Annual results 2016 Press presentation Wiebe Draijer & Bas Brouwers 16 February 2017
Rabobank has taken important steps towards realising its strategic objectives Rabobank is delivering on its promises as set out in the Strategic Framework 2016-2020 The implementation of our strategy… • Customer satisfaction improved across the board • Balance sheet reduction due to RWA relief transactions • Underlying operating expenses down 2% … combined with benign economic environment… • Loan impairment charges at historically low level …led to significant improvement of underlying results… • Underlying operating profit before tax up 14% • All business segments posted higher underlying operating profit before tax • Reported net profit pressured by several exceptional items …and a solid growth of capital ratios • Capital targets for 2020 have already been met Investor Relations 2
Rabobank is a client centered cooperative bank Make a substantial contribution to welfare and prosperity in • Rabobank is a cooperative bank with its roots in the Dutch the Netherlands Food & Agri sector Mission Make a substantial contribution to feeding the world • sustainably The Strategic Framework 2016-2020 enables Rabobank to strengthen its cooperative mission • Rabobank’s mission stems from its cooperative heritage Banking for and agricultural roots Banking for Vision the • Food Banking for the Netherlands: make a substantial Netherlands contribution to welfare and prosperity as a leading cooperative and customer-oriented domestic bank • Banking for Food: make a substantial contribution to feeding the world sustainably as a leader in Food & Agri in selected countries 1. 2. 3. Excellent Flexibility and Improving Strategy customer balance sheet performance focus reduction Investor Relations 3
Profile of Rabobank One Rabobank as the basis Organisational changes support our strategy Active in 40 countries • Simplified, focused top structure 8.7 million customers worldwide • Dedicated Fintech & Development team 7.3 million local Rabobank customers 1.9 million members • Centralised Portfolio Management unit • Shared back-offices New governance: • One legal entity: local Rabobanks + central organisation • Integration of FGH Bank into Rabobank; non-core CRE portfolio • One banking license managed separately • One balance sheet Specialised Rabobank subsidiaries Commanding domestic market shares Ratings unchanged and at a high level in 2016 Market shares 2016 2015 A+/Stable/A-1 Mortgages 21% 20% Aa2/Negative/P-1 Savings 34% 35% AA-/Stable/F1+ Trade, Industry & Services (TIS) 43% 42% AA/Stable/R-1(high) Food & Agri 84% 84% Investor Relations 4
Strong improvement in client satisfaction and interaction Domestic net promotor scores (NPS) Satisfied customers are Rabobank’s highest priority • Continued improvement in customer satisfaction for both business and NPS private banking customers 46 retail customers NPS retail customers 43 41 NPS business customers • Delivering on a faster and more efficient service proposition through improved processes, procedures and products 37 37 37 • 34 Close to our customers when it really matters to them: the ‘New Nearby’ 33 32 • Excellent (digital) banking services 29 • Most dense branch network in The Netherlands 24 24 • Contact points across the country 21 • 19 Home and work visits 18 17 • Also improved client satisfaction within Wholesale (Greenwich) and Rural entities (NPS) 11 10 1. Excellent customer focus Jun/14 Dec/14 Jun/15 Dec/15 Jun/16 Dec/16 Investor Relations 5
In line with Rabobank’s strategy RWAs are managed down Rabobank is using its balance sheet more efficiently, while continuing serving its core clients Athlon Car Lease • Rabobank prepares itself for an increase in RWAs due to the possible Basel IV regulation • In line with its Strategic Framework 2016-2020, Rabobank will reduce its Residential mortgages balance sheet, and make it more flexible in order to remain a rock-solid bank • The final outcome of Basel IV will ultimately determine the extent of the balance sheet reduction Balance sheet Commercial Real Estate reduction • In 2016 Rabobank focused on setting up the infrastructure to be able to transactions reduce its balance sheet through: • portfolio sales • risk participations Robeco Equity stake • securitisations • Initial steps taken in 2016 contributed to a decline of the balance sheet by ca. € 13bn 2. Van Lanschot Equity stake Flexibility and balance sheet reduction Investor Relations 6
Rabobank is rationalising its business Number of staff (in FTEs, incl. external hires) 2016: A year of accelerated change • Rabobank made good progress in executing its cost reduction programme, aimed at: 53,982 • implementing more efficient processes 1,969 52,013 • centralising middle and back-office functions • simplifying structures and delayering • 5,191 Targeted reduction of staff: 12,000 FTEs (excluding impact of Athlon sale) for the 2016-2018 period 45,567 • Headcount reduction of ~5,200 FTEs, versus target of 4,000 FTEs 1,255 • At the same time, initiatives were launched to increase revenues: • margins in business lending are being attuned to the risk profile • growth in rural lending 38,500 • performing in-depth sector reviews to target clients with attractive risk/return profiles • increasing focus on fee and commission income 3. Improving performance 2014 Realised 2015 Realised Athlon 2016 Planned YE 2018 forecast Investor Relations 7
Rabobank is on track in realising its financial ambitions Financial targets and realisation Actuals Actuals Ambition Dec 2015 Dec 2016 2020 CET1 ratio 13.5% 14.0% > 14% Capital Total capital ratio 23.2% 25.0% > 25% ROIC 6.0% 5.2% > 8% Profitability C/I incl. reg. levies 65.2% 70.9% 53%-54% Funding & Liquidity Wholesale funding € 203bn € 189bn < € 150bn These targets are set in the context of a more flexible and reduced balance sheet; ultimate reduction target is dependent on the final outcome of Basel IV Investor Relations 8
Solid net profit, especially considering several exceptional items Profit & Loss account Net profit (in € mn) in € mn 2015 2016 Net interest income 9,139 8,743 Net fee and commission income 1,892 1,918 2,214 Other income 1,983 2,143 2,024 2,007 1,842 Total income 13,014 12,805 1,086 692 Operating expenses -8,145 -8,594 897 H2 1,100 762 Regulatory levies -344 -483 H1 Impairment losses on goodwill and -623 -700 investments in associates Loan impairment charges -1,033 -310 1,522 1,110 1,080 Operating profit before tax 2,869 2,718 924 Tax -655 -690 Net profit 2,214 2,024 2013 2014 2015 2016 Investor Relations 9
Significant improvement of underlying performance Exceptional items included in operating profit before tax Underlying profit before tax (in € mn) +14% In € mn 2015 2016 4,090 Book profit on the sale of Athlon - 251 3,592 Fair Value items* 276 106 1,372 Exceptional items 723 Derivatives Framework -150 -514 Restructuring costs -245 -515 Goodwill impairment RNA (2015) and -604 -700 impairment stake in Achmea (2016) 2,869 Operating profit 2,718 before tax Total effect -723 -1,372 * Results on the fair value of issued debt instruments (structured notes) and hedge accounting 2015 2016 Investor Relations 10
Underlying performance improvement in all business segments (in € mn) Domestic Retail Banking Wholesale, Rural & Retail +118% +13% 952 2,365 14 2,098 838 Exceptional items 332 436 938 Exceptional items Operating profit before tax 1,766 608 1,527 (172) Operating profit before tax 2015 2016 2015 2016 Real Estate Leasing +62% 404 +1% 15 690 696 1 Exceptional items 250 Exceptional items 3 Operating profit before tax 937 689 389 Operating profit before tax 247 -241 2015 2016 2015 2016 Investor Relations 11
Total income reflects lower net interest income and lower income from associates Total income (in € mn) 13,072 13,014 12,889 12,805 2013 2014 2015 2016 106 251 276 1,707 1,788 Net interest income 1,892 1,918 Net fee & commission income 12,738 12,449 Other income excl. exceptionals 9,139 8,743 Gain on sale Athlon FV items 2015 2016 Investor Relations 12
Net interest income development Net interest income (in € mn) and Net interest margin (in % of average balance sheet total*) NIM 12m-rolling average 1.35% 1.33% 1.29% 1.29% 1.21% 9,171 9,095 9,118 9,139 8,743 2012 2013 2014 2015 2016 * Please note that the balance sheet total fluctuates during the year due to fair value items (such as derivatives) and the size of the liquidity buffer Investor Relations 13
Staff reduction main driver of decrease in underlying operating expenses Operating expenses (in € mn) 9,760 8,594 8,055 8,145 2013 2014 2015 2016 Cost/income ratio development 150 514 245 515 Staff costs 2015 2016 2,964 3,044 C/I ratio 65.2% 70.9% Other Opex (incl. regulatory levies) 7,750 7,565 C/I ratio 62.6% 67.1% Restructuring (excl. regulatory levies) 4,786 4,521 Underlying C/I ratio Derivatives Framework 60.8% 60.8% (excl. regulatory levies) 2015 2016 Investor Relations 14
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