Bad debt costs at 26 basis points
The ongoing poor economic situation in the Netherlands has a massive impact on many
sectors of the market. Value adjustments in the food and agri sector are concentrated in glass
horticulture. Although there were increases, these increases were relatively low compared to
value adjustments in the TIS sector, where virtually every segment was affected, with the inland
water transport sector hit in particular. There was a sharp increase in the number of business
failures in the Netherlands, and many enterprises are experiencing pressure on profitability and
liquidity. Businesses that are struggling with continuity problems receive intensive counselling
and, if so warranted based on the long-term outlook, are given top-up loans to bridge the
current period of hardship. Rabobank's credit risk has increased because of the economic
conditions, which has resulted in an increase in value adjustments. They were up EUR 522
million at domestic retail banking, increasing to EUR 721 (199) million in 2009. Bad debt costs
amounted to 26 (8) basis points of average lending, which is higher than the long-term average
of 10 basis points. Of the loan portfolio, 68% is comprised of residential mortgages; as in
previous years, bad debt costs on this segment of the portfolio were minor at 2 basis points.
Capital requirement and RAROC
The capital requirement for the domestic retail banking division saw a 5% increase to EUR 6.7
(6.4) billion in 2009 due to limited growth in lending and poorer customer ratings. In calculating
the capital requirement, risks associated with loans to retail and corporate clients are calculated
using internal rating and risk models. Allowance is made for collateral provided. Economic
capital, i.e. the internal capital requirement, stood at EUR 7.6 (8.7) billion. This drop was
attributable to a lower interest rate risk in the banking book. Risk Adjusted Return On Capital
(RAROC) fell by 0.5 percentage point to 15.2% (15.7%).
Results (in millions of euros)
2009 2008 Change
Interest4,360 4,758 -8%
Fees. and.commission1,2611,354 -7%
Other income505. 42
Total income6,126 6,154 0%
Staff costs2,196 2,264 -3%
Other administrative expenses.1,5.69. .1,639. -4%
Depreciation and. amortisation1.33. 141-6%
Operating, expenses3,898 4.044 4"o
Gross result2,228. 2,110 6%
Value adjustments721199.
Operating profit, before taxation1,507 1,911 -2.1%
Taxation294 478. -38%
Net. profit1,213 1,433 -15%
Bad debt costs (in basis, points)26
Ratios
Efficiency, ratio63.6% 65.7%
RAROC1.5.2% 1.5.7%
Balance sheet (in billions of euros) 31-Dec-09 31-Dec-08
Total assets328.9. 309.7 6%
Private sector loan portfolio278.0 268.3 4%
Amounts.due to customers 185.2 175.6 5%
Capital requirements (in billions of euros)
Capital requirement6.7 6.4 5%
Economic capital7.6 8.7 -13%
Number of employees (in fTEs)28,529 28,953. -1'
23
Domestic retail banking
