- i - The IFRS figures are unaudited -- Reserves at year-end 2004: EUR 19.6 billion -- Net profit in 2004: EUR 1,551 million -- Tier 1 ratio at year-end 2004: 10.8
UTRECHT, Netherlands, July 12, 2005 (PRIMEZONE) --
Results 2004
(amounts in millions of euros) IFRS Dutch GAAP Difference Interest income 6,722 6,249 473 Income from securities and participating interests 371 482 (111) Commission income 2,361 2,112 249 Results on financial transactions 371 312 59 Other income 403 900 (497) Total income 10,228 10,055 173 Staff costs 4,285 4,029 256 Other administrative expenses 2,513 2,335 178 Depreciation 293 368 (75) Operating expenses 7,091 6,732 359 Value adjustments 480 514 (34) Operating profit before taxation 2,657 2,809 (152) Taxation on operating profit 942 957 (15) Third-party interests 164 316 (152) Net profit 1,551 1,536 15
Net profit calculated in accordance with IFRS accounting principles amounted to EUR 1,551 million in 2004. This is EUR 15 million higher than the net profit calculated in accordance with the former accounting principles (Rabobank Accounting Principles, Dutch GAAP). Although the change in the net profit was limited, the composition ofthe results did change, however. The most important changes to the profit and loss account are explained below:
- Interest income under IFRS is EUR 473 million higher than under Dutch GAAP. Most of the difference is attributable to reclassifications. In addition, interest income was reduced due to the fact that swap results on the investment portfolio are no longer amortised. In accordance with IFRS, these results are taken direct to the profit and loss account.
- A number of interests are no longer consolidated under IFRS, which resulted in lower income and lower third-party interests.
- The interests in the Gilde funds and the majority participating interests of these funds are consolidated under IFRS. This caused income to rise by EUR 279 million and operating expenses to increase by EUR 259 million. This did not have any effect on profit, however.
Reserves
On 1 January 2004, the date of the transition to the new accounting standards, the reserves totalled EUR 16.2 billion under IFRS, compared with 15.2 billion under Dutch GAAP. The difference can be accounted for as follows:
(amounts in billions of euros)
Reserves at 1/1/2004 under Dutch GAAP 15.2
Addition of the fund for general banking risks to reserves 1.7
Adjustment valuation derivatives (0.9)
Adjustment valuation buildings (0.3)
Adjustment valuation interest-bearing securities 0.4
Realised results from sale of part of the investment 0.2
portfolio
Taxation effects 0.1
Adjustment to provision for doubtful debts (0.1)
Adjustment to provision for pensions and healthcare (0.2)
Other adjustments 0.1
1.0
Reserves at 1/1/2004 under IFRS 16.2
By year-end 2004, the reserves under IFRS had risen to EUR 19.6 billion.
Balance sheet and solvency
(amounts in millions of euros) IFRS Dutch GAAP Difference year-end 2004 Assets Cash 7,269 7,204 65 Banks 41,050 40,588 462 Lending 274,925 276,170 (1,245) Financial assets 115,670 111,189 4,481 Derivatives 32,035 0 32,035 Other assets 12,753 39,938 (27,185) Total assets 483,702 475,089 8,613 Liabilities Banks 96,444 96,266 178 Funds entrusted 177,482 192,123 (14,641) Derivatives and other trading 39,171 0 39,171 liabilities Trading liabilities 7,090 0 7,090 Debt securities 109,460 92,578 16,882 Other liabilities, accruals and 7,854 46,761 (38,907) deferred income Provisions 21,248 20,752 496 Group equity 24,953 26,609 (1,656) Total liabilities 483,702 475,089 8,613
In comparison with Dutch GAAP, total assets are 2% higher at EUR 483 billion. The increase is primarily due to the fact that under IFRS all derivative positions must be stated in the balance sheet at market value, while under Dutch GAAP this only applies to trading positions. The Tier 1 ratio amounts to 10.8 under IFRS, compared with 11.4 under Dutch GAAP. The ratio is lower under IFRS owing to areduced amount of Tier 1 capital, primarily the result of the adjustments to derivatives (see Reserves).
DOMESTIC RETAIL BANKING
(amounts in millions of euros) IFRS Dutch GAAP Difference Interest income 3,805 4,309 (504) Commission income 1,300 1,022 278 Other income 68 67 1 Total income 5,173 5,398 (225) Staff costs 1,836 1,666 170 Other administrative expenses 1,746 1,723 23 Depreciation 172 186 (14) Operating expenses 3,754 3,575 179 Gross profit 1,419 1,823 (404) Value adjustments 247 299 (52) Operating profit before taxation 1,172 1,524 (352)
Operating profit before taxation amounted to EUR 1,172 million under IFRS, compared with EUR 1,524 million under Dutch GAAP. The most important differences in the profit and loss account can be explained as follows:
- Under Dutch GAAP, loan commission is recognised as interest income. Under IFRS, this is classified under commission income, which results in a movement in income.
- The fact that swap results on the investment portfolio are not amortised under IFRS caused the interest income to decrease. In accordance with IFRS, these results are taken direct to the profit and loss account.
- The increase in staff costs is mainly due to higher pension charges. Under Dutch GAAP, the pension charges were allocated to the different business units on a defined contribution basis. Under IFRS, the defined benefit method is used, which resulted in an increase in the pension charges. The change in allocation method has no effect at Group level.
- Under IFRS, the value adjustments amount to EUR 247 million, compared with EUR 299 million under Dutch GAAP. One important cause of this decrease concerns the interest on impaired loans. Under Dutch GAAP, the interest income on impaired loans is recognised under doubtful debts. This is not permitted under IFRS, which resulted in a decrease in both interest income and value adjustments.
WHOLESALE BANKING AND INTERNATIONAL RETAIL BANKING
(amounts in millions of euros) IFRS Dutch GAAP Difference Interest income 1,320 1,115 205 Commission income 342 376 (34) Other income 672 671 1 Total income 2,334 2,162 172 Staff costs 749 675 74 Other administrative expenses 565 414 151 Depreciation 42 31 11 Operating expenses 1,356 1,120 236 Gross profit 978 1,042 (64) Value adjustments 119 134 (15) Operating profit before taxation 859 908 (49)
Under IFRS, operating profit before taxation at EUR 859 million is EUR 49 million lower than under Dutch GAAP. The most important differences in the profit and loss account are explained below:
- The majority participating interests of Gilde are consolidated under IFRS. This results in higher income and expenses. This does not have any effect on the net profit, however.
- The interest income is higher under IFRS than under Dutch GAAP. This relates primarily to the reclassification of income from securities and participating interests and of the result on financial transactions. For example, under IFRS cumulative preference sharesare considered loan capital rather than equity capital. The income on these shares is therefore recognised as interest rather than as dividend. Under Dutch GAAP, the result on trade derivatives is recognised as income on financial transactions, while under IFRS the interest component of this result is recognised as interest income.
- The operating expenses are higher under IFRS owing to higher depreciation on software and buildings, and impairments to intangible assets.
ASSET MANAGEMENT
(amounts in millions of euros) IFRS Dutch GAAP Difference Interest income 72 87 (15) Commission income 512 512 0 Other income 69 74 (5) Total income 653 673 (20) Staff costs 276 285 (9) Other administrative expenses 173 173 0 Depreciation 17 18 (1) Operating expenses 466 476 (10) Gross profit 187 197 (10) Value adjustments 1 1 0 Operating profit before taxation 186 196 (10)
Under IFRS, operating profit before taxation is EUR 10 million lower at EUR 186 million. The most important differences in the profit and loss account are explained below:
- The fact that results realised on the investment portfolio are no longer amortised causes the interest income to be lower under IFRS.
- Staff costs under IFRS are lower owing to a reduction in pension charges and a change in the treatment of accrued bonuses.
INSURANCE
(amounts in millions of euros) IFRS Dutch GAAP Difference Interest income 679 70 609 Commission income 332 290 42 Other income (12) 618 (630) Total income 999 978 21 Staff costs 441 441 0 Other administrative expenses 223 213 10 Depreciation 30 25 5 Operating expenses 694 679 15 Gross profit 305 299 6 Value adjustments 1 (9) 10 Operating profit before taxation 304 308 (4)
Operating profit before taxation under IFRS amounted to EUR 304 million, which is almost the same as the amount of EUR 308 million under Dutch GAAP. The composition of the result has changed, however. The most important differences in the profit and loss account are explained below:
- Under Dutch GAAP, the accrued interest on insurance commitments is recognised as interest expense in the interest result. Under IFRS, this is recognised as other income.
- The fact that results realised on the investment portfolio are not amortised under IFRS leads to a reduction in interest income.
LEASING
(amounts in millions of euros) IFRS Dutch GAAP Difference Interest income 390 520 (130) Commission income 36 36 0 Other income 215 85 130 Total income 641 641 0 Staff costs 218 212 6 Other administrative expenses 134 134 0 Depreciation 11 12 (1) Operating expenses 363 358 5 Gross profit 278 283 (5) Value adjustments 86 71 15 Operating profit before taxation 192 212 (20)
Operating profit before taxation amounts to EUR 192 million under IFRS, compared with EUR 212 million under Dutch GAAP. The most important differences in the profit and loss account can be explained as follows:
- Under IFRS, the income from operating leases is not included in interest income, but in other income. This causes interest income to decrease and other income to increase.
- The value adjustments item is higher under IFRS owing to the addition to the provision for doubtful debts that have not yet been identified at the balance sheet date. Such a provision was not allowed under Dutch GAAP.
REAL ESTATE
(amounts in millions of euros) IFRS Dutch GAAP Difference Interest income 100 110 (10) Commission income 16 0 16 Other income 9 7 2 Total income 125 117 8 Staff costs 20 20 0 Other administrative expenses 11 11 0 Depreciation 1 1 0 Operating expenses 32 32 0 Gross profit 93 85 8 Value adjustments 0 0 0 Operating profit before taxation 93 85 8
The operating profit before taxation amounts to EUR 93 million under IFRS, compared with EUR 85 million under Dutch GAAP. The most important differences in the profit and loss account are explained below:
- The interest income is lower under IFRS than under Dutch GAAP because fees received (including fees for early repayment) are no longer recognised as interest income but as commission.
- In addition, the commission income under IFRS is higher owing to different treatment of the expenses relating to the preparation ofcontracts. Under Dutch GAAP, these expenses are taken direct to the profit and loss account, whereas under IFRS they are capitalised and depreciated over the average remaining term to maturity of the loan portfolio.
Appendices:
I. Tables with the balance sheet and the profit and loss account in accordance with IFRS and with the accounting policies up to and including 2004 (Rabobank Accounting Principles, Dutch GAAP) All figures in this press release are in millions of euros unless otherwise stated.
II. Summary of the accounting policies under IFRS
This press release only intends to provide an overview of the effects of IFRS on the financial reporting of the Rabobank Group. It does not replace any formal reports. Investment decisions should be based on period reports and other information that Rabobank is required to publish in compliance with the applicable legislation and stock exchange regulations.
- The amounts in this press release have, with only one exception, been calculated in accordance with IFRS and the interpretations issued by the International Accounting Standards Board (IASB) as at 31 December 2004 and approved by the European Commission. The exception concerns the application of the fair value option on a limited scale to a small number of liabilities. Rabobank expects that, owing to the forthcoming amendments in legislation (following the first application of IFRS as from 1 January 2004), it will be possible to use this option in preparing the 2005 consolidated financial statements.
- The standards and their interpretation might be modified before 31 December 2005, which could cause the view presented by the figures in this press release to change. Any amendments would have to be made retroactively with effect from 1 January 2004.
- None of the IFRS figures stated in this press release has been audited.
- Rabobank accepts no responsibility for any revisions or modifications made to any information as a result of changes in policy, developments, expectations or otherwise.
The press release including tables can be downloaded from the following link:
http://hugin.info/133178/R/1002123/153633.pdf
Rabobank Nederland Communications, P.O. Box 17100, 3500 HG Utrecht, tel. +31 (0)30 216 39 04, fax +31 (0)30 216 19 16, www.rabobankgroep.nl