Annual Report Rabobank Group

Transcription

1 Annual Report 2007 Rabobank Group

2 Key figures Volume of services (in millions of euros) Total assets 570, , , ,574 Private sector lending 355, , , ,958 Due to customers 249, , , ,482 Assets managed and held in custody 301, , , ,400 Financial position and solvency (in millions of euros) Equity 31,375 29,377 26,349 23,004 Tier I capital 28,484 26,391 24,860 21,404 Qualifying capital 29,156 27,114 25,272 21,205 Risk-weighted assets 266, , , ,052 Tier I ratio BIS ratio Profit and loss account (in millions of euros) Total income 11,499 10,049 9,363 9,222 Operating expenses 7,709 6,887 6,242 6,177 Value adjustments Taxation Net profit 2,662 2,345 2,083 1,793 Ratios Net profit growth 13.5% 12.6% 16.2% Return on equity 10.1% 9.4% 9.7% 9.1% Efficiency ratio 67.0% 68.5% 66.7% 67.0% Nearby Local Rabobanks Offices: - branches 1,159 1,214 1,249 1,299 - contact points 3,102 3,091 3,031 2,965 Cash dispensing machines 3,107 3,139 3,116 3,062 Foreign places of business Employees Number of employees (in fte) 54,737 50,573 45,580 50,216 Employee satisfaction 85% 87% 81% 85% Absenteeism 3.8% 3.6% 3.7% 3.8% Market shares (in the Netherlands) Mortgages 28% 26% 23% 25% Savings 41% 39% 39% 39% Small and medium-sized enterprises 38% 38% 38% 40% Food & agri 84% 84% 83% 84% Ratings Standard & Poor's AAA AAA AAA AAA Moody's Investor Service Aaa Aaa Aaa Aaa Dominion Bond Rating Service AAA AAA AAA AAA

3 Lending in billions of euros Tier I ratio in % Value adjustments in basispoints of average lending Net profit in millions of euros 3,000 2,500 2,000 1,500 1, Return on equity in % Dutch GAAP

4 Annual Report 2007 Rabobank Group

5 Rabobank Group at a glance Net profit up 14% in millions of euros Private sector lending up 10% in billions of euros , , , , , , , All financial targets were realised. The domestic retail banking business contributed strongly to the increase in net profit. The turbulence in the financial markets caused a decline in Rabobank International s net profit. Rabobank Group Rabobank Group is an international financial services provider operating on the basis of cooperative principles. Rabobank Group s operations include retail banking, wholesale banking, asset management, leasing and real estate. In the Netherlands, its focus is on all-finance services and, internationally, on food & agri. The organisation employs more than 60,000 staff in 43 countries. Rabobank Group comprises the independent local Rabobanks plus their central organisation Rabobank Nederland and its (international) subsidiaries. Rabobank Group s structure guarantees strong internal cooperative ties. Net profit up 24% in millions of euros Private sector lending up 11% in billions of euros , , , Rabobank Group strengthened its positions in the mortgages and the savings markets. The strong competition in the mortgages market persisted. The Rabobank 2010 project is the response of the local Rabobanks to the changing market conditions. Domestic retail banking The domestic retail banking business comprises the local Rabobanks, Obvion and Bizner. The 174 independent local Rabobanks have over 1,100 branches and operate more than 3,100 cash dispensing machines. Overall, the local Rabobanks employ around 29,000 staff. The local Rabobanks serve millions of Dutch clients, both private and corporate, with a comprehensive package of financial services. Together, the local Rabobanks make up the largest insurance agent in the Netherlands. Obvion is a provider of mortgages and simple financial products and operates exclusively in collaboration with independent agents. Bizner is the first corporate Internet bank without account managers or branch offices, but with self-service. Net profit down 43% in millions of euros Private sector lending up 4% in billions of euros The credit market crisis caused a decline in the results of Global Financial Markets. As a result, Rabobank International s net profit was lower. The international retail banking business was developed further with the acquisitions of Mid-State Bank & Trust, HNS Banco, Hagabank and Bank Hagakita. 2 Rabobank Group Annual Report 2007 Wholesale banking and international retail banking Rabobank International the Group s wholesale banking and international retail banking business employs more than 10,000 staff world-wide and serves clients from 29 countries. Besides regional activities, Rabobank International has divisions that are directed globally. These include Global Financial Markets, Structured Finance, Leveraged Finance, Direct Banking, Telecom Media & Internet and Trade & Commodity Finance. Rabobank International focuses on food & agri customers. The Irish ACCBank is a 100% subsidiary of Rabobank International and in Poland, Rabobank International owns a 46% interest in Bank BGZ. In addition, Rabobank International has interests in private equity.

6 Net profit up 62% in millions of euros Assets managed and held in custody for clients up 6% in billions of euros The favourable development in profit was the result of the expansion of the Group s interests in Sarasin and Transtrend, the divestments by Sarasin and the strong investment performance of the Transtrend Diversified Trend Program. The sustainable activities were expanded. Asset management and investment The asset management activities are handled by Robeco, an asset manager with global operations, as well as by the Swiss private bank Sarasin and by Schretlen & Co, the Dutch private bank for high net-worth clients. Rabobank Group has a 46% shareholding in Sarasin and a voting share of 69%. In all, more than 3,600 people are employed in Rabobank Group s asset management and investment activities. Net profit up 14% in millions of euros Loan portfolio up 10% in billions of euros The Car Leasing and Financial Institutions units saw strong growth. Despite the integration, car lease customers were better satisfied with the services provided. De Lage Landen s activities in the consumer loans market now include the Freo label. Leasing Rabobank s leasing activities are performed in 29 countries by De Lage Landen. Asset financing products help producers, vendors and distributors in offering their products in Europe, the Americas, Asia/Pacific, Australia and New Zealand. Also included in De Lage Landen is Athlon Car Lease, an international supplier of operating car leasing that operates in seven European countries. In the Dutch heartland, De Lage Landen offers a broad range of leasing and trade financing products. Freo is De Lage Landen s new Internet concept for simple loans. De Lage Landen employs around 4,600 staff. Net profit up 48% in millions of euros Loan portfolio up 31% in billions of euros Rabo Bouwfonds had an excellent year. A great deal of effort was spent on merging the various real estate units. In the Netherlands, Rabo Bouwfonds strengthened its position in the market for real estate financing. Real estate The private and corporate real estate activities are performed by Rabo Bouwfonds, a leading real estate enterprise with three core activities focused on real estate: development, finance and investment management. Rabo Bouwfonds labels include Bouwfonds Property Development, Rabo Vastgoed, FGH Bank, Nederlandse Hypotheekbank, Rijnlandse Hypotheekbank and Bouwfonds Asset Management. Rabo Bouwfonds employs around 1,800 staff and operates in several European countries. 3 Rabobank Group at a glance

7 Contents About Rabobank Group Who we are, what we do and how we do it that is what this section of Rabobank Group s Annual Report is about. Chairman Bert Heemskerk gives his views on 2007 and looks ahead at It is a comprehensive profile, which includes Rabobank Group s strategy and the policy principles for the years ahead striving for growth, with long-term sustainability always in mind. Finally, this section sets out Rabobank Group s structure. Report of the Executive Board The Report of the Executive Board has grown considerably in size over the years. A transparent narrative to accompany the financial data is indispensable nowadays. The Report of the Executive Board contains an extensive account of the bank s policy in 2007, with detailed discussions of the big picture, such as Group results and market trends, but also of developments at the local Rabobanks, Rabobank International, Robeco, Sarasin, De Lage Landen and Rabo Bouwfonds. Their structures and strategies are explained clearly, as is their synergy within Rabobank Group. Risk management, which is an important theme in today s financial world, obviously receives a great deal of attention in the Annual Report. And, last but not least, the members, staff, sponsoring, and corporate social responsibility are discussed extensively. Aspects of governance Corporate governance, i.e. the way the bank is managed and supervised, is a strong element within Rabobank Group. This section in the Annual Report discusses in extenso how Rabobank Group is managed at each level. To many, the governance of one of the oldest cooperatives in the Netherlands might not be as transparent as that of a listed enterprise. Be that as it may, Rabobank Group uses a set of unique checks and balances at all its levels that make up corporate governance that, in many respects, is even stricter than in listed enterprises. This chapter is followed by the detailed Report of the Supervisory Board. This discusses developments in 2007, focusing on the major events. Financial statements This section in the Annual Report contains the key annual figures, including the balance sheet, the profit and loss account, the statement of changes in equity, a statement of cash flows, the business segments plus the auditor s report. Naturally, far more detailed financial statements are available, including detailed notes. Annual Report on the web Copies of the Annual Report can be ordered via but can also be downloaded as a file from that site. On the website, any desired information in the Annual Report can be found quickly and easily with the aid of a convenient search tool. 4 Rabobank Group Annual Report 2007

8 Key figures cover Rabobank Group at a glance 2 Chairman s foreword 10 Rabobank Group s Strategic Framework 15 Membership of the Executive Board of Rabobank Nederland 20 Profile of Rabobank Group 22 About the Rabobank Group 10 Rabobank Group 34 Domestic retail banking 39 Wholesale banking and international retail banking 49 Asset management and investment 57 Leasing 63 Real estate 68 Risk management 73 Corporate social responsibility 83 The people at Rabobank Group 86 The members of the cooperative 90 Sponsoring 92 Report of the Executive Board 34 Corporate governance 98 Report of the Supervisory Board of Rabobank Nederland 104 Membership of the Supervisory Board 108 Control aspects 98 Consolidated balance sheet 114 Consolidated profit and loss account 116 Consolidated statement of changes in equity 117 Consolidated cash flow statement 118 Business segments 119 Auditor s report 120 Annual figures Contents

9 Vital employees People make the bank. Maintaining the employability of all employees is consequently crucial for the future of Rabobank. Many current employees will continue to work until an older age than in the past. This makes resiliency, enjoying your work and operating with optimum effectiveness more important than ever before. It all comes down to being vital and staying vital. This demands effort

10 both on the part of the employees themselves and on the part of the organisation. This is why Rabobank invests in development and vitality. It does so through a number of programmes and activities such as the Rabobank Seniorship Actively moving forward in your career programme. And because Rabobank always needs professional and motivated employees, we are continually looking for young talent. This has led us to establish the Management Talent Development programme in order to retain talented young professionals for the Rabobank Group by identifying them at an early stage and providing them with guidance and opportunities for development. The aim of this programme is to develop talented young professionals skills and abilities in the field of strategy, vision and leadership.

11 Rabobank Climate Mortgage promotes sustainable living The Rabobank Climate Mortgage encourages people to opt for sustainability when constructing or renovating their homes. Homeowners can save energy and consequently also costs by carrying out a number of measures such as installing double glazing, insulating the roof, replacing an old boiler or placing solar panels. The Rabobank Climate

12 Mortgage makes investments such as these more attractive by offering an interest rate discount on the financing. As a result, sustainable investments are not only good for the climate, but also good for your pocketbook. The Rabobank Climate Mortgage encourages the advisers at the local member Rabobanks to discuss energy-saving measures with their clients. The mortgage is certified by HIER, an agency that is dedicated to making the Netherlands climate neutral and that has developed a campaign in which all the Dutch environmental and nature organisations are united.

13 About the Rabobank Group Chairman s foreword Sustainability is a core element for Rabobank Group Although strong financial ratios are a conditio sine qua non for cooperatives as well, such ratios have never been truly inspirational. What does inspire people is the meaning of what they do and what they are trying to achieve together. What is it, then, that we at Rabobank are trying to create? We want to realise added value for our clients, hence our ambition to obtain a leading position in our home market. Obviously, a sound financial basis is important in that context, but the overriding principle is for us to act in a sustainable manner and to serve interests that will hold for the long term. We do this for our clients, our employees and our planet. This is an important element in our vision. For Rabobank Group, 2007 was a good year, although a tumultuous one. Never in my 38-year career have I seen so many issues in a single year as in Obviously, the most prominent issue for our sector was the credit market crisis, which upsets the entire financial world. Nevertheless, we succeeded in meeting our own financial targets in 2007 as well, with net profit increasing by 14% to EUR 2.7 billion, compared with EUR 2.3 billion in Virtually all Group units contributed to this increased result, which reflects not only the benefit of the proper spread of our activities, but also the strength of our modest risk profile. We do, after all, have a Triple A rating. In 2007, great progress was made with the realisation of a number of strategic goals. We succeeded in strengthening our positions in some Dutch markets that are of special importance to Rabobank Group, one being the mortgages market. In order to serve today s and tomorrow s customers, we made significant investments in new distribution channels. We also greatly expanded our international retail banking business. In addition, our subsidiaries were able to strengthen their activities and market positions in 2007 in accordance with our strategic principles. Sustainability is core to our operations. In this respect, Rabobank Group made great strides in 2007 and we strengthened our image as the pre-eminent sustainable bank globally. Stronger market leadership position in the Netherlands One of the chief principles in our Strategic Framework for the Netherlands is market leadership in all-finance services. In the Dutch mortgages market, where competition remains fierce, the local Rabobanks and Obvion succeeded in growing their market share by 10 Rabobank Group Annual Report 2007

14 Bert Heemskerk more than 2 percentage points, to almost 28%. Many new clients opened savings accounts at the local Rabobanks in 2007, causing our share of the savings market to grow by almost 2 percentage points to 41%. In the start-up market, Rabobank Group increased its market share to 38%. Rabo Bouwfonds strengthened its position in the Dutch market for real estate financing. Expansion of international activities As in 2006, much progress was made at the international level. In 2007 we acquired fine banks in California, Indonesia and Chile. In the summer of 2007, I was a guest at our wonderful bank in the Brazilian state of Mato Grosso. Rabobank provides sustainable financing in this region, but under a strict code of conduct. Improper deforestation, or racial or gender discrimination results in loan refusal. In addition, we increased our interest in the Polish BGZ Bank and opened our fourth foreign Internet bank, in Australia. Internationally, Rabo Development continued its development of rural banks in developing countries in Africa, including Tanzania, Zambia and Mozambique. Paraguay followed later in Rabobank s partner bank in Tanzania uses cash dispensing machines that originate from our local Rabobanks. As a result, the long queues of people waiting at its doors in order to make withdrawals should become a thing of the past. Even more importantly, our Tanzanian partner bank National Microfinance Bank has granted agricultural loans to thousands of farmers. 11 About the Rabobank Group

15 Credit market crisis hinders Rabobank International Since the summer of 2007, the financial world was upset by the so-called subprime mortgages in the United States. This credit crunch, as it has come to be called, also hindered Rabobank International in the second half of Results for Rabobank International were affected by the credit market crisis. Since trade in a number of professional markets was virtually stagnant, results for Global Financial Markets fell. Organic recovery in the Netherlands With mixed news from abroad, everything went quite well in the Netherlands. Our advertising icon Jochem was replaced by Fatima. In terms of name recognition among the Dutch public, Fatima has meanwhile far outstripped Jochem. In addition, Rabobank was pronounced one of the Netherlands most popular employers in According to the Intermediair magazine, we are even the number one. I am proud of these achievements and I hope we shall be able to repeat them for many years to come. Also in 2007, we enhanced our image as an innovative bank, including tests with paying via Rabo Mobiel cell phones. Rabo Mobiel is one of the many new distribution channels with which we affirm our image as a near-by bank in the new digital world. Another novelty that adds to our reputation was the launch of Bizner, the first online internet merchant bank without account managers or branches, but with self-service. In the Dutch market for consumer loans, De Lage Landen s Freo is another new, innovative and customer-oriented label. Best of all though was the news from the Netherlands that the results of the local Rabobanks, after a disappointing year 2006, showed strong recovery in We saw strong growth in lending, in savings and in the number of securities transactions. The strong growth in savings is good news because funding is at least as important as lending. The people at Rabobank do not work there for their salaries alone. I can tell that our people really want Rabobank to be successful and that they put in an extra effort and show genuine commitment. Their dedication to the success of a local Rabobank reflects on their local community. Having and keeping satisfied customers is Rabobank s number one priority We attach great importance to client satisfaction and loyalty. As in 2006, clients were satisfied with our services in 2007, as is evidenced by the fact that Incompany business magazine awarded the title of the Netherlands best private bank to Schretlen & Co, with Rabobank Private Banking coming second. Members are important to the cooperative In 2007, work progressed to intensify the engagement and influence of the more than the 1.6 million members that the local Rabobanks now have. Professionalisation within supervisory boards of the local Rabobanks increased further. Also, the cooperative dividend was defined further, with members having a say in the specific expenditure of this money. We are working hard to strengthen ties with our members by offering special member benefits. Sustainability is in our genes In 2007, Rabobank distinguished itself in the field of sustainability and not by climbing on Al Gore s bandwagon. In fact, we were quite aware of the spirit of the times in 2006 possibly because the concept of sustainability has been in our genes from our beginnings over a century ago. Examples include the launch of the credit card with climate compensation and the Rabo KlimaatHypotheek. In addition, Robeco acquired the Sustainable Asset Management Group, another leading Swiss sustainable asset manager besides Sarasin, in which we took a controlling interest late in Strong performance in asset management, leasing and real estate Our asset management, leasing and real estate activities each performed very well. It is good to see growing collaboration among the Group units. Obviously, mutual strengthening and support, where possible, are essential to the group concept. After a number of acquisitions in 2006 and 2007, we decided, on the basis of a strategic reorientation, to sell the Alex online investment bank, because there was an overlap with the services offered through Rabo Direct Beleggen. 12 Rabobank Group Annual Report 2007

16 We do not shun dilemmas At the same time, 2007 was not without issues. Examples include the Bouwfonds affair, the OpMaat Hypotheek, the Rasmussen issue and the significant shift in the Dutch banking landscape. When we are successful, we are in the limelight. But this does not mean that we make ourselves invisible the moment when difficult issues arise. And when we take a firm position on any issue, we say so publicly. I can be brief about the Bouwfonds affair. The issue existed even before we acquired parts of Bouwfonds. Naturally, I regret that Rabobank Group s newly joined unit attracted negative publicity. Still, we are confident about the competitive strength of the new Rabo Bouwfonds combination and the perspectives it offers. The OpMaat Hypotheek issue did not cause us to lose our heads. We have consistently pursued our policy of face-to-face discussions, offering tailored solutions to our clients. Because Rabobank pursues long-term relationships with its clients, the clients interests and Rabobank s relationship with its clients come first. To us, our ongoing duty of care is an integral part of the way we do business with our clients. Now for the Rasmussen issue. In last year s Tour de France, the Rabobank cycling team had victory within reach. My ticket for Paris had been booked. And then suddenly, out of the blue, there was this courageous decision by Theo de Rooy and Rabobank. There are no winners with such decisions at best, they command respect in the longer term. Despite this much-discussed event, our professional Rabo cycling team still had an excellent year, with good results in many prominent races and tours. It was victorious in the Tour of Spain, also known as the Vuelta, for the second consecutive year. The young talents too, showed their best. This gives us a great deal of confidence in the future results of our efforts; not only in the wonderful cycling sport, but also in field hockey and in equestrian sports. There were some dramatic changes in the Dutch banking landscape. As a result, we gained a significant number of new customers, and savings grew strongly. However, the new Fortis / ABN AMRO combination will be a formidable competitor in the future and the new situation will benefit Rabobank for a limited period only. Meantime, we must seek to strengthen our position, particularly in the corporate market. Continued financial soundness Overall, and despite the credit market crisis, 2007 was a good year for Rabobank Group. To be sure, the crisis dit not leave our operations untouched but we still met all our financial targets. Growth in net profit was 14%, which was above our annual 12% target. The Tier I ratio, which testifies to our excellent solvency position, was This is above the target of 10. Return on equity, at 10.1%, likewise exceeded the 10% target. Economic outlook It is anticipated that the banking crisis will affect world economy development in Together, the large banks, most of which have global operations, took in 2007 losses totalling over EUR 100 billion. This has led to an unmistakable weakening of their respective solvencies, as a result of which fewer loans can be granted and higher margins will be negotiated. It is expected that the Netherlands, too, will see some effects of this in Taking into account the soundness of the Dutch economy, we anticipate that our country, with economic growth of around 2.75%, will remain in first position in Europe. For 2008, I am moderately optimistic about the world economy. A significant economic slowdown in the United States will be inevitable in the first half of 2008, possibly even a recession. This might result in economic slowdown in Europe, Asia and South America as well. Rabobank s economists assume 2% growth for Europe and 6% to 7% growth for Asia. Also, we anticipate that the stock exchange indexes will not rise from their closing levels for Outlook for Rabobank Group The local Rabobanks made a strong contribution to Rabobank Group s results for For 2008, we anticipate continued strong competition in the mortgages market and increasing competition in the savings market. For maximum synergy benefits, we intend to focus even more on further integration of our recent acquisitions. Globally, we will continue our focus on growth as a leading food & agri bank. Following the subprime crisis, Rabobank Group will review its various activities within Global Financial Markets. 13 About the Rabobank Group

17 Several years ago, Rabobank decided to place the focus of its international strategy on food & agri, in line with our agricultural origins. Current events show that this decision was spot on, food & agri is a world-wide booming business. In the future, we will look into the cooperative structure and how it can be given shape in an international context. Another goal is to expand our positions in sustainable energy globally, not only in biogases but also in wind, solar and hydrogen. Although this is not without risk, Rabobank relies on the knowledge and experience it has gained in this field over the past years. Rabobank International will increase its focus on trade in such items as emission rights, weather derivatives and harvest insurance. In the Netherlands, the schedule for the local Rabobanks includes the Rabo 2010 project. This involves full integration of the physical local Rabobank, the local call centre, local Internet and local RaboTV, which will make us accessible locally 24 hours a day, 7 days a week. This makes Rabobank unique in the world. The operation will result also in fewer FTEs in the mid and back offices, with more people being deployed in the front office. Rabobank 2010 anticipates on the trend of products being increasingly offered and taken out via new channels, such as the Internet. Finally, no matter how economic developments will work out in 2008, Rabobank Group will maintain its principle of opting for sustainable solutions in all its planning. Hard commodities, such as copper, iron and oil will remain scarce. Indeed, their reserves will be depleted sooner or later. The so-called soft commodities, such as soy, coffee and palm oil, although they are renewable, will likewise reach a degree of scarcity as a result of growth of the world population and their growing use in biomass as a basis for sustainable energy. This calls for caution from all of us. What matters, is the continued, healthy existence of our planet, and mankind must not overuse it. Already, we notice climate changes and an increase in the occurrence of natural disasters. We cannot ignore this and will have to act together all of us to fight it, even at the cost of some growth. All things considered, I am very proud of our bank s performance in 2007, the year in which sustainability and profitability went hand in hand so naturally. In opting for sustainability, a choice that dovetails seamlessly with our cooperative roots, we have chosen the right path. I am convinced it is the path towards Rabobank s sound financial and socially responsible continuity, also in the longer term. Bert Heemskerk. Chairman of the Executive Board of Rabobank Nederland 14 Rabobank Group Annual Report 2007

18 Rabobank Group s Strategic Framework Continuity through sustained growth Since its start in 1898, Rabobank Group has grown from a collection of small, cooperative rural banks into a prominent all-finance service provider in the Netherlands and a leading food & agri bank with international operations. Hence, our Strategic Framework portrays Rabobank Group as the global food & agri bank with its roots in the Netherlands. It identifies a number of principles that determine our strategy for the years ahead. All-finance service provider in the Netherlands and global food & agri bank Under the Strategic Framework , Rabobank Group should remain a Dutch bank with a dominant market position in food & agri, among private individuals and in the small and medium-sized enterprises sector. At the same time, Rabobank remains a cooperative, although exceptions may be made for subsidiaries and equity investments. The Triple A rating must be ensured, underpinned by an annual net profit growth of at least 12%, a return on equity of at least 10% and a Tier I ratio of at least 10%. Rabobank Group s strategic course will be driven by sustained organic growth. Rabobank Group distinguishes three areas in which growth must be realised: - growth in the Dutch all-finance market, above all through further strengthening of Rabobank s position in the top end of the private and corporate markets; - continued international expansion as a leading international food & agri bank; - further growth of and synergy between the Group entities. The implementation of the Strategic Framework will enable Rabobank Group to provide optimum services to its clients both at home and abroad while maintaining its sound financial ratios and remaining a good and attractive employer. In addition, Rabobank Group will thus be able to advantageously position itself for a possible consolidation cycle in the European financial sector in the medium term. Domestic strategy: leader in the all-finance market Market leadership in the Dutch all-finance market is the main goal. In addition to the mass market for banking services to private individuals, small and medium-sized enterprises and the agricultural sector where Rabobank Group is the clear market leader growth opportunities remain in the top end of the private and corporate markets. Further, Rabobank Group focuses on the segments of the future, i.e. large cities, young people and ethnic minorities. The insurance, investment, consumer credit and real estate product markets likewise still offer opportunities for further growth. Domestic retail banking: responding to a changing environment Rabobank leverages its distribution strength as the near-by bank of the Netherlands, not just physically but also and increasingly via such distribution channels as the Internet, television and mobile phones. Because Rabobank wishes to remain in the forefront, it continues its investment efforts for these new forms of distribution. Responding to differences in client segments and geographical differences by tailored market strategies with distinct labels and distribution channels. 15 About the Rabobank Group

19 The goals of the Rabobank 2010 project, which was started in 2007, are to increase the commercial effectiveness of the local Rabobanks further, to serve customers better and faster and to increase efficiency. In doing so, Rabobank anticipates on changing market and client needs, while at the same time ensuring its long-term continuity. With the Rabobank 2010 project, Rabobank will remain a bank that excels in both service level and speed of response. Much use will be made of the integration of all modern distribution channels, including the websites of the local Rabobanks, RaboTV and Rabo Mobiel. Finally, Internet concepts such as Bizner and Freo are aimed at target groups that were previously more difficult to reach for the local Rabobanks. Strategy abroad: global food & agri bank Expansion of Rabobank Group s international activities is necessary because it is what Dutch corporate clients expect. Small and medium-sized enterprises with international operations as well as large multinational enterprises wish to do business with banks that have an international presence and that have built up a strong reputation in the Netherlands. In addition, international growth is desirable in order to be and remain attractive as an employer. It is for these reasons that Rabobank Group s global food & agri bank, Rabobank International, focuses on becoming the world s leading food & agri bank. This ambition dovetails seamlessly with Rabobank Group s cooperative origins as a financier of the Dutch agricultural sector and the expertise it has developed. Rabobank International Wholesale banking In order to reach the top as a wholesale bank for the food & agri business, Rabobank International will strengthen its position further among the large players in this sector in the years ahead. The global product groups comprise Global Financial Markets, Leveraged Finance and Structured Finance. Rabobank International has a global network in almost thirty countries, with hundreds of branches abroad. The international branch network will focus its wholesale banking activities both on the international food & agri clients and on Dutch wholesale clients. The geographical focus of the wholesale banking activities is on Europe and on the countries where Rabobank International has retail banking operations. Intensified collaboration with other Group entities should result in additional growth of these activities in years to come. International retail banking In growing its international retail banking business further, Rabobank Group focuses on food & agri. This involves services to the agricultural sector as well as to small and medium-sized enterprises and private individuals in rural areas in selected countries. Going forward, the international retail banking activities will be making a greater contribution to Rabobank International s net profit. For the expansion of its international retail banking network, Rabobank International focuses on three growth markets, with its prime focus on traditionally agricultural countries with a stable political climate and a structurally attractive agricultural sector, such as the United States and Australia. Rabobank International also focuses on countries in Central and Eastern Europe that have a growing agricultural sector, such as Poland. Then the fast-growing emerging countries follow with a large agricultural sector, such as Brazil, Chile, China, India and Indonesia. Most projects in these countries are on a smaller scale, and are of relatively minor financial significance. In 2002, Rabobank International started its Direct Banking activities in Belgium. In the years following, Internet banks were opened abroad: in Ireland, New Zealand and Australia. These banks are currently in their start-up phase. 16 Rabobank Group Annual Report 2007

20 Strategy for subsidiaries and equity investments Rabobank Group s subsidiaries and equity investments play an important role in the realisation of its market leadership ambitions. Such market leadership would serve as a means to achieve high customer value. The target for the subsidiaries is to obtain leading market positions within the timeline set out in the Strategic Framework and to increase net profit by 10% to 15% annually. Rabobank Group has a 39% interest in Eureko. Rabobank is the largest distributor of insurance products in the Netherlands, Eureko being the largest insurer in the Netherlands. Rabobank aims to intensify its collaboration with Eureko. Asset management and investment: Robeco, Sarasin and Schretlen & Co The asset management activities are performed by Robeco, Schretlen & Co and the Swiss bank Sarasin. Robeco intends to invest in Europe, to grow in the United States and to expand its activities selectively in emerging countries. In doing so, Robeco provides its investment skills and aims to expand its fund distribution through third parties further. With Sarasin, Rabobank Group serves both private and institutional clients. Sarasin intends to expand its international activities outside its Swiss home market. Schretlen & Co focuses on high net-worth individuals and medium-sized institutional investors in the Netherlands, in close cooperation with the local Rabobanks. Here too, further strengthening of the collaboration with other Group entities is the goal for the years ahead. Leasing: De Lage Landen De Lage Landen offers financing solutions world-wide aimed at enhancing vendor sales manufacturers or distributors around the world, ranging from local alliances to global joint ventures. The acquisition of Athlon in 2006 resulted in a significant expansion of the car leasing activities, including in countries abroad. It is De Lage Landen s ambition to be the most client oriented car lease business in every country where it chooses to operate. Since it was decided, in 2006, that De Lage Landen will be the centre of competence in consumer credit in the Netherlands, this has become an integral part of De Lage Landen s strategy. In addition, De Lage Landen aims for a more prominent role as Rabobank s factoring specialist in the Netherlands. Real estate: Rabo Bouwfonds With its real estate development, Rabo Bouwfonds expresses in concrete terms its motivation to be near-by and committed in all levels of Dutch society. Rabo Bouwfonds is a powerful instrument for Rabobank Group to literally shape the Netherlands outward appearance. With the merger of FGH Bank, Rabo Vastgoed and parts of Bouwfonds, which were acquired in 2006, the real estate division acquired a stronger profile. Rabo Bouwfonds intends to maintain and where possible to further strengthen its leading position in the Dutch market for the development of owner-occupied houses and commercial real estate. Abroad, Rabo Bouwfonds has several housing and commercial real estate development projects in its portfolio. Further, the real estate division intends to obtain a dominant position in commercial real estate financing in the Netherlands. Synergy between Group entities Good cooperation between the Group entities is of great importance. The local Rabobanks offer a broad range of Robeco s investment products to their clients and they work closely with Schretlen & Co for optimum service provision to high net-worth clients. In the Netherlands, many of De Lage Landen s products are sold via the local Rabobanks and Rabobank International. Rabo Bouwfonds works closely with the local Rabobanks. Because the local Rabobanks are firmly rooted in the local communities, they know their clients housing wishes. The good cooperation enables Rabo Bouwfonds to respond to these wishes in housing developments. In addition, Rabo Bouwfonds finances commercial real estate and sells real estate funds to clients of the local Rabobanks. The ambition is to strengthen the cooperation between the Group entities further. 17 About the Rabobank Group

21 Organisational and financial implications of the strategy Rabobank Group s strategic ambitions have been embedded in a cooperative and highquality organisation driven by corporate social responsibility. Cooperative roots The cooperative is and remains Rabobank s cornerstone. The local Rabobanks and Rabobank Nederland, which is also the holding company of the Group s subsidiaries and equity investments, are managed in accordance with the cooperative model and will continue to be so. Over the past years, Rabobank has succeeded in strengthening its cooperative identity, partly by embedding member influence in the cooperative further through the introduction of member councils. The scaling-up process of the local Rabobanks typically goes hand in hand with the introduction of the executive model and further professionalisation of the management function. Another key factor is cooperative dividend, the investment in social activities and commitment, which makes members increasingly committed to the bank s image in society. Cooperative dividend comprises spending and efforts for the improvement of the economic, social and cultural environment, including sustainability initiatives. A growing number of local Rabobanks materialise their cooperative dividends by establishing a body of cooperative funds and regional sustainability funds, among other things. Members have influence in the distribution of these funds. Currently, the Dichterbij member magazine is being filled with local news by all the local Rabobanks separately, with more than 170 different editions being mailed to members. At 31 December 2007, the local Rabobanks have more than 1.6 million members. Further development of active member engagement is crucial to the local cooperative s permanent license to operate. In the coming years, the cooperative s distinct character will be emphasised further, both internally and externally. Leading in HRM policy The quality of our people is of paramount importance to our strategy. Rabobank s HRM policy is aimed at attracting and developing talent, broadening its management and improving the flow of staff. In the year under review, a Group-wide management talent development programme for senior staff was introduced. Another important aspect is ongoing investment in knowledge, skills and experience. People make the bank even better, Rabobank s HRM vision which was refocused in 2007, describes the development of the organisation s HR management by reference to three themes: Smarter working, Career and Diversity. Based on these umbrella themes, the bank s HRM policy was defined further in 2007 and this will be continued in a similar fashion going forward. Employee satisfaction in general remained high in 2007, with 85% (87%) of staff being satisfied, all things considered, with working at Rabobank. In 2007, Rabobank was awarded the title the Netherlands most favourite employer among the highly educated for the first time in the Intermediair magazine s image survey. In 2006, the bank came third. Sustainability NGOs, public authorities and consumers increasingly demand that commercial enterprises conduct their business while having regard for the quality of life of our planet. Poverty alleviation and climate change are the international themes of corporate social responsibility that have been in the focus of attention in recent times. Rabobank Group too, has made a commitment to deal carefully with issues such as human rights or the use of scarce sources of (fossil) energy. Accordingly, Rabobank Group intends to maintain and further expand its leading position in sustainable entrepreneurship and corporate social responsibility. In 2007, particularly good progress was made in embedding CSR criteria in our core activities. The greatest impact came from embedding CSR in the lending process. Other aims are to grow the sales of CSR products and services, to expand Rabo Development and to lower the environmental burden. 18 Rabobank Group Annual Report 2007

22 Rabo Development The Rabo Development initiative was launched in Its aim is to help a number of rural banks in developing countries grow into fully-fledged Rabobanks. Over the next few years, the activities will focus on a limited number of countries including China and several East African countries. Rabo Development invests in these banks by acquiring minority interests. In addition, it provides management support and technical assistance, e.g. by seconding Rabobank staff on a temporary basis. Internationally, Rabobank Group takes its full social responsibility by providing access to financial services for the rural population in developing countries. In so doing, Rabobank Group can make an important contribution to the economic development of these countries and to the financial emancipation of their populations. Financial targets The strategic goals warrant ambitious financial targets. Rabobank Group attaches great value to financial stability. In order to ensure this stability, the following long-term financial targets have been formulated: - annual net profit growth of at least 12%; - tier I ratio of 10% or higher; - return on equity of at least 10%. Following Basel II, the target for the bank s Tier I ratio will be adjusted starting About the Rabobank Group

23 Membership of the Executive Board of Rabobank Nederland From left to right (standing): Bert Bruggink, Sipko Schat, Piet van Schijndel, Piet Moerland. From left to right (sitting down): Hans ten Cate, Bert Heemskerk. 20 Rabobank Group Annual Report 2007

24 Executive Board Bert Heemskerk (H.) Chairman Group Audit Communication Legal and Tax Affairs Personnel Supervision & Compliance Knowledge and Economic Research Executive Secretariat Hans ten Cate (J.C.) Rabobank International Management Board Rabobank International, Chairman Regional management Americas/Asia/Europe CFRO domain Rabobank International Special Management Corporate Social Responsibility Real Estate Robeco Piet van Schijndel (P.J.A.) Private Individuals Private Banking Group ICT Leasing Piet Moerland (P.W.) Cooperative & Management Member Banks Personnel SME Shared Services & Facilities Bert Bruggink (A.) Control Rabobank Group Group Risk Management Credit Risk Management Treasury Investor Relations Sipko Schat (S.N.) Rabobank International Management Board Rabobank International, Deputy Chairman COO domain Rabobank International Corporate Clients Netherlands Financial Markets Corporate Finance Trade & Commodity Finance Private Equity Secretary to the Executive Board Rens Dinkhuijsen (L.A.M.) 21 About the Rabobank Group

25 Profile of Rabobank Group Rabobank Group is an international financial services provider operating on the basis of cooperative principles. Its operations include retail banking, wholesale banking, asset management, leasing and real estate. In the Netherlands, its focus is on all-finance services and, internationally, on retail and wholesale banking and food & agri. The organisation employs more than 60,000 staff in 43 countries. Rabobank Group comprises the independent local Rabobanks plus their central organisation Rabobank Nederland and its (international) subsidiaries. Rabobank Group s structure is characterised by strong internal ties, that stem from its cooperative roots. Rabobank Group has the highest credit rating, Triple A, awarded by the well-known international rating agencies Standard & Poor s, Moody s and Dominion Bond Rating Service. In terms of Tier I capital, the Rabobank Group is among the world s twentieth largest financial institutions. Local Rabobanks, Rabobank Nederland and Rabobank International Together, the 174 independent local Rabobanks employ around 29,000 staff and form the densest banking network in the Netherlands. Rabobank has over 1,100 branches and operates more than 3,100 cash dispensing machines. The local Rabobanks serve millions of Dutch clients, both private and corporate, with a comprehensive package of financial services. The local Rabobanks and their members and customers make up Rabobank Group s cooperative core business. Firmly rooted in society, committed, near-by and a leader. Clients can become members of their local Rabobank. In turn, the local Rabobanks are members and shareholders of Rabobank Nederland, the supralocal cooperative organisation that advises the banks and supports their local services. Rabobank Nederland also supervises, on behalf of the Dutch central bank, the solvency, liquidity and administrative organisation of the local Rabobanks. Rabobank Nederland is the holding company of a number of specialised subsidiaries in the Netherlands and abroad. Rabobank International is Rabobank Group s wholesale bank and international retail bank. It employs more than 10,000 staff world-wide and serves its customers from 29 countries. Mission and ambition The Rabobank Group puts the common interests of people and communities first. Based on its commitment to those interests, the Rabobank Group aims to be a driver and an innovator that contributes to the sustainable development of prosperity and well-being. Its goal is to help people and communities achieve their present and future ambitions. Strengthening mutual collaboration and supplying the best possible financial solutions are the means to achieve that end. Based on this mission, Rabobank Group s ambition is to be the largest, best and most customer-driven and innovative financial institution in the Netherlands. In the international environment, Rabobank Group aspires to be the best food & agri bank, with a strong presence in the world s major food & agriculture countries. For this purpose, Rabobank Group uses the experience it has accumulated in the Netherlands over many years. In addition, Rabobank Group aims at global excellence in sustainable entrepreneurship and banking, as would befit its identity and position in society. Rabobank Group works hard to embed corporate social responsibility in its core activities even further. 22 Rabobank Group Annual Report 2007