Bad debt costs in basis points of the average loan portfolio
in basis points
Domestic retail banking
Wholesale banking and international retail banking
Leasing
Real estate
Rabobank Group
2013
278
59
45
59
57
2012
124
52
44
59
53
Developments in the real estate portfolio
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 has been adversely affected by current
conditions in the market. The value of properties is falling, 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. Where checks reveal that the assumed value
might no longer reflect the market value, the value is reassessed. Valuations are performed by
an independent valuer. Rabobank thereby complies with the tighter requirements applied by
DNB to valuations and the age of valuations in view of the prevailing market conditions.
At Rabobank Group, the management of the Dutch 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 Dutch 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, credit review and valuation policy were already taken in recent years.
Owing to the adverse trends relating to commercial real estate described above, DNB performed
an Asset Quality Review in 2013 among the largest Dutch banks to assess whether they maintain
sufficient capital and provisions to provide financing in this sector. Virtually the whole of
Rabobank's loan portfolio for commercial real estate was within scope. The internal models
that are used to determine how much capital is required to be maintained for unforeseen losses
have also been assessed. The assessment established that Rabobank maintains sufficient Pillar 1
capital for this portfolio. Rabobank has made substantial additions to provisions in the second
half of the year in particular, owing to the deterioration of the quality of the portfolio.
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 has ascertained that it already complied with many of the
recommendations made in the PTA report, insofar as they are relevant to valuations performed
as part of the banking process. Where this was not already the case, Rabobank Group has
aligned its valuation procedures with PTA's recommendations.
The following table provides details of the Dutch commercial real estate loan portfolio at
31 December 2013. The project development sector is now reported separately to provide
additional information since this sector is also affected by longer completion times and a
stagnating real estate market. Rabobank's lending volumes in this subsector are relatively
limited at EUR 3 billion, but the portfolio involves a significantly higher level of credit risk
costs than the property investments.
Annual Report 2013 Rabobank Group