Rabobank

Annual Report 2016

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Pillar 3 report

An overview of the risk management and the capital adequacy of Rabobank.

Company Financial Statements 2016 Rabobank

The balance sheet and the profit and loss statement of Rabobank, with notes.

Consolidated Financial Statements 2016 Rabobank

The balance sheet and the profit and loss statement for the entire Rabobank Group, with notes.

Corporate governance

Retrospective on 2016 by the Supervisory Board. Explanation of the new governance structure of Rabobank.

Management report

Overview of the strategy, developmentsand financial results and corporate social responsibility and sustainability of Rabobank Group

Annual Report 2016

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Glossary of terms 395

Colophon 399

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Corporate governance

Management report

Consolidated Financial Statements

Company Financial Statements

Pillar 3 report

2 Rabobank Annual Report 2016

Chairmans foreword

Rabobanks transition got off to a good start in 2016. We are a leading customer-oriented cooperative bank in the Netherlands and in food & agri worldwide. We are committed to making a substantial contribution towards achieving wealth and prosperity in the Netherlands and to resolving the food issue worldwide. I am proud that, thanks to the enormous efforts of our professionals, all businesses have generated improved results, both in the Netherlands and abroad, and that surveys among our 8.7 million customers show that customer satisfaction has risen. Based on the developments in 2016, we look to the future with confidence.

Satisfied customersOur strategic direction for 2020 rests on three pillars: excellent

customer service, improving our financial results, and a more

flexible and stronger balance sheet. In 2016, we achieved

what we set out to do in all three areas. Customer satisfaction

rose thanks to the efforts of our employees, investments in

digitalisation, organisational changes, and improvements in our

service and product offering. In the Netherlands, our market

shares rose or maintained their strong position, and outside

the Netherlands, we further expanded our leadership in food

& agri. In 2016 we took several new initiatives to improve our

customer service and to innovate. A good example of this is

the fact that we now give our customers the opportunity to

obtain a mortgage offer in one week. Since 1 July 2016, we have

offered interest rate averaging to our mortgage customers.

Commercial customers whose funding needs are less than

EUR 1 million have benefited from our service that offers clarity

on their funding request within one day. In sectors experiencing

structural problems, such as glass horticulture, pig farming and

the dairy industry, Rabobank is taking the lead in the search

for solutions. We are taking responsibility, in partnership with

the sector.

For our Wholesale clients, we were able to play a leading role in

many major food & agri and other transactions in the Netherlands

and worldwide. We were recently named the Best Commodity

Bank by Global Finance Magazine. 2016 was also a successful

year for the international Rural business, with high customer

satisfaction scores and growth in the loan portfolio. One of the

highlights was the Farm to Fork event on innovation in food &

agri. The event was a showcase for how the bank brings clients

together and shares knowledge.

New cooperative structureOn 1 January 2016, our new cooperative structure came into

effect, making us more customer-oriented and more effective.

In the new governance model, the local Rabobanks have

a maximum focus on serving our customers in the Netherlands.

Where possible, we perform support functions centrally.

We putintensive effort into this transition in 2016.

Good results, strong bank2016 was a year of contrast for Rabobank in financial terms.

Thanks to a good operational result, our net profit amounted

to EUR 2,024 million. As the economy picked up, we saw

a sharp reduction in loan impairment charges. We also

succeeded in bringing down costs. The result came under

substantial downward pressure from non-recurring items such

as restructuring costs, an extra provision for compensating

commercial customers with an interest rate derivatives contract,

and an impairment on the stake in Achmea. The underlying

operating profit before tax was EUR 4,090 million, 14% higher

than in 2015.

A strong capital base is one of the main pillars of Rabobanks

strategy. Our objective is to achieve a common equity tier 1

ratio of at least 14% in 2020 and a total capital ratio of at least

25%. In 2016, we once again reinforced our strong capital

position, partly through the sale of Athlon. The recent issue

of new Rabobank Certificates with a nominal amount of

EUR 1.5 billion also impacts the fully loaded common equity

tier 1 ratio, thereby accelerating the realisation of our target

of at least 14% in anticipation of a possible increase in capital

requirements.

Contents Foreword Management report Corporate governance Company Financial StatementsConsolidated Financial Statements Pillar 3

3 Chairmans foreword

OutlookIn 2017, Rabobank will continue to invest in customer service

provision. We will give priority to our digital activities and

innovation, in combination with our identity as a bank firmly

anchored in local communities and always nearby. Outside

the Netherlands, we are capitalising on the growth potential

in Rural Banking, and through our focus on food & agri, are

reinforcing our leading position in the food & agri chain for

our Wholesale clients. We are operating in an environment

of modest economic growth, but also at a time of economic

and political uncertainty around the world. In Europe, the

consequences of Brexit and the outcome of elections in

the Netherlands, Germany and France will be influential factors.

Overall, the positive developments Rabobank experienced in

2016 give us confidence for 2017. We are very grateful to our

customers and our staff for their strong commitment to the

cooperative Rabobank in the year 2016 and beyond. We live

in a world of great uncertainties, both for individual citizens

and for society as a whole. Against this backdrop, we believe

there is an enduring need for a rock-solid cooperative bank

that can help its retail and commercial customers realise their

wishes and ambitions, both in the Netherlands and in food &

agri worldwide.

In 2016, we took steps to reduce the balance sheet, including

the sale of mortgage portfolios to investors and a more intense

focus on core activities. We intend to take more of the loan

portfolio off-balance and will continue to reduce the balance

sheet in 2017.

EmployeesWe are extremely grateful to our employees for their efforts

in what was a very intensive year. The banks transition

is proceeding at good speed and will continue in 2017.

This requires a huge effort from our employees. Our internal

research shows that there is broad support for the strategic

direction of Rabobank and a high level of loyalty to the mission,

but also that people feel under pressure from the pace of

change. Many colleagues have seen their traditional workplace

disappear as we have digitalised our service provision and

implemented much-needed improvements, particularly in the

back-office and support functions. We are introducing a number

of measures designed to maintain motivation and promote

passion. These include a new performance management system

that focuses on personal leadership and enhancing expertise in

ones field, and a programme to promote mental and physical

fitness. Diversity also has our attention: women now occupy

25.8% of the senior roles at Rabobank.

Social impactRabobank commits itself to achieving progress in society

and in the Sustainable Development Goals defined by the

United Nations, through its Banking for Food and Banking for

the Netherlands. We have received many accolades for our

efforts on sustainability. In the Dutch Transparency Benchmark,

we earned joint first place in the financial institutions category

and came in 11th on the ranking of more than 200 large Dutch

organisations. RobecoSAM puts Rabobank at number 7 in its

worldwide ranking of over 100 international banks. Sustainalytics

analysed 396 banks worldwide, ranking Rabobank number 1

for its positive impact on the environment. Our joint venture

with FMO and Norfund underlines our deep commitment to

sustainable growth and development in Africa and its local

financial sector. Together we invest in African banks to stimulate

growth. Also worthy of mention, is our first green bond, issued

in 2016 with a total value of EUR 500 million. We will invest

the returns in sustainable energy projects, such as wind farms

and solar panels. Beyond that, in 2016, Rabobank once again

contributed to numerous social and charitable initiatives, by

making our staff available or by sharing our knowledge, network

and fi