Balance sheet
Financial targets
Rabobank Group uses three financial targets: Tier I ratio, return on equity and net profit growth. The Tier I
ratio, i.e. the ratio between core capital and total risk-weighted assets, was 12.7% (10.7%^ at year-end
2008, exceeding the desired level of 12.5%. This increase was related to the introduction of Basel II.
The return on equity, i.e. net profit expressed as a percentage of core capital, was 9.7% (10.2%). Net profit
for 2008 was 2% (15%) higher, which is below the target.
General
Given the amendments to IAS 39 and IFRS 7 were applied in 2008, Rabobank Group decided to reclassify
a portion of its assets worth EUR 12.0 billion to loans to customers and due from other banks. For more
information, see Note 11 to the Rabobank Group Consolidated Financial Statements. To ensure a correct
view of the various trends, the comparative figures at year-end 2007 were restated in this annual report
by taking this reclassification into account. For comparative and analysis purposes, therefore, the year-end
2007 figure for loans to customers is EUR 385.7 billion, rather than EUR 373.0 billion.
Lending by sector
in billions of euros
450
Food &agri
TIS
Private individuals
Lending by activity
year-end 2008
Domestic retail banking 65%
Wholesale banking and
international retail banking 25%
Leasing 5%
Real estate 4%
Other 1
2004 2005 2006 2007 2008
Higher loan portfolio volume, partly due to increased corporate loan portfolio
Despite the unfavourable economic conditions during the year under review, the balance sheet item
'loans to customers'increased by 11% to EUR 426.3 (385.7) billion, the greater part by far of which
concerned the private loan portfolio. The item loans to customers further comprises lending to
government clients, securities transactions due from private sector lending and interest rate hedges.
Lending to government clients amounted to EUR 8.8 (5.1) billion. The volume of the item'securities
transactions due from private sector lending'decreased to EUR 3.8 (14.4) billion. Rabobank Group uses
derivatives to hedge the interest rate risk on loans to customers. Because these derivatives are valued at
market value, whereas the private-sector lending portfolio is valued on the basis of amortised cost, a
temporary asymmetry in valuation occurs.To prevent this difference from causing unnecessary
fluctuations in the profit and loss account, Rabobank Group applies hedge accounting. The valuation
differences are recognised under 'interest rate hedges'. This item had a volume of EUR 5.0 (-2.5) billion.
The growth in corporate lending in both domestic retail banking and at Rabobank International was
an important contributor to the 11% growth of the private loan portfolio, to EUR 408.6 (368.7) billion.
Of the private sector loan portfolio, 47% consists of loans to private individuals, 36% of loans to the
trade, industry and services sector (TIS) and 17% of loans to the food agri sector. Due to the growth of
the mortgage portfolio in the Netherlands, the volume of loans to private individuals increased by 8% to
EUR 194.0 (180.1) billion. Virtually all of this part of the portfolio consists of mortgages, the remainder
being consumer credits. The loan portfolio to the trade, industry and services sector increased by 13%
to EUR 146.3 (129.2) billion. The loans to the food agri sector were 15% higher, at EUR 68.3 (59.4) billion.
8) For pages 1 to 87, the numbers in brackets are comparative figures. For profit and loss data, they are the figures for 2007; balance sheet
data are the figures at 31 December 2007. The comparative figures have been restated as and when new knowledge became available.
23
Report of the Executive Board
