Smits launches three -
year cost-cutting plan
group news
Although Hans Smits had enough good news to teil Rabobank's annual General
Assembly in his maiden speech as executive board chairman, he also had just as
many rigorous moves to announce.The centenary year had seen a continuation
of double-figure growth in all activities. But the run of spectacular growth
appears to be slowing down to less heady levels. The Rabobank Group will
respond with a strong progam to reduce costs and raise income.'lf we do it now,'
^pays Smits,'then we do it from a strong, proactive position. But it is also a crucial
move to create the investment we need for ongoing human resources and
technological development. And that is essential because we have to go into
Europe in top condition.'
Immediate measures
Strategic Europe
Loud and clear
What 'sNewS Issue 7-July 1999 3
The message that came across from
Hans Smits was both loud and clear.
The first year of our second century comes
complete with challenges as tough as
those facing the earliest pioneers of coop-
erative banking. For the millennium, the
modern-day Allfinanz organization is con-
fronting a vastly changed playing field in
which traditional boundaries - both na-
tional and technological - no longer exist.
Describing Group performance to date
this year as 'going back to more normal
growth patterns', Hans Smits is anticipat-
ing no more than a very slight improve-
ment in 1999 net results compared to last
year. For the first quarter, fee income
growth has already fallen to .5% 19.6%
™or 1998), with both lending and funds
entrusted expected to reach no more than
10% over the whole of 1999 compared to
i 7% for both in the last financial year.
with other partjes.' 1 le stressed that the
cooperative concept of customer orienta-
tion and service would remain a priority
in these 'strategie explorations'.
Smits was frank in his concern for
Rabobank International's (RI) profitabil-
ity. R1 has been the subject of a consider-
In addition to the program designed to
improve results all round, Smits also an-
nounced the Group is reviewing its op-
tions for strategie partnerships with other
players in Europe. The airn is to explore
cooperation in specific areas, such as asset
management and international banking.
'It is still possible that we could find our-
selves in a position where subsidiaries of
Rabobank Nederland share ownership of
soine activities or attract external capital
able amount of media attention in the
Netherlands. With 5,000 representatives
of local member banks, the Rabobank
equivalent of shareholders, present at the
General Assembly, Smits was able to reit-
erate publicly the Group's commitment to
RI as well as giving the 'shareholders' the
real facts behind the situation. 'Revenue is
on target,' he told the meeting, "the costs
are not.' He explained that a number of
immediate measures were about to be
taken on the volume and nature of RI's ac
tivities, starting with those in London and
Utrecht. Initial measures were taken a
week later, on June 17 (see interview with
Maarten Hulsboff on pages 4/5). Further
reorganization and right-sizing is expected
in the fall.
In spite of what could appear as retrench-
ment in some activities, Hans Smits took
the opportunity offered by the lOlst Gen
eral Assembly to remind the Group of the
goal behind the development of RI: 'The
Rabobank intends to continue to offer the
most modern financial services to major
Dutch companies, to international corpo-
rates in our core sectors, and to small and
medium-sized businesses with cross-bor
der operations. It remains our intention to
transform our international banking busi
ness step-by-step from a primarily credit-
oriented operation to that of financial in-
termediary.' The message was loud, it was
clear, but perhaps most interestingly, given
recent press attention and rumours, pre-
cisely what it has always been.
