Rabobank Group Annual Summary 2006

Transcription

1 Rabobank Group Annual Summary 2006

2 Rabobank Group structure 9 million clients 1,64 million members 188 member banks Rabobank Nederland Wholesalebanking and international retail banking Rabobank International Corporate Clients Netherlands Market support domestic retail banking Private individuals SME Private Banking Group departments Audit, Supervision, ICT, Finance, Communications, Personnel, Co-operative and Management, Credit control, Shared Services & Facilities Other corporate departments and services Asset management Investment Leasing Real estate Insurance Mortgages Robeco Group Schretlen & Co Alex Sarasin De Lage Landen Rabo Bouwfonds Eureko (38%) Obvion

3 Contents Contents Rabobank Group structure cover Key figures 2 Chairman s foreword 4 Financial developments 5 Domestic retail banking 8 Wholesale banking and international retail banking 1 Asset management and investment 3 Leasing 5 Real estate 7 Risk management 9 Corporate social responsibility 21 Annual figures 23 Consolidated balance sheet 24 Consolidated profit and loss account 26 Consolidated statement of changes in equity 27 Consolidated cash flow statement 28 Business segments 30 Profile Rabobank Group 31 Colophon cover

4 2 Rabobank Group Annual Summary 2006 Key figures 1 General: Due to consolidation effects, the sum of the figures relating to Group entities will not always correspond with Rabobank Group totals. Changes in terms of percentages can vary as a result of rounding. 1) The first three columns corresponding to the years 2006, 2005 and 2004 are based on IFRS. The other columns corresponding to the years 1997 up to and including 2004 are based on Dutch GAAP. 2) The Tier I ratio and the BIS ratio for 2001 have been calculated taking into account the effect on equity of the changed accounting policy for pensions with effect from 1 January ) Since the adoption of IFRS, the return on equity is expressed as the ratio of net profit to Tier I capital. 4) The SAM rating is calculated every two years Volume of services (in EUR millions) Total assets 556, , , ,089 Private sector lending 324, , , ,996 Due to customers 215, , , ,123 Assets managed and held in custody 286, , , ,000 Financial position and solvency (in EUR millions) Equity 29,377 26,349 23,004 18,143 Tier I capital 26,391 24,860 21,404 22,621 Qualifying capital 27,114 25,272 21,205 22,586 Risk-weighted assets 247, , , ,552 Solvency requirement 19,797 17,112 15,684 15,887 Tier I ratio BIS ratio Profit and loss account (in EUR millions) Total income 10,049 9,363 9,222 10,055 Operating expenses 6,887 6,242 6,177 6,732 Value adjustments Addition to the fund for general banking risks 0 Operating profit before taxation 2,712 2,604 2,566 2,809 Net profit 2,345 2,083 1,793 1,536 Ratios Return on equity 3 9.4% 9.7% 9.1% 10.1% Efficiency ratio 68.5% 66.7% 67.0% 67.0% Nearby Local Rabobanks Offices: - branches 1,214 1,249 1,299 1,299 - contact points 3,091 3,031 2,965 2,965 Cash dispensing machines 3,139 3,116 3,062 3,062 Foreign offices Employees - total number 56,209 50,988 56,324 56,324 - full-time equivalents 50,573 45,580 50,216 50,216 Employee satisfaction 87% 81% 85% 85% Client data Members (x 1,000) 1,641 1,551 1,456 1,456 Membership/customer ratio 18.4% 17.7% 16.7% 16.7% Rating Standard & Poor s AAA AAA AAA AAA Moody s Investor Service Aaa Aaa Aaa Aaa SAM rating (corporate social responsibility) 4 80%

5 Key figures , , , , , , , , , , , , , , , , , , , ,826 98, , , , , , ,100 83,700 15,233 14,261 12, ,458 11,217 10,381 9,708 19,660 17,202 15, ,653 13,007 11,817 11,113 19,892 17,414 15, ,093 13,650 12,660 11, , , , , , , ,163 14,626 13,268 12,225 11,382 10,384 9,156 8, ,018 8,518 8,388 7,714 6,801 5,832 5,280 6,243 5,839 5,965 5,459 4,826 4,099 3, ,348 1,927 1,884 1,834 1,525 1,393 1,296 1,370 1,222 1,178 1,166 1, % 9.9% 9.5% 10.4% 9.8% 9.6% 9.8% 69.2% 68.5% 71.1% 70.8% 70.9% 70.3% 70.6% ,378 1,516 1,648 1,727 1,795 1,797 1,823 2,800 2,697 2,618 2,693 2,719 2,727 2,750 2,981 2,979 2,889 2,676 2,546 2,430 2, ,055 58,096 58,120 55,098 53,147 49,465 44,667 50,849 51,867 52,173 49,711 48,224 45,310 40,927 85% 84% 83% 82% 80% 1,360 1, % 13.2% 9.7% 6.1% AAA AAA AAA AAA AAA AAA AAA Aaa Aaa Aaa Aaa Aaa Aaa Aaa 74% 64%

6 4 Rabobank Group Annual Summary 2006 Chairman s foreword In spite of a number of financial and strategic challenges in our markets, 2006 was a successful year. Net profit increased by 13%, which means that once again we achieved our target of 12%. At least as important is the fact that customer satisfaction improved further. We acquired a number of prominent companies and participating interests abroad, thus furthering our ambition of becoming a leading global food & agri bank. All group companies contributed to the growth in net profit. Despite fierce competition in the Dutch mortgage market and side effects of mergers by local Rabobanks, domestic retail banking showed a healthy increase in profit, while regaining market share in the mortgage market to above 25%. Wholesale banking and international retail banking showed a sharp increase in profit, partly thanks to the good performance of their equity investments. Our subsidiaries Robeco, De Lage Landen, Rabo Bouwfonds, Alex, Schretlen & Co and Obvion again achieved excellent results. A great deal of attention was paid to extending the successful collaboration with Eureko/Achmea and to the way the contemplated follow-up could be shaped. The year 2006 also saw Rabobank launch a number of initiatives and projects that set the trend for its industry. Supported by a strong all-finance organisation and favourable economic conditions, we are optimistic about Bert Heemskerk Chairman of the Executive Board of Rabobank Nederland

7 Financial developments 5 Financial developments - Net profit up 13% to EUR 2.3 billion - Income up 7% to EUR 10.0 billion - Private sector lending up 17% to EUR billion - Savings up 4% to EUR 89.5 billion - Tier I ratio down to 10.7 (11.6) due to acquisitions - Return on equity 9.4% (9.7%) - Operating expenses up 10% to EUR 6.9 billion Results (in EUR millions) change Interest 6,472 6,261 3% Fees and commission 2,296 2,060 11% Other income 1,281 1,042 23% Total income 10,049 9,363 7% Staff costs 4,117 3,880 6% Other administrative expenses 2,429 2,031 20% Depreciation % Operating expenses 6,887 6,242 10% Gross profit 3,162 3,121 1% Value adjustments % Operating profit before taxation 2,712 2,604 4% Taxation % Net profit 2,345 2,083 13% Risk-related costs (in basis points) % Ratios Efficiency ratio 68.5% 66.7% Return on equity 9.4% 9.7% Balance sheet (in EUR billions) 31-Dec Dec-05 Total assets % Private sector lending % Savings % Risk-weighted assets % Capital ratios BIS ratio Tier 1 ratio FTEs 50,573 45,580 11% In financial terms, 2006 was another successful year for Rabobank Group. Net profit increased by 13% to EUR 2.3 billion, compared with EUR 2.1 billion in 2005, which means that the bank s target - an increase in net profit of at least 12% - was achieved. Total lending increased due to the great number of mortgages taken out in the Netherlands and the increase in lending abroad. As a result, private sector lending increased by 17%, from EUR billion in 2005 to EUR billion in The 4% increase in savings to EUR 89.5 billion was mainly due to growth in the international Direct Banking activities. Despite pressure on interest margins, income rose by 7% to EUR 10.0 billion. Organic growth and acquisitions contributed to a 10% increase in operating expenses to EUR 6.9 billion. Total income up 7% Total income grew by 7% in 2006 to EUR 10,049 (9,363) million, with particularly strong increases in commission and other income. Interest income increased by 3% to EUR 6,472 (6,261) million. Fierce competition in the domestic mortgages market caused interest margins to narrow. Due to the higher interest rates, clients felt less inclined to settle their mortgage loans prematurely. Income from penalty interest declined. Likewise did the margins in wholesale banking and leasing operations decline. Increased lending, however offset the tighter interest margin. The improved investment climate resulted in an increase in assets managed and held in custody. Commission income increased by 11% to EUR 2,296 (2,060) million, mainly due to higher asset management and insurance commission.

8 6 Rabobank Group Annual Summary 2006 Other income rose by 23% to EUR 1,281 (1,042) million, party as a result of the growth in car lease activities resulting from the acquisition of Athlon. Likewise, income from the participations in the Gilde funds was higher in Operating expenses up 10% Total operating expenses increased by 10% to EUR 6,887 (6,242) million, with staff costs accounting for 60% of total costs. The increase in the staffing level and standard salary increases caused staff costs to go up by 6% to EUR 4,117 (3,880) million. Various acquisitions and the increase of the bank s interest in Sarasin resulted in strong growth of around 3,400 FTEs. The staffing level was also higher due to both organic growth and more regulations. In 2006, Rabobank Group s total number of employees grew by 11% to 50,573 (45,580) FTEs. The growth in activities caused an increase in other administrative expenses. These went up by 20% to EUR 2,429 (2,031) million. More costs were incurred in order to comply with increased laws and regulations in 2006, and the additions to reorganisation and legal provisions were higher in the year under review. Value adjustments down 13% The item value adjustments, which comprises bad debt expenses and losses incurred on financial assets, declined by 13% to EUR 450 (517) million as a result of positive economic developments and a further quality improvement in the loans portfolio. The value adjustments were 20 (25) basis points of the average risk-weighted assets, which is well below the long-term average of 30 basis points. Income tax down 30% Income tax recognised in 2006 amounted to EUR 367 (521) million, which is equivalent to an effective tax rate of 14%, against 20% in The reduction in the Dutch corporate income tax rate from 31.5% to 29.6% contributed to the decrease in the effective tax rate. Higher results from the participations in the Gilde funds, which are exempt from taxation, likewise contributed to a lower tax burden. The decrease in the effective tax rate was also partly due to non-recurring tax income. Net profit up 13% Rabobank Group achieved a 13% increase in net profit, to EUR 2,345 (2,083) million in After deduction of the portion attributable to minority interests and payments on Rabobank Member Certificates and Trust Preferred Securities III-VI, the sum remaining of EUR 1,757 (1,577) million has been appropriated to equity. Private sector lending up 17% The item loans to customers grew by 17% to EUR (304.5) billion in In the year under review, private sector lending - which accounts for 91% of total lending - increased by 17% to EUR (278.1) billion, reflecting mainly the growth in domestic mortgage lending and strong growth in lending abroad. At 31 December 2006, total private lending comprised 51% to private individuals, 33% to the trade, industry and services sector and 16% to the food & agri sector. Lending by activity at year-end 2006 Lending by region at year-end 2006 Domestic retail banking 68% Wholesale banking and international retail banking 23% Leasing 5% Real estate 3% Other 1% Netherlands 76% Europe excluding the Netherlands 10% America 10% Australia and New Zealand 3% Asia 1%

9 Financial developments 7 The growth of the mortgage portfolio was an important driver for the 13% increase in lending to private individuals to EUR (146.5) billion. The private mortgage portfolio grew by 12% to EUR (143.1) billion. Further growth of the international retail banking business caused a 26% increase in lending to private individuals abroad, to EUR 3.3 (2.6) billion. More loans were granted to producers of durables and to the real estate sector. This contributed to the growth in lending to businesses in the trade, industry and services (TIS) sector by 27% to EUR (83.3) billion. Lending to the food & agri sector covers the complete chain from the primary agricultural sector up to and including food retail. Lending in this sector grew by 9% to EUR 52.5 (48.2) billion. The growth in food & agri was mainly achieved abroad, where lending increased by 15%. Of private sector lending, 68%, or EUR (200.7) billion, was granted to domestic retail banking customers. The wholesale banking business and the international retail banking business together granted 23% of total loans, and leasing and real estate 5% and 3%, respectively. savings as a percentage of total savings climbed from 46% to 48%. One factor offsetting this was a decline in savings at Roparco. The greater part of total savings - EUR 80.5 (77.7) billion - is entrusted to the local Rabobanks. Otherwise, the growth of the item due to customers reflected mainly an increase in corporate term deposits and other amounts due to customers. Term deposits increased by 28% to EUR 46.3 (36.2) billion. Financial targets Rabobank s financial targets are threefold: net profit growth, Tier I ratio and return on equity. With a net profit growth of 13% for 2006, Rabobank Group exceeded its target of 12%. The Tier I ratio was 10.7 (11.6), which is well above the target of 10. The acquisition of Athlon and parts of Bouwfonds caused the Tier I ratio to decline. Tier I capital increased by EUR 1.4 billion to EUR 26.3 (24.9) billion in the year under review. Further growth in lending caused the risk-weighted assets to increase by 16% to EUR (213.9) billion. Rabobank achieved a return on equity of 9.4% (9.7%), compared with the target figure of 10%. Savings up 4% Amounts due to customers grew by 16% in 2006 to EUR (186.4) billion. Savings make up a significant part of this item and increased by 4% in 2006 to EUR 89.5 (86.2) billion. This growth was realised entirely in Internet savings, which showed an increase of EUR 4.1 billion. Partly as a result of the expansion of the Direct Banking activities abroad, Internet Lending by sector in EUR billions Savings in EUR billions Other Roparco Fixed-term deposits 75 Food & agri 30 Savings 50 TIS 20 accounts 25 Private 10 Telesaving 0 individuals 0 Internet saving

10 8 Rabobank Group Annual Summary 2006 Domestic retail banking Net profit from domestic retail banking, comprising the local Rabobanks and Obvion, which sells mortgages via the broker channel, amounted to EUR 1,091 (1,024) million was a two-faced year. On the one hand, fierce competition in the mortgage market put income under pressure. In addition, further laws and regulations requiring an increase in FTEs caused a decline in gross income. The 7% increase in net profit was due to lower value adjustments and taxation. On the other hand, the bank strengthened its market leadership in the Netherlands. The share of the mortgage market increased by 2.5 percentage points to 25.5% (23.0%). Results (in EUR millions) change Interest 4,226 4,202 1% Fees and commission 1,259 1,205 4% Other income % Total income 5,551 5,431 2% Staff costs 2,118 1,990 6% Other administrative expenses 1,607 1,581 2% Depreciation % Operating expenses 3,877 3,735 4% Gross profit 1,674 1,696-1% Value adjustments % Operating profit before taxation 1,535 1,521 1% Taxation % Net profit 1,091 1,024 7% Risk-related costs (in basis points) % Efficiency ratio 69.8% 68.8% Balance sheet (in EUR billions) 31-Dec Dec-05 Total assets % Private sector lending % Savings % Risk-weighted assets % FTEs 29,375 28,909 2% Market share Mortgages 25.5% 23.0% Savings 39.3% 39.4% SME 38% 38% Income up 2% Total income increased by 2% to EUR 5,551 (5,431) million, mainly due to higher commission income. Despite the lower margin on mortgages and a decline in penalty interests, interest income was up 1% to EUR 4,226 (4,202) million. Growth in lending offset the lower interest margin. Because the local Rabobanks sold more insurance policies, the associated commission income increased by 4% to EUR 379 (364) million. In addition, commission income from corporate treasury products was Market shares in % Mortgages Savings SME

11 Domestic retail banking 9 the main cause of the increase in total commission income by 4% to EUR 1,259 (1,205) million. In the year under review, customers placed considerably more investment orders at the local Rabobanks. Due to the introduction of lower commission rates in 2006, this did not result in an increase in securities commission income. Other income increased by EUR 42 million to EUR 66 (24) million. EUR 2.7 billion, representing more than 40% of total mortgage production of EUR 6.1 billion in In the second half of 2006, Rabobank acquired the website, which gives access to a broad offer of owner-occupied houses. Through this website, Rabobank assists private individuals in finding their dream house. Operating expenses up 4% Total operating expenses were 4% higher in 2006, at EUR 3,877 (3,735) million. The growth in staff numbers contributed to the 6% increase in staff costs to EUR 2,118 (1,990) million. The rise in staffing level was due particularly to the need for compliance with more laws and regulations. Projects under the Identification (Provision of Services) Act and the Disclosure of Unusual Transactions (Financial Services) Act resulted in higher expenses. Likewise, the mergers of the local Rabobanks resulted in a temporary deployment of extra staff in Other administrative expenses increased by 2% to EUR 1,607 (1,581) million. Depreciation charges on property, plant and equipment were lower, causing depreciation to decline by EUR 8 million to EUR 152 (164) million. Value adjustments down 21% The improved economic climate was a major contributor to the 21% decline of the item value adjustments to EUR 138 (175) million. Riskrelated costs fell to 10 (14) basis points of the average risk-weighted assets and were thus below the long-term average of 17 basis points. Mortgages The local Rabobanks and Obvion both gained market share. Rabobank Group s market share increased by 2.5 percentage points to 25.5% (23.0%) in the year under review. To achieve a higher market share, the local Rabobanks started the mortgages action programme in 2006, with the stated aims of greater contact with clients and more clientcentredness at the local Rabobanks. The local Rabobanks succeeded in strengthening their positions and market share increased from 18.9% to 20.3%. For Obvion, which sells mortgages via the broker channel, 2006 was an excellent year as well. Obvion s market share grew by 1.1 percentage points to 5.2% (4.1%). Its success was partly due to the launch of the Obvion Basic mortgage. The simple structure of this product makes it possible to offer a lower rate of interest. Since March 2006, clients have taken out Obvion Basic mortgages totalling Savings Rabobank s share of the Dutch savings market at 31 December 2006 was 39.3% (39.4%). The economic upturn provided an impulse to consumers to free savings for additional consumption and to invest in stock, as a result of which savings at the local Rabobanks increased by only 4%, while their market share increased by 0.3 percentage points to 37.4% (37.1%). Roparco s market share declined. At 31 December 2006, Roparco s market share was 1.9% (2.3%). Insurance The dense network of local Rabobanks serves half of all Dutch private customers and businesses. This makes Rabobank a very large insurance broker in the Netherlands. In 2006, the local Rabobanks in collaboration with Eureko notched up a success with the new Interpolis Zorg Actief policy. With the introduction of the new health care insurance system, many people switched to a new insurance company. Members of the local Rabobanks were offered an attractive discount on the Interpolis Zorg Actief policy. This was key to the tempestuous growth in the number of insured persons to thousand at 31 December The Interpolis Alles in één Polis and the Interpolis Bedrijven Compact Polis also continued their successful performance. The number of Alles in één Polis policies increased to 1,202 thousand (1,163 thousand) in 2006, with clients taking out cover for more risks on average under this policy. In the year under review, the number of clients with three or more types of cover grew from 48.0% to 50.4%. In 2006, the local Rabobanks sold 23% more travel insurance policies to private clients. Significantly more homeowners and motor insurance policies were also sold than in Since more mortgages were granted, the number of life insurance policies taken out went up considerably as well. The volume of Interpolis Bedrijven Compact policies rose to 172 thousand (168 thousand). In the year under review, some new services for

12 10 Rabobank Group Annual Summary 2006 corporate clients were developed, including the RisicoScan Verzekeren and the CombinatieLevensVerzekering for agricultural entrepreneurs. The RisicoScan Verzekeren tool provides entrepreneurs with a fast insight into their risk exposure and the possibilities for limiting those risks. The CombinatieLevensVerzekering enables agricultural entrepreneurs to build up a pension outside their business enterprise. Depending on the life cycle phase of the enterprise, the premium allows for flexibility in use for the life insurance element and the savings element. Lending to the trade, industry and services sector increased by 6% to EUR 39.9 (37.5) billion, with strong growth in the building and the real estate sectors. Lending to the health care sector declined, however. Lending to the food & agri sector grew by 3% to EUR 22.1 (21.5) billion, with the primary agricultural sector accounting for the greater part. Loans granted to the primary agricultural sector grew by 2% to EUR 18.2 (17.8) billion, partly thanks to the growth in lending to dairy farming. Lending to the horticultural entrepreneurs declined. Businesses in this sector were affected by higher energy prices. Private sector lending up 10% Lending to the private sector grew by 10% in 2006 to EUR (200.7) billion. Private sector lending comprises 72% to private individuals, 18% to the trade, industry and services sector and 10% to the food & agri sector. Loans to private individuals grew by 12% to EUR (141.7) billion, virtually all of which - EUR (137.8) billion - are mortgages. Lending by sector in EUR billions Food & agri TIS Private individuals

13 Wholesale banking and international retail banking 11 Wholesale banking and international retail banking With a 20% increase in net profit, Rabobank International the wholesale banking and international retail banking operations - made a handsome contribution to the Group s results. Net profit went up by EUR 114 million to EUR 687 (573) million. At the end of 2006, Rabobank made an offer for Mid-State Bank & Trust. These US retail banks will give Rabobank International further access to the important food & agri market of California. In addition, the international retail activities were strengthened by the acquisition in January 2007 of Bank Haga and Bank Hagakita, in Indonesia. In the first half of 2006, Rabobank International also extended its Direct Banking activities by opening its third Internet bank abroad, in New Zealand. Results (in EUR millions) change Interest 1,649 1,477 12% Fees and commission % Other income % Total income 2,622 2,226 18% Staff costs % Other administrative expenses % Depreciation % Operating expenses 1,586 1,277 24% Gross profit 1, % Value adjustments % Operating profit before taxation % Taxation % Net profit % Risk-related costs (in basis points) % Efficiency ratio 60.5% 57.4% Balance sheet (in EUR billions) 31-Dec Dec-05 Total assets % Private sector lending % Risk-weighted assets 64, % FTEs 6,684 5,960 12% Income up 18% Total income increased by 18% in 2006 to EUR 2,622 (2,226) million. The margin on lending by the wholesale banking business was under pressure. Partly as a result of this, interest income increased by only 12% to EUR 1,649 (1,477) million, despite strong growth in lending. Income from Global Financial Markets increased by 14%. Within Corporate Finance, Leveraged Finance made a strong contribution to results, thus offsetting the slight decline in income from Structured Finance. The growing demand for acquisition finance drove up income at Leveraged Finance by 31%. Income from Rabo Participations and the Gilde funds were considerably higher thanks to improved results on exits and revaluations. This contributed to the growth in other income. The international retail banking business accounted for 19% of total income. Income from retail activities increased by 10% to EUR 509 (461) million. ACCBank s income was under pressure as a result of the fall in lending. Income from the other retail banking activities increased as a result of organic growth and the acquisition in the USA. Community Bank of Central California (CBCC) is consolidated in the figures as from February 2006.

14 12 Rabobank Group Annual Summary 2006 Operating expenses up 24% Operating expenses rose by 24% to EUR 1,586 (1,277) million. The expansion of activities caused the number of staff to increase by 12% in the year under review, to 6,684 (5,960) FTEs. Approximately 260 FTEs are from the former CBCC. The increase in the staffing level led to staff costs rising by 14% to EUR 867 (760) million. The integration of CBCC resulted in an additional charge in Also, more project costs were incurred for compliance with Basel II and in-control projects. Partly owing to the acquisition of CBCC and the increase in regulations, other administrative expenses were EUR 191 million higher at EUR 668 (477) million. Depreciation of buildings and software was higher, causing depreciation charges to rise by EUR 11 million to EUR 51 (40) million. Value adjustments down 10% In 2006, value adjustments were 10% lower at EUR 234 (259) million as a result of healthy global economic growth and further quality improvement in the portfolio. The value adjustments were 40 (56) basis points of the average risk-weighted assets, which means that expenses were below the long-term average of 60 basis points. Direct Banking In early 2006, Rabobank extended its Direct Banking network by opening its third Internet bank abroad, in New Zealand. In addition, preparations were made to open a fourth Internet bank in early At 31 December 2006, nearly 19,000 clients in New Zealand were using the RaboPlus Internet bank. Apart from New Zealand, Rabobank operates Internet banks in Belgium and Ireland. At 31 December 2006, the Direct Banking activities abroad had a total of 102,000 (51,000) clients. In the year under review, savings increased by 94% to EUR 3.1 (1.6) billion. Private sector lending up 38% Lending to the private sector increased by 38% in 2006 to EUR 74.7 (54.2) billion, despite the weakening of the US dollar, which fell by 10%. Lending to the food & agri sector increased by 15% to EUR 26.5 (23.1) billion and this sector now accounts for 36% of private sector lending. Loans to the trade, industry and services sector increased by 57% to EUR 44.9 (28.5) billion. The increase in private sector lending was EUR 0.7 billion, with the total amounting to EUR 3.3 (2.6) billion. The greater part of lending was in America, at 35%. Of total lending, 13% was in the Netherlands, with Europe excluding the Netherlands accounting for 33%, Australia & New Zealand for 14% and Asia for 5%. The international retail banking business accounted for 24% of lending, with a 16% increase to EUR 18.2 (15.7) billion in Lending by the US retail activities grew by 85% to EUR 4.2 (2.3) billion. The loans portfolio contributed by Community Bank of Central California amounted to EUR 0.8 billion. Following three years of strong growth, lending by ACCBank declined by 4% to EUR 6.2 (6.5) billion in Lending by sector in EUR billions Food & agri TIS Private individuals Lending by region at year-end 2006 America 35% Europe excluding the Netherlands 33% Australia and New Zealand 14% Netherlands 13% Asia 5%

15 Asset management and investment 13 Asset management and investment The asset management activities - Robeco Groep, Sarasin, Schretlen & Co and Alex - achieved an increase in net profit of 28%, or EUR 223 (174) million. This significant increase is mainly due to a strong cash flow of EUR 6 billion and the positive investment climate during the year under review. With the interests acquired by Robeco in Analytic Investment Management, of Belgium, and - in the beginning of Sustainable Asset Management Group, of Switzerland, Robeco Results (in EUR millions) change Interest % Fees and commission % Other income % Total income % Staff costs % Other administrative expenses % Depreciation % Operating expenses % Gross profit % Value adjustments - - Operating profit before taxation % Taxation % Net profit % Number of orders in NL (in millions) % 31-Dec Dec-05 Assets managed and held in custody % (in EUR billions) For clients % Investment portfolio % FTEs 3,126 1,798 74% expanded its investment expertise further. By exercising its call option, Rabobank increased its voting share in Sarasin from 16% to 69% at the end of December Sarasin is a leading Swiss private bank and asset manager. Income up 16% Total income rose by 16% to EUR 836 (718) million thanks to the growth in assets managed and held in custody. Interest income rose by EUR 25 million to EUR 86 (61) million and commission income increased by 8% to EUR 648 (600) million. At Robeco, the growth of assets managed and the shift towards equity funds both ensured higher management fees. As Robeco launched fewer alternative investment products in the year under review, the related income was down. Alex handled substantially more orders in 2006 than a year ago. The effect was a rise in commission income for Alex, despite a reduction in its fees. Other income increased by EUR 45 million to EUR 102 (57) million. Operating expenses up 18% Operating expenses were 18% higher at EUR 551 (468) million, mainly due to the increase in staff costs. At 31 December 2006, Sarasin employed approximately 1,120 FTEs. These additional staff, the expansion of activities and the increased deployment of staff in in control projects caused the Assets managed and held in custody for Rabobank Group clients at year-end 2006 by investmenttype Equity 44% Fixed income 32% Alternatives 7% Other 6% Mixed 5% Money-market 4% Real estate 2%

16 14 Rabobank Group Annual Summary 2006 staffing level to rise by 1,328 FTEs to 3,126 (1,798) FTEs. Staff costs rose by 19% to EUR 330 (278) million as a result of the growth in staff numbers, higher costs of external hires and standard salary increases. Higher marketing costs contributed to the 19% increase in other administrative expenses to EUR 210 (177) million. Depreciation charges fell by EUR 2 million to EUR 11 (13) million due to lower depreciation of buildings. Expanded interest in Sarasin and cash flow contributed to growth in assets managed and held in custody The assets managed and held in custody by Rabobank Group grew by 28% in 2006 to EUR 286 (224) billion, of which EUR 72 (68) billion represents Rabobank s investment portfolio and EUR 214 (156) billion assets managed and held in custody for clients. Because Sarasin is consolidated in the figures as from 31 December 2006, assets managed and held in custody increased by EUR 41 billion. The consolidation of the Bouwfonds Asset Management activities also added EUR 4 billion to assets. The inflow of new assets made a positive contribution to asset development. In 2006, the gross cash flow amounted to EUR 6 billion, mainly attributable to asset inflows at Harbor Capital Advisors - an American subsidiary of Robeco - and at Robeco Asset Management. The favourable investment climate in the second half of 2006 yielded positive investment results, causing assets to increase by EUR 12 billion. The fall by 10% of the US dollar partly offset the effect of these positive investment results. Of total assets managed and held in custody for clients, 44% are in equities, 32% in fixed-income securities and 7% in structured products, hedge funds and private equity. The other categories, including real estate, mixed and money market investments, account for 17%. Significant rise in orders in 2006 In the year under review, the number of securities and in-house fund orders in the Netherlands grew to 8.6 (6.1) million. The local Rabobanks showed an increase in both the number of in-house fund orders (up 17%) and the number of securities orders (up 65%). Alex also reported a huge leap in the number of orders, the increase being 43%. Robeco s overall performance shows upward trend 1 Measured over a three-year period, most equity investments outperform their benchmark. Although not all track records improved over the past year, Robeco can currently boast an excellent three-year history. Measured over a three-year period, 87% of all its equity investments outperformed the benchmark, against the target of 60%, with the percentage of each business unit exceeding 80%. In 2006, 60% of the assets invested in equity outperformed the benchmark. Flagship fund Robeco outperformed the benchmark by 0.2%, while Rolinco s outperformance was 2.8%. The Robeco Emerging Market equity fund lagged behind the benchmark. The Harbor International fund, with assets under management of USD 18.5 billion, did exceptionally well, outperforming the benchmark by 5.9%. The fixed-interest portfolios again performed well in 2006, with average yields outperforming the benchmark by 0.2%. In the year under review, 86% of assets under management invested in fixed-interest securities exceeded the benchmark. Measured over a three-year period, the percentage was 93%. In 2006, flagship funds Rorento and Lux-o-rente showed outperformances of 0.2% and 0.6%, respectively. The Harbor bond fund likewise outperformed the benchmark. The alternative investment products achieved mixed results. In 2006, the Hattrick bonds realised a 1.9% negative return, against a target positive return of 10%. Transtrend s futures program again realized a sound return in With its Enhanced Risk Diversified Risk Programme, Transtrend s return was 12.0% in 2006 and its annual return over the past three years averaged 10.2%. Robeco-Sage continued to perform well. Sage s return exceeded that of the reference group by 0.4%. Changes in assets managed and held in custody for clients in EUR billions ) Yields are gross, before deduction of management fees, 160 except for alternative investment products, whose yields 150 are stated net Gross cash flow Exchange results Investment results Sarasin Rabo Bouwfonds Interest, dividends and other

17 Leasing 15 Leasing Despite a lower margin, the net profit of De Lage Landen, Rabobank Group s leasing subsidiary, grew by 16% in 2006 to EUR 206 (178) million. Partly as a result of the acquisition of Athlon, which was added to the existing activities from the second half of 2006, the lease portfolio grew by 23%. Results (in EUR millions) change Interest % Fees and commission % Other income % Total income % Staff costs % Other administrative expenses % Depreciation % Operating expenses % Gross profit % Value adjustments % Operating profit before taxation % Taxation % Net profit % Risk related costs (in basis points) % Efficiency ratio 58.7% 54.5% 31-Dec Dec-05 Lease portfolio (in EUR billions) % Europe % America % Asia-Pacific % FTEs 4,128 3,045 36% Income up 17% The 17% increase in income to EUR 842 (719) million was mainly attributable to the growth in other income. Interest margins were depressed by the higher short-term interest rate, causing interest income to decline by 1% to 507 (514) million. Commission income was virtually unchanged at EUR 49 (47) million. A significant part of income from car lease activities is accounted for under other income. The acquisition of Athlon particularly contributed to the 81% increase in other income to EUR 286 (158) million. Operating expenses up 26% The increase in regulations required a lot of effort and involved high expenses in Operating expenses increased by 26% to EUR 494 (392) million, largely due to higher staff costs. The staffing level rose, particularly as a result of the acquisition of Athlon - approximately 790 FTEs, excluding CARe - as well as organic growth of the activities and the increase in regulation. The staffing level grew by 36% to 4,128 (3,045) FTEs, with staff costs rising by 25% to EUR 305 (244) million saw additional marketing expenses related to the start-up of the Consumer Finance activities, which contributed to the 26% increase in Lease portfolio in EUR billions Asia-Pacific 2 America 0 Europe

18 16 Rabobank Group Annual Summary 2006 other administrative expenses to EUR 168 (133) million. Depreciation charges were EUR 6 million higher at EUR 21 (15) million, mainly due to higher software depreciation. Value adjustments down 16% The improved economic conditions and the ongoing improvement in risk control resulted in lower value adjustments, which fell by 16% to EUR 77 (92) million. Compared to 2005, risk-related costs declined to 45 (65) basis points of the average lease portfolio, which is below the longterm average of approximately 70 basis points. billion. The new consumer credit portfolio and the Athlon portfolio together were largely responsible for the growth of the European portfolio by 46% to EUR 11.0 (7.5) billion. The growth of the US lease portfolio was offset by the depreciation of the US dollar, which fell by 10%. The volume of the US lease portfolio was EUR 7.6 (7.6) billion. The activities in the Asia-Pacific region developed according to expectations, showing 24% growth. Strong organic growth of the lease portfolio In 2006, De Lage Landen s portfolio grew by 23% to EUR 18.9 (15.4) billion. At 31 December 2006, the volume of the consumer credit portfolio was EUR 0.7 billion. The car lease portfolio grew by EUR 1.9 billion to EUR 2.5 (0.6) billion. The portfolio contributed by Athlon amounted to EUR 1.8 Lease portfolio by sector at year-end 2006 Office equipment 20% Food & agri 19% Financial services 17% Car leasing 13% Material handling & construction equipment 12% Healthcare 8% Technology finance 5% Trucks & trailers 3% Other 3%

19 Real estate 17 Real estate Favourable market conditions resulted in a strong organic increase in both sales and profit for the real estate organisation. In accordance with the strategy as formulated earlier, the activities were significantly expanded on 1 December 2006 by the acquisition of parts of Bouwfonds. Net profit of Rabo Bouwfonds increased by 33% in 2006 to EUR 104 (78) million, with Bouwfonds contributing EUR 17 million. Rabo Bouwfonds is the market leader in owner-occupied housing projects in the Netherlands. Income up 63% Total income was EUR 94 million higher at EUR 244 (150) million. The growth of the loans portfolio caused interest income to rise by 2% to EUR 98 (96) million, despite pressure on margins. Commission income was unchanged at EUR 1 (1) million. In December 2006, the parts acquired from Bouwfonds contributed to the EUR 92 million increase in other income to EUR 145 (53) million. Results (in EUR millions) change Interest % Fees and commission 1 1 0% Other income % Total income % Staff costs % Other administrative expenses % Depreciation % Operating expenses % Gross profit % Value adjustments % Operating profit before taxation % Taxation % Net profit % Number of houses sold 14,073 1, % Other information 31-Dec Dec-05 Loans portfolio (in EUR billions) % Assets managed and held in custody 4.2 (in EUR billions) FTEs 1, % Operating expenses up 146% Total operating expenses rose by EUR 60 million to EUR 101 (41) million. In 2006, the staffing level grew by approximately 1,250 FTEs as a result of the acquisition of parts of Bouwfonds. Organic growth of activities required additional staff. Employee numbers increased by 1,323 FTEs to 1,654 (331) FTEs, causing staff costs to rise by EUR 30 million to EUR 55 (25) million. Due to organic growth and the acquisition, other administrative expenses were EUR 28 million higher at EUR 43 (15) million.

20 18 Rabobank Group Annual Summary 2006 Significant expansion of order portfolio At the end of 2006, the Development division s residential construction portfolio s potential was 134,000 houses, of which 119,000 are to be built in the Netherlands and 15,000 abroad. The commercial real estate order portfolio is 323,000 m2, of which 44% is retail space, 39% is space for mixed use and 17% is office space. However, at 31 December 2006 there was substantial surplus capacity, particularly in obsolete office buildings. This is why Rabo Bouwfonds operates a selective policy for office development and restructuring. In 2006, Rabo Bouwfonds sold 14,073 houses. The number of houses sold by Rabo Vastgoed was 2,691 (1,767). High interest in real estate funds Private investors increasingly focused on real estate in This was reflected by the successful launch of Bouwfonds Germany Residential Fund III CV. Earlier in the year, Bouwfonds had placed Bouwfonds Germany Residential Fund CV and Bouwfonds Germany Residential Fund II CV with investors. The Leyenburg Woningfonds CV likewise attracted a great deal of interest. Bouwfonds US Residential Fund was set up for international institutional investors. The volume of assets managed at 31 December 2006 was EUR 4.2 billion, the greater part of which was from Bouwfonds. Strong development in lending The loans portfolio grew by 31% in 2006 to EUR 10.3 (7.8) billion. The portfolio contributed by Rijnlandse Bank had a volume of EUR 0.8 billion. New production at FGH Bank amounted to EUR 4.1 billion, due in part to good collaboration with the local Rabobanks and Rabobank International. The repayments amounted to EUR 1.8 billion. The greater part of the portfolio relates to investment financing. Loans portfolio in EUR billions Number of houses sold by country in The Netherlands France Germany 542 Other 227

21 Risk management 19 Risk management Banking means deliberately taking well-considered risks. Rabobank Group pursues a prudent risk policy which entails a modest risk profile. In 2006, great progress was made in the further implementation of the new Basel II accord, which is to come into force for the Rabobank Group on 1 January In addition to these external capital requirements, the internal capital requirement, economic capital, will be the principal indicator in terms of risk management and capital allocation. External capital requirement The new Basel accord on capital adequacy ( Basel II ), which is to come into force for Rabobank Group on 1 January 2008, represents an integrated framework for the supervision of banks and is founded on three pillars. In pillar 1, minimum capital requirements are set for all banks for credit risk, market risk and operational risk. In pillar 2, the supervisory authority stimulates banks to manage their capital adequacy themselves. In this context, developing an economic capital framework is an important tool for Rabobank Group to calculate the required financial buffers. Finally, pillar 3 addresses market discipline, requiring banks to publish sufficient risk information with a view to stimulating market forces. Current prospects are that the Basel II capital requirement will be approximately 30% to 40% lower than the present Basel I capital requirement. Under the new regime, the capital requirement for credit risk will be nearly halved, thanks mainly to the large mortgage portfolio. Under Basel II, the average capital requirement for the mortgage portfolio will fall by more than three-quarters. In addition, the solvency requirement for corporate lending as well as for leasing will be significantly lower because, unlike Basel I, Basel II takes the collateral obtained into account. The requirement for these portfolios will be reduced by more than 50%. However, Basel II has a separate operational risk capital requirement for banks. For Rabobank Group, the capital requirement for operational risk will be around 10% of the total capital requirement under Basel II. Under Basel I, the Tier I ratio at 31 December 2006 was over 10%. Using the internal calculation for the Basel II requirement, this ratio is over 16%. Internal capital requirement Rabobank Group s total economic capital for 2006 has been calculated at EUR 16.9 (14.9) billion. The increase compared to 2005 was due to the growth in Rabobank Group s activities and to model refinements. This includes the development of a new model to determine economic capital for the minority interests. Also, the economic capital for the other assets was modelled. The economic capital is well below the available Tier I capital (core capital) of EUR 26.4 (24.9) billion. This large capital buffer illustrates Rabobank Group s solid financial position. Lending and bad debt expenses Strong economic growth, both in the Netherlands and abroad, resulted in a significant increase in lending by Rabobank Group in numerous industry sectors in The private sector lending grew by 17% to EUR 325 (278) billion, partly as a result of the fast-growing economy. The risk profile of Rabobank Group s loans portfolio continued to be favourable in This is reflected in bad debt expenses of only 15 (20) basis points of average private sector lending in 2006, which is considerably lower than the 5-year average of 22 basis points for the period In 2006, Rabobank Group s bad debt expenses, expressed in

22 20 Rabobank Group Annual Summary 2006 basis points, reached their lowest level in 25 years. For domestic retail banking, bad debt expenses decreased further to 7 basis points. More than 70% of the domestic retail banking loan portfolio comprises financing to private individuals, mainly on the basis of residential mortgages, which historically have very limited credit losses. In addition, the development of the domestic economy in 2006 was favourable to practically all industry sectors, causing bad debt expenses to decline further. Likewise, favourable global economic developments caused lower bad debt expenses for wholesale banking and international retail banking as well as leasing change Bad debt expenses by business unit (in EUR millions) Domestic retail banking % Wholesale banking and international retail % Leasing % Other 1-11 Rabobank Group % Bad debt expenses by business unit (in basis points of the average lending) Domestic retail banking % Wholesale banking and international retail % Leasing % Rabobank Group %

23 Corporate social responsibility 21 Corporate social responsibility Following the preparatory work in 2005, Rabobank achieved a great deal in the area of corporate social responsibility (CSR) in A lot of attention was given to the integration of CSR in lending. Clear choices were made in prioritising targets and key performance indicators. The focus is on those CSR activities with the biggest positive impact on both society and our services. Issue management 2006 was characterised by the shaping of issue management, i.e. identifying and dealing properly with social trends. Rabobank used the trends and issues identified to formulate targets, establish key performance indicators and assign new focus areas in its CSR policy. Focus on financial services Nearly all of Rabobank s stakeholders in the area of CSR consider embedding sustainable development in financial services as the most important field of policy. Rabobank Group is aware that, with its services, it has a strong, guiding influence on economic, social and ecological processes in a great variety of sectors. In coming years, the focus will be on the following two targets: - Further CSR implementation in Rabobank Group s core processes, focusing on lending, leasing and investing. - Marketing new products and services that promote clean technologies and sustainable investments. Further CSR implementation Great progress was made in 2006 with the integration of CSR in the organisation. From the beginning of 2006, all business units and subsidiaries as well as most local Rabobanks have been setting CSR targets, with progress reported on a regular basis. Of the local Rabobanks, 86% has incorporated CSR in their policy cycles and 80% participates in CSR monitoring. Externally, the effect of CSR on client assessment in lending is becoming more and more visible. CSR thinking was given a recognisable position in the real estate activities as well and has been embedded in all project development plans. CSR in lending In 2006, Rabobank Group started the development of a CSR implementation manual, which is an appendix to the Rabobank Group Credit Manual. The CSR manual helps employees apply the principles and guidelines Rabobank has set out for itself in their business services. The manual allows the various Group units to apply this to their own situation in a way that does justice to their specific markets. For example, the European real estate market, where the real estate organisation operates, has issues that differ from those for Rabobank International clients in the sugar industry. The manual became formally effective in February New climate related products and services Rabobank Group believes that the climate market offers business enterprises an opportunity to meet the statutory requirements for reduced CO 2 emissions in a flexible and cost effective way. Rabobank focuses on leveraging the opportunities this market offers to sustainably operating

24 22 Rabobank Group Annual Summary 2006 businesses. In the year under review, a lot of effort was put into the development of new products and services for both corporate and private clients. At the end of 2006, Robeco placed the Robeco Clean Tech Certificate and the Robeco Clean Tech Fund II with investors. Early in 2007, Rabobank, together with World Wildlife Fund, launched a new credit card featuring a climate function. New participations in banks in developing countries It is Rabobank s ambition to make financial services more accessible to people in developing countries. The Rabo Development Program was established for this purpose in Rabobank s target to invest in a few rural banks in developing countries was achieved in At the end of 2006, Rabobank acquired 49% of the shares in Zambia National Commercial Bank. Rabo Development provides the management and has committed itself to a three-year Technical Assistance programme. In addition, an agreement was signed with United Rural Co-operative Bank of Hangzhou (URCB) in China for the acquisition of a 10% share in this Chinese bank

25 Annual figures 23

26 24 Rabobank Group Annual Summary 2006 Consolidated balance sheet At 31 December In millions of euros Assets Cash and cash equivalents 1,630 2,923 Due from other banks 49,086 53,065 Trading financial assets 36,789 39,011 Other financial assets at fair value through profit and loss 21,468 17,449 Derivative financial instruments 18,992 24,135 Loans to customers 354, ,451 Available-for-sale financial assets 48,961 48,644 Held-to-maturity financial assets 1,489 1,908 Investments in associates 3,250 2,971 Goodwill and other intangible assets 1, Property and equipment 5,022 3,115 Investment properties 1, Current tax credits Deferred tax assets 1,477 1,575 Other assets 10,009 6,096 Total assets 556, ,573

27 Annual figures 25 At 31 December In millions of euros Liabilities Due to other banks 113, ,749 Due to customers 215, ,427 Debt securities in issue 128, ,992 Derivative financial instruments and other trade liabilities 26,694 31,182 Other debts 10,649 7,066 Other financial liabilities at fair value through profit and loss 26,270 23,844 Provisions 1, Current tax liabilities Deferred tax liabilities Employee benefits 1,223 1,437 Subordinated debt 2,450 2,645 Total liabilities 527, ,224 Equity Equity of Rabobank Nederland and local Rabobanks 17,426 15,450 Rabobank Member Certificates issued by group companies 5,808 5,811 23,234 21,261 Trust Preferred Securities III to VI issued by group companies 1,959 2,092 Minority interests 4,184 2,996 Total equity 29,377 26,349 Total equity and liabilities 556, ,573

28 26 Rabobank Group Annual Summary 2006 Consolidated profit and loss account For the year ended 31 December In millions of euros Interest income 25,059 19,716 Interest expense 18,587 13,455 Interest 6,472 6,261 Fee and commission income 2,741 2,482 Fee and commission expense Fees and commission 2,296 2,060 Income from associates Net income from financial assets and liabilities at fair value through profit and loss 246 (146) Gains on available-for-sale financial assets 7 38 Other Income 10,049 9,363 Staff costs 4,117 3,880 Other administrative expenses 2,429 2,031 Depreciation and amortisation Operating expenses 6,887 6,242 Value adjustments Operating profit before taxation 2,712 2,604 Taxation Net profit 2,345 2,083 Of which attributable to Rabobank Nederland and local Rabobanks 1,757 1,577 Of which attributable to holders of Rabobank Member Certificates Of which attributable to Trust Preferred Securities III to VI Of which attributable to minority interests Net profit for the year 2,345 2,083

29 Annual figures 27 Consolidated statement of changes in equity Equity of Rabobank Nederland and Rabobank Member Trust Preferred In millions of euros Local Rabobanks Certificates Securities III to VI Minority interests Total equity At 1 January ,018 3,840 1,877 3,269 23,004 Arising in the period (after taxation): Net fair value changes available-for-sale financial assets (174) (174) Net fair value changes cash flow hedges Other changes Reclassified to net profit for the year available-for-sale financial assets (132) (132) Currency translation differences Total income and expense for the year recognised directly in equity (271) Net profit for the year 1, ,083 Total income and expense 1, ,355 Issue of Rabobank Member Certificates and Trust Preferred Securities III to VI - 1, ,971 Payment on Rabobank Member Certificates and Trust Preferred Securities III to VI - (211) (111) - (322) Other (785) (659) At 31 December ,450 5,811 2,092 2,996 26,349 At 1 January ,450 5,811 2,092 2,996 26,349 Arising in the period (after taxation): Net fair value changes available-for-sale financial assets (277) (277) Net fair value changes associates Net fair value changes cash flow hedges (16) (16) Other changes Currency translation differences (14) - (133) (191) (338) Reclassified to net profit for the year available-for-sale financial assets Total income and expense for the year recognised directly in equity 93 - (133) (191) (231) Net profit for the year 1, ,345 Total income and expense 1, (23) 10 2,114 Payment on Rabobank Member Certificates and Trust Preferred Securities III to VI - (277) (110) - (387) Other 126 (3) - 1,178 1,301 At 31 December ,426 5,808 1,959 4,184 29,377

30 28 Rabobank Group Annual Summary 2006 Consolidated cash flow statement For the year ended 31 December In millions of euros Cash flow from operating activities Operating profit before taxation 2,712 2,604 Adjusted for: Non-cash items recognised in profit and loss Depreciation and amortisation Value adjustments (Gain)/loss on sale of property and equipment (14) (12) Share of (profit) of associates and (gain)/loss on sale of subsidiary (527) (218) Fair value (gains)/losses on investment properties 2 1 Fair value (gains)/losses on financial assets and liabilities at fair value through profit and loss (246) 146 Net (gain)/loss on available-for-sale financial assets (7) (38) Net changes in operating assets Due from other banks 7,874 1,387 Trading financial assets 2,222 (5,741) Derivative financial instruments 5,143 7,900 Net changes in non-trading financial assets at fair value through profit and loss (4,019) 25,219 Loans to customers (50,473) (30,337) Net changes in liabilities relating to operating activities Derivative financial instruments and other trade liabilities (4,488) (11,090) Due to customers 29,472 8,956 Debt securities in issue 12,074 18,472 Other debts 3,583 (291) Income tax paid (809) (634) Other changes (2005: mainly attributable to disposal of Interpolis) (2,285) (18,681) Net cash flow from operating activities 1,005 (1,494)

31 Annual figures 29 Consolidated cash flow statement For the year ended 31 December In millions of euros Cash flows from investing activities Acquisition of subsidiaries net of cash and cash equivalents acquired 1,714 (21) Disposal of subsidiaries net of cash and cash equivalents acquired 3 2 Acquisition of property and equipment and investment properties (646) (456) Proceeds from sale of property and equipment Acquisition of available-for-sale financial assets and held-to-maturity financial assets (16,160) (14,885) Proceeds from sale and repayment of available-for-sale financial assets and held-to-maturity financial assets 12,861 10,286 Net cash flow from investing activities (1,898) (4,756) Cash flows from financing activities Proceeds from issue of Rabobank Member Certificates - 2,000 Proceeds from issue of subordinated debt instruments - 1,000 Payment on Rabobank Member Certificates and Trust Preferred Securities III to VI (387) (322) Repayment of subordinated debt (13) (774) Net cash flow from financing activities (400) 1,904 Net changes in cash and cash equivalents (1,293) (4,346) Cash and cash equivalents at beginning of year 2,923 7,269 Cash and cash equivalents at end of year 1,630 2,923 The cash flows from interest are included in the net cash flow from operating activities Interest income 24,675 19,730 Interest expense 17,740 13,986

32 30 Rabobank Group Annual Summary 2006 Business segments Domestic retail banking Wholesale and international retail Asset Management and In millions of euros banking investments Leasing Real estate Other* Total For the year ended 31 December 2006 External income 7,731 1, , (1,954) 10,049 Income from other segments (2,180) 1,040 (58) (462) (248) 1,908 - Total income 5,551 2, (46) 10,049 Segment expense 4,016 1, ,337 Operating profit before tax 1, (325) 2,712 Income tax expense (359) 367 Net profit 1, ,345 Business unit assets 242, ,554 18,894 24,765 17,069 (153,457) 553,205 Investments in associates ,700 3,250 Total assets 242, ,014 18,905 24,776 17,125 (150,757) 556,455 Business unit liabilities 226, ,688 17,238 22,670 16,377 (150,447) 527,078 Total liabilities 226, ,688 17,238 22,670 16,377 (150,447) 527,078 Additions to property and equipment , ,260 Depreciation and amortisation including amortisation of software Value adjustments (1) For the year ended 31 December 2005 External income 7,719 1, , (1,914) 9,363 Income from other segments (2,288) 827 (66) (354) (152) 2,033 - Total income 5,431 2, ,363 Segment expense 3,910 1, ,759 Operating profit before tax 1, (200) 2,604 Income tax expense (256) 521 Net profit 1, ,083 Business unit assets 219, ,147 14,179 20,757 9,101 (128,359) 503,602 Investments in associates ,565 2,971 Total assets 219, ,362 14,333 20,761 9,119 (125,794) 506,573 Business unit liabilities 205, ,787 13,546 19,262 8,496 (126,008) 480,224 Total liabilities 205, ,787 13,546 19,262 8,496 (126,008) 480,224 Additions to property and equipment Depreciation and amortisation including amortisation of software Value adjustments (10) 517 * Including elimination between segments for profit and loss account.

33 Profile of Rabobank Group 31 Profile of Rabobank Group Rabobank Group is a financial services provider operating on the basis of co-operative principles. It offers a wide range of financial services and products. Its origins are in the local loan cooperatives that were founded in the Netherlands more than a century ago by enterprising people who had virtually no access to external financing. The local Rabobanks that evolved from this have a long tradition, particularly in the agricultural sector and in small and medium-sized enterprises. Rabobank Group Rabobank Group comprises 188 independent local co-operative Rabobanks with over 1,200 branches in the Netherlands plus their central organisation Rabobank Nederland and its (international) subsidiaries. Rabobank serves more than 9 million private individuals and corporate clients in the Netherlands and a growing number abroad. It employs 56,000 staff and is represented in 43 countries. Rabobank Group has the highest credit rating (Triple A), awarded by the well-known international rating agencies and Standard & Poor s, Moody s and Dominion Bond Rating Service. In terms of Tier I capital, the organisation is among the world s twenty largest financial institutions. Local Rabobanks and Rabobank Nederland The local Rabobanks and their clients make up Rabobank Group s co-operative core business. Clients can become members of their co-operative local Rabobank. In turn, the local Rabobanks are members and shareholders of Rabobank Nederland, the supralocal co-operative 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 further acts as an (international) wholesale bank and as a bankers bank to the Group and is the holding company of a large number of specialised subsidiaries. Rabobank Group combines the best of two worlds: the local involvement and personal touch of the local Rabobanks with the expertise and economies of scale of Rabobank Nederland and its subsidiaries. Mission and ambition Rabobank puts the common interests of people and communities first. Based on its commitment to those interests, Rabobank 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. With their co-operative structure and a current membership of more than 1.5 million, the local Rabobanks are firmly rooted in society. In the Netherlands, Rabobank may justifiably call itself committed, near-you and a leader. Through its commitment to its clients and their world, Rabobank plays an active, leading role near by them. Innovating, inspiring, competent and visionary are core concepts in this context. In addition, Rabobank is a personal bank - a bank with a human

34 32 Rabobank Group Annual Summary 2006 Profile of Rabobank Group face. Rabobank gets to business starting from the human aspect: human orange first, and then to business blue, the two core colours of Rabobank s corporate logo. 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, the Group uses the experience it has accumulated in the Netherlands over many years. In addition, the Group aims at global excellence in sustainable entrepreneurship and banking, as would befit its identity and position in society. Rabobank Group will further integrate corporate social responsibility in its core activities. Rabobank believes that sustainable growth in prosperity and well-being requires careful nurturing of natural resources and the living environment and it aims to contribute to this development with its activities. Rabobank respects the culture and traditions of the countries where it operates without losing sight of its own objectives and values. In all its actions, Rabobank puts its clients best interests first. The bank creates customer value by: - providing those financial services considered best and most appropriate by our clients; - ensuring continuity in the services provided with a view to the longterm interests of the client; - showing commitment to our clients and their environment, so that we can contribute to achieving their ambitions. Our values In the Netherlands, Rabobank Group offers all the financial services needed by clients as they participate in an economy-driven modern society. The Group strives to ensure that its services are continually adjusted and updated so that they always meet the needs of private individuals and businesses alike.

35 Colophon Published by Rabobank Nederland Communications Editors Andries van der Bruggen, Geoffrey van Diessen, Smink, Van der Ploeg & Jongsma Art direction and design Eden Design & Communication, Amsterdam Borghouts Design, Haarlem Photographs Tjeerd Fonk, Amsterdam English translation Ernst & Young Translation Bureau, The Hague Internet Info.nl, Amsterdam SiteManagement Prepress NEROC VGM, Amsterdam Printers DDPP Document Partners, Wormerveer Disclaimer This Annual Summary is a translation of the Dutch Annual Summary. In the event of any conflict in interpretation, the Dutch original takes precedence. Annual Reports Rabobank Group publishes the following Annual/Interim Reports Annual Report 2006 (in Dutch to be published in April 2007 and English to be published in May 2007); Consolidated Financial Statements 2006 (in Dutch to be published in April 2007 and English to be published in May 2007); Annual Sustainability Report 2006 (in Dutch to be published in April 2007 and English to be published in May 2007); Interim Report 2007 (in Dutch and English, to be published in September 2007); For copies of these reports please contact Rabobank Nederland, Communications. Croeselaan 18, 3521 CB Utrecht, The Netherlands P.O. Box 17100, 3500 HG Utrecht, The Netherlands Telephone: +31(0) Fax +31(0) [email protected] All Annual Reports are also available on the internet:

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