Opportunities and risks

Additional opportunities and risks affecting the development of the Bank’s business compared to the planned results for 2025 could arise as a result of changed operating conditions.

The further development of the current recession in Germany and the geopolitical instability in the world caused by the wars in Ukraine and the Middle East, as well as the tensions between China and the United States, are critical factors influencing the economic situation age. A protracted downturn is possible.

Apart from the demand for credit, the development of interest rates and credit spreads would be the chief factors shaping opportunities and risks in such a scenario. However, the effects on Rentenbank’s financial position, cash flows, and financial performance would be limited by reason of its business model as a promotional bank.

In an economically uncertain environment, the Bank’s own credit spreads have mostly proved to be relatively stable thanks to its credit rating. In this scenario, rising credit spreads of the Bank’s business partners would have a positive effect on its net interest income. Any unexpected rise in interest rates would likewise have a positive effect on Rentenbank’s net interest income because Rentenbank invests its equity in long-term fixed-interest securities.

This scenario would have a temporarily adverse effect on the Bank’s financial position by increasing its undisclosed liabilities. In a worsened economic environment, the Bank would be exposed to the risk that the credit ratings of the borrowers in its portfolio would deteriorate and/or that the demand for credit and therefore the volume of new promotional loans would be reduced. With respect to the Bank’s venture capital investments, economic conditions would worsen and the risk of impairments and defaults would increase in such a scenario.

More detailed information on the Bank’s risks is provided in the Risk Report section.

Further, as yet unknown regulatory requirements could give rise to additional adverse factors affecting administrative expenses such as increased IT and personnel expenses. Such additional regulatory requirements could also necessitate further changes in the IT infrastructure beyond the already planned investments. Moreover, the refurbishment of the landmark-status bank building on Hochstraße could lead to negative budget variances and higher costs.