Notes to financial results of domestic retail banking
Outlook for domestic retail banking
Income up 7%
Domestic retail banking saw a limited 7% increase in total income, rising to EUR 6,941 (6,509)
million in the year under review.Thanks, in part, to growth in lending and amounts due to
customers, interest earnings at domestic retail banking were up 7% to reach EUR 5,218 (4,894)
million in 2011. Commission income increased to a limited extent, landing at EUR 1,357 (1,321)
million. An increase in share capital contributed by the local Rabobanks to Rabobank Nederland
fuelled higher dividend distributions by Rabobank Nederland to the local Rabobanks in 2011
This was one of the reasons for the 25% rise in other results to EUR 366 (294) million. There were
no changes in the share capital of Rabobank Nederland in 2011
Operating expenses up 4%
Total operating expenses at domestic retail banking were up 4% in 2011, rising to EUR 3,986
(3,833) million. In addition, the costs of hiring external staff were higher than in 2010.
Extra staff were needed to implement the measures dictated by new rules and regulations,
and to fill temporary vacancies. Another factor contributing to the 4% increase in staff costs to
EUR 2,258 (2,161) million was the salary increase under the collective bargaining agreement.
Other administrative expenses were up 4% too, rising to EUR 1,609 (1,553) million.
Depreciation and amortisation charges stood at EUR 119 (119) million.
Bad debt costs at 22 basis points
Due, in part, to the EHEC crisis in greenhouse horticulture, bad debt costs already saw a slight
increase in the first half of 2011 despite economic growth and the reasonable outlook at the
time. There was a considerable downturn in the economy, however, in the second half of the
year, causing value adjustments to rise further by 81% to reach EUR 648 (358) million. At 22
(13) basis points of average lending, bad debt costs were above the long-term average of 12
basis points. Of lending, 69% is comprised of residential mortgage loans. Bad debt costs on
residential mortgage loans stood at 3 (4) basis points.
Regulatory capital down 4%
In calculating regulatory capital, risks associated with loans to private individuals and corporate
clients are estimated using internal rating and risk models. Regulatory capital for the domestic
retail banking division saw a limited drop in 2011 on year-end 2010 to EUR 6.4 (6.7) billion.
Economic capital, the internal capital requirement, stood at EUR 7.2 (8.1) billion.
We probably find ourselves at the beginning of a prolonged period of moderate economic
growth. Sectors that rely on consumer spending in the Netherlands, such as the retail trade
and the housing sector, will continue to have difficult times ahead. Exports will also suffer the
consequences of the slowdown in world trade. Lending will only see limited growth as a result.
Expectations are that house prices will continue to drop moderately in 2012 as potential
home buyers are unwilling to part with their cash because of the uncertain outlook and the
borrowing capacity of buyers is under pressure due to government spending cuts and the
weak economy.
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Strategic Framework Broad range of services in the Netherlands
