Euromoney interview establishing
our global niche
management
October's issue of Euromoney, the prestigious journal of international finance,
featured senior Rabobankers Henk Visser and Alex von Ungern-Sternberg in a
lengthy interview that appeared under the headline 'Rabo seeks a global niche.'
At a time when the banking industry is undergoing a far-reaching ratio-
nalization, and financial markets have been battered by momentous shifts, the
article provides a comprehensive strategie overview of our continuing global
intent. It also reiterates our commitment to the niche-centred expansion of our
investment bank.
Consolidating positions
Key is focus
Sophisticated products
Adding value
Dealing in Eurobonds
16 What'sNewS Issue 7 7 November 1998 x
The article opens with a broad
acknowledgement of the fact that -
amid the Rabobank group's far-reaching
thrust into asset management, insurance,
and investment banking - we have
nevertheless succeeded to date in
retaining our triple-A rating and are the
only private sector bank to do so. After
this introduction, Henk Visser positions
our strategy in relation to two key
phenomena. First is the imminent arrival
of the euro, with all the associated
competitive challenges; second, is the
growing importance on non-interest
income in our overall profits mix.
Monetary union required that we move
decisively to reinforce our domestic base
by playing more of an intermediary role
with our retail and corporate clients, and
rhereby further increase our sources of
non-interest income. The deals with
Achmea and Robeco were designed to
consolidate our domestic position: the
Rabobank Group became number one on
the retail and insurance markets in the
Netherlands and at the same time
substantially strengthened its position in
asset management. As for Rabobank
International, Visser noted that 'if we
want to expand our investment banking
activities, we need to be a combination
of a corporate and investment bank,
achieve a dovetailing between the two
entities, focused on the customers of RI
and the customers of the local banks.'
With regard to this thrust into
investment banking, however,
Euromoney writer Antony Currie
remarked that the market is 'already
overcrowded'. What was our concept -
and how did we actually plan to execute
it? Replied Von Ungern-Sternberg: 'the
key word in putting our strategy together
is focus.' We are intent on becoming a
global niche player. We will concentrate
on providing
specified services
that our target
customers in F&A
and health care,
and among the
financial in-
stitutions, cannot
readily obtain from
established com-
petitors elsewhere.
'In equities we
cannot build an Henk Visser, focusing on
all-singing, all
dancing equities unit out of nothing;
instead we have put a lot of effort into
hiring highly talented people in certain
sectors that we will look at on a pan-
F.uropean, Emu-orientated basis.'
Moreover, there are geographic limits as
well: 'US and Asian equities are not yet
on the agenda.'
In other product areas, such as interest
rates, we have a particular advantage in
our triple-A rating, which makes us an
especially attractive counterparty to 'the
whole government sector around the
world. They don't intend to take risks
and have a fiduciary duty not to lose
taxpayers' money.' Hence, our short-term
interest rates group (STIR) that brings
together FX forwards, repos, MM
deposits, FRAs, FRNs, and so forth:
'quite an innovative structure' based on
the short end of the curve that doesn't
distinguish whether the product is a
security or not. The attractive rating is
also an advantage in developing more
sophisticated products like equity deriva-
tives, where 'we can readily cover longer
term transactions.'
But how can we add value by covering
financial institutions, already highly
overbanked, Euromoney asked? Said Von
Ungern-Sternberg: 'We need to be able t<>^
repackage our loan books, by
securitization for example, and sell them
into the market.' He pointed to the
Atlantis project which brought NLG 10
billion of our Dutch loan portfolio into
the US commercial paper market, and
went on: 'When I started, a few
institutions came to
me and said "don't
bother building all
this fixed income
operation, etc. We
can repackage your
commercial loans
portfolio and sell it
to the market."
Then I came to the
realization that
Rabobank had half
the equation - the M
assets which these
investment bankers wanted to sell. So why
should we let them make money out of
our half when we can do it ourselves? So
we are building a capability for
repaekaging our own as well as others'
loans. It's a key product.'
In Eurobonds, 'clearly we are starting
from way behind, with many com-
petitors,' Von Ungern-Sternberg
concedes. However, it is important to
distinguish between currencies such as
the dollar or French francs, where 'we
do not yet have the distribution,' and
Deutschmark or Dutch guilder issues,
which 'we lead manage perfectly happily
on our own. We've made no secret of
not having penetration of the German
and French institutional markets, or the
UK, let alone the US. We don't feel
embarrassed by having to use other
houses. Of course, as our capacity
customers
