Rabobank: 2014 a positive turning point
(Thomson Reuters ONE) -
* Rabobank Group realised net profit of EUR 1,842 million in 2014 (2013: EUR
2,007 million). The underlying result rose strongly in 2014 compared to
2013, when there was a net positive effect on the result from non-recurring
items.
* Significant cost reduction contributed to an improvement in the
efficiency ratio to 62.7%.
* Solvency, expressed as the common equity tier 1 ratio, improved by 0.1
of a percentage point and came to 13.6%, despite more onerous capital
requirements. The capital ratio rose 1.5 percentage points to 21.3%.
* The liquidity position remained strong, with a total liquidity buffer of
EUR 80 billion (2013: EUR 84 billion).
* Amounts due to customers were unchanged at EUR 326.5 billion. Customer
savings deposits declined by 6% to EUR 142.6 billion.
* Rabobank customers made extra repayments on their mortgages amounting to
EUR 4 billion, a record amount. Loans to private customers accordingly
fell slightly by EUR 4.3 billion to EUR 430.4 billion.
* Bad debt costs were stable but still high at EUR 2.6 billion, and
include the non-recurring effect of the AQR.
* 2014 was a positive turning point for the bank in many ways:
* Confidence started to return.
* Serious efforts to streamline customer service (Vision 2016 programme on
schedule).
* Improvement programmes in compliance, risk management, audit and culture
on schedule.
* Review of governance initiated, to be completed in 2015.
* We foresee a mixed picture for 2015. A positive economic outlook on the one
hand, and on the other the realisation that it will still be a difficult
year for some of our customers.
Wiebe Draijer, Chairman of the Executive Board: 'Given the still difficult
economic conditions and the developments in recent years, our financial results
for 2014 are not unsatisfactory. For the future, however, they are still not
sufficient. We have improved our underlying result. In 2014 Rabobank again
ranked among the world's most sound and stable banks. We passed the stress test
by the ECB with good results. But we can do better.'
Last year was a positive turning point for Rabobank in many ways. The confidence
of our members and customers and the public has started to return. Our 8.8
million customers, of whom 7.6 million are based in the Netherlands, have shown
great loyalty to the bank, which we very much appreciate. In addition to our
Vision 2016 customer programme, we devoted our full attention to improving our
internal control systems. In close consultation with the regulators, we have
introduced numerous improvements in the areas of compliance, risk management and
audit. The process of our culture change got off to a very promising start in
2014, and we began the process of reviewing our governance. The decisions in
this area will be reached in 2015. Our aim is to strengthen both our cooperation
and our banking business.
Our employees in the Netherlands and abroad have been fully committed to serving
our customers as effectively as possible in difficult economic conditions, and
they deserve appreciation for this. Customer satisfaction rose, but further
efforts to improve our customer service are still absolutely necessary. The
Vision 2016 programme forms the basis for this in the Netherlands.
Our most important objective in 2015 is further work on regaining confidence and
ensuring that we can meet the requirements that will be placed on us in the
coming years. Our starting point is that we are a cooperative bank that is
rooted in society, and that places the interests of its members and customers
and their environment first. As a socially responsible organisation, Rabobank
will expressly play a role in and contribute to the economic and social agenda
for the Netherlands. Encouraging sustainability and entrepreneurship is part of
this role.
Results in 2014
The Dutch economy recovered cautiously in 2014. We realised net profit totalling
EUR 1,842 million (-8%). The underlying result improved strongly compared to
2013.
In line with the development of interest rates in the financial markets, we
reduced both our mortgage rates and our savings rates. We also saw many
customers make additional repayments on their residential mortgages this year.
This is reflected in the development of the loan portfolio, which declined by
EUR 4.3 billion to EUR 430.4 billion. Amounts due to customers remained more or
less unchanged, despite a fall in savings held in the Netherlands. Customers
experienced difficulties in many of the sectors in which we traditionally have a
strong presence. This applied for instance to business owners in greenhouse
horticulture, commercial real estate, inland shipping and non-food retail. The
bank's result was affected by this. Bad debt costs continued to be high in 2014
at EUR 2,633 million. The AQR had a negative effect on bad debt costs of EUR
448 million. Bad debt costs on residential mortgages in the Netherlands remained
extremely low, at 5 basis points of the average mortgage portfolio. We have seen
a clear recovery in the housing market since mid-2013, with a sharp rise in the
number of residential property sales and a modest increase in the average house
price. We expect this development to continue in 2015.
In terms of its rating and capital position, Rabobank was again one of the
world's most sound and stable banks in 2014. We have further strengthened our
capital position, which is important for our reputation as a solid bank. Our
common equity tier 1 ratio and capital ratio stood at 13.6% and 21.3%
respectively at the end of 2014. Rabobank also passed the stress test of the
European Central Bank with good results in October 2014. The European Central
Bank took over prudential supervision from De Nederlandsche Bank on 4 November
2014. We maintain a healthy capital buffer in even the worst case scenarios. We
will however have to strengthen our buffers further in the years ahead in line
with higher capital requirements. This will require us to look for solutions for
this matter so that we can continue to meet the credit demand from our core
customers.
Our costs declined significantly in 2014, partly due to the LIBOR settlements in
2013 and the deconsolidation of Bank BGZ in 2014. We succeeded in further
limiting our costs in the domestic banking division. This was mainly due to the
effects of our Vision 2016 customer programme. The number of employees in the
domestic retail banking division fell by around 3,000 FTE to around 24,000 FTE.
The efficiency ratio came to 62.6%, an improvement of 3.9 percentage points. Net
profit in domestic retail banking amounted to EUR 751 million.
The result in 2014 was negatively affected by the resolution levy of EUR 321
million in relation to the nationalisation of SNS REAAL. Deferred tax assets due
to past losses from our operations in Ireland contributed to a low tax burden
and positively affected net profit.
The results from wholesale banking and international retail banking were mixed.
We have intentionally ceased a number of activities because their risk profiles
no longer fit with the bank's strategy. This has led to a greater focus on the
global food and agri segment. Net profit rose by EUR 712 million to EUR 758
million. The result in 2013 was heavily pressured by the Libor settlements.
As in 2013, the leasing segment generated a healthy net profit. This was up 3%
on the year, amounting to EUR 436 million. The diversification of the lease
portfolio across countries and sectors in combination with the economic recovery
and strict risk management contributed to the lower level of bad debt costs.
Rabo Real Estate Group still faces difficult market conditions, although the
situation is improving. There was a strong increase in the number of new-build
home sales. The real estate segment realised a net loss of EUR 263 million,
which is EUR 551 million less than the loss in 2013. Impairments on land and
revaluations of land operations were still high in 2013. Bad debt costs at real
estate financier FGH Bank remained high, and pressured the result. We have
decided to integrate FGH Bank within Rabobank, as part of our ambition to create
one Rabobank organisation. The bringing together and streamlining of activities
will increase our ability to optimally serve our commercial real estate
customers.
Outlook
It appears at this time that economic growth in the Netherlands will pick up
further in 2015 and that unemployment will decrease slightly. The recent sharp
drop in the price of oil and the fall in the value of the euro are providing an
extra boost. Due to the fact that, for the first time in years, not only
exports, but also private consumption will grow in 2015, we expect all market
sectors to be able to post growth.
Dutch exports will benefit from higher growth in key export markets this year.
The conflict in Ukraine, tensions in the Middle East and the renewed unrest
surrounding Greece will remain uncertain factors in this respect. Dutch
businesses will invest more due to the recovering economy. The European Central
Bank announced in early 2015 that it will purchase EUR 1,140 billion in
government bonds. It is still unclear at this time whether this will provide a
major impetus for the economy. The growth in investment in housing is picking up
because the housing market recovery is fuelling an increase in new construction.
Disposable household income will rise in 2015 for the second consecutive year.
Private consumer spending will, however, rise only moderately this year because
many Dutch families are still reluctant to spend. We therefore foresee a mixed
picture for 2015 with a positive economic outlook on the one hand, and on the
other the realisation that for some of our customers it will still be a
difficult year.
Key figures
Amounts in millions of euros 31-12-14 31-12-13 %
Total assets 681,086 669,095 2
Private sector loan portfolio 430,391 434,691 -1
Amounts due to customers 326,471 326,222 0
Equity 38,871 38,534 1
Common equity tier 1 capital 28,714 28,551 1
Qualifying capital 45,139 41,650 8
Number of employees (in FTE) 48,254 56,870 -15
Total assets of Rabobank Nederland 498,469 479,235 4
%-age points
Common equity tier 1 ratio 13.6% 13.5% 0.1
Capital ratio (BIS ratio) 21.3% 19.8% 1.5
Leverage ratio 4.9% 4.8% 0.1
Loan-to-deposit ratio 133% 135% -2.0
2014 2013 %
Income 12,857 13,030 -1
Operating expenses 8,055 9,760 -17
Value adjustments 2,633 2,643 0
Net profit of Rabobank Group 1,842 2,007 -8
of which
Domestic retail banking 751 781 -4
Wholesale banking and international retail
banking 758 46
Leasing 436 422 3
Real estate -263 -814
Other 160 1,572
Net profit of Rabobank Nederland 1,352 1,179 15
%-age points
Return on tier 1 capital 5.2% 5.2% 0.0
Efficiency ratio 62.7% 74.9% -12.2
For questions:
Rabobank Group Press Office, +31 (0)30 216 2758
More information:
The 2014 Annual Summary and the presentation are available at
www.rabobank.com/jaarverslagen (Dutch) / www.rabobank.com/results (English).
PDF Press release:
http://hugin.info/133178/R/1897422/673479.pdf
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Source: Rabobank via GlobeNewswire
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