Our three t
Healthy balance between funding
and creating credit lines
Focus for the coming years
Ris CFRO Harry de Roo
on the revised Rl strategy:
Rl grew steadily into a Wholesale/corporate bank located
in 28 locations. Growth scenarios in Australia/New Zeaiand,
Brazil and California appeared to be successful by operating
a Wholesale/corporate business that assisted in both the
funding and the initial profits from the corporate business.
On top of that, in Australia/New Zeaiand and California,
opportunities for retail banking were identified, creating
room for less volatile income. Retail banking also proved to
be a risk mitigating business, not affected by large exposures
that are common in the corporate market.
Now, with the credit crisis still on the surface, the banking
landscape has changed, and capital is scarce. A large
dependency on the financial markets can easily cause
solvency and liquidity issues. For Rl, this means looking at
risk mitigating scenarios that offer enough room for future
growth. To secure a sustainable business we now have to
change our business model and focus not only on our credit
spreads, but instead create a healthy balance between
funding and creating credit lines. From a diversification
perspective, we need different sources of capital and must
think twice about where we allocate capital.
As a result, we have chosen to focus in the coming years
on a combined model where our Wholesale business and
retail business leverage off each other. Wholesale being
there for selected bigger F&A clients, who offer us the
opportunity to be their long-term bank of choice because
of our knowledge, capacity and steadiness, and rural retail
being there for SME clients (and consumers) providing
us with a steady income flow and deposits. Also, our
more sophisticated Wholesale products can potentially
be leveraged to the retail clientele. Products originally
developed for Wholesale have become more plain vanilla
for SMEs (i.e. GFM treasury products or products like
greenhouse financing developed by Structured Finance).
Marketing-wise, our retail business can push the Rabobank
brand, while the Wholesale business positions Rabobank
as the leading corporate F&A player globally.
goals
"Fundamentally, we have three goals within
the organisation. Firstly, we want to establish
market leadership in the Netherlands. So the
first question to each Group entity is: what
are you doing to make that happen? That's
your first goal in life. Secondly, we want to
become a leading global F&A bank. So that's
the second goal in life for each entity. And
thirdly, how are you gong to make your
specialism flourish? Consequently, every
entity is now challenged to deliver on market
leadership in the Netherlands and become a
global F&A player.
"Then, on top of those three pillars there
is our challenge to more than adequately
fund our asset growth. Over the past
years, Rabobank had strong asset growth
internationally, but not enough liability
growth within some business areas. This
forced us to go to the professional markets
for funding. And although we successfully
raised long-term money on the financial
markets, it is advisable to diversify your
funding sources as it is always difficult to
exactly know why and when funding prices
of a certain source will change.
"So, to secure a sustainable business and be
less dependent on volatile financial markets
(certainly now with the current credit crisis)
we have to change our business model and
not focus only on our credit spreads, but also
create a healthy balance between funding
sources and asset generation. The regions will
be expected to find more funding through
their customer base. Additionally, we want 50
percent of the growth of corporate banking
assets to come from cliënt funding, while in the
retail environment we've set that figure at 70
percent.'
ISSUE 19 APRIL 2009 THE WORD 13
