Rabobank is a Netherlands-based co-operative bank which provides services to corporates in 26 different countries, particularly companies operating in the agricultural and food sectors. Rabobank delivers a range of capital market and risk management services to corporates via its Global Financial Markets division. Financial Logistics, meanwhile, is a key element of the Corporate Clients Netherlands offering, focusing on liquidity and risk management and advisory services relating to transactions of up to one year.
Introduction to Rabobank
Rabobank Group is a full-range financial services provider that operates on cooperative principles. It is owned by 183 local member banks and has 289 offices in 38 countries.
Rabobank has 55,000 employees worldwide and has been awarded AAA status by Moody’s, Standard & Poor’s and Dominion Bond Rating Service. As a co-operative bank with no external shareholders, Rabobank does not pay dividends. It is the largest financial service provider in the Netherlands and is one of the fifteen largest financial institutions in the world in terms of Tier 1 capital.
Rabobank Group consists of Rabobank Nederland, the co-operative organisation which advises the local banks, as well as its subsidiaries and the 183 independent Rabobanks across the Netherlands.
Rabobank was formed by the 1972 merger of two agricultural co-operative banks, Coöperatieve Centrale Raiffeisen-Bank and Coöperatieve Centrale Boerenleenbank, both of which were founded in 1898. The name ‘Rabobank’ was derived from the first two letters of each of their names and was formally adopted in 1980.
From the 1970s, Rabobank began to expand internationally, opening branches in Europe and also in Asia, North America and South America.
Rabobank offers corporate services in 26 countries worldwide and focuses in particular on companies operating in the food, beverage and agribusiness sectors as well as specialising in the telecom, media and internet (TMI) sector and in leveraged finance. Rabobank sees this focus on particular sectors as an important point of differentiation compared to other European banks. “People choose to bank with us because we understand them rather than because we lend them money,” says Alistair Mules, Head of Corporate Markets Europe at Rabobank.
GFM and FL
Global Financial Markets (GFM) is a unit of Rabobank International. GFM provides a range of alternative financing, capital structure and risk management solutions to corporate clients.
Corporate Clients Netherlands is another unit of Rabobank International. Financial Logistics (FL) is a part of Corporate Clients Netherlands and it addresses corporates’ cash management, liquidity management and risk management needs on a holistic basis.
There is a certain degree of overlap between the services provided by GFM and FL, as both deal with corporate risk management. Broadly speaking, GFM executes and advises on longer term risk hedging, while FL focuses on short-term risks and transactions of up to one year. Although GFM does execute some transactions of less than one year, the focus is on the longer term transactions.
Rabobank is active in every country in which the bank has corporate relationships. GFM predominantly covers these countries via specialists based in Utrecht (the Benelux team) and London (the Europe team) while also frequently connecting with the local banking operations.
Global Financial Markets (GFM)
The GFM umbrella covers Rabobank’s activities related to the financial markets. These are broadly divided into:
Debt Capital Markets.
GFM offers corporates alternative forms of financing to a straightforward loan. These include capital markets issues, high yield bonds, US private placements, securitisation and loan syndication. Rabobank also provides recommendation on capital structure for the broad range of its corporate clients, both public and private and those with or without a rating.
Once the financing options have been considered, GFM considers which risk management solutions can be used to get clients to their desired final position. GFM advises on the management of risk and covers areas such as:
FX risk & including a detailed analysis of the client’s currency positions and foreign currency income, leading into tailored solutions.
Interest rate risk hedging.
Commodity risk & including hedging of soft commodities, such as agricultural products, as well as energy hedging and carbon trading.
Rabobank’s AAA credit quality is another important aspect of the GFM offering. “It means that we end up looking at longer term solutions for our clients than other banks and being chosen for more credit intensive structures as well,” explains Alistair Mules. “Clients would rather have that exposure with the AAA bank for its 30 year cross-currency hedging than with a different type of institution.”
Global Financial Markets
Head of Corporate Markets Europe
What is your role?
I’m the Head of Corporate Markets Europe, which means that I’m responsible for all of the activity that we undertake within GFM with our corporate and corporate bank clients in the Europe region. The corporate bank lends the client money; then everything beyond that we do from a GFM standpoint. FL is one part of that offering.
How do you work with treasurers?
Because of our focus on particular industry sectors we get involved in our clients’ underlying business, and partly because we look at all products, we end up taking quite a solutions-based approach. It’s a sounding board and a partnership approach, where we work with companies on their capital structure, look at various opportunities for them on the capital markets side and on the risk management side, then we will suggest options for them.
Rabobank might not necessarily finally deliver all of the options that we present to the client. We give them the pros and cons of each and aim to be best placed to deliver one or more of the list of options. We’re quite content for some of these to be delivered in partnership with other banks or simply by someone else better positioned in a particular field – we always find there is enough of a role for us to deliver value.
We find we are very successful at co-ordinating ourselves internally as we’re a little more focused and a little smaller than most banks. We have a global corporate team that shares information and approaches across the various regions, feeding back across what we’re seeing in the sector in different countries. We find that helps a lot in terms of providing clients with more efficient solutions.
How do you see GFM evolving in the next few years?
I would expect Rabobank, and other banks, to focus more on core business going forward rather than the more opportunistic or cyclical business that has been happening in the market. For Rabobank, corporate business has always been a focus – this will continue to grow in terms of investment and focus going forward. We’re looking to build out our GFM business in Asia, the US and Australia as well as in Europe.
Manager Sales Financial Logistics
What is your role?
Over four years ago I joined Rabobank as a relationship manager for Food & Agri corporates. I did this for three years and then in early 2006 I joined Financial Logistics as manager of the central sales team. In this role I am responsible for corporate clients in the FL area.
What areas are included in Financial Logistics?
Financial Logistics consists of five interrelated products and services: Payments & Receivables, Cash Flow Management, Liquidity Management, Risk Management and Advice. By combining these activities Financial Logistics is able to offer an integrated product range to optimise our clients’ risk and liquidity management Other Dutch banks separate these product lines, but corporate treasurers and CFO’s are responsible for monitoring and controlling their cash, liquidity management and risk management – so why shouldn’t a bank combine these areas?
So we combined these areas and agreed with GFM to expand the FL proposition with advice in the area of FX risk – transaction risk, transfer risk and economic risk – and interest rate risks up to the period of one year. The client is serviced by FL but the execution of these transactions is done by GFM. In this way we can offer our clients a single window for their short-term financial logistic processes.
Why do GFM and FL exist as separate units?
Apart from issues such as compliance and the existence of Chinese Walls, the activities of GFM and FL are of a different complexity. FL focuses on the mitigation of short-term risks and advice on streamlining and controlling the client’s cash and liquidity management (execution of payments, issuance of guarantees, Letters of Credit etc), whereas GFM focuses on product delivery and execution of transactions in the area of Financial Markets, such as FX and IRR-swaps, options etc.
FL and GFM are different disciplines, but each is executed by experts who are capable of offering high level advice and services to our corporate clients. In a strong co-operative approach FL and GFM are able to address and mitigate the risks that a corporate treasurer or a CFO is facing within the company’s course of international activities.
How do you expect this area to develop in the next few years?
What we see is that especially in the area of cash management and payments, margins are diminishing. SEPA is an important factor that will encourage transparency, while further reducing the margins on payments on a European scale. As a result banks will change their focus more into an advisory role in order to compensate for this.
For example, by means of supply chain management, banks can offer added-value to their clients. This can be achieved by knowing our clients, their customers, their suppliers, what they are doing, where they are active, what risks are present in each part of the chain and how Rabobank can mitigate those risks.
Financial Logistics (FL) combines a number of different areas in order to provide corporate clients with a more integrated approach.
Rabobank illustrates the FL proposition using a pyramid with five layers. Payments and receivables and cash flow management represent the two lower layers, which are the more general layers of the pyramid. The three upper layers of the FL pyramid offer more customised advice, including liquidity management, risk management and advisory services. A dedicated FL consultant supports customers throughout every step of the process, from structuring payments to tailor-made advice.
By combining the various activities FL offers an integrated product range to optimise risk and liquidity management, aiming to provide organisations with a competitive advantage.
FL Sales consists of a team of 13 central consultants who advise corporate clients on short-term treasury and working capital concerns, as well as a further 15 consultants working in regional teams, liaising between corporates and member banks. In addition, sales product management and marketing staff bring the total headcount across FL to 65.
FL recently introduced the Rabo Financial Logistics Portal (RFLP), which is a web portal that streamlines customers’ financial logistic processes in a number of ways. It provides corporates with real-time visibility into their overall financial positions. The RFLP unites several different areas: international cash management, trade services, treasury management and short-term working capital.
An integrated approach
In order to provide the level of expertise necessary in these different product areas, FL and GFM exist side by side. FL provides the corporate client with fundamental cash management tools alongside shorter term risk management strategies and trade finance. GFM focuses on longer term transactions with a different complexity. This separation enables Rabobank’s specialists to be trained in each area, providing high levels of knowledge and expertise.
However, at the same time it is important to provide clients with an integrated approach. “CFOs and treasurers are not only working with working capital, interest rate risk etc,” explains Chris Sunderman. “They are increasingly involved in other issues like pensions, compliance and supplier risk. If you want to add value in advisory terms to those treasurers and CFOs you need to combine product categories in order to provide the right advice.” The key to achieving this is a centrally managed bank-client relationship.
Rabobank views the relationship between corporate client and bank as a single relationship. As a result, there is a strong emphasis on providing clients with a single point of contact in the form of a relationship manager, who oversees all the company’s dealings with Rabobank and links in product people from other areas of the bank when appropriate.
The structure of the client’s relationship with Rabobank is determined by a number of factors including the client’s size, preferred mode of operating and the complexity of the services provided. In the case of a large corporate, for example, discussions might be carried out between a number of different staff at the bank and a number of the client’s staff. However, the relationship manager oversees all of these discussions and retains a clear overview of the company’s goals.
As treasurers continue to take on a wider range of responsibilities, Rabobank has responded by structuring its product areas into two units which can meet clients’ varied needs. Between them, Financial Logistics and Global Financial Markets provide corporate clients with a comprehensive range of products and advisory services. Meanwhile, the importance of a well-managed relationship remains key and is reflected in the provision of dedicated relationship managers.
With offices in 38 countries worldwide, the Rabobank Group has the highest qualification of credit status (Triple-A) from prominent international rating agencies Standard & Poor’s, Moody’s and Dominion Bond Rating Service. Specialising in the food and agribusiness, the bank is measured by its core capital and is one of the top twenty world’s largest financial institutions. The Rabobank group also includes specialised subsidiaries in insurance, leasing, vendor finance, trade finance, asset management, investment funds, private banking & trust and venture capital. In the treasury arena, Rabobank specialises, amongst others, in financial logistics, liquidity funds and tailor-made solutions. As a cooperative institution, the primary aim of Rabobank is to work with and for customers on mutually beneficial financial solutions.