Landeskreditbank Baden-Württemberg - L-Bank

Our housing-related activities are funded partly from public funds and partly from our own funds.
Trade and Industry-Related Financings; Financing of Business Start-ups and Small and Medium Sized
Companies
In respect of trade and industry related financing, we administer several public assistance programs
sponsored by Baden-Württemberg alone or jointly with Germany. Those programs primarily support small and
medium-sized businesses located in Baden-Württemberg. They provide business start-up assistance and
financing for investments in technology, environmental protection measures, forestry and agriculture. We
provide liquidity assistance to companies, offering low-interest financing for growth and consolidation, mergers
and acquisitions, debt restructurings and short- and medium-term investments, and also issue guaranties required,
for example, in connection with foreign trade activities.
We provide financing both to financial institutions, which then lend the proceeds to eligible borrowers, and
to borrowers directly. Our financings take the form of loans, equity capital investments, guaranties and other
instruments.
In most cases, we extend loans to financial institutions, typically commercial, cooperative or savings banks,
which in turn lend the funds to borrowers. In such financing transactions, the intermediary bank bears the credit
risk with respect to the ultimate borrower, while we bear the credit risk with respect to the intermediary bank. In
effect, we thereby pass on the responsibility and administrative cost of granting and servicing loans to the
intermediary bank. Where we take the credit risk of companies, we do so by taking sub-participations in loans
extended by intermediary banks to their customers or, where required by the relevant public assistance program,
by extending loans to customers directly.
In order to reduce the credit risk of intermediary banks and thereby enhance their capabilities to extend
more loans, especially to small and medium-sized companies, we also extend guaranties of collection in favor of
intermediary banks, offer protection with respect to individual creditors or portfolios of creditors by way of credit
default swaps and sometimes invest in asset-backed securities sponsored by other banks or in credit linked notes.
Using these financing techniques, we do not, except for direct equity investments described below, establish
a direct customer relationship with the ultimate creditor. We thereby fulfill our role as a state development bank,
not competing with commercial or public banks.
The following table shows our loans and commitments in this area of business for each of the years
indicated:
Trade and Industry-Related Financing
Loans and Commitments
2004 2003 2002
(in millions of EUR, except for %)
Loans outstanding (1) ............................................... 4,182.95 3,775.7 (3) 3,765.73
% of total loans outstanding ......................................... 9.17 8.58 9.16
Commitments made (2) .............................................. 1,872.0 1,118.03 1,267.83
% of total commitments made ........................................ 21.1 12.48 17.85
(1) Loans outstanding at December 31 of the year indicated. We do not make fiduciary loans or administrative
loans in this area of financing.
(2) Commitments represent the volume of funds committed by us for loans, grants and guaranties during the
year indicated, including amounts to be disbursed in future years and not including amounts disbursed
during the year indicated pursuant to commitments made in prior years.
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