The ratings reflect Rabobank’s leading position in the Netherlands as a low risk cooperative bank, with sound prudential metrics.

In line with Scope’s bank rating methodology, the ratings on Rabobank do not incorporate any additional notches for government support, as the agency considers a potential state-bailout scenario to be increasingly unlikely as European Union banking systems move towards a resolution and recovery framework which includes creditor bailin.

In its research, Scope notes that the Group’s strong franchise combined with management’s prudent approach has enabled Rabobank to maintain a robust capital position and to generate resilient earnings even during the financial crisis. The Group was the only large financial institution in the Netherlands which did not require government aid. More recently, earnings have been negatively impacted by the weak economic environment in the Netherlands. While over 75% of the loan portfolio is domestic, the exposure is broad and well diversified across mortgages, small and medium-sized enterprises, food and agribusiness and commercial real estate. As credit costs and regulatory capital requirements have continued to increase, Rabobank is aiming to improve profitability so that it can maintain capital levels at a high standard. At year-end 2013, on a fully-loaded CRD 4 basis, the reported CET1 and leverage ratios were 11.1% and 4.8%, respectively.

As a positive rating-change driver for Rabobank, Scope mentions the successful implementation of the Vision 2016 restructuring program which would lead to a structural improvement in the earnings of the domestic retail banking operations. The plan involves adapting its business to changing customer preferences and reducing costs by EUR 1bn as the number of local Rabobanks is cut to approximately 100 from the current 129. As negative rating-change drivers, noted are a change in management’s risk appetite or a significant decline in market access. The Group regularly uses capital markets funding as deposits are not sufficient to meet funding needs.

Both the rating drivers and the rating-change drivers are detailed in Scope’s research on Rabobank which supports the ratings.

The following ratings were assigned:

Rabobank Group NV
- Issuer Credit-Strength Rating (ICSR) at A+. The ICSR represents a credit opinion on a bank’s ability to meet its contractual financial commitments on a timely basis and in full while remaining a going concern.
- Senior unsecured debt rating at A+.

In the near future Scope will rate Rabobank’s short-term debt, as well as subordinated securities and capital instruments.

Scope said that the ratings assigned today to Rabobank, as well as to 17 other large European banks, represent the first step in its rating coverage of the banking industry. The ratings assigned to Rabobank are (i) based on public information, (ii) not solicited by the issuer and (iii) with issuer participation in the process.

The methodology used for the rating assessment is “Bank Rating Methodology” published in February 2014. The methodology used for the financial forecasts of the rating analysis is “Forecasting Bank Financials” published also in February 2014. These methodologies are available on www.scoperatings.com.