Rock-solid bank: performance
Rabobank Group
Rabobank Group booked result of EUR 1.8 billion
The Dutch economy showed very slight growth in 2014. Disposable
household income increased slightly, but growth in consumption was
slowed by repayment of mortgage debt and capital accumulation. It was
again a difficult year for many small and medium-sized enterprises (SMEs).
Amounts due to customers rose by EUR 0.3 billion to EUR 326.5 billion and
the loan portfolio declined by EUR 4.3 billion to EUR 430.4 billion. On balance,
this resulted in a loan-to-deposit ratio of 1.33 (1.35).The liquidity buffer,
measured in High Quality Liquid Assets, stood at EUR 80 (84) billion.
The net result of Rabobank Group amounted to EUR 1,842 million in 2014,
a decline of EUR 165 million.The result was negatively affected by the
non-recurring resolution levy in relation to the nationalisation of SNS Reaal.
In 2013, profit was positively affected by factors including the sale of Robeco.
Excluding these effects, there was an improvement in the net profit.
Operating expenses fell as a result of the reduced workforce and lower
reorganisation costs.The return on tier 1 capital amounted to 5.2%.
Bad debt costs1 were in line with 2013 and at 60 basis points2 of the average
loan portfolio were still well above the long-term average of 32 basis points.
Most of the losses occurred in the domestic portfolio, and related mainly to
commercial real estate. In addition, the Asset Quality Review (AQR) led to an
expense of EUR 448 million. Bad debt costs on residential mortgages in the
Netherlands were still very limited, at 5 basis points of the mortgage
portfolio. Solvency remained as strong as ever, with a common equity tier 1
ratio of 13.6% and a capital ratio of 21.3%.
1 In the financial statements, the bad debt
costs are referred to as 'value adjustments'.
2 One basis point equals 0.01 percentage
point.
Progress in realisation of financial targets
EDTF 4 Rabobank Group's progress in the realisation of its strategic financial targets regarding
profitability, solvency and liquidity is described below:
The return on tier 1 capital - whereby the net profit is related to the level of tier 1 capital at
the beginning of the year - amounted to 5.2% (5.2%). The target for 2016 is set at 8%.
Cost savings and virtualisation of the services provided by the local Rabobanks and Rabobank
Nederland, as well as further improvement of the returns realised by the other commercial
divisions, should contribute to an increase in this return in the coming years.
The common equity tier 1 ratio, the common equity tier 1 capital as a percentage of the risk-
weighted assets, amounted to 13.6% (13.5%).The capital ratio, which relates the qualifying
capital to the risk-weighted assets, amounted to 21.3% (19.8%). In the coming years, Rabobank
intends to increase its capital ratios by improving its profitability and introducing strict targets
40 Annual Report 2014 Rabobank Group
