Notes to the financial results
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Consolidated Financial Statements
Company Financial Statements
Pillar 3
Total income increased by 5%
In 2016 total income of WRR and Group Treasury increased
to EUR 3,609 (3,436) million. Strong increase in income is
mainly seen in the North America and Europe regions. At WRR
commercial interest margins stabilised. Among others negative
interest rates, the relatively flat interest rate curve and higher
liquidity buffer costs led to lower net interest income from
the Group Treasury activities. As a result net interest income
decreased to EUR 1,974 (2,270) million. WRR's loan portfolio
grew, while it also focused, in line with their strategy, on more
fee-generating business. As a result net fee and commission
income increased to EUR 538 (513) million. Markets performed
better compared to 2015 and also the release of foreign
exchange reserves connected to the closing of Rabobank's
office in Curagao contributed to the increase in other income to
EUR 1,097 (653) million.
Operating expenses fell by 3%
In 2016 operating expenses at WRR fell to EUR 2,254 (2,331)
million. Despite the increase in the value of the US dollar, staff
costs remained more or less stable at EUR 1,137 (1,123) million
due to cost-saving initiatives related to our performance
improvement programme, Performance Now. Examples
of such initiatives include efforts in further standardisation
of the organisation and simplification of the IT landscape.
Other administrative expenses were down to EUR 1,023 (1,101)
million mainly due to the release of a provision for legal issues.
As a result of lower depreciation on software developed
in-house, depreciation was down to EUR 94 (107) million.
Loan impairment charges down by 52%
Loan impairment charges of Wholesale, Rural Retail more than
halved in 2016, falling to EUR 255 (526) million. For Wholesale
all regions, with exception of Asia, exhibit significant reductions
in loan impairment charges over 2016 compared to 2015.
Specifically for the Netherlands loan impairment charges
decreased below the long-term average, due to improved
economic conditions. For Rural Retail the decrease can mainly
be attributed to the exceptionally low loan impairment charges
of ACC Loan Management. Total loan impairment charges were
equal to 26 (53) basis points of the average loan portfolio, well
below the long-term average of 59 basis points.
In 2017 the Dutch economy is expected to grow and the
global economy is forecast to grow by 3.1%. In the United
States, growth strengthens somewhat, while the eurozone
continues to grow robustly. This will have a positive effect on
the Netherlands, as more than two-thirds of the added value
of Dutch exports is realised in Europe and North America.
Nonetheless, international uncertainties have grown as a result
of the United States change of course in foreign and trade
policy and still many unknowns around the planned exit of the
United Kingdom from the EU. Although also difficult to gauge
the potential impact of growing anti-EU sentiment within
several EU-Member States and elections in countries like France,
Germany and the Netherlands contribute to an uncertain
environment. The Chinese economy seems to be stabilising, but
several challenges remain.
Wholesale, Rural Retail will continue to focus on consolidating
Rabobank's position as leading bank for Dutch Wholesale
clients and also on consolidating our leading position as a food
agri bank. Total income from the wholesale, rural and retail
businesses is forecast to increase slightly in 2017 due to higher
fee and commission income. The cost-income ratio is expected
to further improve. The loan portfolio will be further aligned
with the Banking for Food strategy, and portfolio growth is
anticipated for rural banking.
41 Our output and impact: improving performance
