*Interim '99 - sustained growth
group performance w~s
didyou know
The headline looks fine and the
Group as a whole certainly brought in
sustained growth in Allfinanz services
in the first half. But Hans Smits and
the executive board are 'not satisfied'.
As he told the press on 20 August,
'we've again booked doublé figure
growth in many activities. And we've
^ven been able to reduce some
costs significantly. But the income/
expenditure ratio remains far too low.'
On budget
Customer cover
Strategie alliances for Europe
Hans Smits' first press call as chairman
was also the first time Rabobank an-
nounced its interims as a Group, rather
than as a cluster of separate entities. The
previous day had seen ABN Araro post
growth in profit levels of around 30%
across the board. These solid figures
looked even bigger and rounder when
compared to our own 5% efforts. Pre-
dictably, just about every question was
prefixed with references to numbers gen-
erated by what is undoubtedly one of our
biggest competititors in the Netherlands.
•fet, both Smits and Wint van der Cïoor-
lergh appeared to have valid and reason-
able reasons for the less than spectacular
showing compared to what we ourselves
have been used to in recent years. Accord-
ing to Smits, 1999 is 'a transition year'
and that from next year, with our house in
order, 'we will be aiming for consistent
growth in profits of between 8 and 10%
on an annual basis'.
The managing board has announced
Roadshows for senior staff on the
outeome of the Strategie Review in
September and October. They are in
London, Atlanta and Singapore and
will offer support on budget and
business planning.
So whv is growth in profit down even
though activity levels are up and increas-
ing? The chief bugbear is costs. According
to Van der Goorbergh, who is the execu
tive board member responsible for report-
ing finaneials, the local banks are well on
budget. But because activities are increas-
ing and turnover along with it, new staff
is needed to provide the level of service
that Rabobank and its Allfinanz sub-
sidiaries promise to customers. If funds
entrusted 17%) and lending (15%), in-
surance premiums (11%) and assets under
management (12%) made doublé figure
growth, then so did personnel costs. These
were up by no less than 19%. 'The fact
that our expenses are continuing to rise
faster than income means we have to take
action,' says Van de Goorbergh, 'what we
must do is streamline our processes and
increase efficiency so that we can reduce
costs to an income/expenses ratio of
around 1.5.'
Smits mentioned necessary reductions in
costs of between 15 and 20%. One way
of achieving these cuts is through a
process which is already in motion in the
domestic market. The launch this spring
of a wholly new concept in the Nether
lands means Rabobank is pioneering what
can best be described as fine-meshed cus
tomer coverage through small-scale pres-
ence. In practical terms, this means that
the nationwide, comprehensive branch
network will be complemented by dedi-
cated consultancy and sales points and
even single-advisor offices if this is what
customer requirements demand. Through
this focus on providing more personalized
services and especially advice and consul
tancy as well as the possible regionaliza-
tion of back offices, both men were opti-
mistic further reductions in cost base
would be feasible.
In spite of all the adjustments to how ser
vice is provided in the domestic market,
one thing will not change. Smits empha-
sized there will be no departure from our
cooperative principles. 'Rabobank is rec-
ognized as a customer-oriented provider
of high quality services and we intend to
remain that.' He raised this point when
asked explicitly about possible future co-
operation with Belgium's Kredietbank,
now part of the KBC Allfinanz group. 'We
Hans Smits explains the ftner details to Bioomberg journalist Jennifer Freedman
