Rock-Solid Bank Being a Rock-Solid Bank is a cornerstone of Rabobank's strategy. We strive to do the right things exceptionally well, with everyone taking ownership and remaining conscious of the risks. About this Chairman's Corporate Consolidated Financial Company Financial Report Foreword Management Report Appendices Governance Statements Statements Financial Targets on Track Despite Rapidly Changing Environment Rabobank is beyond the halfway point of the planning horizon of its Strategic Framework 2016-2020. This framework defines several financial key targets and provides direction for performance improvement and balance sheet optimization in 2020. To maintain our position as a rock-solid bank, we monitor these targets closely and frequently reassess our chosen course. This helps us remain well poised to absorb the impact of forthcoming regulations, such as the reform of Basel III (also known as Basel IV) and the minimum requirement for own funds and eligible liabilities (MREL). The table below presents our ambitions and the actual performance on ourfinancial targets as at December 31, 2018. Summary of Financial Targets Within Framework 2016-2020 Amounts in billions of euros Capital Fully loaded CET1 ratio MREL buffer Profitability ROIC Ambition 2020 12-31-2018 12-31-2017 >14% 16.0% 15.5% 28.25% 26.82% >8% 7.4% 6.9% Cost/income ratio (regulatory levies included) 53%-54% 65.9% 71.3% Funding and liquidity Wholesale funding 150 153 160 Overall we have made valuable progress on our strategic targets, despite the now drastically different operating environment and customer demand compared to when we set these targets in 2015. Comfortable Position to Meet Future Regulatory Requirements To comply with stricter regulatory requirements, we set clear ambitions for our capital and MREL ratios. In 2018, Rabobank further strengthened its capital ratios. Our fully loaded common equity tier 1 (CET1) ratio, that is, our CET1 capital as a percentage of our risk-weighted assets,1 assuming the CRD IV/CRR regulation has been fully adopted, stood at 16.0% (2017:15.5%) on December 31,2018. We have already exceeded our 2020 target, which is prudent in the light of the final proposals published by the Basel Committee in December 2017 on new capital requirements for banks, which will result in the gradual inflation of our risk-weighted assets from 2022 onwards. Adding a part of our net profit to retained earnings further increased ofourCETI capital and ultimately resulted in a positive impact ofO.9 percentage points on ourCETI ratio.This effect was partly pressured by the negative impact (14 basis points) of the full adoption of the IFRS 9 accounting standard on January 12018. Our total capital has been replaced by a MREL requirement that must be met with a combination of own funds and non-preferred senior bonds. The MREL eligible buffer divided by risk-weighted assets further increased in 2018 from 26.82% to 28.25%, mainly due to profit retention and the issuance of new instruments. In the second half of 2018 we issued a tier 1 transaction of EUR 1 billion and three tranches of non-preferred senior bonds: EUR 1 billion, USD 1 billion and USD 0.25 billion. In anticipation of Basel IV, we will continue to strengthen our capital ratios over the coming years. In 2018, our risk-weighted assets increased to EUR 200.5 (2017:198.3) billion. Based on pro- forma calculations and balance sheet composition at year-end 2018, we expect the impact of the Basel Committee proposals to lead to an approximate 30%-35% increase in risk-weighted assets on a fully loaded basis. This indication is based on our current interpretation of the proposals (including credit risk, operational risk, market risk, CVA, and the aggregated output floor) and the choices we anticipate in connection with the Basel proposals.The estimate excludes all technical, data-quality, and strategic (balance sheet) management actions to mitigate the ultimate impact, which we expect to remain below 30%. 1 The bank uses models for each asset to determine the risk weight depending on the asset's risk profile. The higher the risk weight, the more capital the bank has to hold for the asset in question. Annual Report 2018 - Management Report 48

Rabobank Bronnenarchief

Annual Reports Rabobank | 2018 | | pagina 50