Annual Report 2020 The Cooperative Rabobank in COVID-19 times. &The Cooperative Rabobank About this Report
Our Reporting Approach in 2020 topics required the most attention due to their significant impact In preparing this Integrated Annual Report, we have taken on Rabobank and on our stakeholders. We explain the process the Global Reporting Initiative (GRI) Standards (Option: core) of determining materiality and the boundaries of the topics in into account. This report and financial statements have been Appendix 1. prepared in accordance with the appropriate reporting standards and guidelines. The statements and report refer to the reporting Published by Rabobank Communications & Corporate Affairs period January 1, 2020 to December 31, 2020 and were first published on March 11, 2021 on our corporate website. The Rabobank Annual Report takes an integrated approach that highlights our Croeselaan 18 contribution to our stakeholders by providing both financial and Postbus 17100 non-financial information. Throughout the report, we provide 3500 HG Utrecht detailed performance data. The Financial Report includes the Nederland Financial Statements. We describe our reporting approach in Phone +31 (0)30 216 0000 Appendix 1. E-mail [email protected]
Materiality The materiality analysis provides insight into the choices we made in the reporting year. A materiality matrix illustrates which Management Report Corporate Governance Appendices Consolidated Financial Statements Company Financial Statements Other Information
Management Report Overview of Rabobank’s strategy, developments, financial results, corporate social responsibility, and 5 sustainability. Read more
Corporate Governance Retrospective on 2020 by the Supervisory Board. Explanation of our governance structure. Read more 75
Appendices Materiality Matrix, Definitions & Methodology Non- Financial Key Figures Read more 95
Consolidated Financial Statements The balance sheet and the profit and loss statement for the entire Rabobank Group, with notes. Read more 107
Company Financial Statements The balance sheet and the profit and loss statement of Rabobank, with notes. Read more 211
Other Information Statutory Provisions and Assurance Reports Read more 232 Management Report Corporate Governance Appendices Consolidated Financial Statements Company Financial Statements Other Information
Chairman's Foreword
EUR 1,096 million Net Result for 2020 in the Face of Covid-19 Dominated Year for Society, Customers and Bank
Covid-19 and its economic turbulence impacted our customers as a bank committed to making global food supply chains significantly in 2020. We supported them while maintaining more sustainable was expanded, playing an important role in our solid capital and liquidity position. This has provided the green financing of our global customers, and supporting evidence of our ability to absorb the 2020 Covid-19 impact and farmers around the world in their shift to more sustainable shows the bank is ready for the forthcoming impact in 2021. We food production. posted a net result of EUR 1,096 million in 2020. At the heart of many of our achievements in this past year was Covid-19 was and is the most significant health crisis of our the contribution and leadership of our 43,272 (FTE) employees generation. Its effects on our customers, our employees and around the world. They adapted, worked from home and are societies at large have been dramatic. And it is still ongoing. From still coping with the consequences. Our people deserve extra health threats to lockdowns, Covid-19 continues to dominate gratitude for their role and contribution in this difficult year. people's lives, businesses and the global economy. Crises call for rapid response and adaptation. And this is what we have Financial performance demonstrated during 2020 and will continue to do in 2021. Covid-19 significantly affected our financial performance. The 2020 net result is a reflection of that. At EUR 1,096 million in Our primary focus has been the availability of our banking services profit, our 2020 net result dropped by 50% compared to last and supporting our customers in their immediate continuity year. The effect of Covid-19 was primarily visible in the level needs in these extreme times, Rabobank adapted to customer of impairment charges which rose to EUR 1,913 million (2019: demands, providing temporary financial relief for those in need. EUR 975 million), equivalent to 46 basis points of the average We have been able to support around 8,000 private customers, loan portfolio. The timely and collective action of governments, and 79,000 corporate customers. Despite the immediate effects regulatory authorities and our own organization was instrumental these circumstances have had on the bank in financial terms, we in mitigating and delaying the immediate effect of Covid-19 proved to be well capable of dealing with this situation. on our customers. We do expect a deterioration in the credit quality in the business loan portfolio in the course of 2021, which At the same time, the severe Covid-19 crisis demanded the very is reflected in the higher level of impairment allowances. The essence of what a cooperative bank with a mission stands for: credit quality of our residential mortgage loan portfolio remained to contribute substantively to the significant transitions that are strong. And apart from a number of subsectors, Food & Agri sector shaping the world we live in. As a meaningful cooperative, our seems to be less impacted by this crisis. contribution to society last year was first and foremost to focus on the immediate needs of our customers. But we were also able to Total income was down as a result of lower economic activity and accelerate the delivery of our strategy during the pandemic. We negative asset revaluations, but the decline can also be attributed improved digital service to our customers and members with new to the persistent low interest rate environment. Despite the fact innovations in our Rabo App, building on the foundations laid in that we were able to further reduce our costs, the cost/income the recent years. Besides that, ratio has increased to 65.8%, primarily as a result of lower interest income. The Return on Equity decreased to 2.7%.
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The private sector loan portfolio decreased slightly from Outlook EUR 417.9 billion to EUR 409.4 billion, mainly because of It remains important to further strengthen the core of the bank currency fluctuations. The Food & Agri portfolio decreased to while continuing to invest in new growth. The pandemic is far EUR 105.4 billion (2019: EUR 111.7 billion) partly because of from over, with the virus mutations causing a new surge of exchange effects. Furthermore, we remained market leader in the casualties and governmental measures. It will have a burdensome Dutch residential mortgage market with a market share of new impact on everyone. Many of our customers will be in need of production of 22%. Deposits from retail and wholesale customers financial support. We stand ready to support these customers rose sharply by 7%, which is in line with the general trend in the with fitting solutions. Dutch savings market due to the impact of Covid-19. The low interest rate environment, tightened legislation and Thanks to a longstanding strategy of strengthening the balance digitization also affect the banking landscape deeply. In the sheet, our financial buffers have proven able to withstand an context of this difficult environment, we will maintain focus on economic downturn with large-scale impacts on clients. Even further improving our operational and financial performance. In after year of the pandemic, the capital position remains rock- order to better serve our customers at lower costs, we launched solid and secure. The CET 1 ratio increased to 16.8%. Due a program of continuous improvement for the coming years to the extraordinary circumstances, we made an exceptional by which we will optimize our cost/income ratio. The foreseen distribution to certificate holders in the form of Rabobank transition is an extension of the ongoing improvements we have Certificates instead of a cash payment. been making in recent years. This is expected to result in an average annual reduction of our workforce by 1000 FTE in the next On December 15, 2020 the European Central Bank (ECB) issued a 5 years. A mix of regular outflow, reduction of external FTEs and recommendation to banks to refrain from or limit dividends until redeployment within Rabobank will partly mitigate the impact on at least September 30, 2021. Rabobank announced on December forced leaves. 21, 2020 that it will adhere to the recommendation, and that it will discuss the prudence of any distributions on Rabobank It is part of our ongoing change and improvement process Certificates prior to September 30, 2021 with the ECB. Rabobank to respond to the current challenges and prepare for the hereby announces its intention at its full discretion, to make a future. We will accelerate the use of digital channels and invest in quarterly distribution of EUR 0.13674 per Rabobank Certificate innovative solutions and mobile service locations and concepts. on March 29, June 29 and September 29, 2021 respectively. Accordingly, we will downsize our traditional branch network Rabobank has the intention to revert to its payment policy in case in the Netherlands in the coming years. In our Wholesale and the ECB withdraws any recommended limitations on dividend Rural business, we will further simplify and enhance our operating distribution. At that time Rabobank will - at its full discretion - model and footprint. We foresee growth opportunities in Food & decide on any future distributions thereby considering whether Agri and leasing, focusing on the transitions in the food supply it is prudent to make a distribution, and if so, the level of chain, the energy sector and sustainability at large. Above all, we such distribution. will stay close to our customers in their communities, all around the world.
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Our role as gatekeeper of the financial system is still our top priority. The total number of specialists dedicated to Know Your Customer (KYC) activities worldwide increased to 4,000. In 2021, we further invest in our KYC activities and advanced technology, which will increasingly enable us to detect transaction patterns that were not visible before. We will also expand our collaboration with other banks and public-private partnerships. In September 2018, Rabobank received an injunction (last onder dwangsom) from De Dutch Central Bank (DNB). Commencing from 1 April 2020, DNB carried out an investigation and concluded that Rabobank did not meet the requirements of the injunction. As a result, a penalty (dwangsom) of EUR 500.000 has been forfeited. We already took a provision for the same amount in the first half of 2020. Building a robust and future-proof KYC organization that meets all aspects of regulations is an ongoing process and has our utmost attention.
If there is any certainty about the year ahead, it is that further adaptation to the changes following the Covid-19 developments will be needed. As a leading bank in the transition to a sustainable world, we will continue to help our customers in this difficult second year of Covid-19, but also focus on opportunities accelerating the profound sustainable transitions, in food, energy, housing and the way our corporate customers operate.
Wiebe Draijer, Chairman of Rabobank's Managing Board
Wiebe Draijer, Chairman of the Managing Board
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Contents
Key Figures 7 Rabobank at a Glance 9 Excellent Customer Focus 15 Meaningful Cooperative 23 Empowered Employees 33 Rock-Solid Bank 38 Our Financial Performance 40 Rabobank 40 Financial Results of Rabobank 41 Notes to the Financial Results of Rabobank 41 Balance Sheet Developments 43 Capital Developments and Risk Information 45 Capital Developments 45 Risk Management 47 Segment Reporting 60 Domestic Retail Banking 61 Highlights 61 Financial Results 61 Notes to the Financial Results 61 Wholesale & Rural 64 Highlights 64 Financial Results 64 Notes to the Financial Results 64 Leasing 66 Highlights 66 Financial Results 66 Notes to the Financial Results 66 Property Development 68 Highlights 68 Financial Results 68 Notes to the Financial Results 68 Outlook on 2021 69 Members of the Managing and Supervisory Board 71 Managing Board Responsibility Statement 74 Corporate Governance 75 Remuneration 82 Appendices 95
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Key Figures
Amounts in millions of euros 12-31-2020 12-31-2019 12-31-2018 12-31-2017 12-31-2016 Financial Key Figures Common Equity Tier 1 Ratio 16.8% 16.3% 16.0% 15.5% 13.5% Total Capital Ratio 24.2% 25.2% 26.6% 26.2% 25.0% Leverage Ratio 7.0% 6.3% 6.4% 6.0% 5.5% Risk-weighted Assets 205,773 205,797 200,531 198,269 211,226 Wholesale Funding 131,361 151,742 153,223 160,407 188,862 Cost/Income Ratio Including Regulatory Levies 65.8% 63.3% 65.9% 71.3% 70.9% Underlying Cost/Income Ratio Including Regulatory Levies 64.5% 63.0% 63.9% 65.3% 64.8% Return on Equity 2.7% 5.3% 7.3% 6.7% 4.9% Income 10,782 11,756 12,020 12,001 12,805 Operating Expenses 6,542 6,956 7,446 8,054 8,594 Impairment Charges on Financial Assets 1,913 975 190 (190) 310 Net Profit 1,096 2,203 3,004 2,674 2,024 Total Assets 632,258 590,598 590,437 602,991 662,593 Private Sector Loan Portfolio 409,380 417,914 416,025 410,964 424,551 Deposits from Customers 361,028 338,536 337,410 340,682 345,687 Liquidity Coverage Ratio 193% 132% 135% 123% 130% Loan-to-deposit Ratio 1.12 1.22 1.22 1.21 1.22 Non-performing Loans 13,882 15,705 18,436 18,315 18,873 Non-Financial Key Figures Net Promotor Score Private Customers in the Netherlands 56 61 57 53 36 Net Promotor Score Private Banking Customers in the Netherlands 57 63 61 50 41 Net Promotor Score Corporate Customers in the Netherlands 51 51 53 43 30 % Online Active Private Customers in the Netherlands 65.6 64.0 61.8 - - % Online Active Corporate Customers in the Netherlands 82.2 81.5 80.8 - - Availability of Internet Banking 99.8% 99.7% 99.9% 99.9% 99.7% Availability of Mobile Banking 99.8% 99.6% 99.9% 99.9% 99.7% Availability of iDEAL 99.9% 99.7% 99.8% - - Total Sustainable Financing 52,278 44,5831 46,607 17,377 - RepTrak Pulse Score 72.6 71.5 70.8 69.5 66.1 Member Engagement Score 52% 49% 45% - - Community Funds and Donations 42.5 45.4 48.8 45.5 43.3 Employee Engagement Scan 69 64 61 - - Diversity: % Women Employed in the Netherlands 49% 51% 52% - - Absenteeism in the Netherlands 3.4% 4.3% 4.3% 4.0% 3.6% Ratings Standard & Poor’s A+ A+ A+ A+ A+ Moody’s Aa3 Aa3 Aa3 Aa2 Aa2 Fitch A+ AA- AA- AA- AA- DBRS AA AA AA AA AA Sustainalytics ESG Risk Rating Category Diversified Banks 1 1 1 - -
1 We have assessed our total portfolios for the various sustainable finance categories. Because of a lack of available data, this is not yet possible for wholesale sustainable loans. We have therefore removed this category from our sustainable finance portfolio. We have also taken the figures from the position at year-end 2019, which was 1,417 million.
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Rabobank at a Glance
Mission Growing a better world together
Almost 9.6 million customers
8.9 million Dutch customers1 0.7 million international customers2
What We Offer in the Netherlands The Netherlands (amounts in EUR billions) 86 Local Rabobanks 188.8 Dutch Private Mortgages Domestic Lending to Food & Agri 3 Retail Banking 40.3 287 2.1 79.4 Lending to Trade, Industry and Services 3 offices million members 1.6 billion point-of-sale terminal transactions 8.1 0.8 134.8 Savings million private million corporate customers customers 48.9 Assets Under Management 1.4 Leasing 8,901 BPD transactions
What We Offer Internationally International (amounts in EUR billions) 37 Countries 65.2 Private sector lending to Food & Agri 32.3 Private sector lending to Trade, Industry, 32 3 2 and Services 30.5 Leasing 6.