Bad debt costs at 29 basis points
expenses dropped by 7% to EUR 2,706 (2,908) million thanks to group-wide cost control and
lower costs incurred for the deposit guarantee system. Depreciation and amortisation charges
were up 8% to EUR 571 (527) million.
2010 was a year of moderate economic recovery. Although producer confidence improved
slightly, consumer confidence remained low. The economic recovery was fuelled mainly by a
recovery of world trade. Many of our wholesale clients were able to improve their financial
position. As a result, it was safe for Rabobank to make considerably fewer allocations on
balance to the provisions. Bad debt costs were down mainly at the local Rabobanks, Rabobank
International and De Lage Landen. At group level, value adjustments dropped by 37%, falling
to EUR 1,234 (1,959) million. At 29 (48) basis points of average lending, bad debt costs are still
slightly above the long-term average of 23 basis points.
Net profit at EUR 2,772 million
Net profit increased by 26% to EUR 2,772 (2,208) million thanks primarily to lower bad
debt costs, but also because of higher interest income and a moderate rise in expenses.
The recognised tax expense was EUR 514 (229) million, which corresponds to an effective tax
rate of 15.6% (9.4%). An amount of EUR 1,846 (1,395) million remains net of non-controlling
interests and payments on Rabo Member Certificates and hybrid equity instruments.
This amount was used to bolster Rabobank's capital position. In order to uphold our client
service level in the future, Rabobank needs to maintain its robust capital position.To be able
to do this, enough earnings should be retained annually to be added to equity.
Risk Adjusted Return On Capital (RAROC) is used as a measure whereby profitability is
consistently weighed against risk. The RAROC ratio is used also for pricing at transaction
level and in the loan approval process. In 2010, Rabobank Group achieved a RAROC after
taxation of 12.5% (10.3%), a 2.2-percentage point rise on 2009.