Rabobank Investor presentation H1 2018 results - 17 September 2018
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Rabobank Investor presentation H1 2018 results 17 September 2018
Disclaimer This presentation (the “Presentation”) is prepared by Coöperatieve Rabobank U.A. (“Rabobank”) incorporated under the laws of the Netherlands. The liability of its members is excluded. Rabobank is among others regulated by De Nederlandsche Bank N.V. and by the Netherlands Authority for the Financial Markets, as well as the European Central Bank. This Presentation is solely for information purposes and on the basis of the acceptance of this disclaimer. Neither the Presentation nor any of its contents, in whole or in part, directly or indirectly, may be used for any other purpose without the prior written consent of Rabobank. This Presentation is only directed at Eligible Counterparties and Professional Clients, as defined in the Markets in Financial Instruments Directive 2014/65/EU (“MiFID”) (the “Recipient”). It is not directed at Retail Clients (as defined in MiFID). The content of this Presentation reflects prevailing market conditions and Rabobank’s judgment as on the date of this Presentation, all of which may be subject to change. The information and opinions contained in this Presentation have been compiled or arrived at from sources believed to be reliable, but no representation or warranty, express or implied is made as to their accuracy, completeness or correctness. The information contained in this Presentation is published for the assistance of the Recipient, but is not to be relied upon as authoritative or taken in substitution for the exercise of judgment by any Recipient nor will any information in this Presentation (including, but not limited to, Statistical Information (as defined below) and forward- looking statements) be subject to updating. Rabobank has further relied upon and assumed, without independent verification, the accuracy and completeness of all information made available to it. To the extent permitted by law, Rabobank excludes any liability howsoever arising from the contents of this Presentation or for the consequences of any actions taken in reliance on this Presentation or the content herein. Each Recipient is advised to seek independent professional advice as to the suitability of any products and to their tax, accounting, legal or regulatory implications. Members of the Rabobank Group trade on their own account and may from time to time hold or act in securities issued by a client, or may act as advisers, brokers or bankers to a client or any of its affiliates. This Presentation contains certain tables and other statistical analyses (the "Statistical Information"). Numerous assumptions have been used in preparing the Statistical Information, which may or may not be reflected in this Presentation or may or may not be suitable for the circumstances of any particular Recipient. As such, no assurance can be given as to the Statistical Information's accuracy, appropriateness or completeness in any particular context, or as to whether the Statistical Information and/or the assumptions upon which they are based reflect present market conditions or future market performance. The Statistical Information should not be construed as either projections or predictions. This Presentation may include "forward-looking statements". Such statements contain the words "anticipate", "believe", “could”, “intend", "estimate", "expect", "will", "may", "project", "plan“, the negative of such terms and words of similar meaning. All statements included in this Presentation other than statements of historical facts, are forward-looking statements. Such forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause actual results, performance or achievements to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Such forward-looking statements are based on numerous assumptions regarding present and future business strategies and the relevant future business environment. The information and opinions contained in this Presentation are wholly indicative, for discussion purposes only and are subject to change without notice at any time. No rights may be derived from any potential offers, transactions, commercial ideas contained in this Presentation. This Presentation does not constitute an offer, commitment or invitation and does not constitute investment advice and is not intended for the use by persons as an offer of securities subject to the Netherlands Financial Supervision Act. This Presentation shall not form the basis of or be relied upon in connection with any contract or commitment whatsoever. © Rabobank, Croeselaan 18, 3521 CB Utrecht, The Netherlands, www.rabobank.com/ir, Chamber of Commerce number 30046259. Investing Rabobank and the other parts of Rabobank Group that are designated as investment firms are registered as such with the Netherlands Authority for the Financial Markets. The aforementioned investment firms are licensed by the Netherlands Authority for the Financial Markets under the Financial Supervision Act. If you invest funds that you have borrowed, you run the risk of incurring a debt as well as losing the invested amounts. This Presentation does not constitute an offering document. The information herein is neither an advertisement nor does it comprise a prospectus for the purpose of EU Directive 2003/71/EC (as amended from time to time). The information herein has not been reviewed or approved by any rating agency, government entity, regulatory body or listing authority and does not constitute listing particulars in compliance with the regulations or rules of any stock exchange. Nothing in this Presentation should be construed as legal, tax, accounting, regulatory or investment advice and the Recipient is advised to consult its own independent professional advisers in relation to investment in one of the products mentioned. The information contained herein does not purport to be complete and your decision to invest in one of the products mentioned should solely be based on the applicable prospectus or information memorandum including the risk factors, costs, terms and conditions and underlying values. The applicable prospectus or information memorandum is available with Rabobank or on www.rabobank.com/ir. The value of your investment can fluctuate. Past performance offers no guarantee for future results. Investor Relations 2
Valuable progress on all our strategic objectives
Update on strategy Economic environment
• Continuing positive trend in customer satisfaction • Ongoing positive economic momentum in the Netherlands
• Ready for next step in successful transformation of domestic retail • Prolonged strong fundamentals in Dutch housing market
banking • Solid global economic expansion amidst ongoing (geo)political
• Balance sheet optimization on track uncertainties
• Further progress in the execution of strategic portfolio management • Persistent low interest rate environment despite gradual winding
• Acceleration of our investments in digitization down of extraordinary monetary policy
Improvement of financial results Strong capital ratios and optimized funding position
• Net profit +12% to € 1.7bn • Capital targets already met and well positioned to absorb future
• Growth in loan portfolio (+ € 7.6bn) and deposit base (+€ 3.4bn) requirements
• Net interest income impacted by low interest rate environment • Rabobank intends to meet its limited MREL needs with Own Funds
• Ongoing impairment releases and Non-Preferred Senior (NPS)
• Continued strong underlying performance • Rabobank is ready to start issuing in NPS format
• Majority of long term funding budget raised in H1 2018
Investor Relations 3
Rabobank at a glance
Mission | Growing a better world together Credit ratings
The Netherlands Rabobank is one of the few banks with NPS rated in the ‘A-AA’ range
101 local Rabobanks Jun 2018 PS NPS T2 AT1 Issuer/outlook
420 1.9mn 20% 33%
A+ A- BBB+ - A+/Positive
offices members
Mortgages Private savings
Aa3 A3 Baa1 Baa3 Aa3/Stable
6.5 0.8mn € 192bn € 120bn
million private corporate € 59bn
customers customers AA- AA- A BBB- AA-/Stable
Private sector lending to TIS
€ 27bn
Domestic Retail Banking Private sector lending to F&A AA - - - AA/Stable
International PS: Preferred Senior; NPS: Non-Preferred Senior; T2: Tier 2; AT1: Additional Tier 1
38 countries
€ 63bn ESG ratings
Private sector lending to F&A*
€ 41bn
Private sector lending to TIS* 86 out of 100 points
Industry ESG Leader
€ 29bn
Private sector lending by Leasing*
WRR & DLL loan portfolio per region in € bn
89 out of 100 points
* Including WRR and DLL lending in the Netherlands
Investor Relations 4
Topics Update on strategy H1 2018 results Appendix: • Dutch economy, housing market and credit ratings • Financial results • Loan portfolio • Capital, funding & liquidity • Current & future developments Investor Relations 5
Strategy overview
Focus on 10 top priorities for 2018-2020
Growing a better world together
Banking for the Netherlands Banking for Food
Excellent customer Meaningful Rock-solid Empowered
focus cooperative bank employees
10 Strategic Top Priorities
• 100% Digital • Concrete socially • Top performance • Inspired employees
convenience in everything responsible contribution • Optimal balance sheet • One-Rabobank culture
• Top customer advice • Involved members and • Exceptionally good
nearby communities execution
• Growth with innovation
Investor Relations 6
Highlights H1 2018 (I)
Excellent customer focus Meaningful cooperative
Growth deposit base & loan book Industry leading in sustainability
• Growth loan book by € 7.6bn • Sustainalytics score: 86 + awarded ‘ESG Industry Leader’
• Deposit base increased by € 3.4bn • Oekom Prime: awarded ‘Industry Leader’ in 2017
• RobecoSam: score 89 (11th worldwide)
Most customer-friendly bank First to launch ‘ESG Leader’ program
• 1st place by consumers as the most customer-friendly • Rabobank was first to launch ESG Leader CP/CD program
bank in the Netherlands (Customer First Awards) • Driven by Rabobank's 'ESG Industry Leader' status
• Sustained increase in domestic Net Promotor Scores Rabobank issues short term funding labelled as ESG
investment
Strong progress in innovation 3rd Kickstart program launched (Food)
• Rabobank innovation SurePay (IBAN name check) rolled • Launched Kickstart Waste to drive food waste reduction,
out to many Dutch banks and insurance companies from stimulating innovations to financial support for
• 1st Dutch bank to facilitate 3rd party payment initiation farmers to improve replanting, logistics and storage
• Customers can check account balance or set a spending
alert using their voice via Google Assistant
Driving energy efficient housing
Client-focused operating model • Proprietary sustainability scan helps mortgage clients
• New client focused operating model for local Rabobanks identify sustainability improvements in their homes
in the Netherlands as the foundation for a more effective
• Introduced Green Depot, a 2-year interest-free depot to
and efficient banking operation
finance sustainable home improvements
Investor Relations 7
Highlights H1 2018 (II)
Rock-solid bank Empowered employees
Strong net profit #1 Employer in the Netherlands
+12% • H1 net profit of € 1.7bn (+12%) supported by favorable
economic environment
• Rabobank awarded #1 favorite employer to work for by
talents (university & higher vocational education)
(€ 1.7bn)
Comfortable capital position Diversity strong and improving
CET1 15.8% • Well positioned to absorb future • Women well-represented in senior management
Total Basel IV and MREL requirements (30.96%) positions (33% overall, 40% in Managing Board)
Capital 26.1% • Expected Non-Preferred Senior issuance in H2 2018 • Strong cultural diversity in our young talent pool (30%)
Continued strategic focus 235 New start-up ideas generated
• Non-core domestic CRE portfolio divested with FGH Bank • Employees from 13 countries generated 235 ideas for
portfolio sale start-ups through our innovation incubator program
• Repositioned BPD with focus on Dutch and German • Involved in 68 start-up communities and organizer of F&A
market by divesting BPD France (expected closing: Q4) innovation events such as FoodBytes! and Terra
Improved efficiency High employee mobility
64.6% • Cost/Income ratio improved to 64.6% with further cost
reduction remaining a point of attention
• 63% of the employees we had to let go found a job within
six months, which is above average for the banking sector
(-3.0%-point) in the Netherlands
Investor Relations 8Ongoing successful transformation in the Netherlands…
Ready for the next phase
Phase 1 | Implement new governance Phase 2 | Regionalize mid- & back office Phase 3 | Optimize service model
January 2016 2016 -2018 June 2018
14 regions
of 6-7
Rabobanks
• Anticipating changing client demands and • Efficiency improvement through process • Next step towards a more effective and
regulatory requirements standardization and regionalization of efficient organization as per 1/1/2019
• Merger of 106 local Rabobanks with central customer call center and operational service • Further optimization of omnichannel client
entity to one legal entity with one banking centers service model
license and one balance sheet • Incorporated digitalization as an integral part • 250 Market teams ensure customer intimacy
• More flexible, simple and adaptive structure of the strategy and change agenda through face-to-face contact, operating out
supporting cooperative values • Significantly reduced cost and FTE, while of 90 banks supported by 14 regional teams
increasing Net Promotor Scores (NPS)
Investor Relations 9…resulting in higher client appreciation and efficiency
Net Promotor Score (domestic market) FTE development Rabobank Group
-8,390*
NPS private banking customers 60 52,013
NPS retail customers
56
NPS business customers
52
45,567 -106**
43,729 43,623
37
33
38,500
21
Dec 15 Dec 16 Dec 17 Jun 18 Dec 15 Dec 16 Dec 17 Jun 18 Ambition
* Including 1,255 FTEs due to the Athlon sale in 2016
** This is the balance of -775 FTEs at DRB (of which ~400 FTEs transferred to the central
organization), and +669 FTEs at the other business segments
Investor Relations 10100% Digital convenience in everything
Digitizing our traditional services and channels
Solid base of digital clients Distinctive improvement in digital sales and servicing
>80% Active online corporate customers Before year-end 2018 we will improve the 30 most important customer
>50% Digital onboarding for private individuals journeys in the . Examples include:
• Opening of a joint current account
>95mn Visits per month in the app
to 5 minutes from 30 days
>85 Features available in the app • Digitally temporary blocking of cards resulting in
~10% less cards distributed per month
• Strong growth in use of payment request +135% in
last 6 months
Preparing ourselves for Open Banking & Platform
Business driven data solutions
Banking
• Development of self-learning prediction model that classifies sales • Addition of Bunq account information,
leads, leading to substantial increase in leads conversion success and payment initiation recently launched
creating an efficiency-drive in sales • Developers platform launched with
• Credit risk forecasting in business lending with advanced early expanding API’s and platform
warning system using machine learning (>85% accuracy rate) capabilities
• With Google Assistant customers can check their account balance or
set a spending budget using their voice
Investor Relations 11Growth with innovation on three dimensions
We deliver innovations for our clients We help our clients innovate We actively invest in start-ups and
scale-ups that fit our innovation focus
and strategy
IBAN name check launched with major Dutch International Food & Agri innovation Leading blockchain platform for SME clients,
banks, preparing for international expansion ecosystem. Active on 3 continents, 1,300 start- commercially live as of July. Developed with
up applications pitching from > 30 countries other European banks, Rabobank first Dutch
bank with working platform in international
trade market
Internal start-up enabling simple digital Robotica innovation initiative, which executes
currency hedging. Adoption by Scandinavian Roboscans. Via this ecosystem robotica was
bank will support international expansion introduced to 450 customers Investment in JoinData to facilitate data
streams in the Food & Agri sector
Recent winner of our internal Moonshot We are partner of YES!Delft, the #1 tech
campaign. Focused at digital cattle incubator in Europe. > 200 Start-ups have New mobile and online payment service in the
management by newly developed tech solution collaborated (of which 65% Rabobank clients), Netherlands, a joint initiative of Rabobank and
using ear-tags with > € 30mn capital funding provided by other Dutch banks
Rabobank
Investor Relations 12Sustainability
We invest in the local and global community
Sustainability: integrated in our day-to- Sustainability: Rabobank is a leader Sustainability: partnership with UN
day work We allocate ample resources to sustainability. Rabobank and UN Environment are working on
We help clients to make a positive impact on For example with € 19bn Sustainable an ambition to finance $ 1bn to boost
their community with financial solutions, advice Finance in total, Rabobank is a leading sustainable food production
and network knowledge: renewable energy projects financier
• GreenDepot: finance solution Our mission fits naturally within the
to invest in energy saving Rabobank was first to launch UN Sustainable Development
measures in houses ESG Leader CP/CD program (€ 5bn), Goals (‘SDG’). We also use SDG for
driven by Rabobank's 'ESG Leader' internal steering and target setting
status as assessed by Sustainalytics.
• We support clients in Under this program Rabobank issues short term
embedding circular practices funding labelled as ESG investment We developed client photos reflecting the
into their businesses sustainability performance of our larger
In H1 2018 we were mandated several business clients. This is used in the credit
Sustainable Revolving Credit Facilities, approval and monitoring process
• July 2018: introduction of for example by:
Circular Economy financing first sustainable RCF in
guidelines (in cooperation with Dutch construction
other banks) market
a leading F&A company
in Spain
Investor Relations 13Optimization of Rabobank’s balance sheet is on track
Creating room for further growth of the core operations of the bank
Non-exhaustive selection of balance sheet initiatives
2016 - 2017 H1 2018
Funding
• Further diversification of our funding base
(covered bonds, DLL asset backed
securities, TLTRO, etc.)
Inaugural
€ 500mn
Green Bond
Green STORM
2016 and 2017
Launch of € 25bn
Covered Bond
programme
$ 500mn asset
backed
securities
$ 824mn asset
backed
securities
€ 1.25bn
FORDless STORM
and € 550mn
diversification Green STORM
• Decreasing funding costs via collateralized 2018
lending
Balance sheet
• Creating flexibility for new lending and a
solid balance sheet by investor participation
€ 1.0bn
mortgage
portfolio sale
€ 1bn RMBS
Purple STORM
transaction
€ 3.0bn capital
relief
transaction
€ 600mn
mortgage
portfolio sale
€ 2.0bn capital
relief
transaction
flexibility • This will not change the commercial
relationship of our clients with Rabobank
Balance sheet
• Focusing on the core of our strategy::
Banking for the Netherlands and Banking
€ 1.1bn sale of
Athlon Car Lease
Sale of remaining
Robeco stake
Sale of Van
Lanschot stake
Sale of Orix
Group stake*
Sale of
substantial parts
of Bouwfonds**
Sale of € 1.3bn
CRE portfolio
reduction for Food
• Reduction of non-core activities
Strengthening • Building and preserving our strong
€ 1.25bn perp AT1
securities (coco)
$ 1.5bn 10-year
Tier 2 notes
€ 1.5bn
Rabobank
Certificates
$ 500mn 12NC7
Tier 2 notes
capital base capital position
* Orix/Robeco will remain an important and trusted financial partner for Rabobank ** Multiple transactions between 2016 and 2018
Investor Relations 14Valuable progress on our financial targets
Financial targets and results Achievements in H1 2018
Jun Dec Jun Ambition • Overall, we are well on track to deliver on our promises
2017 2017 2018 2020 • CET1 ratio increased by ~1%-point over the last 12 months as a result of
adding net profit to retained earnings
Fully loaded • We are well positioned to absorb the impact of new regulations such as
14.7% 15.5% 15.8% >14%
CET1 ratio Basel IV and MREL, as our capital ratios are well in excess of our 2020
Capital
Total capital targets
25.5% 26.2% 26.1% >25%
ratio* • ROIC exceeded our 2020 ambition level on the back of enhanced
efficiency and continued impairment releases
ROIC 7.8% 6.9% 8.8% >8% • C/I ratio improving due to stable income generation and ongoing
restructuring program
Profitability C/I ratio 67.6% 71.3% 64.6% • Further improvement of C/I ratio will remain a priority in the coming
53-54% years, though our target has become challenging given the ongoing low
Underlying interest rate environment and the acceleration of IT investments
63.9% 65.3% 62.9%
C/I ratio • Wholesale funding slightly increased due to the growth of our balance
Wholesale sheet
Funding € 171bn € 160bn € 164bn < € 150bn
funding
See slides 29 and 30 for further details on MREL
Investor Relations 15Topics Update on strategy H1 2018 results Appendix: • Dutch economy, housing market and credit ratings • Financial results • Loan portfolio • Capital, funding & liquidity • Current & future developments Investor Relations 16
Positive net profit development
Profit & Loss account Main developments
In € mn H1 2017 H2 2017 H1 2018 • Net profit +12% to € 1,698mn
• Stable top line despite the challenging interest rate environment
Net interest income 4,454 4,389 4,274
• Operating expenses down 4% in line with headcount reduction
Net fee & commission income 988 927 981 • Negative impairment charges continue to bolster net profit
• Decrease in income tax mainly due to US tax reform
Other results 496 747 774
• € 1.2bn of net profit added to retained earnings to further strengthen
Total income 5,938 6,063 6,029 our balance sheet and finance future growth (H1 2017: € 0.9bn)
Operating expenses 3,755 4,299 3,611
Net profit (in € mn)
Regulatory levies 258 247 284 2,674
H2
Impairment charges -67 -123 -37 2,214
2,024 H1
1,158
Operating profit before tax 1,992 1,640 2,171 692
1,027
Tax 476 482 473
Net profit 1,516 1,158 1,698 1,522 1,516 1,698
997
2015 2016 2017 2018
Investor Relations 17Continued strong underlying performance
Main developments Underlying profit before tax (in € mn)
+2%
• Rabobank was able to match its strong underlying performance realized
in H1 2017 2,326
2,276
• Lower net releases from impairment allowances were offset by several 2,189 155 Exceptional items
favorable items in Other results 284
549
Exceptional items included in operating profit before tax
In € mn H1 2017 H2 2017 H1 2018
Fair Value items* -186 -127 -133
2,171 Operating profit before tax
Restructuring costs -98 -61 -22 1,992
Provision RNA 0 -310 0 1,640
Derivatives framework 0 -51 0
Total effect -284 -549 -155
* H1 2017 and H2 2017 Fair Value items consist of results on (i) hedge accounting and (ii) issued
debt instruments (structured notes). As from 2018 onwards the latter will be nil due to the
adoption of IFRS 9 H1 2017 H2 2017 H1 2018
Investor Relations 18Total income slightly up despite challenging interest
rate environment
Total income (in € mn) Development of (underlying) income
5,938 6,063 6,029
Other results • Corrected for the appreciation of the euro, total income was up 4%
682 874 907 • Net interest income (NII) was down 4%. Excluding FX effects NII
Net fee and declined by 2% due to the ongoing low interest rate environment and a
commission income 988 lower average loan portfolio
927 981
• Net fee & commission income remained more or less stable:
• DRB: up 2% driven by higher commissions on payment accounts and
AuM
• WRR: down 3%, but in local currency up 4% mainly due to a strong
6,124 6,190 6,162 performance of our M&A division
• Leasing: sharp rise due to higher fees on syndicated financial leases
in the US and a change in accounting treatment
Net interest income 4,454 4,389 4,274 • Real Estate: fee level much lower due to the downscaling of the
activities of FGH Bank and Bouwfonds IM
• Sharp rise in underlying Other results, driven by:
• a book profit on the sale of FGH Bank’s non-core CRE financing
activities and a positive revaluation in the loan portfolio of ACC
-186 -127 -133 • higher results at area developer BPD
FV items
H1 2017 H2 2017 H1 2018 • the reversal of an impairment taken by DLL in H2 2017
Investor Relations 19Net interest income impacted by prolonged low interest
rate environment
Net interest income (in € mn) and Net interest margin
(in % of average balance sheet total)* Main developments
1.39% 1.41%
1.32% 1.33% 1.33% 1.29% 1.33% • Net interest margin improved slightly, mostly driven by a lower average
NIM (12m-rolling average) balance sheet total
• Low and negative interest rate environment continues to affect net
interest income (NII) due to:
• lower margins on savings and payment account balances
• the cost of prudently managing the Group’s sizeable liquidity buffer
• continued high - but declining - level of early repayments on
mortgage loans
4,657
• DRB: stable NII due to positive impact from new business margins on
4,482 4,375 4,368 4,454 4,389 4,274 mortgages and SME lending
• WRR: NII slightly down, but improved in local currency in line with loan
portfolio growth
• Leasing: NII down, mainly due to lower new lending margins
• Real Estate: NII reduced to almost nil following the sale of virtually the
whole CRE loan portfolio
H1 2015 H2 2015 H1 2016 H2 2016 H1 2017 H2 2017 H1 2018
* Balance sheet total fluctuates during the year due to fair value items (such as derivatives) and the size of
the liquidity buffer. The figures up to and including 2016 are including Athlon
Investor Relations 20Multi-year transformation program is paying off
Operating expenses (in € mn) 4,299 Development of (underlying) expenses
Derivatives framework 51
310 • Corrected for the appreciation of the euro, operating expenses were
Provision RNA
3,755 61 down 2%, driven by lower restructuring costs
Restructuring 3,611
98 • Staff costs decreased due to ongoing headcount reductions, a lower
costs 22
(final) payment in connection with a pension guarantee and FX effects
• Other operating expenses (excluding restructuring costs) more or less
1,611 stable, despite higher project expenses related to legacy files and
Other Opex 1,451 1,462 regulatory compliance
• Since 2015 our underlying cost base has been reduced by almost
€ 600mn on an annual basis
• The C/I ratio improved by 3%-points
3,877
3,657 3,589
Staff costs 2,206 2,266 2,127
Development cost/income ratio incl. regulatory levies
H1 2017 H2 2017 H1 2018
C/I ratio 67.6% 75.0% 64.6%
Underlying C/I ratio 63.9% 66.6% 62.9%
H1 2017 H2 2017 H1 2018
Investor Relations 21Asset quality continues to benefit from economic tail wind
Impairment charges (in € mn and in bps of average lending) All segments benefited from benign economic environment
• For the third consecutive 6-month period negative impairment charges
-3 bps -6 bps -2 bps
(IC), albeit somewhat smaller than in the previous two periods
-€ 67mn -€ 123mn -€ 37mn
Leasing 41 • IC at -2 bps of average lending (10-year average: +34 bps)
• Limited or even negative IC in all business segments:
WRR 105 • DRB: smaller net release of allowances; residential mortgage
65 portfolio continued to perform well with negligible IC
35
-2 0 • WRR: IC decreased to nil; nearly all business lines and regions
Other -14
-42 reported lower IC
Real Estate -43 -73 -3 • Leasing: IC remained at a stable and moderate level
-27 • Real Estate: small release of allowance
-10
• Other: negative IC due to partial sale and revaluation of a legacy
investment portfolio
Domestic Retail -156 -103
H1 2017 H2 2017 H1 2018
Investor Relations 22Non-performing loans improve on a like-for-like basis
NPL development* Non-performing loans (NPL)
(in € mn and in % of total loans & advances)
• Rabobank is frontrunner in applying the EBA ‘Definition of Default’ to its
portfolio as from 1 January 2018. One-off impact on NPL stock:
3.6% 3.4% 3.5% 3.8% 3.5% + € 1.9bn, mainly in the mortgage portfolio
• NPL stock further affected by:
• Conservative write-off policy
19,763 18,873 18,315 20,215 18,755 • Helping clients with ample prospects getting through tough times
1,900 1,460 • NPL decreased as a result of the favorable economic environment and
the sale of non-core CRE exposure by FGH Bank
• Overall asset quality is improving, further evidenced by still favorable
impairment charges and declining level of impairment allowances
• NPL level of remaining non-core CRE portfolio (ACC Ireland) is above
average; excluding ACC the NPL ratio would be 3.2%
• NPL Coverage ratio decreased to 23% from 27% (Dec 2017) mainly as a
result from:
• sale of non-core CRE loans, which were highly provisioned
• one-off increase in level of NPL in mortgage portfolio as a result of
application of the EBA ‘Definition of Default’
Dec 15 Dec 16 Dec 17 Jan 18 Net portfolio Jun 18
development * NPL includes both Stage 3 Loans & Advances and NPL in Financial Assets at Fair Value
Investor Relations 23Loan portfolio increased after a few years of slight
contraction
Composition of private sector loan portfolio (in € bn) Main developments
+2%
• Domestic residential mortgages portfolio slightly down as new
411 416 production was more than offset by continued elevated level of early
408*
29 Leasing
repayments
27 27
• Domestic CRE lending** further down in line with strategy
37 36 37 WRR Rural & Retail
• WRR: exposure growth concentrated in Wholesale, both domestic and
abroad (especially in North America)
62 61 65 WRR Wholesale (excl. CRE)
• Leasing: steady underlying growth
42 • 72% of private sector loan portfolio outstanding in the Netherlands
42 43 Domestic Retail other SMEs
• 47% of loan exposure to private individuals, 29% to trade, industry &
27 27 27 Domestic Retail F&A
services and 24% to F&A
23 22 22 Domestic CRE **
193 193 192 Domestic Retail mortgages
* Due to the adoption of IFRS 9 as at 1 Jan. 2018 the loan portfolio declined by € 2.9bn
** This includes the aggregate exposure of the Domestic Retail Banking, WRR and Real Estate
Dec 17 Jan 18 Jun 18 business segments to CRE
Investor Relations 24Loan-to-deposit ratio improved slightly
Deposits from customers and private sector lending (in € bn) Main developments
1.21 1.20 LtD ratio • Deposits DRB: up € 6.3bn, partly supported by seasonal effects. The
411 408* 416 increase was split evenly over:
• Private savings: typically vacation bonuses paid out in May,
341 343* 347 temporarily boosting balances of accounts held by private
individuals
84 86 87 WRR and Other • Other deposits: increase in current accounts held by SME clients
• RaboDirect: balances decreased as we are withdrawing from the Irish
28 28 25 RaboDirect retail market
• Deposits WRR and Other: mainly balances from corporate customers,
which remained more or less stable
229 229 235 DRB
• Loan-to-deposit (LtD) ratio slightly improved
Dec 17 Jan 18 Jun 18
Lending Deposits from customers
* Due to the adoption of IFRS 9 as at 1 Jan. 2018 the loan portfolio declined by € 2.9bn and deposits increased by € 2.5bn
Investor Relations 25Capital position provides strong basis for regulatory
developments
CET1 development (Fully loaded) CET1
• CET1 capital well above target and capital requirements
15.5% +0.6% -0.3% 15.8%
13.5% • Ratio strengthened by 30bps, driven by retained earnings and despite
12.0%
the -14bps IFRS 9 impact
• With a 15.8% fully loaded CET1 ratio Rabobank is solidly positioned for
the manageable impact of Basel IV
• Rabobank is committed to its >14% CET1 target and continues to
2015 2016 2017 Profit minus Other H1 2018 further strengthen its CET1 base in anticipation of Basel IV
distributions
Total capital development (Transitional) Total capital
MREL eligible
26.5%
capital
• Rabobank has been building up its capital buffers to protect its senior
25.0% 26.2% 26.1%
23.2% funding against the (unlikely) risk of bail-in
7.4% 7.3%
Tier 2 7.4% • The total capital ratio of 26.1% offers a strong capital buffer to protect
6.8%
3.0% 3.0% Rabobank’s senior funding base and future NPS holders
AT1 2.9% 3.6%
• The introduction of NPS allows for optimization of Rabobank’s MREL
stack
14.0% 15.8% 15.8%
13.5%
CET1 • Including the grandfathered AT1s and amortized part of Tier 2 with a
maturity >1yr, Rabobank holds 26.5% of MREL eligible capital
2015 2016 2017 H1 2018
Investor Relations 26Rabobank solidly positioned for future MREL
requirement
MREL requirement MREL requirement and position
(in % of RWA)
• Rabobank has received a binding MREL requirement of 30.96%
(~€ 65bn – FYE2016). This number:
• Includes the binding Basel I floor in the Recapitalization Amount
• Is based on BRRD I - future MREL subject to ongoing political
4.06% 30.96% developments (European trilogue) with regards to the risk reduction
11.65% 26.50%
package
8% TLOF • With MREL eligible instruments of >30.96%*, Rabobank already meets
its MREL requirement. As a result, no transition period is set
15.25% • Rabobank intends to meet its MREL requirement with a combination of
Own Funds and Non-Preferred Senior only
• With MREL eligible capital of 26.5%, the additional MREL issuance is
very manageable
LAA RCA CBR including Total MREL MREL eligible MREL eligible
adjustments requirement capital instruments*
* Under BRRD I preferred senior is MREL eligible and included in calculations
Investor Relations 27Limited MREL issuance in light of Rabobank’s
redemption profile
The role of NPS in the capital stack (in € bn) MREL strategy
PONV Resolution
• Rabobank’s substantial own funds (€ 52.8bn) provide a significant buffer
for NPS investors
Own funds: € 52.8bn 15.6
15.4 • The introduction of NPS could gradually diminish the role of Tier 2 as
6.0
key instrument to meet MREL requirements
31.4
13.7 • Rabobank intends to maintain a best-in-class Tier 2 layer protecting
NPS holders
CET1 AT1 Tier 2 Non-Preferred Senior Preferred Senior
2018-2021 senior unsecured maturity profile (in € bn) Issuance plans
• Upcoming senior unsecured redemptions (€ 63.7bn until 2021) allow for
gradual refinancing into NPS to address MREL needs. Based on current
RWAs, the MREL shortfall (excluding senior unsecured) is limited
• Rabobank expects NPS issuances of € 3-5bn per annum. This range is
19.3
subject to regulatory and peer group developments and includes early
15.9 14.4 14.1 anticipation of the expected Basel IV impact
2018 2019 2020 2021
Investor Relations 28Funding strategy: optimization and diversification
Product base further diversified (in € bn) Funding strategy: global market approach
30 • Diversified wholesale funding mix achieved by tapping different
Senior Unsecured Green Covered TLTRO
markets, maturities, currencies and products
20 • Rabobank’s funding target for 2018 has been set at € 10 - 12bn including
13.7
NPS (subject to balance sheet developments) of which ~€ 9bn has been
10 13.7 funded in H1 2018:
• Year-to-date issuance is distributed over USD, EUR, AUD and NZD
0 benchmarks, topped up with private placements in various markets
2015 2016 2017 H1 2018
2018 H1 • Continued commitment towards strategic and liquid benchmark curve
• In line with Rabobank’s strategy of reducing its wholesale funding
Currency diversification dependency, it is likely that Rabobank remains a net negative issuer
(also including NPS)
7% EUR
3%
7% USD
6%
AUD
55% GBP
22%
JPY
Other
Investor Relations 29Topics Update on strategy H1 2018 results Appendix: • Dutch economy, housing market and credit ratings • Financial results • Loan portfolio • Capital, funding & liquidity • Current & future developments Investor Relations 30
The Dutch economy is still growing, albeit more slowly
Key figures Dutch economy (Sep 2018)* Key characteristics Dutch economy
Actual Forecast Forecast • Population 17mn
Year-on-year change (%)
2017 2018 2019 • GDP € 738bn
Gross Domestic Product 2.9 2.9 2.3 • GDP per capita 5th in the EU, 13th in the world
• Household savings deposits € 351bn
Private consumption 1.9 2.6 2.6
• Pension funds assets € 1,510bn (205% of GDP)
Government spending 1.1 2.1 2.7 • Household gross mortgage debt € 696bn
Business investment 4.7 6.0 3.4
Economic Outlook
Residential investment 12.0 6.6 1.9
• The Dutch economy has fully recovered from the financial crisis, with
Exports 5.3 2.5 3.6 above EU-average GDP growth
Imports 4.9 2.8 4.2 • Unemployment rate is rapidly declining
• Private consumption rising because of higher disposable income, high
consumer confidence and rising house prices
Inflation (%) 1.3 1.7 2.5 • Housing market boom showing signs of fatigue with the number of
transactions declining in the first half of 2018
Unemployment (% labor force) 4.9 3.9 3.6
• Inflation will increase further in 2018 and 2019, in part due to
Government budget (% GDP) 1.1 0.6 0.9 pro-cyclical economic policy
Government debt (% GDP) 56.6 52.8 49.0 • The downside risks are mostly international in origin, in the form of
rising trade tensions and geopolitical risks
* Source: RaboResearch
Investor Relations 31Dutch housing market characterized by strong price
growth but decreasing sales activity
House Price Index and number of transactions • House Price Index: 122.5 (June 2018; 2015 = 100) versus 120.9 peak in
August 2008
300 160 • In 2017 a record number of ~242,000 existing homes were sold. Year-to-
date sales were down 8% y-o-y. Forecast full year 2018: 225,000
transactions
140
250 • Prices rose by 8.8% in Q2 2018 (7.6% in 2017; 5.0% in 2016) and are
expected to rise by 8.7% in 2018 and 7% in 2019
120 • Overall affordability remains relatively good, except for first-time buyers
200
• Owner occupation rate is 56%, comparable to surrounding EU countries
100 • Underlying fundamentals hint at further price increases in the short run:
150 • Increasing number of households and high income growth forecasted
80 • Housing shortage, also visible in the non-regulated rental segment
where rent levels are rising quickly
100 • Limited land available for housing and limited new production
60
• Favorable tax regime: interest paid on mortgage loans, taken out for
owner-occupied houses, is income tax deductible. This makes house
50 40 purchase vis-à-vis renting an attractive option
2000 2006 2012 2018
• Strict mandatory underwriting criteria and strong legal system
12-months total of number of
os homes sold (x 1,000) (l) mitigate credit risks
House Price Index (2015=100)
(2010=100) (r) (x 1,000) • Interest rates remain low
Investor Relations 32National Mortgage Guarantee contributes to the
strength of the Dutch mortgage market
About the National Mortgage Guarantee (NHG) fund
• Offers financial protection to both lender and borrower in the event the borrower is left with residual debt
• Benefits from a back-stop government guarantee
• Rated Triple A by Fitch and Moody’s
• Underwriting criteria:
• Maximum house price € 265,000
• For homes that are subject to energy-efficiency investments the maximum house price is € 280,900
• Affordability criteria (max. ratio of loan expenses-to-income and maximum 100% LTV) comparable to the criteria for non-NHG loans
Specifically for borrowers
• Residual debt will in principle be forgiven
• Lower interest rate
• Borrowers pay a one-off guarantee fee of 1% of the mortgage loan
Specifically for mortgage lenders
• Due to the credit cover by the fund, regulatory capital requirements are lower
• Extensive cover: not only residual debt, but also interest arrears and disposal costs
• For mortgages originated after 1 January 2014 the lender will participate for 10% in any loss claims made under NHG
• 20% of Rabobank’s mortgage portfolio benefits from National Mortgage Guarantee
Investor Relations 33Credit ratings remained strong in H1 2018
Dec 2017 Jun 2018
Issuer ratings PS NPS T2 AT1 Issuer ratings
A+/Positive/A-1 A+ A- BBB+ - A+/Positive/A-1
Aa2/Negative/P-1 Aa3 A3 Baa1 Baa3 Aa3/Stable/P-1
AA-/Stable/F1+ AA- AA- A BBB- AA-/Stable/F1+
AA/Stable/R-1(high) AA - - - AA/Stable/R-1(high)
PS: Preferred Senior; NPS: Non-Preferred Senior; T2: Tier 2; AT1: Additional Tier 1
AA/Aa2
A-/A3
BB/Ba2 NL Rest of Europe Rest of world
Graph based on the average rating score assigned by Fitch, Moody’s and S&P (July 2018) of the world’s 60 largest commercial banks (the Banker, July 2018), plus major Dutch banks
Investor Relations 34Topics Update on strategy H1 2018 results Appendix: • Dutch economy, housing market and credit ratings • Financial results • Loan portfolio • Capital, funding & liquidity • Current & future developments Investor Relations 35
Rabobank posted 12% higher net profit in € mn Jun 2017 Jun 2018 Change Net interest income 4,454 4,274 -4% Net fee & commission income 988 981 -1% Other results 496 774 56% Total income 5,938 6,029 2% Operating expenses 3,755 3,611 -4% Gross result 2,183 2,418 11% Impairment charges -67 -37 +45% Regulatory levies 258 284 10% Operating profit before tax 1,992 2,171 9% Tax 476 473 -1% Net profit 1,516 1,698 12% ROIC 6.9% 8.8% +1.9%-pnt Cost/income ratio (incl. regulatory levies) 67.6% 64.6% -3.0%-pnt Impairment charges -3 bps -2 bps +1 bps Investor Relations 36
Underlying performance by business segment (I)
(in € mn)
Domestic Retail Banking (DRB) Main developments Domestic Retail Banking
0%
• Total income remained stable: downward pressure on NII (due to lower
1,463 1,459
1,371 margins on savings and payment accounts) was compensated by favorable
49 4
Exceptional items 54 new lending margins and an increase in net fee & commission income
• Lower operating expenses (-7%), driven by a lower headcount due to the
digitalization and centralization of services
Operating profit before tax 1,414 1,317 1,455 • As in H1 2017, impairment releases contributed to operating profit, but to a
2,731
much lesser extent (€ 27mn versus € 156mn)
1,715
• Slight reduction of loan portfolio due to continued elevated level of early
mortgage repayments
H1 2017 H2 2017 H1 2018
Wholesale, Rural & Retail (WRR) Main developments Wholesale, Rural & Retail
+14%
• Corrected for the appreciation of the euro, the improvement in total income
784 (+5%) outpaced the increase in operating expenses (+3%)
688 0
639 • Excluding FX effects NII was up 7%, in line with loan portfolio growth
Exceptional items 0
• Non-interest income corrected for FX effects 6% up, partly due to a strong
312 performance of our M&A and Private Equity divisions
784
Operating profit before tax 688 • Profit improvement driven by € 105mn lower impairment charges
327 • Loan portfolio grew by 6%
H1 2017 H2 2017 H1 2018
Investor Relations 37Underlying performance by business segment (II)
(in € mn)
Leasing 16%
Main developments Leasing
• Total income up 5%, driven by the reversal of an impairment taken in
283
4
H2 2017
244
• Marginally higher operating expenses due to business growth
177 • Impairment charges decreased by 15% to € 35mn, well below long-term
6 average
279
Operating profit before tax 249 • Financial lease portfolio grew by 6%
171 • Outlook positive for Leasing due to the shift to a ‘pay for use’ economy
-5
Exceptional items
H1 2017 H2 2017 H1 2018
Real Estate Main developments Real Estate
68%
302
• Includes area developer BPD, investment manager Bouwfonds IM and FGH
29 Bank; the latter was dissolved mid-2018
• Performance improvement driven by BDP, which closed 20% more
transactions of new residential units
156
4 • Segment result benefited from a book profit on the sale of FGH Bank’s
93 273
remaining non-core CRE loans
Exceptional items 0
152 • NII plummeted due to a conscious reduction of the loan portfolio
Operating profit before tax 93
• As in H1 2017, impairment charges contributed to operating profit, but to a
H1 2017 H2 2017 H1 2018
lesser extent (€ 3mn versus € 43mn)
• In August 2018 Rabobank reached agreement on the sale of BPD France
Investor Relations 38Topics Update on strategy H1 2018 results Appendix: • Dutch economy, housing market and credit ratings • Financial results • Loan portfolio • Capital, funding & liquidity • Current & future developments Investor Relations 39
Total assets up due to business growth
in € bn Dec 2017 Jan 2018 Jun 2018
Assets Loans and advances to customers 432.6 429.4 439.3
Cash 66.9 66.9 67.5
Loans and advances to banks 27.3 26.9 25.8
Securities 31.6 34.7 31.7
Derivatives 25.5 25.5 24.7
Other 19.1 19.1 18.8
Total Assets 603.0 602.5 607.8
Equity & liabilities Equity 39.6 39.6 40.5
Deposits from customers 340.7 343.2 346.6
Long-term issued debt 122.7 122.3 124.8
Short-term issued debt 37.7 37.7 39.0
Banks 18.9 18.9 19.9
Derivatives 28.1 28.6 26.5
Other 15.3 12.2 10.5
Total equity & liabilities 603.0 602.5 607.8
Encumbered assets According to EBA guidelines 10% 10% 11%
Investor Relations 40Diversified loan portfolio with focus on the Netherlands
Group private sector loan portfolio by business segments Group private sector loan portfolio € 415.7bn
in € bn Jan 2018* Jun 2018 change Leasing
7% Domestic CRE*
Group total 408.1 415.7 2% 5%
• Domestic Retail Banking 279.9 279.9 0%
• WRR 99.9 106.2 6% WRR (excl.
domestic CRE)
− Domestic Wholesale 17.1 18.2 6% 25%
− International Wholesale 47.1 50.7 8%
− International Rural & Retail 35.7 37.3 4%
Domestic Retail
• Leasing 27.1 29.0 7% mortgages
46%
− Domestic 1.2 1.5 25% Domestic Retail
other SMEs
− International 25.9 27.5 6% 11%
• Real Estate 0.7 0.3 -57%
Domestic Retail F&A
• Other 0.4 0.3 -25% 6%
* Loan portfolio as at 1 Jan. 2018 declined by € 2.9bn due to the adoption of IFRS 9 * This includes the aggregate exposure of the Domestic Retail Banking, WRR and Real Estate
business segments to domestic CRE
Investor Relations 41Rabobank largest financier of the Dutch economy
Domestic lending by client category Domestic private sector portfolio € 300.2bn
(72% of Group loan portfolio)
in € bn Jan 2018 Jun 2018 change
Wholesale Leasing
Total Domestic lending 299.3 300.2 0% (excl. CRE) 1%
5%
• Mortgages 193.1 191.8 -1% Other SMEs
14%
• Food & Agri retail 27.0 26.6 -1%
• Commercial real estate* 21.7 22.0 1%
• Other SMEs 41.9 43.4 3% CRE *
Mortgages
7%
64%
• Wholesale (excl. domestic CRE) 13.9 14.2 5%
• Leasing 1.2 1.5 25%
• Other 0.4 0.3 -25% Food & Agri retail
9%
* This includes the aggregate exposure of the Domestic Retail Banking, WRR and Real Estate
business segments to domestic CRE
Investor Relations 42Well diversified international loan portfolio
International private sector loan portfolio International private sector portfolio € 115.5bn
(28% of Group loan portfolio)
Rural &
in € bn Wholesale TOTAL
Retail
Total international portfolio Leasing
24% Rural & Retail
• WRR 50.7 37.3 88.0 32%
− Europe excl. the
13.8 - 13.8
Netherlands
− North America 16.3 16.2 32.5
− South America 8.1 3.7 11.8 Wholesale
44%
− Australia & New Zealand 3.4 17.0 20.4
• Breakdown international loan portfolio WRR:
− Asia 8.3 0.4 8.7 • Wholesale: 58%
• Rural & Retail: 42%
− Africa 0.2 - 0.2
• Focus on Food & Agri business: F&A lending 60% of total WRR loan
• Leasing 27.5 portfolio
• Leasing: share of Food & Agri business in total lease portfolio 35%
Breakdown of loan portfolio based on country of residence
Investor Relations 43Credit quality loan portfolio further improved
NPL and allowances Main developments
% of loans & • Declining levels of NPL and Impairment allowances evidence of
in € mn Jun 2018
advances continuing improvement of the credit quality of the loan portfolio
Non-performing loans Domestic Retail Banking 12,061 4.3%
• January 2018 one-off impact on level of:
(NPL) WRR (incl. Other) 6,108 2.8%
Leasing 518 1.7% • NPL stock: +€ 1.9bn (application of EBA ‘Definition of Default’)
Real Estate 68 13.5% • Allowances: -€ 1.1bn (adoption of IFRS 9)
Total Rabobank 18,755 3.5% • NPL ratio calculation according to EBA definition; excluding remaining
non-core CRE portfolio (ACC Ireland) the NPL ratio would be 3.2%
Jan 2018 • NPL Coverage ratio calculated according to EBA definition, i.e.
Total Rabobank 20,215 3.8% excluding IBNR (IAS 39) and Stage 1 + 2 (IFRS 9) allowances; decrease to
23% from 27% (Dec 2017) mainly as a result from:
Jun 2018
Allowances • sale of non-core CRE loans, which were highly provisioned
Domestic Retail Banking 2,601
(Stages 1, 2 & 3) WRR (incl. Other) 1,147 • one-off increase in level of NPL in mortgage portfolio as a result of
Leasing 255 application of the EBA ‘Definition of Default’
Real Estate 55
Total Rabobank 4,058
Jan 2018
Total Rabobank 4,361
Investor Relations 44Consistently strong-performing domestic residential
mortgage portfolio (I)
Portfolio by type of mortgage • Loan portfolio –1% to € 192bn, mainly as a result of continued elevated
level of early (partly) repayments due to the ongoing low interest rate
Other environment
8% Interest only • As in H2 2017, releases exceeded new additions to allowances
22%
• As at 1 January 2018 NPL and allowances increased due to the
Savings
23% introduction of a new definition of default:
• potential defaults are recognized at an earlier stage
• excluding this one-off effect, the underlying development of the
Redeeming Partial interest only
18% 29%
asset quality is still positive
• Number of delinquencies and foreclosures remains very low
• Average loan-to-value ratio: 67% (Dec. 2017: 69%)
Portfolio by contractual fixed interest rate period
• National Mortgage Guarantee (NHG): stable at 20.0% of mortgage
Fixed 10 Years
2-3 Years 30% • Banks are in a preferential position to enforce the liquidation of
2% collateral
4-5 Years • Bank has full recourse to the borrower
9% • Share of interest only will decline due to prevailing tax regime
6-10 Years
50%
Investor Relations 45Consistently strong-performing domestic residential
mortgage portfolio (II)
in € mn Jun 2017 Dec 2017 Jan 2018* Jun 2018 Change Dec 17 – Jun 18
Loans 194,483 193,110 193,110 191,791 -1%
Non-performing loans 1,293 1,112 2,912 2,347 -19%
− in % of loans 0.67% 0.58% 1.51% 1.22% -0.29%-pnt
Allowance 196 169 333 237 -29%
− in % of non-performing loans 15% 15% 11% 10% -1%-pnt
Change
H1 2017 H2 2017 H1 2018
H1 2017 – H1 2018
Loan impairment charges 12 -10 -25 -€ 37mn
In basis points 1 bps -1 bps -3 bps -4 bps
* NPL and allowances increased as at 1 Jan. 2018 due to the implementation of a new definition of default. See also previous slide
Investor Relations 46Loan-to-value mortgage portfolio decreased further
LTV domestic residential mortgage portfolio Loan-to-value (LTV) is not the sole determinant of loan quality
• Average LTV portfolio June 2018: 67% (Dec 2017: 69%)
Loan-to-value NHG Guaranteed Other Total
• Prudent underwriting standards, including a Loan expenses-to-income
0%-50% 2.7% 25.6% 28.3% ratio, and active risk monitoring are the most important factors
determining the risks in Rabobank’s mortgage portfolio
50%-60% 1.8% 10.4% 12.2% • LTV figures do not take into account:
• free savings accounts of the borrower
60%-70% 2.6% 11.0% 13.6%
• securities and other assets of the borrower
70%-80% 3.6% 10.3% 13.9% • To cover premature death risk, the majority of clients have taken out a
life insurance, pledged to the bank
80%-90% 4.2% 9.7% 13.9% • Some clients have taken out an insurance to cover unemployment risk
• An LTV>100% does not mean that the loan in question is non-
90%-100% 3.4% 6.4% 9.8%
performing. As long as the borrower is able to meet debt service, the
100%-110% 1.1% 3.0% 4.1% collateral value is less of an issue
• Declining trend in the share of mortgages with an LTV >100%
110%-120% 0.3% 1.4% 1.7% (8% in H1 2018)
>120% 0.3% 2.2% 2.5%
20.0% 80.0% 100.0%
Investor Relations 47Well diversified business lending
Group F&A portfolio € 100.0bn Well diversified business lending
Sugar Other • Subsectors
3% 11%
Animal protein • Geography
Beverages 16%
3% • Links in the food supply chain
Food retail & foodservice
5% Grains & oilseeds
20%
F&A portfolio
Farm inputs
10% • € 100.0bn (+2%), 24% of total Group loan portfolio, of which:
Fruit & veg Dairy • Domestic retail SMEs: € 26.7bn
10% 22%
• WRR: € 63.3bn
Group non-F&A portfolio € 119.0bn • Leasing: € 10.1bn
• Domestic primary F&A market share around 86%
Retail non-food Other Lessors of real
4% 25% estate Finance & insurance
Construction 12% (except banks) Non-F&A portfolio
4% 11%
• € 119.0bn (+3%), 29% of total Group loan portfolio, of which:
Health care Trade
6% 11% • Domestic retail SMEs: € 59.2bn
Transport and warehousing Professional, scientific • WRR: € 40.9bn
5% and technical services • Leasing: € 18.9bn
Activities related to real estate 6%
Manufacturing
8% • Mainly SME lending
8%
Investor Relations 48Commercial real estate: lower exposure, improving
credit quality
Development domestic commercial real estate lending Main developments
(in € bn) • CRE exposure being actively managed down (H1 2018: -4%; 2017: -4%;
28 26
24 2016: -15%)
23 23 22
• Improving real estate market is reflected in decreasing LTVs, NPL level
and impairment allowances
• LTV of domestic lessors of real estate (i.e. buy-to-let) loan portfolio
further improved to 68% (Dec 2017: 71%), mainly due to the further
reduction of non-core exposure and improved market conditions
• In H1 2018 FGH Bank sold the final part of its non-core loan portfolio to
Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18
RNHB (deal size: € 1.3bn)
Breakdown of domestic commercial real estate loan portfolio • FGH Bank merged with Coöperatieve Rabobank U.A. on 30 June 2018
Other
18%
Offices & mixed use
Land 25%
4%
Industrial
14% Residential
Retail outlets 23%
16%
CRE financing includes the aggregate exposure of the DRB, WRR and Real Estate business segments to domestic CRE
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