Were investing
in the future
9
Commodity prices have
been very volatilewhich
makes it challenging.
But the structural demand
for foodstujfs is definitely
increasin^. In the endy
Rob ten Heggeler,
Managing Board member
As a Managing Board member of Rabobank
International, Rob ten Heggeler is responsible
for corporate clients and Rabo Securities.
He believes old-fashioned relationship banking
is back with a vengeance - and he ivelcomes it.
and the markets spent too much time denying the impact
the US crisis was having on Europe. But when that belief
began to crumble they did move very quickly and launched
an array of measures. Luckily they also saw the need for
capital injections, ratherthan simply buying up illiquid assets,
which was the plan in the US. European governments saw
that buying up illiquid assets would not by itself be enough
to restore confidence in the market. The US government
realised this too and adopted the European approach of
capital injections. So, in effect, we had a global approach
to the problem, which was what we needed. Restoring
confidence in the financial sector will be the key to
weathering this particular storm."
Of course, fora well-funded bank this lack of market liquidity
presents a perfect opportunity for cherry picking, or lending
to clients that offer the best returns, he says. But even
Rabobank can't take up all the slack left by other banks. Nor
should it, De Groot says. Rabobank's focus on the Food and
Agribusiness (F&A) sector is one of its greatest strengths.
To lose that focus in search of quick profits would be a huge
mistake, and would be very uncharacteristic of the bank.
Rabobank CEO Bert Heemskerk has also been very quick to
emphasise that the bank will continue to focus on its core
clients and core sectors and has no wish to be all things to
all men. Nor is this a matter of putting all the bank's eggs in
one basket, De Groot says. "People outside the F&A sector
tend to forget that it is an incredibly broad sector, so broad
in fact that the various segments mitigate risk in others."
Nor should we forget that the middle class is growing very
rapidly in a number of very powerful emerging economies.
99 00 oi o
Elwin de Groot ,-q
According to Rob ten Heggeler, the most visible effect
of the current credit squeeze is that banks have virtually
stopped lending above a certain leve!. 'There's a big
difference right now between smaller funding deals,
say €75 million and less, and anything above that.
Below that level there is still some competition, although
nowhere near as intense as in the past Margins are also
higher at this level, but the rise is nothing compared with
the huge increase in margins for bigger deals."
Banks are stil! very cautious and the bigger the deals the
more cautious they are, he says. Although Rabobank is
also cautious, it is one of the few banks still active in the
market for relatively big deals. And the margins on loans
have increased tremendously. "Almost a year ago, we were
warning our people that banks were having problems
with their liquidity and would be increasingly reluctant to
enter new deals. We knew this would drive
up margins, but to be honest I really didn't expect
margins to increase as much as they have, or as quickly as
they have. I was thinking in terms of 25 or 50 basis points,
which is dramatic enough, but we're now seeing deals
in which the spreads are up as much as 200 basis points."
And banks are not even negotiating on deals, with many
as happy to walk away from the deal as to close it Any
deal not done shortens their balance sheet and improves
their solvency ratio, which is something banks are
currently focusing on. This, of course, puts borrowers in
a very difficult position, as they struggle to close deals
no matter how much they are willing to pay.
(cont. on page 20)
ISSUE
THE WORD