Business development forecast
The Bank’s loan loss provisions were little changed in the 2024 financial year. Rentenbank expects that the loan loss provisions will be subject to only minor changes in 2025. We do not expect any significant changes in the volume-weighted average credit rating of the loan portfolio, which should therefore remain at AA+. This expectation is supported by the small, only 8.0% unsecured portion of the Bank’s lending portfolio, coupled with the steady performance and consistently good credit ratings of the Bank’s business partners. Rentenbank continually monitors the business development of its business partners. There was no need to recognise specific valuation allowances (SVAs) in the lending portfolio in 2024 and it is not planned to recognise any SVAs in 2025 either.
Annual and five-year budget plans are prepared for the purpose of forecasting the Bank’s future financial position, cash flows, and financial performance. These budget plans cover the planned development of new loans, existing loans, capital, income and costs, as well as adverse scenarios. They also include the planned development of regulatory ratios and the anticipated development of the Bank’s risk-bearing capacity. The forecasts offered in the following refer to the budget plan for 2025.
Budget plan for the 2025 financial year
According to the current budget plan, in the Promotional Activity segment the average volume of new promotional loans is expected to be modestly lower and the net interest rate spreads for new promotional loans are expected to be moderately lower than in the previous year. And because the planned spreads on new promotional loans are narrower than the spreads on promotional loans maturing in 2025, the net interest income of the Promotional Activity segment is expected to be moderately lower in 2025.
Special promotional loans will continue to be the focus of the Bank’s lending activity. Rentenbank plans to grant new promotional loans totalling EUR 5.2 billion in 2025. However, the economic environment and investment propensity are rather weak at the present time.
In the Promotional Activity segment, the portfolio of securities, registered bonds, and promissory note bonds in 2025 is expected to be moderately above the level of 2024.
Already in 2022, Rentenbank’s offering of promotional loans to finance start-ups related to the Bank’s promotional mandate was expanded to include investments in venture capital funds. Commitments of an amount in the triple-digit millions have already been made. We are planning to make further investments of an amount in the mid-double-digit millions in 2025.
In the Capital Investment segment, Rentenbank expects that interest income in 2025 will be well above the level of the preceding year, mainly because reinvestment returns are expected to be significantly higher than the returns on maturing securities, and also in view of the expected investment returns on newly allocated funds.
The net interest income of the Treasury Management segment in 2025 should be modestly higher than in the preceding year because we expect higher income from collateralised money market transactions, among other things.
Modestly lower net interest income in total is expected from the three operating segments in 2025.
The administrative expenses planned for 2025 should be above the level of the preceding year particularly due to further investments in IT security and IT infrastructure and the implementation of new regulatory requirements. In view of the anticipated development of income and costs, a moderately lower operating result before loan loss provisions and valuation effects is expected in 2025. Despite the lower operating result, Rentenbank will still be able to fund the planned promotional activities without restriction from its current income.
The cost-income ratio will probably be moderately higher due to modestly lower income and higher administrative expenses.
Rentenbank’s ESG ratings are expected to be at about the same levels at least in 2024.