Financial targets
RAROC
Balance sheet
Gross profit rose by 20% to EUR 3.8 billion and the efficiency ratio showed
a 1.5 percentage point improvement, to 67.0%. The item Value adjustments
increased by 65% to EUR 742 million, corresponding to 22 basis points of average
lending and in line with the five-year average of 23 basis points.
Private sector lending up 10% to EUR 356 billion
- Net profit growth at least 12%
- Tier I ratio at least 10
- Return on equity at least 10%
Rabobank Group achieved its financial targets in 2007. Its operations are managed by the
following financial ratios: net profit growth, Tier I ratio and return on equity. With an increase
in net profit of 14% (13% 1), Rabobank Group exceeded its target of 12% in 2007. At year-end,
the Tier I ratio, i.e. the ratio between core capital and total risk-weighted assets, was 10.7 (10.7).
This is higher than the internal requirement of 10. The Tier I ratio declined as a result of the
acquisition of Mid-State Bank Trust and the increase of the bank's interest in Transtrend.
However, due in part to the issue of Capital Securities, the Tier I ratio was unchanged from
31 December 2006. These issues contributed to the 9% rise in core capital to EUR 28.5 (26.4)
billion. The risk-weighted assets were 8% higher, at EUR 266.6 (247.5) billion. The return on
equity, i.e. net profit expressed as a percentage of core capital, was 10.1% (9.4%). This exceeds
the target figure of 10%.
Rabobank Group uses RAROC, i.e. Risk Adjusted Return On Capital, as a measure of its
financial performance. This measure provides insight in the profitability of the bank's various
units and products, taking the risk exposure into account. RAROC is calculated by relating
the adjusted profit realised on a particular activity to the capital required for that activity.
In 2007, Rabobank Group realised a RAROC (after tax) of 13.0% (13.8%). Economic capital
required at 31 December 2007 was EUR 20.5 billion.
In 2007, the item Loans to customers grew by 5% to EUR 373.0 (354.9) billion, the greater
part by far of which - EUR 356.0 (324.1) billion - concerned private sector lending. In addition,
the item loans to clients comprises: lending to the public sector, professional securities
transactions and loan adjustments due to hedge accounting. At year-end 2007, lending to
the public sector amounted to EUR 5.1 (3.1) billion. The volume of professional securities
transactions was EUR 14.4 (28.4) billion.
In 2007, growth in domestic mortgage lending was an important contributor to the 10%
increase in private sector lending to EUR 356.0 (324.1) billion. At 31 December 2007, 24% of
lending was abroad. Of the loans to private clients, 9% is from Europe excluding the
Netherlands, 11% from the Americas, 3% from Australia and New Zealand and 1% from Asia.
50% of private sector lending was to private individuals, 33% to the trade, industry and
services (TIS) sector and 17% to the food agri sector.
The growth of the mortgage portfolio in the Netherlands was an important driver for the
8% increase in lending to private individuals to EUR 180.1 (166.1) billion. Lending to private
individuals comprises mainly mortgages and - to a lesser extent - consumer loans.
The private mortgages portfolio grew by 10% to EUR 177.4 (160.9) billion.
1 For page 1 to 113 the numbers in brackets More real estate loans were granted and De Lage Landen's loan portfolio grew further.
are comparative figures. For profit and loss data, This contributed to the 10% growth in lending, to EUR 116.4 (105.5) billion, to enterprises in
they are the figures for 2006; balance sheet data the trade, industry and services (TIS) sector.
are the figures at 31 December 2006.
35
Report of the Executive Board
