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
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