'Rabobank can in
crease its market
share now by acquir
ing healt
"Market volatility is caused by two things:
real changes in the fundamental picture and
exaggerated market expectations (greed
fear). At the moment, we experience a nega-
tive change in the fundamental economie
picture, with all the ugly consequences for
banks. On top of that, there are significant
market fears regarding the 'Who's next to fail
or default?'-question, driving the substantial
widening of credit spreads. In this situation,
Rabobank remains a safe haven for two
reasons. First, while not being independent
from economie cycles, it is by far less exposed
to volatile asset classes, lts home market,
the Netherlands, and its core business there,
residential mortgages, are among the most
stable markets worldwide. Also, its busi
ness abroad, food agri, is less wobbly than
other banking segments. Second, market
participants know about Rabobank's stance
towards its triple A rating and the necessary
fundamentais behind it: a strong capital base,
high asset quality and strong liquidity. As a
result of the two aspects, Rabobank's credit
spreads, although at a higher level than pre-
crisis, are among the lowest of commercial
banks."
"Rabobank's focus on maintaining a prudent
balance sheet and having a strict risk
management regime can limit the bank's
potential for higher profitability in the short
term. However, it becomes very clear now
that this approach limits the downside in
times of crises and ensures long-term suc-
cess. Since Rabobank is in the comfortable
situation of not having demanding majority
shareholders or having tofend off takeover
attempts, it should continue with this credit
positive approach. Recent months proved
that this is the right way."
"Rabobank can increase its market share now
by acquiring healthy business that other
banks simply cannot take at the moment,
due to various constraints. This business
should of course fit into the Rabobank
strategy, for instance business in the world
wide Food and Agri segment. The bank can
also optimise its funding mix by introducing
covered bonds, whose relative attractiveness
has increased in recent months. As some
targets might have become vulnerable,
Rabobank can even make reasonable ac-
quisitions in this market. Flowever, the most
important opportunity is one that should be
missed: getting overconfident and making
decisions which are not in line with the ap
proach that has been successful so far."
issue 16 THE WORD
