Developments in real estate portfolio
Structured credit
Rabobank's portfolio of commercial real estate in the Netherlands is managed primarily by
FGH Bank and the local Rabobanks.The quality of the commercial real estate loan portfolio is
affected by conditions in the market. The value of properties is falling owing to the current
state of the market, with the value of less marketable real estate coming under particular
pressure. The review and valuation policy and the non-performing loans policy are based on a
risk-oriented approach, in which Rabobank complies with the statutory provisions currently in
force with respect to the valuation of commercial real estate (Article 4:58(1) and (3) of the
Dutch Financial Supervision Act 2010). Where checks reveal that the assumed value might no
longer reflect the market value, the value is reassessed. Valuations are performed by an
independent third party.
At Rabobank Group, the management of the commercial real estate portfolio receives special
attention. The Commercial Real Estate Task Force was set up for this specific purpose in
mid-2010. The Task Force frequently reports to the Executive Board on developments in the
size of the portfolio and the level of risk it contains, and it will continue to keep a close eye on
developments in the market and in the portfolio for the next few years. Steps to tighten the
financing, revision and valuation policy were already taken in recent years.
Rabobank Group endorses the aspirations of the Dutch Valuers and Auditors Platform (Dutch
acronym: PTA) to increase professionalism, quality and transparency in the area of real estate
valuation. Rabobank is pleased to be able to report that Rabobank Group already complies
with many of the recommendations made in the PTA report, insofar as they are relevant to
valuations performed as part of the banking process. In line with PTA's recommendations,
Rabobank Group will tighten up procedures in specific areas related to the internal valuation
process and external valuers in 2013.
The following table provides details of the Dutch property investment portfolio at
31 December 2012.
in millions of euros
2012
2011
2010
2010-2012
at year-end 2012
Bad
Bad
Bad
Bad
debt
debt
debt
debt
Impaired
costs
Write-off
costs
Write-off
costs
Write-off
costs
Write-off
Allowance
loans
Portfolio
Domestic retail banking
104
12
50
20
30
4
184
35
400
917
10,781
Rabo Real Estate Group
232
67
128
19
46
14
407
100
353
1,525
15,523
Total Domestic
337
79
178
39
76
18
591
136
754
2,441
26,304
Rabobank's portfolio contracted slightly in the year under review as a result of repayments
and a lower risk appetite. Market developments are weighing down the quality of the
portfolio, which has been reflected in a higher level of impaired loans, i.e. bad debt costs, over
the past few years. Important mitigating factors for the quality of the loan portfolio are
Rabobank's focus on relationship banking and the fact that its financing policy is more
customer than product-driven. If the current economic developments continue, loan losses
are expected to remain high in the years to come.
In addition to this Dutch portfolio, the foreign commercial real estate portfolio stood at
EUR 3.2 billion. This brings the total portfolio to EUR 29.5 billion.
Structured credit exposure in the trading and investment books stood at EUR 4.0 (4.6) billion
at 31 December 2012.
Monoline insurers are counterparties in some credit default swaps used to hedge the credit
risk of certain investments. The counterparty risk on the monoline insurers before provisions
continued to fall, partly as a result of the scaling down of the portfolio, and stood at EUR 728
(1,313) million at 31 December 2012. As the total allowance amounted to EUR 634 (1,140)
million, the remaining counterparty risk was EUR 94 (173) million. This counterparty risk exists
56 Annual Report 2012 Rabobank Group
