Expenses fractionally lower
Staff costs 5% higher
Other administrative expenses 10% lower
Value adjustments 8% higher
Operating profit before taxation up 5%
Lower taxes
Net profit up 16%
77 Rabobank Group Annual Report 2005
Notes to the profit and loss account
Total expenses decreased fractionally in 2005, down EUR 13 million to
EUR 6,164 million, due entirely to lower other administrative expenses.
Staff costs and depreciation were slightly higher.
Staff costs were up 5% at EUR 3,880 (3,683) million, mainly reflecting
higher pension expenses. Wages and salaries were 3% higher. The number
of FTEs decreased in 2005 by 4,636 to 45,580, largely as a consequence
of the sale of Interpolis to Eureko. Adjusted for this effect, there was an
increase of just over 1%, reflecting the growth in the bank's international
operations.
Other administrative expenses, which include IT costs, rents and the like,
were 10% lower, down EUR 220 million at EUR 1,953 million. This decrease
reflects in part the sale of equity investments by Gilde funds, which are
therefore no longer included in the consolidation. Operation Service also
yielded the first cost savings. An additional provision of EUR 85 million
was formed for Operation Service in 2005, on top of the provision of
EUR 120 million formed in 2004.
Value adjustments, which comprise loan losses and losses on financial
assets, were 8% higher at EUR 517 million, equivalent to 25 basis points
of the average risk-weighted items (unchanged compared with 2004).
Risk-related costs in 2005 were incurred largely as a result of an increase
by the international activities of the wholesale and international retail
business unit, where value adjustments were higher last year as a result
of the formation of several new provisions for activities in other countries.
Value adjustments for the Dutch retail banking business were lower,
reflecting the very low risk profile of the loan portfolio, which consists
predominantly of personal lending.
Operating profit before tax rose 5% in 2005 to EUR 2,682 (2,566) million.
Taxation in 2005 amounted to EUR 599 (773) million, equivalent to an
effective tax rate of 22.3% (30.1%). The lower tax burden was due chiefly
to the lower rate of Dutch corporation tax and incidental tax income.
Net profit in 2005 turned out 16% higher at EUR 2,083 (1,793) million.
After the deduction of minority interests and payment of the fee to
holders of Rabobank Member Certificates and Trust Preferred Securities,
in so far as these are counted as equity, the remaining sum of EUR 1,577
(1,392) million has been appropriated to equity.
