Income up 14%
Total income grew by 14% in 2007 to EUR 11,499 (10,049) million, with a particularly strong contribution from commission and other income. Interest income was 5% higher, at EUR 6,771 (6,472) million. Due to the higher interest rates, clients felt less inclined to settle their mortgage loans prematurely. Income from penalty interest declined. The margin in domestic retail banking declined as a result of the continued competition in the mortgages market. The margin in the leasing activities declined likewise. The growth in lending offsets the effects of the lower penalty-interest income and the lower interest margin.
The rise in asset management commission was largely due to the fact that Sarasin was consolidated from the end of 2006. Further, the good investment performance of the Transtrend Diversified Trend Program and the expansion of the interest in Transtrend contributed to the higher commission income. Total commission income was 24% higher, at EUR 2,857 (2,296) million.
Other income was 46% higher, at EUR 1,871 (1,281) million, with a strong contribution from the parts of Bouwfonds, which had been acquired in 2006. The acquisition of Athlon in the second half of 2006 and the sale of activities at Sarasin likewise contributed to the increase in other income. Income from the Eureko participation, which is included in other income, was lower.
Operating expenses up 12%
Total operating expenses increased by 12% in 2007 to EUR 7,709 (6,887) million. The higher staffing level caused staff costs to go up by 8% to EUR 4,445 (4,117) million. In 2007, several acquisitions resulted in an increase in staff numbers by around 2,800 FTEs. Rabobank Group's total number of employees grew by 8% in 2007 to 54,737 (50,573) FTEs. The growth in activities, both organic and due to acquisitions, caused an 17% increase, to EUR 2,846 (2,429) million, in other administrative expenses. Depreciation charges were 23% higher, at EUR 418 (341) million, mainly because of higher depreciations on buildings and self developed software.
Value adjustments at 22 basis points
The item Value adjustments increased by 65% in 2007 to EUR 742 (450) million. This corresponds to 22 (15) basis points of average lending, which is in line with the five-year average of 23 basis points.
Income tax up 5%
Income tax recognised in 2007 amounted to EUR 386 (367) million, which is equivalent to an effective tax rate of 12.7% (13.5%). One of the contributors to the lower income tax was the reduction in the Dutch corporate income tax rate compared to 2006. The results from equity investments such as those in the Gilde funds and the Eureko participation, which are exempt from taxation, contributed to a lower tax burden.
Net profit up 14%
Because Rabobank Group's income grew more strongly than its expenses, the efficiency ratio improved by 1.5 percentage points in 2007, to 67.0% (68.5%). The higher gross profit, particularly, caused Rabobank Group's net profit to grow by 14% in 2007, to EUR 2,662 (2,345) million. After deduction of minority interests and payments on Rabobank Member Certificates, Capital Securities and Trust Preferred Securities III to VI, the sum remaining was EUR 1,937 (1,757) million.