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2015-08-20

Rabobank: economic recovery boosts profit

Sound financial position maintained, customer satisfaction increases

The increase in profit in the first half of 2015 was mainly due to the decline
in loan impairment charges. The underlying profit performance emphasises the
need to further improve performance, not least because of stricter capital
requirements in future.

Strong financial results:

* Rabobank Group booked net profit of EUR 1,522 million in the first half of
2015 (+41%).
* The recovery in the Dutch economy contributed to a sharp fall in loan
impairment charges at the local Rabobanks and at real estate subsidiary FGH
Bank. This contributed to a return on tier 1 capital of 9.0% in the first
half of 2015.
* The efficiency ratio improved to 60.6%. The effects of the cost-reduction
measures are starting to show. Further improvements to the efficiency ratio
will require continuing focus on cost control and improved income.
* Loan impairment charges fell to EUR 356 million (-70%), well below the
long-term average.
* Amounts due to customers rose by EUR 1.9 billion to EUR 328.2 billion.
Savings by retail customers were up 1% to EUR 143.6 billion, despite
additional mortgage repayments.
* On balance, the loan portfolio increased by EUR 4.7 billion to EUR 434.4
billion, mainly due to currency effects. The economic recovery in the
Netherlands has not yet led to higher demand for loans from businesses. The
market share in the trade, industry and services sector in the Netherlands
increased slightly.
* The result was pressured by impairment of the goodwill for RNA
(California).
* In the first half of 2014, the result was reduced by EUR 214 million due to
the non-recurring resolution levy in connection with the nationalisation of
SNS Reaal. In the first half of this year, a charge of EUR 121 million was
incurred for the contribution to the National Resolution Fund in the
Netherlands. In the second half of this year, Rabobank will also need to
take account of the bank tax and the contribution to the ex-ante financing
of the deposit guarantee scheme.

Sound financial position:

* Solvency, as measured by the common equity tier 1 ratio, came to 13.2%
(1-1-2015: 13.2%). The capital ratio improved to 21.5% (1-1-2015: 20.8%).
* The liquidity position remained strong, with a total liquidity buffer of
EUR 81 billion.
* Credit ratings were maintained at a high level.

Customer satisfaction increases:

* The Vision 2016 programme is contributing to better streamlining and
virtualisation of our service provision.
* Net promotor scores are higher, but the underlying score is still below our
stated ambition for customer focus.
* Product innovations: Rabo Wallet, Rabo SmartPin.
* The new mobile banking app will be launched in September 2015.

Executive Board Chairman Wiebe Draijer: 'Our financial results increased
substantially in the first half of 2015. There has been a rise in customer
satisfaction and we have had to set fewer funds aside for customers facing
financial difficulties. We must continue to adapt and improve to provide our
customers with the best possible service both now and in the future. It is
vital that we continue to reduce costs and improve income further, given the
intensive competition and stricter capital requirements. We are working on
adapting our governance model and are developing a new Strategic Framework.
This process will be concluded in December 2015.'

'The Dutch economy is steadily recovering. Our customers are feeling this and
we can observe this in the sharp decline in loan impairment charges. Low
interest rate levels have prompted Dutch customers to make additional
mortgage repayments. Private consumption continues to grow, due to higher
disposable incomes and improved consumer confidence. This has not yet led to
a marked growth in business investment. As a consequence, lending edged down
slightly in the Netherlands. In our international markets the loan portfolio
increased, partly due to the depreciation of the euro.'

'Rabobank is one of the most sound banks in the world, as reflected in the
credit ratings assigned to us. Our capital position is strong and we have
raised our already ambitious capital targets further. In view of the
forthcoming stricter capital requirements, we are looking at ways to
structure our capital and our balance sheet more effectively. We will give
higher priority to improving profitability and strict control of the volume
of our risk-weighted assets.'

'Customer satisfaction rose in the first half of 2015. The appreciation score
for our advisors also rose in the first half of 2015 among both retail and
business customers. The Vision 2016 programme is bearing fruit. Our customers
are positive about the streamlining and virtualisation of our services. The
reduction in the number of employees and the associated reduction in costs
are visible in our financial results. The number of employees at our domestic
retail banking division fell by approximately 1,000 FTEs in the first half of
2015, with the consequences for the employees who lost their jobs being
absorbed as far as possible through additional policy measures. Staff costs
were lower. We introduced a number of innovations in the first half of 2015,
including the Rabo Wallet and Rabo SmartPin. We will continue to respond to
changes in consumer behaviour and new technological opportunities.'

Domestic retail banking
The net profit of domestic retail banking in the first six months of 2015
amounted to EUR 1,073 million, up EUR 732 million from the first half of
2014. In the savings market, our market share was under pressure. The market
share in mortgages started to pick up again, as did our market share in the
trade, industry and services sector. The Dutch economy grew in the first half
of 2015, reflecting increased exports and the growth of domestic spending,
stimulated by the improving housing market. Business investments lagged
behind economic developments and the relatively low interest rate on savings
continued to prompt retail customers to make comparatively large repayments
on their mortgages. Additional mortgage repayments by our customers amounted
to approximately EUR 2 billion. This led to a 1% decrease of the domestic
loan portfolio to EUR 287.0 billion. Amounts due to customers increased by 2%
to EUR 212.4 billion. The economic recovery was clearly manifest in the
development of loan impairment charges: these fell by EUR 584 million in the
first half of 2015 to EUR -6 million. The decline was partly the result of
the sale of assets, which led to a release of the relevant allowances.

Wholesale banking and international retail banking
An impairment of EUR 600 million was recognised on the goodwill relating to
RNA (Rabobank National Association). Without this impairment, the net result
of the wholesale banking and international retail banking division for the
first six months of 2015 was a profit of EUR 310 million, EUR 79 million
lower in comparison with the same period in 2014. Net profit from Treasury
operations declined, while the result at Wholesale, Rural&Retail was higher
than in the first half of 2014. Loan impairment charges increased by EUR 95
million to EUR 273 million, or 54 basis points of the average loan portfolio,
which is equal to the long-term average.

Leasing
The close cooperation with partners, the specialisation in a limited number of
industries and the balanced spread of its activities across several regions
again led to a strong result for DLL in the first half of 2015. The leasing
segment recorded net profit of EUR 247 million for the first six months of
2015, up 11% from the same period last year. The activities of DLL grew; the
lease portfolio increased by 6% to EUR 34.9 billion, partly due to exchange
rate effects. The share of food and agri in the lease portfolio was stable at
32%.

Real estate
The net profit of the real estate segment came to EUR 98 million. In the same
period last year, there was a net loss of EUR 90 million. The higher profit
is mostly due to the decline in loan impairment charges. It was announced at
the start of 2015 that FGH Bank would be integrated within Rabobank as a
centre of expertise for financing commercial real estate. Financing
commercial real estate will continue to be an important activity for
Rabobank, albeit at lower volume.

Outlook

After two years of recession, the Dutch economy returned to growth in 2014.
Exports were the main driver behind this growth. Economic growth in the
Netherlands will be more broadly based in 2015 and 2016, with both private
consumption and private investment also contributing to the Dutch economic
recovery. But there are still points of concern. The number of bankruptcies
and the unemployment rate in the Netherlands remain relatively high despite a
downward trend. While many of our customers now have better prospects, the
damage inflicted by the crisis has not yet been fully repaired.

Low levels of private consumption have been a major weakness in the Dutch
economy in recent years. Relatively high debt positions, falling house
prices, government spending cuts and increases in the tax and insurance
burden have resulted in decreasing or stagnating consumption over the past
five years. We do, however, expect to see private consumption once again
contribute to Dutch economic recovery both this year and next. House prices
in the Netherlands have once again begun to rise. While we do not expect the
rise in house sales in 2015 and 2016 to be as strong as in 2014, we do
foresee a continued rise in Dutch house prices. As a result the number of
Dutch households with mortgage debt greater than the value of their homes
will decrease further. The economic recovery can also be seen in the Dutch
labour market. We expect to see a further increase in employment in the
private sector and consequently a decrease in the unemployment rate in the
Netherlands.

We expect that our customers will continue to make relatively large repayments
on their mortgages. We are consequently taking the possibility of a slight
contraction of lending into account for the rest of this year. This is also
expected to result in a limited decrease in amounts due to customers. As in
recent years, the bank tax in the fourth quarter will constitute an
additional expense, as will the contribution to the deposit guarantee scheme.
We remain optimistic regarding the development of the result over the long
term.
Key figures

-----------------------------------------------------------------------------------------------
| Amounts in millions of euros 30-06-2015 31-12-2014 % |
| Total assets 674,844 681,086 -1% |
| Private sector loan portfolio 434,362 429,731 1% ...

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