Appendix 7 Our financial performance -
segment reporting
Domestic retail banking
Underlying profit benefited from positive economic sentiment
Net profit of the domestic retail banking division increased strongly in 2017 to EUR 2,028 million
compared to EUR 1,269 million in 2016. This increase was mainly the result of lower operating
expenses and a further decrease of loan impairment charges. Corrected for restructuring costs
and the addition to the provision for the SME interest rate derivatives recovery framework, the
domestic retail banking division's underlying operating profit before tax increased by EUR 280
million to EUR 2,834 million in 2017.
Contents Introduction Management report Appendices Corporate governance Consolidated Financial Statements Company Financial Statements
The growth of the Dutch economy amounted to more than
3% in 2017.This trend is expected to continue, but growth is
expected to slow down slightly in 2018. The economy benefited
mostly from continued growth in household consumption and
investments in housing. Rabobank's domestic loan portfolio
shrank 2% to EUR 280.0 billion, mainly due to continued high
levels of extra repayments on clients'existing mortgages.
Furthermore, the mortgage portfolio shows a slow and
gradual decline as the share for new mortgages is lower than
the existing overall market share. Deposits from customers
increased by EUR 5.5 billion to EUR 228.8 billion in 2017.
The favourable economic developments and low interest
rates caused the strongest increase in house prices in more
than 10 years and a high number of housing transactions.
The combined market share of Rabobank and Obvion in the
Dutch residential mortgage market increased from 20.6%
to 22.0%.The market share in the private savings market
amounted to 33.6% (2016: 33.5%).
In 2017, staff costs at domestic retail banking decreased
compared to last year from EUR 1,820 million to EUR 1,430
million.This decrease was caused by a further staff reduction
of 4,009 internal FTEs resulting from Performance Now, a
restructuring programme that supports our ambition to
further increase our clients focus by enhancing effectiveness
and efficiency. Part of this decrease is the result of employees
moving from local Rabobanks to the central organisation to
create economies of scale. Other administrative expenses also
decreased, as these were inflated in 2016 by a higher addition
to the provision for the SME interest rate derivatives recovery
framework and higher restructuring costs.
The positive economic climate saw loan impairment charges
decrease from EUR 32 million to minus EUR 259 million.
Allowances previously taken for defaulted loans proved more
than sufficient and newly defaulted loans were limited.The loan
impairment charges represent minus 9 basis points of average
lending, which is far below the long-term average of 23 basis
points.
Profile of the domestic retail banking segment
In the Netherlands, Rabobank is a leading player in providing
loans in the residential mortgage market, and has considerable
stature in the savings, payments, investment and insurance
markets. The bank is also an important financial services
provider for the SME segment, the Food Agri sector, and the
corporate segment. At 31 December 2017 the 102 (2016:103)
local Rabobanks had 446 (2016:475) offices. They offer a
comprehensive range of financial services to approximately 6.4
(2016:6.5) million private clients and approximately 755,000
(2016: 762,000) commercial clients in the Netherlands.
The domestic retail banking business employs 13,635 (2016:
17,877) people (in total FTEs - including mortgage lender
Obvion, a Rabobank subsidiary), of which 12,466 are internal
employees and 1,169 are external employees. Obvion employs
492 (2016:559) people in FTEs.
Loan portfolio decreased by 2%
In 2017, the housing market continued to flourish due to low
interest rates, a high consumer confidence and favourable
economic conditions.This resulted in a higher volume of new
mortgage loans granted as well as a high volume of repayments
on existing loans.The persisting low interest rate on savings
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