The table below gives information on the commercial real estate loan portfolio in the Netherlands
at 31 December 2014. The Property Development segment is moreover presented separately,
since this segment is also experiencing longer processing times and a stagnating real estate
market. Rabobank's lending in this segment was relatively low, at EUR 1.9 (3.0) billion.
Commercial real estate loan portfolio
31-Dec-14
in millions of euros
Loan portfolio
Impaired
Allowance
Bad debt costs
Write-off
- Property investment domestic retail banking
8,586
1,197
673
249
152
- Property investment Rabo Real Estate Group
14,676
3,059
1,104
544
333
Total property investments
23,262
4,256
1,777
792
485
- Property development domestic retail banking
1,062
527
342
23
26
- Property development Rabo Real Estate Group
820
89
37
8
2
Total property development
1,882
616
379
31
27
Commercial real estate loan portfolio
31-Dec-13
in millions of euros
Loan portfolio
Impaired
Allowance
Bad debt costs
Write-off
- Property investment domestic retail banking
9,087
949
516
144
35
- Property investment Rabo Real Estate Group
16,163
2,632
788
485
23
Total property investments
25,250
3,581
1,304
629
58
- Property development domestic retail banking
1,942
680
396
168
48
- Property development Rabo Real Estate Group
1,041
135
30
29
11
Total property development
2,983
815
426
197
59
The table above only concerns specific Rabobank's commercial real estate portfolio in the Netherlands declined again in 2014, mainly
bad debt costs and specific loan loss due to repayments, loan sales and a lower risk appetite. The developments in the market
allowances. caused a deterioration in the quality of the portfolio, as can be seen from the higher level of
impaired loans, and therefore also the costs of loan losses in recent years. Significant 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-driven than property-driven. Since some of
the difficulties in the commercial real estate market also have structural characteristics, loan
losses in the real estate portfolio are nonetheless expected to remain high in the years to come.
Nearly the entire commercial real estate portfolio outside the Netherlands is provided by
ACC Loan Management. This is a run-off portfolio. Although property values in prime locations
in Ireland stabilised to some extent, in other locations values were still under pressure.
Further additions (EUR 111 million) were therefore made to the provisions for this portfolio
in 2014. More additions are likewise expected for 2015, albeit at a lower level than in the past
few years.
Country risk
With respect to country risk, a distinction is made between collective debtor risk and transfer risk.
Collective debtor risk is the risk that a large number of debtors in a particular country will all be
unable to fulfil their obligations owing to the same cause, e.g. war, natural disasters, political or
social unrest, or government policy that fails to create macroeconomic and financial stability.
Transfer risk relates to the possibility of foreign governments placing restrictions on fund
transfers from debtors in their own country to creditors in other countries. Rabobank uses a
country limit system to manage collective debtor risk and transfer risk. After careful review,
relevant countries are given an internal country risk rating, after which general limits and
transfer limits are set. Transfer limits are introduced based on the net transfer risk, which is
defined as total loans granted less loans granted in local currency, guarantees, other collateral
obtained to cover transfer risk and a deduction related to the reduced weighting of specific
92 Annual Report 2014 Rabobank Group
