Equity
Developments in equity
Progress on financial targets
Capital requirements
Regulatory capital
in billions of euros
2011
2012
Amounts due to customers are made up mainly of savings deposits by private individuals, which
continued to rise both in and outside the Netherlands. Savings deposits by private individuals
increased by 7% at group level, landing at EUR 149.7 (140.0) billion. Of savings, 83% have
been deposited with domestic retail banking and 17% with international retail banking.
Many Dutch private individuals decided to increase their savings in 2012, which led to further
growth in savings deposits at the local Rabobanks. The acquisition of Friesland Bank also
contributed to the rise in amounts due to customers in the Netherlands. In 2012, Rabobank
International again managed to raise savings deposits via its online savings banks outside the
Netherlands. The reporting year also saw the launch of the International Direct Banking
concept in Germany under the label RaboDirect. As a result, the number of direct banking
clients of the six foreign online savings banks rose to 670,000 from 472,000; savings deposits
held by these banks were up 48% to EUR 24.2 (16.4) billion.
Rabobank Group's equity amounted to EUR 44.6 (45.0) billion at
year-end 2012. Retained earnings and a EUR 0.2 billion partial
conversion of Rabo Extra Member Bonds into Rabobank Member
Certificates resulted in an increase in equity. In addition, non-
controlling interests fell due to the completion of the sale of
Sarasin. The redemption of Capital Securities worth USD 750
million also led to a drop in equity. Of equity, 63% is comprised of
retained earnings and other reserves, 15% of Rabobank Member
Certificates, 19% of hybrid capital and 3% of other non-controlling
interests. Three subordinated loans of GBP 500 million, EUR 1 billion
and USD 1.5 billion were issued in 2012.
Other non-controlling
interests
Hybrid capital
Rabo Member Certificates
Reserves and retained
earnings
Because of developments in profit, the return on tier 1 capital, which is the ratio of net profit
to tier 1 capital at the beginning of the year, fell by 2.0 percentage points to 5.6% (7.6%) in
2012. Rabobank still maintains its long-term target of 8%.
The core tier 1 ratio is the ratio of core tier 1 capital to risk-weighted assets. Thanks, in part, to
retained earnings, this ratio improved from 12.7% to 13.2% in 2012. Rabobank plans to bring
about further growth in the core tier 1 ratio until 2016 by improving profitability and making
choices with respect to asset growth. The target core tier 1 ratio is 14%.
Rabobank experienced modest growth in lending in the year under review combined with a
marginal drop in amounts due to customers. The loan-to-deposit ratio, which divides a bank's
total loans by its total deposits, stood at 1.39 (1.38). Limited growth in lending is expected
over the next few years. In order to achieve the envisaged improvement in the loan-to-
deposit ratio to 1.3 at year-end 2016, Rabobank will need to bring about steeper growth in
amounts due to customers both in the Netherlands and abroad.
in billions of euros
45
30
20
E
Other risks
Operational and
business risk
Interest rate and
market risk
Credit and transfer risk
Rabobank Group's required regulatory capital stood at EUR 17.8
(17.9) billion at year-end 2012. The capital requirement saw a
limited drop overall. The increase as a result of the consolidation
of Friesland Bank was more than offset by portfolio movements
and portfolio changes in the risk assumptions at other divisions.
Of the total capital requirement, 89% relates to credit and transfer
risk, 9% to operational risk and 2% to market risk.
Rabobank Group uses the Advanced Internal Rating Approach,
which has been approved by the Dutch Central Bank (DNB), to
calculate the regulatory capital for credit risk for virtually the entire
loan portfolio. The standardised approach is applied, in dialogue
with DNB, to portfolios with relatively limited exposure and to a few
smaller foreign portfolios that are not yet subject to the Advanced
Internal Rating Approach. Operational risk is measured using the
Dutch regulator-approved internal model based on the Advanced
Measurement Approach. Where market risk is concerned,
Rabobank has permission from DNB to calculate the general and
specific exposures using its internal Value-at-Risk (VaR) models,
based on the rules of CAD II (Capital Adequacy Directive).
8 Annual Report 2012 Rabobank Group
