Rabobank Group

The present economic situation led to lower activity levels at many of Rabobank’s clients. As a result, the growth of the loan portfolio slowed and bad debt costs increased. Maintaining a solid financial position, which is necessary to be able to continue to serve clients well in the long term, requires healthy margins to be earned across the entire product range and stringent cost management. In 2010, operating expenses at all our group entities will be examined even more critically and the deployment of labour will be aligned more tightly with the expected activity levels. Cost savings will also be achieved by aiming to expand the use of virtual channels and further standardisation of processes.

Dutch consumers started to save more and competition for savers’ funds was fierce. Clients entrusted more savings to local Rabobanks, but some market share was lost. The margin on savings declined owing to the fierce competition. At Rabobank International, income at Global Financial Markets rose. Robeco and Sarasin benefited from the recovery of the stock markets and as a result the loss incurred in the first six months of 2009 was turned around into a profit. Margins on new lease transactions and property loans increased at De Lage Landen and at FGH Bank. The Rabo Real Estate Group sold fewer residential properties, at lower average margins. As a consequence of the tough economic situation, our Dutch clients in the small and medium-sized enterprises segment fared less well. This led to an increase in bad debt costs at local Rabobanks. At Rabobank International and De Lage Landen these costs likewise remained at high levels, just as in the first six months of 2009.

Growth of the loan portfolio slowed due to the tough economic conditions in the Netherlands. Rabobank maintained its leading position in the mortgage loan market and extended it in the Dutch SME market. The local Rabobanks and Obvion continued to report growth in loans, but it was substantially lower than in 2008. The size of the portfolio declined at Rabobank International. Due to these developments the growth of the loan portfolio at the group level slowed, particularly in the second half of 2009. Retail and business clients entrusted more funds to the local Rabobanks. However, due to the outflow of businesses’ fixed-term deposits at Rabobank International, total due to customers decreased. Businesses currently often need these funds themselves in order to finance their operations. Assets under management rose at both Robeco and Sarasin due to an inflow of assets in combination with the stock market recovery. Retained earnings and the issue of hybrid capital led to an increase in equity.

In 2009 the Rabobank Group continued its progress in the field of corporate social responsibility. The Food & Agribusiness Principles were formulated to help make the entire value chain more sustainable, from the source up to consumption. In addition, the Dutch Greentech Fund was founded together with the World Wildlife Fund, Delft University of Technology and Wageningen University. The fund invests in promising Dutch start-ups that make value chains more sustainable through innovative technology or processes, especially with regard to agriculture, food production, water, air and bioenergy. With this fund Rabobank is targeting – in view of the urgency of the climate problem – a reduction in CO2 emissions. Against this background, the Rabocard with climate compensation will be discontinued with effect from 2010. The high level of interest in green investments was undiminished in 2009. Interest in green bonds and green savings among Rabobank’s clients is high. In fact, demand exceeds supply. The amount available for spending on green bonds is limited, however, as there are fewer projects to invest in due to the economic crisis. On balance the number of green projects financed this year will decline to some extent. The bank does see some recovery in the market in the fourth quarter. Projects are being initiated again in the field of wind energy in particular.
Rabobank Private Banking, Robeco and Sarasin are continuing their developments in the field of responsible investments. Therefore involvement in controversial arms is actively excluded, and there are initiatives to apply the principles of responsible investment to all services.
The Rabo Real Estate Group implemented a number of attractive projects in the field of sustainable property development and sustainable construction, including Plantage De Sniep in Diemen and De Rotterdam in Rotterdam. In addition it contributed to doubling the budget for first-time buyers’ homes. The Rabo Real Estate Group was also the principal sponsor of the Open Monuments Day 2009.
De Lage Landen continued to develop as finance partner for sustainable solutions in fields including sustainable energy, LED lighting for greenhouse horticulture and other sectors, recycling of leased capital goods, and electrical vehicles and battery systems. It developed the Green Car Plan and the Green Energy Plan for its staff. It also worked to prepare the establishment of the De Lage Landen Foundation, which engages in microleasing of agricultural equipment and other activities.
Innovation will continue in 2010. We will continue to contribute to making the food & agribusiness more sustainable, and to innovation in the field of sustainable energy. We are continuing our work to improve our own eco-efficiency en reduce our CO2 emissions. We will furthermore integrate our corporate social responsibility reporting with our financial reporting in an integrated online annual report.

Everywhere in the world, most countries took the initial steps out of recession in the second half of 2009. Financial markets recovered from the enormous stress that characterised the start of 2009. The renewed economic growth is due largely to successful government policy and a slower drawdown of inventories by businesses. Both are temporary factors, meaning there will not necessarily be lasting high growth. Although there will probably be no new recession, Rabobank does foresee a slowdown in economic growth in most countries during 2010. The effects of the inventory cycle will have come to an end and governments will be forced by sharply rising budget deficits to reduce their stimulation measures. In addition, the high unemployment, which is set to rise further in some places, will lead to lasting caution among consumers. The weak economic growth follows a very substantial contraction, and throughout the whole of 2010 economic activity in many countries will therefore remain below the level achieved before the recession. Consequently, the growth in business activity and job supply will not be sufficient to make up for the losses of 2009. This applies to the Netherlands as well. Economic growth will partly be achieved in sectors that were hit hard in the past year, including industry, trade and transport. While some of the lost turnover will be made up in these sectors, other sectors, the construction industry for instance, still have tough times ahead of them. Businesses and employees will accordingly continue to be faced with major challenges this year. The uncertainties about the economic situation mean that it is necessary for us to continue to look at the future together with our clients with an open mind. In doing so we will take potential risks into account and consider how to deal with them, but above all also keep our eyes open for opportunities and how to grasp them.