One Rabobank: stronger and nearby
Rabobank has been a solid cooperative bank for more than 115 years, with a firm presence in society, supporting its members and customers. And we will continue to do so. The world around us has changed dramatically in the past few years in terms of customer expectations, economic performance, technological advancements, rules and regulations.
These factors are external to the bank, but we’ve been changing too. We strengthened our cooperative in 2015 and made plans to prepare ourselves for the future. This allows us to remain the bank that we want to be for our customers and members. It means that we must make clear choices. Unfortunately, sometimes with painful, but inevitable consequences, such as the loss of thousands of jobs.
Structure and strategy
December 2015 was an historical moment for Rabobank. We future-proofed our company structure, we strengthened our mission and we narrowed the focus of our strategy. From now on, there is only one Rabobank, which works efficiently and is more connected with local communities in the Netherlands and beyond.
In the Strategic Framework 2016-2020, we put even more emphasis on customer contact and excellent service. It is our ambition to be the most customer-focused bank in the Netherlands and a leading global food and agri bank.
To maintain our position as a rock-solid bank, we need to make our balance sheet more flexible, and to reduce it by a maximum of EUR 150 billion between 2014 and 2020. We will transfer parts of our loan portfolio to external partners, and will maintain a lower liquidity buffer in line with the reduced overall balance sheet.
In addition, we need to improve performance. Our aim for 2020 is to improve profits by more than EUR 2 billion compared to 2014. This will come about by both higher revenues and lower costs. These estimates come on top of the current cost-reduction programmes, Mars and Vision 2016. The Mars programme further reduces costs at the central level while Vision 2016 aims to improve customer service while reducing costs. These programmes are on schedule and are expected to be completed in 2016.
Nearby the customer
Performance improvement plans will succeed if we implement a number of important changes. We would like to move closer to the customer by means of our local member banks, in all areas: physically in customer conversations and networks, virtually with apps and websites, and mentally through engagement. The 'nearby' approach ensures that local member banks can count on the full support of a tightly organised banking business. One in which innovation, rapid processing and readily available knowledge ensure that cooperative customer service comes first again.
Banking for the Netherlands
In the Netherlands, Rabobank will be dedicated to stimulating economic growth. We will strengthen our customers with our financial products, knowledge and experience. We will give extra attention to specific target groups, such as young people, the elderly, entrepreneurs and flex workers. We will contribute to the living, working and business environment to make communities better than ever before. We will focus on the themes of mobility, vitality, agriculture and food, raw materials, water, housing, and sustainable and innovative customers. We call this ‘Banking for the Netherlands’.
Banking for Food
Globally, we want to contribute to the improvement of the food and agriculture sector, under the title ‘Banking for Food’. We want to play an important role in feeding the world sustainably. Banking for Food addresses one central question: how to ensure that all people around the world will have enough to eat?
Read the entire Strategy chapter in the annual report
Should we focus on food and agriculture outside the Netherlands, even if opportunities with higher returns come along which fall outside our strategic focus?
The bank’s profitability has to increase. But we are reluctant to grant loans to business that does not contribute to our mission to be a leading international food and agri bank. Even when those activities bring higher returns, since this would be at the expense of our core customers. Due to (higher) capital requirements, there is a cap on the amount of loans we can grant. This can lead to a dilemma: for customers outside the Netherlands, do we prioritise the strategic food and agribusiness focus, even if we are presented with higher-return opportunities that fall outside this scope?
Why does the bank have to become more profitable? The regulator requires that banks hold higher capital buffers. This means that the capital held by the bank has to increase, compared to the outstanding loans. The bank can increase its capital by retaining profit. To achieve this in the time required, the bank will have to demonstrate better performance. Another response to the higher capital requirements is to reduce the balance sheet and make it more flexible. We will discuss this further in the dilemma: Rock-solid bank.
In our current Strategic Framework, profitability improvement is quantified further: the pre-tax group result needs to improve by more than EUR 2 billion in 2020, compared to 2014. With this in mind, can we afford to pass up funding opportunities with higher returns outside the Netherlands?
Focus is important because we must hold capital against the loans we grant. Simply put, this means that if there are more loans on the balance sheet, we need to hold more capital. Here, capital is the limiting scarcity factor: with a certain amount of capital, you have a maximum amount of credit that you can extend. Therefore, it is clear that we have to be selective. However, that doesn't yet answer the question of whether we can actually afford a strategic focus.
We have already mentioned that the bank's performance has to improve. The focus of Rabobank’s activities is based on its strategic strength: 23% of the loan portfolio goes to food and agribusiness. Within these sectors, we have a knowledge advantage, allowing us to deliver more added value to food and agribusiness customers than other banks. This means that in the long term, the international food and agribusiness focus is the best way to remain a rock-solid bank.
This may entail choices that aren't always the most logical from a short-term and long-term profit perspectives. However, it’s important to us to continue to follow our mission. Rabobank's core portfolio contains food and agribusiness activities that enable sustainable future growth. Looking for returns from customers that don't fit within the strategic focus would be at the expense of future growth in the food and agribusiness portfolio. By providing a focus, we are actually increasing our strength, as well as the strength of our customers within the food and agri sector.