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.'

Rabobank Bronnenarchief

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