Contents Management report Corporate governance Consolidated financial statements Financial statements Pillar 3
Culture change
In 2015, Rabobank put a great deal of effort in organisational
culture change. Customers' interests form an important aspect of
the bank-wide Culture Collective culture programme. We aim to
create a transparent culture where customer focus, purpose and
trust are key principles.This culture is one in which employees
are given space to step up and take responsibility and become
empowered. Our employees in the Netherlands took the
Banker's Oath before summer 2015. During the Values Week,
colleagues engaged in dialogue about their standards, values
and conduct. There will be a follow-up of this initiative in 2016.
Sustainability
Sustainability has always been one of our priorities, and this
was no different in 2015. The Circular Economy Challenge is
a programme in which three companies from the food industry
and five companies from the automotive industry have taken
up the challenge to develop a business case in the field of
circular entrepreneurship, within a year. The phenomenon
of circular economy is gaining an ever firmer foothold in the
Dutch economy and Rabobank wants to play a pioneering
role. Rabo Brazil received two emblematic awards as the most
sustainable bank.
Rock-solid bank
The financial targets which Rabobank sets for itself in order to
be and remain a rock-solid bank concern the bank's profitability,
solvency and liquidity. Reflecting the higher net profit, the
return on the tier 1 capital increased by 1.3 percentage points
to 6.5%. Solvency is measured on the basis of the common
equity tier 1 ratio and the capital ratio. The common equity
tier 1 ratio amounted to 13.5% and we further strengthened
our capital ratio to 23.2%.The loan-to-deposit ratio improved
to 1.25.
As a result of new regulations such as Basel IV, MREL and TLAC,
capital requirements will increase. The target for the common
equity tier 1 ratio is a minimum of 14% and the target for
the capital ratio has been raised to at least 25% by the end
of 2020. The extent to which targets for these ratios exceed
these minimums depends on the definitive terms of the new
regulations. 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). In order to achieve its targets, Rabobank
needs to improve its profitability. Reducing the balance sheet
and making it more flexible should contribute to achieving
higher capital ratios. We aim to optimise the balance sheet by
placing parts of our loan portfolio with external parties and by
maintaining a lower liquidity buffer. More flexible use of the
balance sheet will enable Rabobank to service more customers.
Selling on mortgages and business loans to investors will allow
us to grant more loans. We are also taking a critical look at
activities which do not contribute (sufficiently) to the ambitions
of Rabobank. These measures will lead to a potential balance
sheet reduction of a maximum of EUR 150 billion in the period
up to 2020.
Growth in results is necessary
The financial results we achieved in 2015 form a basis for
further improving our performance. We need a significant
improvement in performance.This is the only way we will be
able to achieve the required return of 8% on invested capital,
given the consequences of higher capital requirements.
The improvement programme we have started is targeting
an increase in gross profits of approximately EUR 2 billion by
2020 (excluding the impact of the balance sheet reduction on
our results), to be achieved through cost savings and higher
income. Furthermore, the flexibilisation and limitation of the
balance sheet should contribute to achieving higher capital
ratios. As a result, our cost/income ratio, excluding regulatory
levies, will fall towards the 50% mark, which is more in line
with other market players. In 2015, this ratio reached 63%
(and including the regulatory levies, 65%).
Outlook
Growth returned to the Dutch economy in 2015 and it appears
it will continue in 2016. Unemployment will decrease slightly
in 2016, but will still be at historically high levels by Dutch
standards. The growth in retail consumer spending will pick
up further this year, while Dutch businesses will step up their
investments. However, the economic recovery is still too fragile
for many businesses to invest. For this reason, investment
growth is still moderate.
In 2015, the housing market saw a second year of strong
recovery, with a significant increase in the number of residential
property sales and a moderate increase in average price levels.
Due to the tightening supply in the owner-occupied housing
market, the average house price growth will be slightly higher
in 2016 than in 2015.
The growth of the global economy will remain weak in 2016, as
it was last year. In China, the slowdown in growth will continue,
while some important commodity-producing countries, such
as Brazil, Argentina and Russia are currently in a recession.
The eurozone continues to see only modest growth, around the
level of 2015. This is a very modest recovery level, which masks
important differences between countries. Unemployment
remains a concern, in particular in Southern Europe where
the unemployment level is extremely high. The UK and the US
4 Rabobank Annual Report 2015
