RAROC
Operating expenses down 4%
Cost cuts were achieved throughout Rabobank Group.Total operating expenses were down 4%
in 2009, falling to EUR 7,304 (7,663) million. The drop in clients' activity levels led to an outflow
of staff at virtually all group entities, particularly in the second half of the year. This resulted in
a reduction in employee base by 2% to 59,311 (60,568) FTEs at group level. Staff costs fell by
10% to EUR 3,869 (4,290) million as a result of internal staff cuts as well as a sharp reduction in
the costs of contract staff and a decrease in pension costs. Other administrative expenses
were up 4% to EUR 2,908 (2,796) million due, in particular, to the provision of EUR 200 million
that was formed for the collapse of DSB Bank.
Bad debt costs at 48 basis points
Value adjustments increased at group level due to the poor economic conditions, which
were felt particularly by the local Rabobanks, but also by Rabobank International and De Lage
Landen.The 'value adjustments' item rose by EUR 770 million to EUR 1,959 (1,189) million in
2009. This corresponds with 48 (31) basis points of the average loan portfolio volume, which is
above the long-term average of 21 basis points.
Net profit at EUR 2,288 million
The increase in gross profit was outweighed entirely at Rabobank Group by the rise in
value adjustments.The recognised tax expense in 2009 amounted to EUR 316 (98) million.
This corresponds with an effective tax rate of 12.1% (3.4%).The tax-exempt share of profit of
associates, including the equity interest in Eureko, is a factor in the lower tax rate. Net profit
stood at EUR 2,288 (2,754) million on balance. Net of non-controlling interests, payments on
Rabobank Member Certificates and hybrid capital instruments, an amount of EUR 1,475
(2,089) million remains. This was used to strengthen equity.
7 The RAROC ratio was calculated by
linking up net profit to the average
economic capital for the year.
Risk Adjusted Return On Capital (RAROC) is used as a measure whereby profitability is
consistently weighed against risk. RAROC is used also for pricing at transaction level and in
the loan approval process. In 2009 Rabobank Group achieved a RAROC after taxation of
10.3% (12.5%)7, a 2.2% percentage point drop on 2008.
16
Report 2009 Rabobank Group
