Depreciation
Value adjustments down 13%
Income tax down 30%
Net profit up 13%
Balance sheet
Private sector lending up 17%
Depreciation charges increased by 3% in 2006 to EUR 341
(331) million.
The item value adjustments, which comprises bad debt
expenses and losses incurred on financial assets, declined by
13% to EUR 450 (517) million as a result of positive economic
developments and a further quality improvement in the
loan portfolio. The risk-related costs were 20 (25) basis points
of the average risk-weighted assets, which is well below the
long-term average of 30 basis points.
Income tax recognised in 2006 amounted to EUR 367 (521)
million, which is equivalent to an effective tax rate of 14%,
against 20% in 2005. The reduction in the Dutch corporate
income tax rate from 31.5% to 29.6% contributed to the
decrease in the effective tax rate. Higher results from the
participations in the Gilde funds, which are exempt from
taxation, likewise contributed to a lower tax burden.
The decrease in the effective tax rate was also partly due
to non-recurring tax income.
Lending by activity at year-end 2006
^■Domestic
retail banking
I Wholesale banking
and international
retail banking
Leasing
I Real estate
Other
68%
23%
5%
3%
1%
Lending by region at year-end 2006
^^Netherlands
Europe excluding
the Netherlands
America
Australia and
New Zealand
Asia
76%
10%
10%
3%
1%
Rabobank Group achieved a 13% increase in net profit,
to EUR 2,345 (2,083) million in 2006. After deduction of the
portion attributable to minority interests and payments on
Rabobank Member Certificates and Trust Preferred
Securities III-VI, the sum remaining of EUR 1,757 (1,577)
million has been appropriated to equity.
The item loans to customers grew by 17% to EUR 354.9
(304.5) billion in 2006. This balance sheet item comprises:
- private sector lending;
- lending to government clients;
- securities transactions due from private sector lending;
- credit adjustments due to hedge accounting.
The increase in lending related largely to private sector
lending. At the end of 2006, lending to government clients
amounted to EUR 3.1 (2.5) billion and the outstanding
amount of securities transactions was EUR 28.4 (22.0) billion.
Rabobank Group uses derivatives to hedge the greater part
of its interest rate risk for loans to clients. These derivatives
are valued at fair value and loans to clients are valued on an
amortised cost basis. Rabobank Group applies hedge
accounting to prevent these value changes from being
reflected directly in the profit and loss account. Due to
interest rate developments in 2006, this resulted in a
revaluation of loans to customers, with the item credit
adjustments due to hedge accounting at EUR -0.7 (1.8) billion.
In the year under review, private sector lending - which
accounts for 91% of total lending - increased by 17% to
EUR 324.1 (278.1) billion, reflecting mainly the growth in
domestic mortgage lending and strong growth in lending
abroad. The greater part - 76% - of private sector lending
was to clients in the Netherlands, with 10% in Europe
excluding the Netherlands, 10% in America, 3% in Australia
and New Zealand and 1% in Asia. At 31 December 2006,
total private sector lending comprised 51% to private
individuals, 33% to the trade, industry and services sector
and 16% to the food agri sector.
20 Rabobank Group Annual Report 2006
