TEXT-S&P summary: KfW

Wed Dec 19, 2012 6:23am EST

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(The following statement was released by the rating agency)

Dec 19 -

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Summary analysis -- KfW ------------------------------------------- 19-Dec-2012

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CREDIT RATING: AAA/Stable/A-1+ Country: Germany

Primary SIC: Commercial banks,

nec

Mult. CUSIP6: 48245A

Mult. CUSIP6: 48245R

Mult. CUSIP6: 48246U

Mult. CUSIP6: 48246W

Mult. CUSIP6: 500769

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Credit Rating History:

Local currency Foreign currency

12-Aug-1998 AAA/A-1+ AAA/A-1+

09-Feb-1996 AAA/-- AAA/--

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Rationale

The ratings on German state-owned development bank KfW are based on an explicit federal government guarantee for KfW's liabilities. In addition, KfW--an institution incorporated under German public law--benefits from the federal government's maintenance obligation (Anstaltslast), which requires the federal government to safeguard KfW's economic health and maintain its ability to operate and meet its obligations in a timely manner. Standard & Poor's Ratings Services believes that there is an "almost certain" likelihood that KfW would receive timely and sufficient extraordinary support from the government of the Federal Republic of Germany (AAA/Stable/A-1+) in an event of financial distress.

In accordance with our criteria for government-related entities (GREs), we are of the view that KfW has:

-- A "critical" role in implementing the federal government's economic policies, as KfW is Germany's flagship development bank and ranks among the largest financial institutions in Germany. The government uses KfW to help achieve its economic policy goals, for instance with subsidized loan programs; and

-- An "integral" link with Germany's central government and, to a lesser extent, the governments of the federal states. The Federal Republic of Germany owns 80%, and the regional states hold 20% of KfW. KfW has the status of a public law institution.

KfW reported total assets of EUR495 billion at year-end 2011, up 12% from 2010. On 30 Sept. 2012, total assets stood at EUR518 billion.

KfW issues debt in international capital markets and uses the proceeds through the commercial banking system to provide financing for infrastructure, small and midsize enterprises (SMEs), housing, and environmental projects in Germany and, to a limited extent, elsewhere in Europe. In 2011, KfW's medium- and long-term funding reached nearly EUR80.0 billion, and we expect similar funding volumes in 2012. In 2013, KfW expects to issue EUR70 billion-EUR75 billion. Abroad, KfW is responsible for Germany's official financial cooperation with developing countries as well as export and project financing. KfW's legally independent subsidiary KfW IPEX-Bank GmbH (AA/Stable/A-1+) handles export and project financing.

KfW played a pivotal role in implementing the German government's fiscal stimulus packages in 2009/2010, and it assumed EUR15.2 billion of Germany's contribution for the loan package from eurozone countries to the Hellenic Republic (Greece; (B-/Stable/B). The German government is guaranteeing KfW's loans to Greece.

In 2011, KfW's operating profit was EUR1.9 billion before valuations, down from EUR2.3 billion in 2010, and net income was EUR2.1 billion. In the first nine months of 2012, operating profit before valuations stood at EUR1.7 billion (up from EUR1.4 billion for the corresponding period of 2011), and net income at EUR1.7 billion (from EUR1.8 billion).

KfW's shareholder equity-to-assets ratio remained at 3.6% in 2011. The core capital ratio increased to 15.4% in 2011, compared with 12.4% a year earlier.

The KfW group's total new lending decreased to EUR70.4 million in 2011, reflecting the phasing out of the fiscal stimulus program. Over the first nine months of 2012, net new lending stood at EUR48.2 billion, a 9% decline over the corresponding period of 2011.

Outlook

The stable outlook reflects that on the Federal Republic of Germany. We believe that the explicit and implicit support from the federal government will continue, underpinned by the European Commission's confirmation of Germany's Anstaltslast and the federal government's guarantee of KfW's obligations as stipulated under a 2002 agreement.

Related Criteria And Research

-- KfW IPEX-Bank GmbH, May 9, 2012

-- 2009Enhanced Methodology And Assumptions For Rating Government-Related Entities, June 29, 2009

-- Rating Sovereign-Guaranteed Debt, April 6, 2009

-- Principles Of Corporate And Government Ratings, June 26, 2007

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