broad portfolio of instruments to promote investments in the future”, Nikola Steinbock said.
Declines in nearly all segments of special promotional loans
The volume of new special promotional loans granted fell from EUR 3.2 billion in the first half of last year to EUR 1.5 billion in the first half of 2024, representing a 51.4% decline. The volume of new loans granted in the Agriculture promotional line declined by 17.2% to EUR 663 million (H1 2023: EUR 801 million) due to the expiration of the Investment and Future Programme for Agriculture, which led to a decrease in machinery financing. Also in the Agribusiness promotional line, the volume of new loans granted, at EUR 176 million, was 57.5% below the level of the year-ago period (EUR 415 million). The volume of new loans granted in the Rural Development promotional line declined by 61% to EUR 623 million (EUR 1.6 billion).
The high EU reference rate established at the start of the year, coupled with the EU state aid rules, leaves no room for Rentenbank to offer competitive market terms without subsidies. Consequently, commercial banks are currently resorting to other funding sources to a greater degree to finance non-subsidy-eligible projects such as renewable energy plants remunerated under the German Renewable Energy Act. That is why Rentenbank registered the sharpest decline in its Renewable Energy promotional line, in which the volume of new loans granted fell by 88% to EUR 41 million (EUR 339 million).
Continued efforts to promote innovation
Rentenbank promotes innovation in all phases, from development to practical introduction and dissemination of forward-looking methods and products. The promotional programme launched together with the German Federal Ministry of Food and Agriculture (BMEL) in 2021 supports young ag-tech and food-tech companies in the early financing stages. As part of its venture capital (VC) activities, moreover, Rentenbank has invested a total amount of EUR 33.7 million in the VC funds Blue Revolution Fund, Nucleus Capital, Oyster Bay Capital, Extantia, and Forbion.
Also in collaboration with the BMEL and the Frankfurt-based TechQuartier, Rentenbank has further strengthened the position of the ag-tech and food-tech start-up programme “Growth Alliance” in the current year. Under this programme, which now features four different offerings, Rentenbank provides targeted support to start-ups for their phase-specific challenges in all stages of the lifecycle. As a cooperation partner, Rentenbank also supports numerous initiatives and programmes to foster innovative and sustainable ideas and networking within the sector.
US dollar is the most important issuance currency
To fund its promotional activities, Rentenbank raised EUR 4.9 billion (EUR 7.4 billion) in medium- and long-term funds in the international capital markets in the first half of 2024. This amount corresponds to around half of the total issuance volume of EUR 10 billion planned for the full year 2024. The most important issuance currency was the US dollar, which accounted for 53% (25%) of total funds raised. The euro’s share declined to 27% (65%). The largest investor groups were commercial banks, accounting for 53% (56%), and central banks, accounting for 35% (31%) of the total issuance volume.
Operating result below the level of the year-ago period
The operating result before provisions for loan losses and valuation effects amounted to EUR 97.5 million in the first half of 2024, below the level of the corresponding year-ago period (EUR 103.9 million). This decline resulted mainly from the EUR 10.0 million increase in administrative expenses, which was driven by higher IT investments and a higher staff count. Nevertheless, this result exceeded our expectations by a wide margin thanks to the persistently high level of interest rates, which led to a high amount of net interest income.
Capital ratio and leverage ratio remain at high levels
At the end of the first half of 2024, Rentenbank’s capital ratios calculated on the basis of the EU Capital Requirements Regulation (CRR) remained at high levels. The Common Equity Tier 1 capital ratio came to 37.2% (31/12/2023: 31.3%) and the leverage ratio was 10.2% (31/12/2023: 10.3%).
Key figures - first half 2024 (PDF)
Background:
Landwirtschaftliche Rentenbank is Germany’s development agency for agribusiness and rural areas. Its promotional mandate covers not only agriculture and forestry, but also the entire food value chain, the increased use of energy from renewable sources, and the promotion of bio-economy solutions. Rentenbank attaches particular importance to the promotion of innovation, including research and development in universities, the promotion of start-ups, and the market introduction and practical use of new technologies and products. Rentenbank’s promotional instruments are subsidies and special promotional loans. The special promotional loans are granted via the local banks of the ultimate borrowers on a competitively neutral basis. Rentenbank provides funding to banks, savings banks, and local authorities operating in rural areas. The Bank is a federal institution under public law whose capital stock was formed by contributions from the German agriculture 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. As one of the few triple-A rated institutions in Germany, Rentenbank raises funds in the capital markets.
This press release contains certain forward-looking statements that are based on current expectations, estimates, assumptions, and projections of the Management Board and on the information currently available to it. These statements particularly include statements about our plans, strategies and prospects. Such forward-looking statements are identified by words such as ‘expects’, ‘anticipates’, ‘intends’, ‘plans’, ‘believes’, ‘seeks’, ‘estimates’ and similar expressions. These statements are not to be understood as guarantees of future performance; instead, they are dependent on factors that involve risks and uncertainties and are based on assumptions that may prove to be incorrect. Except where required by law, we assume no obligation to update forward-looking statements after the publication of the present press release.
