Notes to financial results of wholesale banking and
international retail banking
Income up 7%
Operating expenses up 17%
Bad debt costs at 59 basis points
Regulatory capital down 8%
Outlook for wholesale banking and international retail
banking
Total income from wholesale and international retail banking was up 7% in 2012, rising to
EUR 4,005 (3,750) million. This increase was attributable in particular to a EUR 405 million rise
in other income to EUR 612 (207) million because of the sale of remaining equity interest in
Indian-based Yes Bank and the higher share of profit of Agricultural Bank of China. The lower
deposit interest rate of the European Central Bank was a factor in the 6% drop in interest
income to EUR 2,775 (2,957) billion. Commission was up 5%, reaching EUR 618 (586) million,
thanks, in part, to an increase in commissions on loans.
Rabobank International saw its total operating expenses increase by 17% to EUR 2,416 (2,072)
million in the year under review. The implementation of changes in international rules and
regulations proved to be a substantial cost item whose impact was felt in staff costs and other
administrative expenses. Owing to routine pay increases, higher pension costs and, to a lesser
extent, an increase in headcount, staff costs rose by 18%, reaching EUR 1,320 (1,116) million.
The headcount was 15,805 (15,747) FTEs. Other administrative expenses were up 15% to
EUR 976 (847) million due, in part, to higher consultancy fees. Depreciation and amortisation
charges grew by 10% to EUR 120 (109) million.
Rabobank International's value adjustments stood at EUR 621 (686) million in 2012. As ACC Bank
accounted for EUR 301 million of these value adjustments, the total figure was again heavily
affected by this bank. Bad debt costs amounted to 59 (73) basis points of average lending,
which is higher than the long-term average of 54 basis points.
Rabobank International's regulatory capital fell by 8% in 2012, dropping to EUR 6.5 (7.1) billion
in 2012. This fall is attributable most of all to portfolio adjustments and less so to changes in
risk weightings. Reflecting the same movement, economic capital, i.e. the internal capital
requirement, landed at EUR 7.9 (8.8) billion.
Rabobank International will adopt an even greater focus on the food and agribusiness in the
years ahead. To this end, the existing service offering will be critically reviewed on an ongoing
basis. The goal is to create an international division that contributes optimally to the strategic
group targets, keeps costs low and maintains a responsible risk profile. Against this
background, the coming years will be devoted to further cementing the ties between
domestic retail banking and Rabobank Group's international activities.
50
Annual Report 2012 Rabobank Group
