KfW’s ratings are driven by the strong and explicit linkages between KfW and the Federal Republic of Germany. KfW is the promotional bank of Germany, supporting the economic and policy objectives of the federal government, particularly focused on issues concerning the environment, globalization / technical progress and demographic change. In 2015, c. 37% of the bank’s new financing commitment was targeted in relation to the environment and around 40% of domestic business was targeted for SMEs.

As of H1 2016, total promotional business volume was around EUR 36.2bn, of which EUR 26.7bn related to domestic business and EUR 9bn to international financing. Strong demand in particular for the financing of energy-efficient residential construction and energy efficiency projects at companies contributed to strong demand for domestic promotional business. Demand for general corporate finance, however, remained down year-on-year on account of reluctance among Germany companies to invest.

KfW does not seek to maximise profitability, but aims for a level of profitability which enables it to fulfil its promotional objectives. Nevertheless, the bank has been highly profitable over the past years, strongly supported by extremely low provisioning needs.

The rating agency noted positively that KfW was complying with significant parts of bank regulatory law, including capital and risk management requirements, despite not being regulated as a credit institution. 

KfW funds itself almost entirely through the capital markets as it is not permitted to accept deposits. However, due to the explicit and direct statutory guarantee and institutional liability (Anstaltslast) from the Federal Republic KfW is able to continuously access market funding at affordable costs.
 

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