Operating expenses down 1%
Impairment losses at 31 basis points
RAROC
In domestic retail banking, the increased competition in the savings market depressed the margin on
the amounts due to customers. Total commission income was 1% higher, at EUR 2,889 (2,857) million.
Other income fell by 82% to EUR 246 (1,394) million. The continuing turbulence in the financial markets
depressed Rabobank International's trading results. On balance, the fair value changes of assets and
liabilities had a limited impact on earnings. Rabo Real Estate Group's project results were also lower.
Income from the Eureko participation was negative. The sale of Alex and the consolidation of Bank BGZ
made positive contributions to earnings. In 2007, other income benefited from revenues from the sale
of activities at Sarasin.
Total operating expenses were 1% lower, at EUR 7,611 (7,663) million, in 2008. Partly as a result of a
reduction of the bonuses, staff costs were 3% lower, at EUR 4,290 (4,400) million. From 2008, Bank BGZ
employees are included in Rabobank Group's staff count. As a result, staff numbers at Rabobank Group
increased by 11% to 60,568 (54,737) FTEs. Staff numbers at the local Rabobanks and Robeco declined.
Other administrative expenses were 1% higher, at EUR 2,796 (2,779) million. Depreciation charges were
8% higher, at EUR 525 (484) million, partly because of higher depreciations of proprietary software and
increased amortisation of intangible assets.
Mainly as a result of the increase in the item 'value adjustments' at Rabobank International, this item
rose to EUR 1,189 (266) million in the year under review. This corresponds to 31 basis points of average
lending and is higher than the long-term average of 21 basis points.
Income tax at 3%
Income tax recognised in 2008 amounted to EUR 98 (397) million, which is equivalent to an effective
tax rate of 3.4% (12.8%). The results from equity investments such as those in the Gilde funds and the
equity investments in Rabo Private Equity, which are exempt from taxation, contributed to the lower
effective tax rate.
Net profit up 2%
Thanks in part to the performance in domestic retail banking, Rabobank Group realised a net profit of
EUR 2,754 (2,696) million. After deduction of minority interests and payments on Rabobank Member
Certificates, Capital Securities and Trust Preferred Securities III to VI, the sum remaining was EUR 2,089
(1,971) million.
RAROC is the acronym that stands for Risk Adjusted Return On Capital, i.e. the risk-weighted return on
capital. RAROC supports the decision-making process by enabling a consistent assessment of expected
returns against risks present. In addition, RAROC is used for pricing on a transactional level as well as in
the loan authorisation process. In 2008, Rabobank Group realised a RAROC after tax of 12.5% (14.4%)E3
9) The RAROC has been calculated by relating net profit to average economic capital for the year.
27
Report of the Executive Board
