Improving performance
Our output and impact
Rabobank
Financial performance
Rabobank operates in a challenging environment characterised by changing customer needs,
disruption through innovation, new competitors, changing economic conditions, market volatility
and more stringent regulations. The current European Central Bank (ECB) monetary policy makes
a prolonged low interest environment likely. This offers banks fewer possibilities to maintain or improve
their net interest margins. Simultaneously, capital requirements are becoming tighter. Regulations such
as the proposed reforms to Basel III, minimum requirement for own funds and eligible liabilities (MREL)
and total loss absorbing capacity (TLAC) are aimed at maintaining a stable, competitive and accessible
banking system. As a consequence of these regulations Rabobank will face higher capital requirements
and higher risk weighting of assets. Rabobank wants to increase retained earnings, but by adding
retained earnings to the reserves the available capital can grow only to a limited extent. Therefore,
Rabobank will also have to mitigate the increase in its capital requirements by reducing the balance
sheet and making it more flexible. We need to keep the balance sheet flexible in order to facilitate
future growth for our customers. So while we keep developing new services that meet customers'
needs, we need to do so without putting pressure on our balance sheet. With these developments and
challenges in mind, along with Rabobank's aim of remaining a rock-solid bank, the following financial
targets have been set for the period up until 2020.
Contents Foreword Management report Corporate governance Consolidated Financial Statements Company Financial Statements Pillar 3
Update in realisation of financial targets
The table below presents the ambitions of the Strategic
Framework 2016-2020 and the actuals as at 31 December 2016
and 2015.
Summary targets financial framework2016-2020
Amounts in billions of euros
Actual 2015
Actual 2016
Ambition 2020
Profitability
ROIC
6.0%
5.2%
>8%
Cost/income ratio (regulatory levies included)
65.2%
70.9%
53%-54%
Capital
Common equity tier 1 ratio
13.5%
14.0%
>14%
Total capital ratio
23.2%
25.0%
>25%
Funding and liquidity
Wholesale funding
203
189
<150
Rabobank wants to achieve higher capital ratios by increasing
retained earnings, reducing the balance sheet and by raising
additional capital. To facilitate the growth of common equity
tier 1 capital through retained earnings, we will need a return
on invested capital (ROIC) of at least 8%. The ROIC is calculated
by dividing the net profit realised after non-controlling interests
by the core capital (actual tier 1 capital plus the goodwill in
the balance sheet at the end of the reporting period) minus
deductions for non-controlling interests in Rabobank's equity.
The target cost/income ratio for 2020 is 53%-54%, including
regulatory levies.
23 Our output and impact: improving performance
