Rabobanking - Italian style
4 International
Up for sale
Finding a niche
Complex reporting
New legislation
State-of-the-art funding
Incredsed products
Brodd spredds
Top-10 ranking
ISSUE 35/14 NOVEMBER 1994
Italy's fast-paced financial centre has proved a perfect environment for Rabobank. In
only five years, the Milan operation has grown from a modest rep office into a fully-
fledged branch. Not surprisingly, the 16-person team on the Via Albricci are proud of the
fact they have brought in positive returns every year since the launch. But we found out
first hand just how hard our Italian Rabobankers work to enjoy: la dolce vita.
Style capital of Europe, traffic nightmare,
La Scala, Duomo - all these aspects of Milan
are immediately apparent as you walk from
Rabofm's old office under the shadow of the
city's over-dressed cathedral to the more util-
itarian new premises on Via Albricci. Yet, even
with the pictures still to be hung and the
kitchen in packing cases, something of Milan's
inherent elegance seems to have rubbed off
on the ordinary office equipment that provid
es the backdrop for Rabobank Italia's oper-
ations. There is no name on the street-door,
and only a tiny business card on the fifth-floor
entrance announces the bank's presence here.
'We're still not sure what our name will be,'
laughs GM Roberto de Cardona. 'The Central
Bank of Italy will decide that, and they
haven't let us know yet. Plus, we don't want
to hang a name-plate with the old logo. So
probably it will be January 1 before we go
"public".'
But that doesn't mean the bank's newest
branch isn't a hive of activity. Consistent
growth has been the aim since Rabobank ac-
quired a small, originally American finance
company from the Pittsburg National Bank
Group in 1991 and merged it with the existing
rep office in Milan. 'In the late 1980s,' De Car
dona recalls, 'a small team of four and I
formed PNBG's presence in Italy. At some
point, they decided to withdraw all their
foreign activities, so essentially the finance
company was for sale.'
De Cardona first approached NMB, a Dutch
Time out for a picture.
bank which was in the process of becoming
part of the ING Group, but though they were
interested, the immanent merger meant no
decisions could be taken. He then contacted
Rabobank. Within three months the deal was
done and De Cardona and his staff joined the
bank as Rabofin. 'The name is taken from our
legal form - we were a finanziaria, or finance
company,' De Cardona says. 'At the time, a
fittanziaria could do almost as much as a
regular bank. And it had the advantage of not
having to report to the Italian Central Bank.
So, it was the perfect structure for us at that
time.'
Italian Central Bank reporting is a convulated,
complex process. Operations manager, Um-
berto Ortelli, shrugs expressively while ex-
plaining about the stacks of manuals which
appear every six months defining new regul-
ations and new requirements. 'It wouldn't be
so bad if the requirements changed radically.
But often it's slight adjustments to existing re
porting so you have to alert all the time. As
we've become a branch, we're going to have to
do it in the future, but I'm convinced we've
now got our systems sorted out and we're
ready to go.'
If branch status means so much additional
work, why has Milan opted for upgrading?
'The law regulating finanziarias has changed,'
says deputy GM Roland van Limburg Stirum.
'The scope of this type of company was limit-
ed and meant we were no longer able to offer
some products. That was why we began as-
sessing the possibility of obtaining a banking
licence.'
One of the main reasons for this move was
funding. 'Italian banks can go to the local
market,' Van Limburg Stirum continues,
'while finance companies have some limi-
tations we are excluded. Even though we are
part of a Triple-A organization, we are not
considered a prime interbank counterparty, so
they charge us more than we would normally
expect to pay as a bank.' Rabofin solved the
problem by looking elsewhere for funding.
'We tapped the Euro-market and by attaching
some interest-rate and currency swaps, we got
the price we wanted. Our treasury department
is small but expert in this area and accounts
for about 75 percent of our income. But our
scope is still limited because to get the Euro-
funds here in Italy as a finance company, you
have to pay withholding tax on the interest we
pay to the foreignfunder. A bank does not. So,
as a branch, we can get Eurofunds directly
without the withholding tax aspect.'
However, fiscal management was not the sole
reason for upgrading. As a branch, Milan will
be able to offer clients more products, so from
a marketing point of view, branch status was
also attractive. 'We'11 now be able to do der-
ivatives for clients,' explains treasury manager
Massimo Borgato, who is responsible for the
derivative side of Milan's business, 'whereas
up till now we were only allowed to do that for
our own bond portfolio.'
You could argue that working the Italian bond
portfolio is a big enough job for the two-man
treasury team. The Italian national debt is the
largest in Europe, and possibly in the world.
'So,' says Borgato, 'there is a big market there
for us and the spreads and possibilities of
arbitrage in that market are very interesting.'
But Rabobankers in Milan want their oper
ation to be a balanced and to grow. 'Our main
strategy for the future,' De Cardona says, 'is to
grow in those areas where we have proved to
be extremely successful. One is treasury, of
course. But our marketing has also been ef-
fective. Although the market in Italy does not
allow the high level of returns we can get from
treasury because it is very competitive spread-
wise, our efforts have still produced a lot of
new business. And we're very happy about
that.' In fact, account manager Mauro
Bambacigno received the best food and agri-
deal award last year for his Parmalat deal that
brought in the New York office in what has
been described as a text-book CAM oper
ation.
Rabobank Italia may be small in terms of
personnel, but it ranks number 10 in the
whole foreign bank circuit. 'Our aim,' says
Van Limburg Stirum, 'is to become an im
portant bank for larger Dutch companies in
Italy. At present, ABN AMRO has that
position because they've been here over 20
years and have three branches. But we're
catching up.'
