Stirring up business
w:
investment banking
Ml
io What'sNewS Issue
Global product manager Bill Cuthbert has been in the bank for nine months
now and he has used that time productively. On the table is a comprehensive
business plan for the short-term interest rate products division (STIR).
This plan spells out how STIR will take the existing beating heart of treasury
funding activity and build it into an eight-line (see chart) multidimensional unit
and specialist short-end house.
6'June 1998
STIR's business plan contains some
pretty impressive numbers. Bill
Cuthbert is not only forecasting a balance
sheet increase from STIR products alone
of more than 300 percent. He is also
planning to halve value at risk and
unsecured interbank risk. To do this, he
aims to broaden current treasury
operations, redeploy and reskill existing
staff and introducé external talent to
provide the necessary additional expertise
leadership, but with little net
expansion of the headcount. And
all within the next two years. We
asked him how.
The business plan is a starting point
but also the end of a process. Wbere
didyou start
I've been in the bank since
September 1. Much of my time
has been spent travelling around
the network, talking to people.
Finding out how Rabobank
works. What I found was a bank
which is 100 years old. For 90 of
those years it remained a
domestic player. Only in the last
ten years has there been real
international expansion. But in
that decade, it has expanded
internationally very rapidly indeed. The
result was we now have dealing rooms in
22 offices. This represents a huge network
which we needed to bind together into a
single integrated team.
And the second?
Ihad to see what the euro was going to
mean in a treasury and investment
banking sense. There is a very strong
difference between the very considerable
market shares we have in various
products here in the Netherlands and the
minute share we will represent in Europe.
We must at least defend our Dutch
market share, let alone the opportunity to
aggress and approach customers in the
broader Euroland. Basically, these are also
the main reasons why I perceive the bank
has elected to move into investment
banking.
How do you see that choice on a European level?
Ithink the bank had three options. It
could have moved strongly into retail
as others have done, or we could have
attempted to become one of the big ten
banks worldwide, slogging our brains
out and spending our capital so that at
the end of ten years, we're the only one
left standing. There's also the middle
way, the niche model. Once all the
huge players have finished bumping
Bill Cuthbert - reengineering the business into a regionally
integrated operation
Soft commodities?
Yes, the bank is the number one F&cA
bank yet has no risk advisory
capabilities in soft commodities, nor
indeed exposure to risk or trading in
those products. So we need to build that
as a fourth leg. Do I need to explain the
others? I think it's logically consistent.
How did you put the plan together?
The global product management team
put in a lot of work. But the end
result is very much a joint effort with
input from the regional units around the
world. I think it represents an agreed
route map for the dramatic expansion of
our activities in this area.
What are you doing first?
My role at the moment is literally to
piek up the living and breathing
heart of the Rabobank treasury
and operate on it so, firstly, that
it becomes rather more exciting,
and secondly, it becomes a
leader in its market sector. If
you compare and contrast this
to Michael Ice, who has a very
different task and is walking
into an empty house, trying to
turn on the lights as he goes.
The first task for us is
to address human resources
which ntake the bank tick and
to keep upgrading where
necessary.
Can you explain? fl
into each other, there will be a great
deal of business to be done in niches.
We should occupy those niches which
are our natural hunting ground and
which are our natural interface to
customers. That would leave us with
four niches of which people will say:
yes, it is perfectly sensible for
Rabobank to be in those niches
because it is Rabobank.
And those are?
Feil clearly one is short term
interest rate products, the others
are fixed income and derivatives (F1D)
- these are Michael Ice and Teym
Eliazov's areas of expertise - the euro,
both debt and equity, as our 'home'
market, and soft commodity based
financing and derivative trading. For
the record, the first and the last are my
responsibility.
y job is to re-engineer the
business into something
that is regionally integrated, i.e. we are in
every single market place and in all the
products that represent short term interest
rate or financing products.
What about risk, you are known to have very decided
views on that.
The thing about money markets is that
you almost always make money. But
the way to look at any STIR business is
not through the blurred focus of
profitability. The risks in money markets
are very different to those in other
product areas. In the case of our
competitors, the money market
departments will consume capital in large
quantities, balance sheets in large
quantities, or take lots of risks. In these
institutions, most people are pleased if the
net income before bonus and taxes is
positive. I prefer to apply rather sterner
tests. I say: what about return on equity?
