Contents Foreword Management report Corporate governance
Consolidated Financial Statements
Company Financial Statements
Pillar 3
Up until 2015, movements in Rabobank's own credit spread
were recorded in the statement of income. Credit spreads are
a function of the perceived creditworthiness of Rabobank, but
also of sector-specific events, home-country events and the
broader macro-economic outlook, so they can be rather volatile.
In 2016, the European Commission endorsed the International
Financial Reporting Standard 9 (IFRS 9). Under this accounting
standard, value changes that result from changes in the credit
spread must be excluded from the statement of income.
Rabobank chose to adopt this specific part of IFRS 9 early,
immediately after endorsement, since this change mitigates
volatility in the statement of income. Up until June 2016, the
net profit was pressured by EUR 63 million due to the change
in fair value that is attributable to changes in own credit risk.
As a result of the early adoption as of 1 January 2016 the full
year negative effect of EUR 365 million was accounted for in
other comprehensive income in equity.
In 2016, the first day gains on several newly issued notes were
partly offset by a negative revaluation result due to interest
rate volatility. The net result on structured notes decreased by
EUR 125 million to EUR 150 (275) million. In 2015, driven by
the Greek turmoil, a widening of the credit spreads fuelled the
result on structured notes.
Hedge accounting
Hedge accounting can be applied under IFRS in order to
mitigate volatility in the consolidated statement of income.
This volatility is caused by valuation and classification
differences between available-for-sale assets measured at fair
value, loans granted and issued debt measured at amortised
cost on the one hand, and related hedging derivatives
measured at fair value through profit and loss on the other.
IFRS does not allow the designation of hedge accounting
relationships for all types of economic hedges. As a result of the
imperfections and restrictions in applying hedge accounting,
even when the risk is economically hedged, its application
cannot completely prevent volatility in the consolidated
statement of income.
Operating expenses increased 6%
Staff costs down 6%
In 2016, the total number of employees (including external
hires) at Rabobank decreased by 6,446 FTEs to 45,567 (52,013)
FTEs mainly as a result of the large restructuring programme
Performance Now in the Netherlands. The sale of Athlon and
staff reductions at WRR in Ireland, Australia, New Zealand and
Chile also contributed to the decrease. The largest reduction in
staff was at the local Rabobanks. Besides the staff reduction, the
sobering of fringe benefits helped to bring staff costs down to
EUR 4,521 (4,786) million.
Other administrative expenses up 25%
Other administrative expenses increased to EUR 3,635 (2,916)
million in 2016, as an additional provision of EUR 514 (150)
million was made after Rabobank adopted the SME interest
rate derivatives recovery framework (for more information,
see here). Total restructuring costs amounted to EUR 515 (183)
million in 2016. As of 31 December 2016, the restructuring
provision in the balance sheet amounted to EUR 461 (354)
million. This rise in restructuring costs can be attributed mostly
to redundancies at Rabobank and, to a lesser extent, FGH Bank,
DLL and ACC Loan Management. The digitalisation of services
resulted in a decline in the number of employees and branches.
The revaluation of property in own use, due to a lower
occupancy rate of the local branch premises, also contributed
to the increase in other administrative expenses. The increase in
the other administrative expenses was partly compensated by
a provision release for legal claims at WRR.
Depreciation down 1%
As a result of lower depreciation on intangible assets,
depreciation fell to EUR 438 (443) million.
Impairment losses on goodwill and investments
in associates
In 2016, the operating profit before tax was pressured by
non-cash impairments of Rabobank's stake in Achmea of
in aggregate EUR 700 million. The outlook for the future
profitability of Achmea deteriorated during 2016, taking
into account recent developments in the health insurance
market and the financial results over the first half year of 2016.
These elements, combined with the deteriorating business
environment of Dutch insurers over the last years, gave triggers
of potential impairments for the investment in Achmea. The test
to establish whether these potential impairments had occurred
resulted in downward adjustments of the book value of the
investment in Achmea.
In 2015, an impairment on goodwill lowered the operating
profit before tax by EUR 623 million. Of this sum, EUR 604 was
associated with RNA in the United States.
Loan impairment charges at only 7 basis points
With EUR 310 (1,033) million, loan impairment charges for 2016
were significantly lower than in 2015, with improvements in
nearly all business segments. Due to the economic recovery
31 Our output and impact: improving performance
