Chairman's foreword
Decline in profits due to economic adversity
Earnings from divisions in 2012
For Rabobank, 2012 was a difficult year without any economic recovery. The Dutch economy
contracted more in 2012 than foreseen at the beginning of the year. The year was
characterised by a drop in consumer spending, rising unemployment, falling house prices and
a lack of business investments. The debt crisis caused uncertainty in the financial markets. The
drop in earnings was relatively strong in the domestic retail banking division in particular due
to higher value adjustments, lower interest income and mounting operating expenses.
In addition, Rabo Real Estate Group delivered a significantly worse performance and the bank
tax weighed down profit by EUR 196 million. Total net profit for 2012 saw a 20% drop on 2011,
landing at EUR 2,112 million.
Our solvency and liquidity positions remained robust: the core tier 1 ratio rose to 13.2% and
the tier 1 ratio to 17.2%. We have our strong capital position to thank for the fact that we once
again managed to raise adequate funding for our activities in the international financial
markets over the past year. Our international reputation has not been tarnished.
Sustainability and socially responsible business practices have become an integral part of a
business's licence to operate. The call for transparency and accountability is rising, especially
in the financial sector. The role of banks and their position in society are under scrutiny and
this will not change in the years to come. After all that has happened, banks need to win back
the trust of consumers. We, too, have to work to strengthen the trust of our members and
customers. We have declared 2013 'The Year of the Customer', in which community
involvement, transparency and accountability will be priorities.
Rabobank is broadly recognised and acknowledged as an exceptional player in the market. In
terms of our history, structure, governance and objectives, we are, in fact, fundamentally
different from other banks. Thanks to our cooperative structure, we offer an unparalleled and
robust institutional framework for members and customers to seek dialogue with us about
shared interests such as the sustainable economic development of local communities. This is
how we make a positive impact on social issues that directly affect our customers.
The lack of economic recovery translated mainly into a drop in earnings from domestic retail
banking. Businesses in all sectors of industry suffered from the poor economy, but those
active in construction and real estate, transport, retail, glasshouse horticulture, and maritime
shipping and inland navigation were hit particularly hard. This was reflected in value
adjustments, which were up EUR 681 million to reach EUR 1,329 million (i.e. 44 basis points,
which is higher than the long-term average of 13 basis points). The loan portfolio sawa 4%
growth to EUR 306.5 billion thanks primarily to the consolidation of Friesland Bank. Amounts
due to customers were up 7% to EUR 213.9 billion. Although the integration of the Friesland
Bank operations demands a lot, the project is progressing as planned and will be completed
in 2014. There was a fall in interest income. Operating expenses were up at the local
Rabobanks due to the costs associated with the implementation and enforcement of stricter
rules and regulations. As a result, the efficiency ratio worsened from 57.4% to 59.8%. Net
profit from domestic retail banking fell by 30%, dropping to EUR 1,304 million.
Despite the challenging economic climate, Rabobank International had a relatively good year,
posting a profit of EUR 704 million, a 10% drop on 2011. Lower interest spreads and higher
operating expenses put pressure on earnings, but they were offset, in part, by gains from the
sale of shares in Indian-based Yes Bank. Rabobank has been the leading bank for Dutch
wholesale clients since 2011The loan portfolio showed slight growth in 2012, which was
generated most of all in the food and agribusiness sector. We have also gained a reputation in
2 Annual Report 2012 Rabobank Group