Financial developments 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. 18 Annual Report 2010 Rabobank Group

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Annual Reports Rabobank | 2010 | | pagina 19