- Solid Results in Unusual Times
UTRECHT, The Netherlands, Aug. 26 /CNW/ -
- Net profit at EUR 1.3 billion
- Equity up 10% to EUR 37 billion
- Tier 1 ratio higher, at 13%
- Private sector loan portfolio up EUR 7 billion, at EUR 415 billion
- Bad debt costs at 55 basis points due to adverse economic conditions
"While some economists have spotted a swallow, I, for one, do not see an
economic recovery yet. Many western countries are battling with recession,
including the Netherlands, which is experiencing its most severe economic
decline since World War II. This has created serious problems for customers,
which in turn is reflected in Rabobank Group's results. Despite difficult
economic conditions, Rabobank Group has achieved solid results for the first
six months of 2009, with net profit at EUR 1.3 billion and an improved capital
position. Our Tier 1 ratio has improved towards 13%."
"In a market in which growth in both mortgage lending and corporate
lending slowed down, the local Rabobanks succeeded in strengthening their
market positions. More loans were extended to food & agri clients by Rabobank
International and De Lage Landen. The private sector loan portfolio grew by 7
billion to EUR 415 billion. As a result of lower levels of activity among our
clients in the second half of 2009, growth in lending is likely to level off
further. In addition, bad debt costs are expected to continue to be higher
than the long-term average. Interest income at local Rabobanks came under
severe pressure owing to fierce competition in the Dutch savings market.
Improved margins, accelerated execution of the Rabobank 2010 Programme and
further cost reductions are therefore absolutely necessary, not only to
maintain our sound capital position but also to be able to continue to service
our clients well, now and in the future," says Piet Moerland, Chairman of
Net profit amounted to EUR 1.3 billion. The Tier 1 ratio was 13.0%, above
the already high target level of 12.5%. Return on equity was 8.7%. Rabobank
Group experienced a drop in the growth rate of both new mortgage business and
corporate lending. The private sector loan portfolio grew by EUR 7 billion to
EUR 415 billion. The economic downturn results in higher allowances for bad
debts. Because businesses kept lower amounts of deposits at Rabobank, amounts
due to customers dropped by 6% to EUR 285 billion, although savings deposits
held by private individuals increased by 4% to EUR 120 billion.
Income saw a 9% rise to EUR 6.3 billion, which was attributable in
particular to a strong improvement in treasury results. Thanks to a range of
cost-cutting measures, operating expenses decreased by 1% to EUR 3.7 billion.
The organisation, which has about 60,000 employees (in FTEs), operates in
46 countries. The customer's interests are served based on a long-term
Domestic retail banking
As a result of the economic downturn in the Netherlands, domestic retail
banking suffered from lower growth in the loan portfolio and rising bad debt
costs. The business did manage to strengthen its leading position in private
sector lending and the SME market. The local Rabobanks and Obvion saw a 2%
rise, i.e. by EUR 6 billion, in their loan portfolio, to EUR 275 billion, with
loans to SMEs increasing by 5%. Amounts due to customers were up 3% to EUR 181
billion. This influx allowed the local Rabobanks to largely fund the growth in
their loan portfolios themselves. Margins on savings dropped due to fierce
competition. Profit was down owing to a fall in interest income and a rise in
bad debt costs. Net profit stood at EUR 486 million. More and more local
Rabobanks are introducing the Rabobank 2010 Programme. This program offers
options for innovation and improving customer service while cutting costs.
Wholesale banking and international retail banking
In keeping with the updated strategy, Rabobank International's lending to
the Dutch corporate sector and the food & agri sector increased in the first
half of 2009. Likewise, its international retail banking activities extended
more loans. Lending to non-core clients was scaled down. On balance, the
private sector loan portfolio for wholesale and international retail banking
fell by 1% to EUR 100 billion. Services on offer for globally operating
clients were broadened further. The outflow of corporate time deposits caused
a drop in amounts due to customers. Income for Global Financial Markets was
higher as a result of a strong increase in the client turnover as well as
falling interest rates. The economic downturn led to some impairments at
Participations and an increase in bad debt costs. Net profit at Rabobank
International rose by EUR 354 million to EUR 428 million.
Asset management and investment
In the first half of 2009, the total inflow of assets into Robeco,
Sarasin and Schretlen & Co was EUR 3 billion. The stock markets recovered
slightly in that period. At the asset management division, assets under
management and held in custody were up 6%, rising to EUR 195 billion, thanks
to a positive cash flow and positive investment results. The net loss amounted
to EUR 9 million, against a net profit of EUR 131 million a year ago,
disregarding the gain recognised on the sale of Alex. The drop was related to
the decline in ordinary commission income from asset management and
At De Lage Landen, Rabobank Group's leasing subsidiary, net profit fell
by 58% to EUR 47 million in the first half of 2009. The global recession
suppressed clients' appetite for investment and caused bad debt costs to rise.
Clients had poorer credit ratings, which resulted in fewer loans being
granted. Margins on new contracts improved. The loan portfolio grew by 1% to
EUR 24 billion. Other income was down due to the decline in the second-hand
Adverse conditions continued in the property market. Rabo Real Estate
Group sold fewer homes due to reluctant customers. Bouwfonds Property
Development sold 2,636 homes in the first six months of 2009, compared with
3,384 homes sold in the first half of 2008. FGH Bank more or less managed to
stabilise the volume of its loan portfolio at EUR 17 billion, with higher
margins on new loans and low bad debt costs despite the recession. Net profit
for Rabo Real Estate Group was down 27%, dropping to EUR 68 million.
The local Rabobanks sell a wide range of - mostly Interpolis - insurance
products. The close ties with Interpolis were a factor in the increase in the
number of Alles in één Polis insurance policies and ZorgActief Polis health
insurance policies sold. The local Rabobanks sold more non-life insurance
policies in the first half of 2009. This resulted in a 1% increase in
commission income, to EUR 186 million, despite the drop in commissions from
life insurance policies by EUR 5 million.
The current difficult economic circumstances have proved that risk
management is a core banking competency. Rabobank Group pursues a prudent risk
policy that entails a moderate risk profile. Although the impact of the
economic downturn could be felt, and was evident in the form of higher bad
debt costs, Rabobank Group overall remained very strong in the first half of
2009. Impairment losses on illiquid assets amounted to EUR 254 million after
taxation. With a Tier 1 ratio of 13%, Rabobank Group's capital position
remained robust, and its liquidity position remained more than adequate.
Furthermore, the full-year target volume for long-term funding had already
been raised by the end of the first half of 2009.
Corporate social responsibility
Corporate social responsibility is an explicit strategic choice for
Rabobank Group. CSR is applied in all core activities of its financial
services as well as in its business operations.
In order to explain how we operate in the food & agri market, we have
formulated five Food & Agri Business Principles.
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this hyperlink into your Internet browser's URL address field. Remove the
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During the first half of 2009, Rabobank International started to discuss
these principles with its stakeholders. Robeco and Sarasin have also continued
to integrate CSR into their asset management processes. As part of this,
Robeco defined a policy for the integration of ESG (environmental, social and
governance) factors into the investment process. Sarasin decided to switch to
a sustainable investment style for its asset management activities, which it
has offered to some of its clients since 2009. The value of assets of Rabobank
Group clients that are managed in a sustainable manner continued to rise. At
De Lage Landen, a Business Principles Committee advises the Executive Board on
the application of CSR principles and business ethics. Rabo Real Estate Group
also continued to integrate CSR into the services it provides.
Lower rate of economic contraction
The global economic slump bottomed out in the first quarter of 2009 and
the rate of economic decline has since then eased in almost all countries.
Nevertheless, most western economies are still in recession. We expect that
the negative economic dynamics - rising unemployment and falling corporate
profits - that are currently affecting many countries will continue to have an
adverse effect on global economic trends in the upcoming quarters.
Furthermore, it is not yet clear whether the financial system will recover
sufficiently to support an economic upsurge. Although a partial upswing in
world trade and industrial production might bring economic growth in the next
few quarters, Rabobank's Economic bureau expects broader economic recovery to
be slow in most countries until 2010.
During the first six months of the year, economic activity in the
Netherlands was significantly lower across the board. We expect the situation
to stabilise in the second half of the year, but a new predicament has arisen:
as industry and international trade are recovering from the severe economic
downturn of the previous quarters, domestic spending is still falling.
Spending will remain under pressure next year as well, partly because of
rising unemployment. As the global economy is expected to experience only
moderate growth in 2010, next year's exports will not yet be able to provide
the Dutch economy with the strong driver it so desperately needs. In short,
while we still have a rocky road ahead of us, it looks as if economic activity
is slowly rising, leading us out of the economic depression.
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