Recovery of earnings leads to further improvement
in capital ratios
Thanks to the moderate upturn in the economy, our clients fared better in
2010. For Rabobank Group, this resulted in lower value adjustments, which
saw a 37% drop to EUR 1,234 million. Bad debt costs stood at 29 basis
points of average lending. The recovery was tentative, however, and
uncertainty continued to reign among consumers and manufacturers,
leading to a limited need for retail and wholesale loans. As a result, private
sector lending at group level was up 5% only, rising to EUR 436.3 billion.
Amounts due to customers rose by 4% to EUR 298.8 billion, EUR 192.8
billion of which had been placed with the local Rabobanks. Net profit saw
a 26% increase, rising to EUR 2,772 million, thanks in particular to lower
bad debt costs and - to a lesser extent - a recovery of margins on savings
deposits and strict cost control. Rabobank Group's tier 1 ratio was up 1.9
percentage points to 15.7%, due mainly to retained earnings. Return on
equity stood at 8.6%. At 64.5%, the efficiency ratio was more or less stable.
RAROC was up 2.2 percentage points to 12.5%.
Group financial targets achieved
Rabobank Group has three financial targets: a tier 1 ratio of 12.5% or more, an increase in net
profit by 10%, and a return on equity of at least 8%. The tier 1 ratio is the ratio of tier 1 capital
to risk-weighted assets.The tier 1 capital increased by EUR 2.3 billion to EUR 34.5 (32.23) billion
thanks mainly to retained earnings. Due in part to the further roll-out of Basel II, portfolio
developments and stricter control of solvency requirements, risk-weighted assets dropped to
EUR 219.6 (233.2) billion. As a result, the tier 1 ratio rose by 1.9 percentage points to 15.7%
(13.8%) during the reporting period. Rabobank Group's net profit grew by 26% to reach
EUR 2,772 (2,208) million. Return on equity was up 1.3 percentage points to 8.6% (7.3%).
3 For page 18 to 105, the amounts in
brackets are the comparative figures.
Where results are concerned, these
are the figures for 2009; where the
statement of financial position is
concerned, these are the figures at
year-end 2009.The comparative figures
have been restated to reflect the
insights gained since their preparation.
Increase in lending at local Rabobanks in particular
Rabobank Group's private sector loan portfolio saw a moderate 5% increase, rising to EUR 436.3
(415.2) billion in 2010 as a result of the moderate economic recovery. Private sector lending
is recognised within 'loans to customers', which item rose by 5% at group level in 2010 to
EUR 455.9 (433.4) billion. In addition to private sector lending, the 'loans to customers' item
comprises 'public sector lending', which accounted for EUR 5.6 (3.9) billion, 'securities
transactions due from private sector lending', which stood at EUR 7.8 (8.4) billion, and 'interest
rate hedges', which amounted to EUR 6.2 (5.8) billion at year-end 2010. On a percentage basis,
Rabobank International posted the highest increase in lending.This increase was mainly
attributable to the devaluation of the euro, for instance against the US dollar and the Australian
dollar. Lending also continued to grow at the local Rabobanks, Obvion, De Lage Landen
and FGH Bank.
Annual Report 2010 Rabobank Group