l
Rabobank Group's net profit was 16% higher in
2005 at EUR 2,083 million. This growth is partly
due to strict cost control. Income was marginally
higher and the tax burden was lower.
Income up 2%
Interest income up 3%
Fees and commission up 18%
Other income down 36%
76 Rabobank Group Annual Report 2005
Notes to the profit
and loss account
Total income rose 2% to EUR 9,363 (9,222) million. Commission income
in particular increased sharply in 2005, while other income was lower.
Net interest income was EUR 212 million higher at EUR 6,407 million, an
increase of 3%. This was lower than the growth in lending and savings,
reflecting the significant narrowing of the interest margin under pressure
from increased competition and the flattening of the yield curve.
Total net fees and commission income in 2005 was EUR 345 million, or
18%, higher at EUR 2,217 million. This increase was due mainly to higher
commission income from asset management and other commission
income, which includes fees and commission from Global Financial
Markets.
Other income was down 36% at EUR 739 (1,155) million. This item
includes the insurance business and trading results, the bank's share in
the results of associates and the results on financial assets available-for-
sale. The results of insurance business and of associates were both
excellent. Income was down as a result of fewer exits at Gilde funds
(after the highly successful year 2004) but also because fewer funds
were consolidated than in 2004. The trading results, the results on
available-for-sale financial assets and a large proportion of the other
income are relatively volatile, because these items are heavily influenced
by exchange-rate and interest-rate movements. Losses of other income
were largely attributable to swaptions arranged by Rabobank with its
pension fund. This swaption hedged the pension funds against the
effect of lower interest rates, while Rabobank decreased its interest
rate risk on higher interest rates. Because interest rates fell during the
subsequent period, this resulted in year-end losses for Rabobank but in
higher investment returns for the pension fund. Rabobank benefits from
this, since in the defined benefit plan, its contribution depends on the
investment returns achieved. However, higher returns than expected do
not immediately translate into a more favourable pension premium
trend, whereas the losses on the swaption were charged directly to the
result for 2005.
Fees and commission
in EUR millions
700
600
500
400
300
200
100
2004
0
2005
Asset Payment Insurance Lending Sales and Other
management services purchases commission
