Rabobank Group

Despite a limited need for loans among Rabobank clients in 2010 due to the uncertain economy, all group entities managed to bring about growth in lending. It should be noted, however, that a considerable share of the increase in lending outside the Netherlands was attributable to the depreciation of the euro. Although lending was up in the Netherlands, the growth rate was relatively low. Private sector loan portfolio increased by 5% at group level, rising to EUR 436 billion. Rabobank managed to maintain or slightly increase its share of the markets and sectors where it is a leading player, i.e. in mortgages and savings, SMEs and agriculture.

2010 was a good year for investments on average. Stock exchanges worldwide showed a moderately positive development. Currency effects, the influx of assets and higher share prices contributed to an increase in assets managed and held in custody for clients by 17% to EUR 270 billion at our asset management operations. Robeco manages about half of the assets, Sarasin is responsible for managing a quarter, and the remaining assets are managed by Schretlen & Co, Rabo Real Estate Group and the local Rabobanks. All divisions saw an increase in assets under management for clients.

Many of our clients fared better in 2010 because of the economic recovery. This resulted in a 37% drop in value adjustments at group level to EUR 1,234 million. Bad debt costs stood at 29 basis points of average lending. Thanks in particular to this decline in value adjustments and lower costs, net profit rose by 26% to EUR 2,772 million. The tier 1 ratio was up 1.9 percentage points, rising to 15.7%, chiefly owing to retained earnings. The efficiency ratio landed at 64.5% and return on equity increased to 8.6%. In line with its risk profile, Rabobank has an extremely limited exposure to European government bonds that are currently perceived as subprime by the market.

The financial crisis stirred up a deep public debate about the actions of financial institutions, and lessons have been learned since then. The Banking endeavours to make banking practices better and more transparent and put the client’s interests centre-stage. Rabobank wholeheartedly supports the Banking Code and implemented it vigorously in 2010.
In that context, Rabobank pays a great deal of attention to customer care, providing sound, dependable services, creating simple, transparent products, being close to clients and building a bond of trust with clients. In 2010, these aspects of responsible banking continued to be implemented in our core activities.

Rabobank sets high standards as far as its services and its policy on responsible banking are concerned. Clients need to be able to tell that the services they receive are responsible and transparent. Moreover, Rabobank Group is committed to creating more sustainability in value chains in all of its core activities. Sustainability is also an aspect of Rabobank's own operations. Rabobank decided on a policy for responsible lending through which we can help make various sectors more sustainable. Retail banking worked hard on making products more transparent, preventing financial problems for clients, and providing services to vulnerable groups. Rabobank adheres to the United Nations Principles for Responsible Investment. Robeco developed a classification system for investment funds in 2010. This classification shows investor clients to what extent an investment fund makes responsible investments. Rabobank’s reputation as a responsible bank shines through in many respects. Rabobank Group occupies a foremost position in various sustainability and transparency reviews.

The economic recovery that began in 2010 is expected to level off somewhat during 2011. The slowdown in economic growth in the Netherlands is due to a number of factors. First, the global recovery is weakening. This will have a direct impact on the Netherlands, with its open economy. In addition, the Dutch government will implement drastic spending cuts over the next few years, and there is still uncertainty regarding a number of matters, such as employment, purchasing power, house prices and pensions, which will continue to have an adverse effect on consumer confidence, and hence private consumption, in 2011.
As far as the global economy is concerned, some of the problems that led to the credit crunch have still not been addressed properly. The US current account deficit remains substantial, while China is keeping the yuan exchange rate at a low level. Within Europe, major differences in economic growth can still be seen. Resolving economic imbalances is in fact something that every country needs to take responsibility for. What this essentially means is that countries that have a savings deficit need to take steps to reduce it, while countries with a savings surplus should consume and invest more. Simply hoping that we will return to the old, familiar growth paths is not realistic. Within the context of these expectations, the banking industry as a sector needs to assume a serving role towards its clients and the economy, and it needs to do everything in its power to repair bonds of trust with clients.

The economic recovery is expected to level off during 2011, making it another challenging year for Rabobank. Government cutbacks and uncertainty regarding house prices and pensions, as well as employment and purchasing power to a lesser extent, will affect consumer and producer confidence. Moreover, solvency and liquidity requirements will become tighter under the new Basel regulations.
Despite these challenges, Rabobank Group has started the year full of confidence. Rabobank has a very strong image, and 2011 will present the bank with opportunities to continue to set itself apart from the competition in a positive way. Owing to the limited economic recovery, lending is expected to show moderate growth. We want our liquidity position to remain resolutely robust, and for this reason the emphasis will be on attracting client funds both in the Netherlands and in other countries. We will continue to serve clients by providing the right products and services, which requires our group entities to work together effectively. By serving clients well, continuing to focus on achieving healthy margins and being responsible when it comes to costs, Rabobank Group’s profitability, and therefore our capital position, is expected to remain at an appropriate level, ensuring that we can continue to serve our clients going forward.