Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland)

Transcription

1 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) Primary Credit Analyst: Nigel Greenwood, London (44) ; Secondary Contact: Alexandre Birry, London (44) ; Table Of Contents Major Rating Factors Outlook Rationale Related Criteria And Research NOVEMBER 10,

2 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) SACP a + Support +1 + Additional Factors 0 Anchor Business Position bbb+ Very Strong +2 GRE Support 0 Issuer Credit Rating Capital and Earnings Adequate 0 Risk Position Adequate 0 Group Support 0 A+/Negative/A-1 Funding Liquidity Average Adequate 0 Sovereign Support +1 Major Rating Factors Strengths: Our view of its relative business stability, prudent strategy, and prioritization of long-term franchise growth over short-term returns. Market-leading franchise in The Netherlands. Strongly performing domestic residential mortgages represent just under one-half of the loan book. Weaknesses: Weakly performing commercial real estate loan book. Modest efficiency in light of sluggish growth prospects. Slowly emerging from a period of reputational damage and related changes to the senior management team. NOVEMBER 10,

3 Outlook: Negative Standard & Poor's Rating Services' negative outlook on Rabobank Nederland reflects our view that we may lower the long-term counterparty credit rating by one notch by year-end 2015 if we consider that extraordinary government support is less predictable under the new EU legislative framework (The EU Bank Recovery and Resolution Directive). We could revise the outlook back to stable if we consider that potential extraordinary government support for Rabobank Nederland's senior unsecured creditors is unchanged in practice, despite the introduction of bail-in powers and international efforts to increase banks' resolvability. We could also revise the outlook to stable if other rating factors, such as a stronger stand-alone credit profile (SACP) or measures that could provide substantial additional flexibility to absorb losses while a going concern, fully offset increased bail-in risks. In addition to potential changes in government support, the key rating driver will be our assessment of Rabobank Nederland's SACP over the next months, though we expect little meaningful change. We view an upward revision of the SACP as less than likely while Rabobank Nederland works through its legacy commercial real estate (CRE) exposures and builds capitalization, by our measures. We currently see relatively limited downside risk to Rabobank Nederland's SACP, though it could arise if the bank's franchise stability and management expertise prove not to be as robust as we currently expect or if we forecast our risk-adjusted capital (RAC) ratio to fall below our 7% threshold for an "adequate" assessment. Rationale The starting point for our ratings on Rabobank Nederland is its 'bbb+' anchor, which is primarily based on our view of the banking system in its home market of The Netherlands. We then adjust for the following bank-specific factors: A "very strong" business position due to its strong franchise in The Netherlands and its relatively prudent strategy. An "adequate" capital and earnings assessment primarily driven by our projection of a RAC ratio in the 7.5%-8.0% range in An "adequate" risk position, reflecting our assessment of the bank's relative overall loss experience. "Average" funding and "adequate" liquidity, since we consider that the relatively high loan-to-deposit ratio by international standards is mitigated by the improving maturity profile of Rabobank Nederland's wholesale funding and its sound liquidity buffers. We adjust the resulting 'a' SACP upward by one notch to arrive at the 'A+' issuer credit rating, reflecting our expectation of potential extraordinary government support in a stress scenario, though this is currently under review. Anchor: 'bbb+' The 'bbb+' anchor draws on our Banking Industry Country Risk Assessment (BICRA) methodology and our view of the weighted-average economic risk in the countries in which Rabobank Nederland operates, based on the geographic distribution of its private-sector customer lending: The Netherlands (75%), North America (10%), Australia (5%), the rest of Europe (5%), and the rest of the world (5%). The economic risk score for The Netherlands is '3' on a scale of 1-10 (1 is the lowest risk and 10 is the highest), and the weighted-average score for the countries in which Rabobank Nederland operates is just above that mark. Our assessment of economic risk reflects that the Dutch economy is only slowly coming out of a prolonged correction. NOVEMBER 10,

4 Although residential house prices have stabilized and started to increase moderately since mid-2013, commercial real estate prices continue to decrease, a trend we expect to reverse only gradually during Gross household leverage remains elevated and growth in the eurozone (European Economic and Monetary Union) is forecast at below average, constraining improvement in the private sector, in our view. However, we expect Dutch banks to benefit from The Netherland's diversified and competitive domestic economy, flexible fiscal policy, and adaptable labor market. Our overall assessment of economic risk incorporates the government's track record of reporting strong current account surpluses, although we expect the recovery to remain sluggish in Our assessment of industry risks for Dutch banks incorporates strong domestic concentration and our view that the competitive environment is stable. Two of the three dominant players have undergone material restructurings, in large part imposed by the European Commission because they received state aid. We believe these restructurings have largely been completed. We consider that the prospective profitability of domestic banking activities has improved compared with before the financial crisis, as a result of improved margins and sectorwide efforts to reduce costs. The system's relatively heavy reliance on wholesale funding is partly attributable to households' propensity to save in life insurance and pension products, rather than in bank deposits. We consider that Dutch systemwide funding profile benefits from factors including the depth of the domestic capital market and the Dutch authorities' good track record in providing liquidity support. Table 1 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) Key Figures --Year-ended Dec (Mil. ) 2014* Adjusted assets 677, , , , ,861 Customer loans (gross) 467, , , , ,711 Adjusted common equity 26,015 26,403 29,415 31,641 21,440 Operating revenues 6,398 13,020 13,452 13,378 12,716 Noninterest expenses 3,946 8,807 9,027 8,720 8,196 Core earnings ,137 1,942 2,239 *Data as of June 30. Business position: Resilient franchise expected to remain robust We consider Rabobank Nederland's business position to be "very strong". This is based on our view of its relative business stability, which we believe is demonstrated by its very high domestic market share and ability to convert this into reasonably predictable and recurring earnings. We believe that its international activities, which focus on food and agriculture, add to the diversity of its domestic business. We also consider its business strategy to be prudent and note that, as a cooperative organization, it prioritizes steady, long-term franchise growth over short-term returns. We expect our assessment, which ranks highly on an international basis, to remain in place, even though the bank is undergoing significant change--in particular following the damaging Libor-related conduct announced in late Key domestic peers are ING Bank N.V. and ABN AMRO Bank N.V. We consider that Rabobank Nederland has a stronger business position than its Dutch peers, reflecting its position in the Dutch market and the fact that it did not require support from the government during the financial crisis. A broader international peer group includes highly NOVEMBER 10,

5 rated commercial banks in developed markets with large domestic market shares. Stable revenue generation from the bank's domestic and commercial banking activities is a key supporting factor (see charts 1 and 2). This stability is underpinned by Rabobank Nederland's diversified product offering and its leading positions in Dutch household savings (37% market share at June 30, 2014), residential mortgages (20% of flow in the first half of 2014, though the share of stock is higher at about 32%) and lending to trade, industry, and service sectors (42% in the first half of 2014). The bank's roots are in financing the Dutch agriculture sector, and it still dominates this market; its market share is around 85%. Chart 1 NOVEMBER 10,

6 Chart 2 Rabobank is less diversified internationally than several larger banks, but we believe that its focus is linked to its core expertise. Its international activities focus on supporting Dutch clients and its traditional core market of food and agriculture financing. Its international network is consequently focused on major agriculture centers in Europe, the Americas, and Australasia. In late 2013, Rabobank Nederland announced the revelation of a number of employees' inappropriate conduct related to interbank rate submissions, and the failure of the governance framework to identify and manage these risks. The events occurred between 2005 and early 2011, and the company reported that 30 employees were involved in, aware of, or should have been aware of, the inappropriate conduct. The bank incurred a charge of 774 million in its 2013 accounts. The bank has taken a number of steps to address these issues. These include changes to the management team, significant culture-change initiatives, and streamlining the bank into one operation so that its international activities are no longer managed separately. On top of this, the bank is significantly reducing the cost base of its domestic retail operation while managing more-demanding regulatory capital requirements and a sluggish domestic economy. We consider that the strategy to simplify the organization, with a stronger focus on its domestic franchise and the NOVEMBER 10,

7 global food and agriculture sectors, is plausible. The ability and willingness to take material steps to reduce operating expenses in its domestic retail business is also supportive of our view of management and strategy. We note, however, that a new executive chairman (effectively the CEO) has only recently taken office and does not appear to have direct senior management experience in a commercial bank. We also note that the longstanding CFO also combines the role of CRO whereas the international norm is for these two important roles to be separated. Table 2 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) Business Position --Year-ended Dec (%) 2014* Total revenues from business line (currency in millions) 6,398 13,020 13,452 13,378 12,716 Retail banking/total revenues from business line Commercial & retail banking/total revenues from business line Asset management/total revenues from business line Other revenues/total revenues from business line Return on equity *Data as of June 30. Domestic retail banking. Wholesale banking and international retail banking. Capital and earnings: Steady capitai strengthening expected We view Rabobank Nederland's capital and earnings as "adequate" and we project its RAC ratio will improve to 7.5%-8.0% in We had previously forecast 8.25%-8.75%. Our changed view principally reflects a lower-than-expected starting point, our more-cautious opinion of earnings trends, and the possible negative impact of Libor-related litigation provisions. That said, we consider it unlikely that Rabobank Nederland's RAC will dip below the 7% threshold to which we ascribe an "adequate" capital and earnings assessment because we don't see major downside risks to our fairly cautious assumptions. We calculate that Rabobank Nederland's year-end 2013 RAC ratio was 7.0% (see table 5) and we expect only a modest improvement by year-end This metric is a little below the average for the top-100 banks globally (around 7.7% at end-2013, and on an upward trend) but our projection for Rabobank Nederland conservatively excludes the potential benefits of new hybrid issuance. Rabobank Nederland's mutuality restricts to some extent its ability to raise new core capital, if required. However, it has issued deeply subordinated Rabobank Certificates--classified as common equity tier 1 capital, and which we include within adjusted common equity--to its customers and has demonstrated good access to the hybrid market in the past. In our view, the decision to allow institutional investors to buy member certificates increases the liquidity of these capital instruments. Key elements of our base-case RAC projection include: Broadly flat operating revenues through as higher net interest income (helped by improving mortgage spreads) is largely offset by weaker noninterest income trends. Income to grow 1.5% year-on-year in NOVEMBER 10,

8 A further exceptional SNS levy charge of 106 million in the second half of 2014 and Dutch bank tax of about 195 million (we include the latter in operating expenses and we assume a similar figure in 2015 and 2016). Operating expenses to fall from our calculation of 8.8 billion in 2013 to about 8.0 billion in 2016 on the back of domestic cost reductions. The loan impairment charge to average about 43 bps through Standard & Poor's RWA to fall by 2% in 2014 and by 1% in 2015 before rising slightly in Rabobank Nederland reported a regulatory fully-loaded common equity tier 1 ratio (CET1) of 10.8% at June 30, The bank states that on a pro forma basis this ratio will increase by about 40 bps as a result of the sale of Bank BGZ in Poland, which was completed in the third quarter. Rabobank Nederland states that its target is to have a CET1 ratio of 14% by end Moreover, the bank states that its H1 ratio did not include the benefits of its H1 retained profit. By our measures, we consider that Rabobank Nederland's capitalization is not as strong as its CET1 ratio implies. This primarily reflects the more-conservative standardized risk-weighting that we apply. In first-half 2014, Rabobank Nederland reported a statutory profit before tax of 1,050 million (little changed from the same period in 2013). Earnings for 2014 have been negatively affected by a 214 million Dutch government levy for the banking sector related to the 2013 nationalization of SNS REAAL. Moreover, impairment charges remained elevated at 1,188 million (little changed from the year before). When looking at Standard & Poor's measure of core earnings (which strips out exceptional items), Rabobank Nederland's earnings are lower than we might otherwise expect. For example, we expect its ratio of core earnings to revenues to be about 9% in 2014, which compares to an average of about 12.5% in the prior five years; stronger performing international peers typically exceed 20%. In addition to the elevated impairment charges, we note that Rabobank Nederland's earnings capacity to date has been somewhat constrained by the cost structure of its domestic activities, and--due to its cooperative roots--its lesser focus on profit maximization than commercial peers. For example, its cost-income ratio in first-half 2014, by our measures, was quite high at 62%, compared with 59% at ABN and 58% at ING (all these first-half figures benefit from the absence of the bank tax, which is booked in the second half, and which we include within operating expenses). We note that Rabobank Nederland has initiated a range of meaningful cost containment measures, in particular that the costs of the domestic retail banking division fall to 4.0 billion in 2016 from 4.5 billion in We consider the quality of capital to be satisfactory. We calculate that adjusted common equity represented about 90% of total adjusted capital (TAC) at June 30, 2014, which is a similar proportion to its international peer group. Rabobank Nederland's only hybrid instruments eligible for TAC are two $1 billion issues from 2011 (see table 3). We note that no Dutch bank has yet to issue an Additional Tier 1 security. Table 3 Rabobank Nederland TAC Reconciliation ( mil.) 30/06/ /12/ /12/2012 Common shareholders' equity (as reported by the company)* 30,969 30,464 34,530 (+) Minority interest-equity 470 1,039 1,407 (-) Dividends (not yet accrued or distributed) (-) Revaluation reserves (642) (360) (510) (-) Goodwill and nonservicing intangibles (2,033) (1,991) (2,343) NOVEMBER 10,

9 Table 3 Rabobank Nederland TAC Reconciliation (cont.) (-) Interest-only strips (-) Tax loss carryforwards (1,451) (1,451) (184) (+/-) Postretirement benefit adjustments 0 0 (2,405) (-) Cumulative effect of credit-spread (1,366) (1,366) (1,094) (+/-) Other adjustments Equals adjusted common equity (ACE) 26,015 26,403 29,415 (+) Preferred stock and hybrid capital instruments (subject to our limits) 2,859 2,859 2,859 (+) General reserves Equals total adjusted capital (TAC) 28,874 29,262 32,274 Note: 2012 data not restated. *Equity of Rabobank Nederland and local Rabobanks and Rabobank Certificates. Data not disclosed at half-year. Table 4 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) Capital And Earnings --Year-ended Dec (%) 2014* S&P RAC ratio before diversification N.M S&P RAC ratio after diversification N.M Adjusted common equity/total adjusted capital Net interest income/operating revenues Fee income/operating revenues Market-sensitive income/operating revenues N/A Noninterest expenses/operating revenues Preprovision operating income/average assets Core earnings/average managed assets *Data as of June 30. N.A.--Not available. N/A--Not applicable. N.M.--Not meaningful. Table 5 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) RACF [Risk-Adjusted Capital Framework] Data At Dec. 31, 2013 (Mil. ) Exposure* Basel II RWA Average Basel II RW (%) Standard & Poor's RWA Average Standard & Poor's RW (%) Credit risk Government and central banks 84,489 1, ,974 4 Institutions 22,279 5, , Corporate 244, , , Retail 258,424 43, , Of which mortgage 194,410 19, , Securitization 15,747 6, , Other assets 13,641 14, , Total credit risk 638, , , NOVEMBER 10,

10 Table 5 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) RACF [Risk-Adjusted Capital Framework] Data At Dec. 31, 2013 (cont.) Market risk Equity in the banking book 4,991 15, ,979 1,001 Trading book market risk -- 2, , Total market risk -- 18, , Insurance risk Total insurance risk Operational risk Total operational risk -- 18, , (Mil. ) Diversification adjustments Basel II RWA Standard & Poor's RWA % of Standard & Poor's RWA RWA before diversification 210, , Total Diversification/Concentration Adjustments , RWA after diversification 210, , (Mil. ) Capital ratio Tier 1 capital Tier 1 ratio (%) Total adjusted capital Standard & Poor's RAC ratio (%) Capital ratio before adjustments 35, , Capital ratio after adjustments 35, , *Exposure at default. Securitisation Exposure includes the securitisation tranches deducted from capital in the regulatory framework. Exposure and Standard & Poor's risk-weighted assets for equity in the banking book include minority equity holdings in financial institutions. Adjustments to Tier 1 ratio are additional regulatory requirements (e.g. transitional floor or Pillar 2 add-ons). RWA--Risk-weighted assets. RW--Risk weight. RAC--Risk-adjusted capital. Sources: Company data as of Dec. 31, 2013, Standard & Poor's. Risk position: Solid mortgage book but underperforming CRE and SME books Our risk position assessment for Rabobank Nederland is "adequate". We don't believe that Rabobank Nederland's risk position is materially superior to major Dutch peers or international peers with a similar economic risk and product mix. In particular, we consider that its overall loss experience has been dampened by recent weaknesses in its CRE and small and midsize enterprise (SME) portfolios. Moreover, given our view of the still-muted Dutch economic growth outlook and the challenged commercial property market, we assume that loan impairment charges will remain well above historic levels over the next two years. Although its domestic market accounts for around three-quarters of total lending, Rabobank Nederland is active across all parts of the Dutch economy without undue concentrations. This is reflected in a diversification benefit of 14% at end-2013 under our RAC methodology. International operations are being focused on the food and agriculture sectors in which Rabobank Nederland has longstanding expertise and competitive advantages. We acknowledge that Rabobank Nederland's historic loss experience has been good. Missteps related to elevated impairments and write-downs in Ireland and in U.S. structured credit respectively did not, on their own, have a severe balance sheet impact. Indeed, the bank states that its 10-year average total loan loss rate through June 2014 was 32 NOVEMBER 10,

11 bps, which we believe is indicative of the generally conservative credit culture. We now take the view that Rabobank Nederland's loan loss experience is no longer a credit strength. We calculate that its loan loss rate averaged over 50 bps over the 2012 to 2014H1 period. Looking ahead to , our assumption of a 43 bps average is not superior to our expectations for the major Dutch banks or our Dutch system-wide view of credit loss estimates (we assume bps for the latter; see chart 3). Loan losses have mainly arisen from CRE and SME exposures. Rabobank Nederland's domestic CRE book is not large at about 6% of total net loans. However, the bank states that about 20% of its Dutch CRE book was impaired at June 30, 2014 with provisions coverage of impaired loans being just under 40%. Domestic CRE provisions of 537 million in the first half of 2014 were about 45% of total group provisions in the period. The domestic retail SME loan book is about 15% of the total loan book. The bank does not provide a split of domestic SME provisions in the first half of 2014 but reports that these were about 28% of total provisions in 2013 and that about 7% of this portfolio was impaired at year-end 2013, with provision coverage of 36%. We expect both the CRE and SME portfolios to remain weak in the second half of 2014 and to only gradually improve thereafter. On a more positive note, Rabobank Nederland's two largest loan portfolios are performing well. Residential mortgages, 48% of the net loan book at June 30, 2014, have consistently performed better than Dutch peers. The bank states that just 0.6% of its residential mortgage book was three months or more in arrears at June 30, Provision charges were a reported 5 bps in the first half of 2014, which compares to our system-wide estimate of about 13 bps. Over a longer time frame, the differential is similar; for example, we estimate 5 bps for compared to our system-wide estimate of 12 bps. In part, we believe this differential reflects Rabobank Nederland's typical avoidance of intermediary sourced lending, lower LTV lending, and bias toward older customers away from the largest cities. Food and agribusiness, about 20% of the net loan book, is well diversified by type and geography. About two-thirds of the book is international. While there are some pockets of weakness, for example Dutch greenhouse horticulture, we expect credit performance to remain sound. We assume that credit growth will remain mild. In fact, we expect the loan book to decline in size as the CRE book reduces, some international exposures are reduced, and because the Dutch mortgage book is less of a strategic growth focus than historically (and because the tax regime is now less advantageous to borrowers). NOVEMBER 10,

12 Chart 3 Table 6 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) Risk Position --Year-ended Dec (%) 2014* Growth in customer loans 5.9 (5.0) Total diversification adjustment / S&P RWA before diversification N.M. (14.0) (12.4) (17.8) (17.6) Total managed assets/adjusted common equity (x) New loan loss provisions/average customer loans Net charge-offs/average customer loans N.M Gross nonperforming assets/customer loans + other real estate owned Loan loss reserves/gross nonperforming assets *Data as of June customer loan data does not deduct reverse repos, which are not disclosed. The bank states that the private-sector loan portfolio was billion at June 30, 2014 compared to billion at year-end, i.e. a 0.3% decline. N.M.--Not meaningful. Funding and liquidity: We consider Rabobank Nederland's funding as "average" and its liquidity as "adequate". Its loan-to-deposit ratio is a relatively high reported 136% at June 30, 2014, despite its leadership of the domestic deposit market. We acknowledge NOVEMBER 10,

13 that this profile is typical in the Dutch market due to the large amount of mortgage debt outstanding owing to tax relief, and because Dutch household savings are typically channeled into investments such as life insurance and pension products. We understand that management aims for a ratio of 130% by the end of 2016 and that it considers that Rabobank Nederland meets the Basel III liquidity and funding requirements at June 30, 2014, with a liquidity coverage ratio of 161% and a net stable funding ratio of 119%. Over the next two years, we assume that the loan book will decline in size and that customer deposits will exhibit stability. Moreover, we assume that the existing liquidity buffer and fairly low reliance upon short-term wholesale funding (for which we judge Rabobank Nederland's profile to be broadly similar to ABN AMRO and ING Bank), will persist. Rabobank Nederland's funding profile is underpinned by its large, granular, and stable domestic deposit base. The bank states that its market share is 37%, which is very healthy on an international comparative basis. Market share has fallen slightly in recent years, in part as peers seek to rebalance their funding profiles, but we expect Rabobank Nederland's market share to not fall below the 35% mark. Wholesale funding is diversified and with a satisfactory maturity profile. We calculate that Rabobank Nederland's stable funding ratio was a satisfactory 98.4% at Dec 31, 2013 and we expect little change at year-end Rabobank Nederland's liquidity position has strengthened materially over the past few years. The bank maintains a surplus of liquid assets well in excess of regulatory requirements. At June 30, 2014, it reported a liquidity buffer of billion, which was about 1.8x reported short-term wholesale funding. More than one-half of the liquidity buffer comprises deposits at central banks, mainly at the ECB and the FED, and Dutch government bonds. The remainder mainly consists of other assets eligible for repo activity with central banks. Our measure of broad liquid assets to short-term wholesale funding was 1.2x at Dec. 31, 2013, up from 1.1x the year before, and we assume little change at year-end Table 7 Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) Funding And Liquidity --Year-ended Dec (%) 2014* Core deposits/funding base Customer loans (net)/customer deposits Long term funding ratio Stable funding ratio Short-term wholesale funding/funding base Broad liquid assets/short-term wholesale funding (x) Net broad liquid assets/short-term customer deposits Short-term wholesale funding/total wholesale funding Narrow liquid assets/3-month wholesale funding (x) *Data as of June 30. H1 data is an estimate. N.A.--Not available. N/A--Not applicable. N.M.--Not meaningful (7.8) N/A N/A N/A NOVEMBER 10,

14 External support: High systemic importance in The Netherlands The long-term counterparty credit rating on Rabobank Nederland is one notch higher than the SACP, reflecting our view that it has "high" systemic importance in The Netherlands and that the Dutch government is "supportive" of its banking sector, as our criteria define these terms. Our assessment of Rabobank Nederland's systemic importance partly reflects its material market shares in retail deposits and residential mortgages. We note that we only apply one notch of support, rather than two, given Rabobank Nederland's relatively high SACP (see table 22 of our bank rating methodology). We observe that European authorities are taking steps to increase the resolvability of banks and require creditors rather than taxpayers to bear the burden of the costs of failure. From January 2016, the Bank Recovery and Resolution Directive is set to introduce the mandatory bail-in of a minimum amount of eligible liabilities, potentially including certain senior unsecured obligations, before governments could provide solvency support. Additional rating factors: No additional factors affect the ratings. Related Criteria And Research Related Criteria Bank Hybrid Capital And Nondeferrable Subordinated Debt Methodology And Assumptions, Sept. 18, 2014 Group Rating Methodology, Nov. 19, 2013 Banks: Rating Methodology And Assumptions, Nov. 9, 2011 Banking Industry Country Risk Assessment Methodology And Assumptions, Nov. 9, 2011 Bank Capital Methodology And Assumptions, Dec. 6, 2010 Related Research Various Rating Actions Taken On Dutch Banks On Stabilizing Economic Risks, Nov. 4, 2014 Banking Industry Country Risk Assessment: The Netherlands, Nov. 4, 2014 Anchor Matrix Industry Risk Economic Risk a a a- bbb+ bbb+ bbb a a- a- bbb+ bbb bbb bbb a- a- bbb+ bbb+ bbb bbb- bbb- bb bbb+ bbb+ bbb+ bbb bbb bbb- bb+ bb bb - 5 bbb+ bbb bbb bbb bbb- bbb- bb+ bb bb- b+ 6 bbb bbb bbb- bbb- bbb- bb+ bb bb bb- b+ 7 - bbb- bbb- bb+ bb+ bb bb bb- b+ b bb+ bb bb bb bb- bb- b+ b bb bb- bb- b+ b+ b+ b b+ b+ b+ b b b- NOVEMBER 10,

15 Ratings Detail (As Of November 10, 2014) Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland) Counterparty Credit Rating Certificate Of Deposit Foreign Currency Local Currency Greater China Regional Scale Commercial Paper Foreign Currency A-1 Local Currency Junior Subordinated Preferred Stock Senior Secured A+ Senior Unsecured Greater China Regional Scale Senior Unsecured A+ Senior Unsecured Senior Unsecured A-1 Short-Term Debt A-1 Subordinated Counterparty Credit Ratings History 04-Nov Nov Nov Jan Dec Nov Dec-2009 Sovereign Rating Netherlands (State of The) (Unsolicited Ratings) Related Entities Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank Nederland), (London Branch) Issuer Credit Rating Cooperatieve Centrale Raiffeisen-Boerenleenbank B.A., "Rabobank Nederland" (New York Branch) Issuer Credit Rating Senior Unsecured A+ Short-Term Debt A-1 Subordinated Rabobank Nederland (Australia Branch) Senior Unsecured A+ Senior Unsecured A-1 A+/Negative/A-1 A+/A-1 A+/A-1/A-1 cnaaa/cna-1+ A+/A-1 BBB- BBB- cnaaa A+/A-1 BBB+ A+/Negative/A-1 AA-/Negative/A-1+ AA-/Stable/A-1+ AA/Negative/A-1+ AA/Watch Neg/A-1+ AA/Stable/A-1+ AAA/Negative/A-1+ AA+/Stable/A-1+ A+/Negative/A-1 A+/Negative/A-1 BBB+ NOVEMBER 10,

16 Ratings Detail (As Of November 10, 2014) (cont.) Rabobank Nederland (Hong Kong branch) (Unsolicited Ratings) Certificate Of Deposit Greater China Regional Scale Rabobank New Zealand Ltd. Issuer Credit Rating Rabobank USA Financial Corp. Issuer Credit Rating Rabo Capital Securities Ltd. Junior Subordinated Rabohypotheekbank N.V. Issuer Credit Rating cnaaa/cna-1+ A+/Watch Neg/A-1 --/--/A-1 BBB- A+/Negative/-- *Unless otherwise noted, all ratings in this report are global scale ratings. Standard & Poor's credit ratings on the global scale are comparable across countries. Standard & Poor's credit ratings on a national scale are relative to obligors or obligations within that specific country. Additional Contact: Financial Institutions Ratings Europe; FIG_Europe@standardandpoors.com NOVEMBER 10,

17 Copyright 2014 Standard & Poor's Financial Services LLC, a part of McGraw Hill Financial. All rights reserved. No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor's Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an "as is" basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT'S FUNCTIONING WILL BE UNINTERRUPTED, OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages. Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P's opinions, analyses, and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw, or suspend such acknowledgement at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal, or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof. S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain nonpublic information received in connection with each analytical process. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription) and (subscription) and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at NOVEMBER 10,