About this
Report
Chairman's
Foreword
Corporate
Management Report Appendices Governance
Consolidated Financial Company Financial
Statements Statements
Net Fee and Commission income Increased Slightly
In 2018, net fee and commission income increased slightly to
EUR 1,931 (2017:1,915) million. Investment management services
and insurance policies contributed to a higher net fee and
commission income at DRB. Local Rabobanks we saw higher
commissions on payment accounts. At WRR, net fee and
commission income increased slightly thanks to the strong
performance of our Capital Markets division. Also, our Mergers
and Acquisitions division performed stronger than in 2017. Net
fee and commission income in the Real Estate segment decreased
by 83% following the downscaling of activities by Bouwfonds IM.
This was more than offset by higher income earned by our core
business segments. Net fee and commission income at DLL
increased by 41%. This increase comes from higher fee income for
syndicated leases as well as a negative one-off adjustment in
2017.
Other Results Up 23%
The increase in other results to EUR 1,530 (2017:1,243) million can
be partly attributed to the improved result on fair value items. On
balance, the gross result on fair value items improved from a
negative result of EUR 313 million in 2017 to a negative result of
EUR 115 million in 2018. Also, higher results on ourequity stake
in Achmea contributed to the increase of other results. Other
results at WRR decreased by 26% as our Markets division could
not match the previous year's strong performance. The Real
Estate segment's other results increased by 19% due to gains on
the sales of the residual part of FGH Bank's loan portfolio and of
BPD's French subsidiary (BPD Marignan), BPD's improved
performance in general. At DLL, other results went up by 32%, as
a result of the reversal of an impairment taken at year-end 2017
due to a portfolio optimization.
Operating Expenses Decreased by 8%
Staff Costs Down 4%
In 2018, the total number of employees (including external hires)
at Rabobank decreased by 1,868 FTEs to 41,861 (2017: 43,729)
FTEs mainly because of the large restructuring programs in the
Netherlands. The largest reduction in staff in 2018 was realized at
local Rabobanks. At WRR and DLL, staff levels increased as
expected. At WRR more (temporary) staff came on board for the
execution of several (regulatory) projects, whereas DLL needed
more resources to support business growth. Overall staff costs
decreased by 4% to EUR 4,278 (2017:4,472) million, which was
tempered by an increase in costs for temporary staff. In 2018 the
costs associated with the 2% pension accrual guarantee given in
2013 to the pension fund (covering the years 2014-2020)
decreased to EUR 12 (2017:160) million. This accounts for part of
the decrease in staff costs. This guarantee is capped at
EUR 217 million, of which EUR 202 million has already been used
up until 2018.
Other Administrative Expenses Decreased by i2%
Total other administrative expenses decreased to EUR 2,780
(2017: 3,176) million in 2018.This decrease can be largely
explained by the EUR 310 million provision taken by RNA in 2017
for compliance program matters. Lower restructuring costs
(EUR 120 million versus EUR 159 million in 2017) helped reduce
other administrative expenses as well.
Depreciation Down 4%
Depreciation decreased to EUR 388 (2017:406) million as a result
of our restructuring efforts and the consequential closing down
of offices in the Netherlands.
Impairment Charges on Financial Assets at 5 Basis Points
In 2018 impairment charges on financial assets amounted to
EUR 190 million. Although higher than in 2017 (a net release of
EUR 190 million), they are still at a low level. We again saw
favorable developments in most business segments. Relative to
the average private sector loan portfolio, impairment charges on
financial assets amounted to 5 basis points (2017: minus 5 basis
points). Calculated over the past 10 years (2008-2017) and
including the elevated level of impairment charges over the years
2012 - 2014, the average impairment charges amount to 34 basis
points.
On January 1, 2018 the non-performing loans showed a one-off
increase of EUR 1.9 billion to EUR 20.2 (2017:18.3) billion due to
the application of a more prudent "Definition of Default" to our
sizable mortgage and SME portfolios. This change is in line with
new EBA guidelines, which banks across Europe have to
implement by January 12021 at the latest. On December 31
2018, non-performing loans (on a like-for-like basis) decreased to
EUR 18.4 billion. Next to underlying improvements as a result of
the favorable economic climate, the sale of a legacy CRE portfolio
also resulted in a decrease in the stock of non-performing loans.
All in all, as at December 31, 2018 the NPL ratio (non-performing
loans and advances as a percentage of the aggregate amount of
loans and advances) declined to 3.5% (January 1,2018:3.8%). The
related NPL coverage ratio (impairment allowances, excluding
Stage 1 2 allowances, as a percentage of non-performing loans
and advances) decreased to 22% (January 12018:24%). The sale
and write-offs of highly provisioned loans (including non-core
CRE) resulted in a decline in NPL Coverage Ratio. In more general
terms, Rabobank's NPL Coverage Ratio is affected by relatively
sizable portfolios in the stock of non-performing loans that are
well collateralized and that are generally characterized by a high
cure rate and high recovery rate. In addition, the positive
economic outlook enable higher expected collateral values.
Annual Report 2018 - Management Report
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