Rabobank’s annual profit down 2% after Libor fine

Dutch lender Rabobank said net profit dipped 2 per cent last year as a $1 billion (€730 million) fine for rigging benchmark interest rates and hefty real estate impairments were only partly offset by the sale of its fund management business.

The only major Dutch bank to survive the 2008 financial crisis without a state bailout, Rabobank had a turbulent year marked by job cuts, branch closures, and real estate losses.

But by far the biggest blow to its reputation among customers and the Dutch public was its role in the London Interbank Offered Rate (Libor) scandal - the cost of which, Rabobank said, would not be borne by taxpayers.

The cooperatively owned bank paid €774 million to British, US and Dutch regulators after 30 staff were found to have been involved in “inappropriate conduct” with regard to Libor and its Euribor cousin - interest rates used as benchmarks for more than $300 trillion of financial assets.

Traders' blatant manipulation of rates, revealed in dozens of shocking emails, prompted a public outcry and led to the resignations of chief executive Piet Moerland and Sipko Schat, an executive responsible for Rabobank International's wholesale clients division.

"We are entitled to set off a very large portion of the settlement amount of €774 million for tax purposes, both in the Netherlands and abroad," Rinus Minderhoud, acting chief executive, told a press conference.

“We have voluntarily opted not to do so, however. This is a bill we have to foot ourselves. The full amount will therefore be paid by Rabobank and no one else, especially not the taxpayer,” he said.

The search for a permanent successor to Moerland, who quit in October, is still in progress, Mr Minderhoud said.

Rabobank, the country’s second-largest bank by assets after ING, said net profit fell 2 per cent to €2.012 billion in 2013. It said it expected operating results to improve thanks to cost savings, while impairments on real estate and land holdings and provisions would be lower this year.

On top of the Libor fine, Rabobank was hit by an €817 million loss at its real estate business because of impairments and revaluations, substantially increasing provisions in the second half to reflect the deterioration of the quality of the portfolio.

Those were partly offset by a €1.6 billion gain from the sale of its fund management business, Robeco, to Japanese financial services firm Orix Corp and a positive impact from pension changes.

Rabobank, a mutual lender that finances Dutch cheese and tulip producers, was stripped of its coveted triple-A credit rating from Standard & Poor’s in late 2011.

It divested Sarasin and Robeco, its private banking and fund management businesses, to bolster its capital buffers, and has agreed to sell its Polish unit, Bank BGZ, to BNP Paribas for about 1 billion euros. The Polish financial regulator was quoted this month as saying it would not rule on the deal before August.

Rabobank chief financial officer Bert Bruggink appeared confident approval would be given.

“The Polish regulators sent us supplementary questions in order to be satisfied about the stability of the banking system ... which is a perfectly usual thing to do,” Mr Bruggink said on a conference call with reporters.

“I don’t think we can say that the Polish government is putting up all kinds of barriers for us that would make it impossible to close the deal,” he said.

Rabobank has announced sweeping job cuts, branch closures and reductions in remuneration packages to save about €1 billion in costs.

About 8,000 domestic retail banking jobs will go by 2016 - reducing the headcount in those operations by nearly a third to 20,000 from 28,000, while Rabobank said it would close about 300 out of the 800 or so existing branches of its member banks.

Reuters