Bad debt costs at 29 basis points RAROC 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. 23 Financial developments

Rabobank Bronnenarchief

Annual Reports Rabobank | 2010 | | pagina 24