Rabobank warns over impact of Russian sanctions as profits fall

Rabobank has warned that the impact of Russian sanctions may hurt its business, as the Dutch mutual bank reported a drop in profits the first half of the year.

Rabobank forecast a recovery in the second half of this year as private consumption picks up faster than expected, but cautioned in a statement yesterday that Russian sanctions could have an adverse impact on its business customers.

“The consequences of the trade conflict with Russia that has recently flared up represent an uncertain factor,” the bank said, adding that sanctions could have a “limited” impact on its performance, in a further sign that the continuing stand-off over Ukraine is creating uncertainty for businesses across Europe.

Fears of a damaging trade war between Russia and the West have grown as Moscow banned imports of a wide range of European Union and United States agricultural and food products this month and threatened possible sanctions on aerospace, shipbuilding and auto sectors.

It has also banned a collection of other western food and drink products, through Rospotrebnadzor, its consumer protection agency, which on Wednesday temporarily shut down four McDonald’s restaurants, including the group’s flagship Moscow location.

Climate of trust

“We are assuming that the current trade conflict will not continue to escalate and that the climate of trust will not be further eroded,” Rabobank’s statement said. “Should this happen, nonetheless, a weaker development of the economy in 2014 and 2015 cannot be excluded.”

In the six months to June 30th the bank reported that net profit slipped by 3 per cent to €1.1 billion, pulled down by a one-off €214 million charge from the Dutch government related to the bailout of local lender SNS Reaal.

As the Netherlands economy gradually recovered on the back of trade and corporate investments, Rabobank added that domestic consumer confidence was picking up as the housing market rapidly recovered. Its loan portfolio decreased by €1.5 billion to €433.2 billion in the period, a drop the bank said was partly explained by early repayments on residential mortgages.

Solvency, measured by the common equity tier 1 ratio, dropped to 12.6 per cent in the first half of the year. The bank issued little further guidance about the potential impact of the asset quality review by the European Central Bank, the results of which are expected in October this year.

Investigation

The

lender has been at the centre of an ongoing investigation into the manipulation of Libor and other key benchmark rates, paying some $1 billion to US, UK and Dutch authorities to settle the investigation in October.

On Monday a former senior rate trader at Rabobank pleaded guilty of conspiring to manipulate interest rates to a court in New York. A Japanese trader who also worked for Rabobank was the first person to plead guilty in the investigation earlier this year. – Copyright The Financial Times Limited 2014