Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
associated priorities and accelerators, we have drawn up a new
implementation agenda designed along four axes: complete
customer focus, rock-solid bank, meaningful cooperative, and
empowered employees.The implementation agenda will, in
the coming years, enable Rabobank to regain its fundamental
position as a cooperative, customer-focused bank in
the Netherlands and as a leading food and agri bank worldwide.
Financial Framework 2016-2020
The Strategic Framework 2016-2020 provides direction to
Rabobank for the next five years. The financial targets Rabobank
sets to be and remain a rock-solid bank are in part determined
by the expected impact of new regulations.These regulations
include Basel IV, the minimum requirement for own funds
and eligible liabilities (MREL) and total loss-absorbing
capacity (TLAC). As a result of these new regulations, capital
requirements will increase. In addition, the risk weighting
of assets and the subsequent required absolute amount of
capital are expected to increase significantly.The objective, in
anticipation of these regulations, is for the common equity tier 1
ratio to increase to a minimum of 14% and the capital ratio to
increase to at least 25% by the end of 2020. The extent to which
these minimum targets are met will vary in accordance with
the definition of the new regulations when they are officially
adopted. In the most severe scenario the upper limit for both
ratios could rise to as high as 17% (common equity tier 1) and
30% (capital ratio).
To facilitate the growth of the common equity tier 1 capital
through retained earnings and allow for the future growth
of Rabobank, an ROIC of at least 8% will be required. We are
seeking this return in order to compensate our capital providers.
To achieve this ROIC target, pre-tax profits by 2020 will need
to be more than EUR 2 billion higher compared to 2014
(excluding the effects of the reductions on our balance sheet
results). With this performance improvement, the cost/income
ratio excluding regulatory levies will decrease to a level of
approximately 50%.
Higher capital ratios will be achieved by raising additional
capital, retained earnings and reductions on the balance
sheet. Given the size of the expected capital requirements
and expected future costs associated with our funding,
issuing additional equity and/or subordinated debt will not
provide the solution for our cooperative. Rabobank is, more
than other banks, dependent on the financial markets and it
aims to reduce this dependency. For this purpose, Rabobank
seeks to reduce its wholesale funding for the group to below
EUR 150 billion by 2020.
The balance sheet will be reduced through the sale of assets,
by removing parts of the mortgage and corporate loans
portfolios from the balance sheet, and by making choices in the
sectors we serve. Balance sheet reductions will lead to lower
risk-weighted assets, which will contribute to achieving our
solvency targets. In the base case scenario, Rabobank aims to
reduce its total assets by up to EUR 150 billion by the end of
2020 compared to total assets at the end of 2014.
Summary of targets in Financial Framework 2016-2020
Ambition 2020
Capital
Common equity tier 1 ratio
>14%
Total capital ratio
>25%
Return
ROIC
>8%
Cost/income ratio
50%!
Funding Liquidity
Wholesale funding
EUR 150 billion
Total assets
EUR 530 billion
1: Including regulatory levies, 53%-54%.
Previous financial targets
The new Strategic Framework will run from 2016 to 2020.
For the year 2015, the fulfilment of the commitments is
compared to the old objectives as set out in the Strategic
Framework 2012-2016. The objectives and the actual figures for
2015 are presented in the table below.
Summary of targets in Financial Framework 2012-2016
Target for
Actual
2016
2015
Profitability
Return ontier! capital
8%
6.5%
Solvency
Common equity tier 1 ratio
14%
13.5%
Total capital ratio
20%
23.2%
Liquidity
Loan-to-deposit ratio
1.30
1.25
Impact of performance improvement on staffing
The improvement in profits in 2020 will have to come from
higher earnings as well as cost savings. These cost savings will
have a drastic impact on staffing. In the years 2016-2018, 9,000
jobs will disappear within Rabobank.These cuts are in addition
to the 3,000 that are already planned in the context of the
Vision 2016 and Mars programmes. Both in the Netherlands and
abroad, the elimination of jobs will mainly affect the supporting
functions.This drastic measure will be guided in a socially
responsible way, with care and consideration for the individual
employees.
14 Rabobank Annual Report 2015
