Rectification
WHAT'S NewS Issue 8 August/September 1997
info exchange
7
Internationale priority should be to
arrange the best possible deals for our
F&A clients. This means assuming the
roles of arranger, lead manager and, if
necessary, underwriter, while at the same
time sharply limiting stakes, exposures
and retained risks.
Provide access to non-banking markets
instead of competing against them:
financial disintermediation is here to stay
and our F&A clients have a growing
interest in securitization. We must provide
active support in promoting non-banking
sources of finance including private
placements, debt or equity, and/or
^jpvestment funds.
Move towards more creative
structuring of financial solutions: this
applies both to financing requirements,
and to the management of surplus cliënt
funds. We need to further evolve our
expertise in alternative structures and their
balance sheet, tax, pricing and risk
implications, and also place greater stress
on engineering multidisciplinary solutions
involving structured finance, mergers and
acquisitions (M&A), project finance and
investment banking.
An enhanced ability to identify and
manage risks confronting our F&A
clients: this will apply to traditional areas
including interest rate and/or currency
movements and country risks, as well as
Éfc&A-specific concerns such as raw
material supply and volatility in market
prices for raw materials, inventories and
final products.
A considerably strengthened emphasis
of F&A corporate advisory services: This
principle is powerfully knowledge-driven
and involves enhancing our focus on
strategie corporate issues including
mergers, acquisitions, joint ventures,
divestments and related financial
restructuring.
A reallocation of scarce resources to
those F&A activities with the best overall
prospects: this has several implications - it
involves not only placing emphasis on
selected financial products and services
but also to particular regions and
countries and F&A market subsectors that
have the brightest future prospects. The
operative question remains: 'Where is
Rabobank International able to provide its
F&A customers with demonstrable and
superior value.' Indeed, this essential
question underpins specific decisions on
the allocation of our scarce capital as well.
FACTS AND FIGURES
The new F&A business plan reflects
several fundamental choices in this
respect. Among the most important of
these is an actual freezing in the solvency
allocated to corporate banking, with a
consequent reduction of low-ROS
corporate lending by several of the
existing offices. Subject to reconciliation
of the various business plans by the RI
controller, the increase in the solvency
requirement during the period 1997-2000
should amount to some NLG 578 million.
Of this, about NLG 478 can be financed
through growth of its own funds. The
share of total income generated by
corporate banking will likely fall back
from its 1996 level of 70 per cent to about
50 per cent in three years. Meanwhile, we
expect to see an increase in the share of
corporate finance investment banking
from about 11 per cent to 25 per cent, and
an unchanged level of income from trade
finance, at 19 per cent. The capital
allocation for F&A corporate lending will
show moderate overall growth - up
roughly NLG 200 million. However, total
capital available for F&A corporate
lending in low-return regions (like
Western Europe and North America)
should decline by approximately NLG
150 million. This will release funds for use
in emerging economies offering higher
interest margins. There, new offices will
be established.
SUPPORT CENTRES
Meanwhile, according to the F&A Plan,
capital employed in the trade finance area
will nearly doublé to NLG 500 million; in
F&A corporate finance it will quadruple
to NLG 380 million; in investment
banking it will rise sixteen-fold to NLG
160 million. It is also recognized that not
all of RI's offices can (nor should) be
equipped for self-contained operation in
F&A; hence, the identification of 'support
centres' for these activities. For example,
the F&A Plan foresees a substantial
upgrading in research. This function will
be partly regionalized. Key offices will
include Utrecht, Warsaw, New York, Sao
Paulo, Singapore, Sydney and Hong Kong.
Support centres have also been identified
for corporate finance: London, New York
and Singapore will form the overall core.
Other support centres will join this core to
provide expertise in specific fields: Utrecht
for structured finance, Warsaw and Sao
Paulo in the case of M&A, and Sydney for
securitizations. On the Investment
banking side, private placements will be
handled out of Utrecht, New York and
London. Gilde and Robeco will be
responsible for the investment funds. In
securities, Amsterdam, London, New
York, Singapore and Hong Kong will be
developed as support centres. In risk
management, the key offices will be
Utrecht, London, New York, Sao Paulo,
Warsaw, Hong Kong and Singapore, while
financial advisory services will be
concentrated in Utrecht, London, New
York, Sao Paulo, Singapore, Hong Kong,
Sydney and Warsaw. 'The F&A support
centres will be erected upon the basis of
close cooperation with the management
team investment banking and the policy
committee corporate finance,' says
Greenberg. 'In this we will not act
unilaterally.'
FIELDING THE TEAM
As the F&A Business Plan 1997-2000
recognizes, one of the most important of
our many unique selling points is the fact
that we can field a global team in F&A,
and synergize our international
perspective in new and innovative ways to
deliver superlative value and to more
closely meet our clients' specific needs.
On page 1 of our July issue the
IAMA introduction said that the world
population was set to doublé by the
year 2020. Most of you will probably
have questioned the extremely near-
future prediction and have realized
that something was wrong. It is world
food consumption which will have
doubled by 2020 and tripled by 2050;
the world population will have
doubled by the year 2200.
Our apologies for this error.