Financial developments Satisfactory results despite economic adversity The international debt crisis caused an increase in uncertainty among consumers and producers, culminating, in the second half of 2011into an abrupt end to the moderate economic recovery that had been seen in the Netherlands in the first half of the year. As a result, Rabobank Group's private sector loan portfolio rose by a mere 3% in 2011, landing at EUR 448.3 billion. Several customer groups experienced difficulties, judging from the increase in bad debt costs. The marked 10% rise in amounts due to customers to EUR 329.9 billion demonstrated that customers were looking for a robust bank to entrust their money. Net profit stood at EUR 2,627 (2,772) million, a 5% decrease. Return on equity landed at 7.6%. The Tier 1 ratio was up 1.3 percentage points, reaching 17.0%, thanks to retained earnings and the issue of hybrid capital. Operating expenses rose slightly more than operating income in relative terms, resulting in a deterioration of the efficiency ratio to 65.2%. RAROC was down 0.7 percentage points to 11.8%. Financial targets at group level Rabobank Group has three long-term financial targets: a Tier 1 ratio of 12.5% or more, an increase in net profit by at least 10%, and a return on equity of no less than 8%. The Tier 1 ratio is the ratio of Tier 1 capital to risk-weighted assets. Retained earnings and the issue of hybrid capital contributed to the rise in Tier 1 capital by EUR 3.5 billion to EUR 38.0 (34.51) billion. Risk-weighted assets were up EUR 4.0 billion, rising to EUR 223.6 (219.6) billion. As a result, the Tier 1 ratio rose by 1.3 percentage points to 17.0% (15.7%) in the year under review, amply above the target of 12.5%. Rabobank Group's net profit for 2011 amounted to EUR 2,627 (2,772) million, with profit for the first half of the year still exceeding that for the first half of 2010. Considerably lower profits for the second half of 2011 weighed down the overall financial results for 2011 compared to those for 2010. Return on equity stood at 7.6% (8.6%), falling short of the minimum target of 8% by 0.4%. Driven by Basel III, a bank's capital strength is increasingly being measured by its core Tier 1 ratio, i.e. Tier 1 capital exclusive of hybrid equity instruments as a ratio of risk-weighted assets. Rabobank Group's core Tier 1 ratio stood at 12.7% (12.6%) at year-end 2011 1 For page 6 to 107 the amounts in brackets are the comparative figures Where income is concerned, these are the figures for 2010; where the statement of financial position is concerned, these are the figures at year-end 2010. Some comparative figures have been restated to reflect the insights gained since their preparation. A new Standard Poor's rating Rating agency Standard Poor's adjusted Rabobank's credit rating from AAA to AA at year-end 2011Standard Poor's uses a new methodology for calculating its bank ratings, which incorporates experiences gained during the crisis. This has resulted in an AA rating. Standard Poor's still qualifies this profile as representing stability, a low risk profile and high credit worthiness. Based on the new Standard Poor's methodology, Rabobank is the world's best- rated privately owned bank. Fitch Ratings adjusted Rabobank's rating from AA+ to AA.This was driven by the adverse economic climate in Europe. The new rating reflects the challenging market for banks in Europe. Moody's and DBRS maintained their ratings of Aaa and AAA respectively. All four rating agencies have awarded Rabobank the highest rating of all private banks in the world. 6 Annual Report 2011 Rabobank Group

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Annual Reports Rabobank | 2011 | | pagina 7