BUILDING OPTIONS On the markets WHAT'S NEWS Issue 8 August 1996 info exchange Rabobank's activities in derivatives and options have traditionally been primarily trade-oriented: a matter of taking positions on our own account. In the current competitive environment, however, the cliënt necessarily takes the centre stage, and our clients' needs are growing more elaborate every day - not least in the ^^st-changing derivatives business. Head of derivative sales. Maarten van der Kloot Meijburg, explains. One recent response to the growing and increasingly complex derivatives business has been to build up a team of five dedicated sales people who are working together with 15 traders to serve and extend our base of clients from corporates and institutional investors to include a large number of so-called 'rniddle market' companies as well. LEVERAGING EXPERTISE Derivatives - financial instruments like forward interest rate agreements, interest rate or currency swaps - are all essentially •ehicles that allow the cliënt to hedge gainst adverse interest rate or currency movements. 'More and more, they are now becoming commodity products,' says Meijburg. 'We have to work hard to build up our turnover, our market presence, and our cliënt base. We can do this not only by customer-oriented pricing strategies, and by leveraging our expertise to offer more exotic instruments, but also by plugging derivatives into structured deals, into banking products and services that more closely meet the clients needs.' MIDDLE-MARKET TARGET Given the inherent limit on the profitability of derivatives deals, espeeially with big corporates and institutions, the sales team is particularly keen to broaden its position and cultivate relationships in the so-called •liddie market'. These companies, with les of between NLG 25 and 800 million, are now served by the local banks. They are active in such fields as food production, logistics and transport, horticulture, and animal feeds. Also, there are opportunities in the public sector, where a number of housing companies, health-care operations, and municipal authorities are now headed for privatization. CREATIVE STRUCTURES 'All of these have substantial interest rate and other risks and we can really play a useful advisory role,' says Meijburg. 'Say you're a shipping company and you know you have to invest in a new vessel. That's an investment of several million guilders. You might not want to do it right away, but nevertheless you want to take advantage of interest rates while they're low. Rabobank can hedge you against an interest rate hike with a forward rate agreement (FRA) or a forward swap, or it can combine the benefits of a floating loan and a fixed loan by using an interest rate option construction.' MUTUAL EXPOSURE In seeking to build up its market - the goal is an average monthly turnover of NLG 2 billion this year - Rabobank can Looking for NLG 2 billion a month - Meijburg (seated) and bis sales team (fltr) Joris Heijting, Carolien van Eggermond, Mark van der Plas and Gerrit Willem Gramser. use its Triple-A credit rating to special advantage. 'With derivatives, the cliënt and the bank always have an exposure on each other,' Meijburg notes. 'The cliënt is always reassured by a bank that has a sound credit rating.' Rabobank is a significant player on international capital market. But for the team which works in and on these markets, the bottom line is always: the customer comes first. 'Our primary goal,' says Haijo Dijkstra, head of funding and structures, 'is to be able to offer our investment customers the best possible products at the best available rates.' This statement is no mere cosmetic marketing hype. The bank's priority is to protect and enhance its long-term relationship with the cliënt. And this strategy is pursued even if it means sacrificing short-term funding targets. The key is to structure deals that are successful both for investors and for the bank. This is accomplished through a variety of instruments; for example, a multi-currency European medium term note program. With pre-set documentation and an umbrella prospectus, tranches totaling some ECU 5 billion have already been issued (out of an ECU 7.5-billion ceiling). HIGH-QUALITY PAPER Overall, since 1992, about NLG 18 billion has been released on the international capital markets. In 1996 alone, the bank issued some NLG 4.7 billion worth of bonds, medium-term loans, and private placements. Many of these were non- syndicated funding transactions specifically designed for institutional investors who wished to take a view on the likely movement of currencies, interest rates, commodities, equities, and/or credits, (either singly or in combination). Although there recently has been a shift in the market away from structured towards unstructured deals, the institutional investors' priority was and remains high- quality paper with a minimal credit risk. SHAVING POINTS Rabobank's position as the biggest savings bank in the Netherlands - coupled with its high rating - represents big advantages when it comes to funding the bank's assets. 'In the competitive environment of today's marketplace, every basis point we can shave off the price we pay for funds helps to bring us closer to our customers,' Dijkstra remarks. DIVERSIFYING SOURCES In order to avoid overdependence on Dutch institutions and retail investors, Rabobank is diversifying its funding

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blad 'What's news' (EN) | 1996 | | pagina 11