Rabobank Group

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Rabobank Group

PO Box 17100
3500 HG Utrecht
The Netherlands
Telephone: ( + 31) 30 216-2804
Fax: ( +31) 30 216-1976
Web site: http://www.rabobankorganisatie.nl

Cooperative
Incorporated: 1972 as Coöperatieve Centrale Raiffeisen-Boerenleenbank (Rabobank)
Employees: 45,000
Total Assets: Nfl 550 billion ($ 261.9 billion)(1999)
NAIC: 52211 Commercial Banking

Rabobank Group, known in the Netherlands as Coöperatieve Centrale Raiffeisen-Boerenleenbank, is the third-largest provider of financial services in the Netherlands and ranks as the 32nd largest bank worldwide. Unlike its chief domestic rivals, publicly listed ABN Amro Holding N.V. and ING Groep N.V., Rabobank has clung steadfastly to its status as a private cooperative, composed of 439 independent member banks with some 1,800 branches under the Rabobank name. With a membership of more than 550,000, Rabobank supplies financial products in one form or another to some seven million customers—more than half of the population of the Netherlands. Formed in order to provide financial support to the Netherlands’ farming community, Rabobank remains true to its roots and accounts for more than 85 percent of the country’s food and agriculture-related financial services business. Since the mid-1980s, however, Rabobank has been engaged in an aggressive expansion drive, both within the Netherlands and on the international financial scene. Rabobank has extended its portfolio of services to include insurance, through subsidiary Interpolis; asset management and investment fund products through subsidiary Robeco Group, acquired in 1996; international wholesale banking services, targeting especially the worldwide food and agriculture markets, through subsidiary Rabobank International, with 121 branches in 35 countries; private banking and asset management through International Private Banking & Trust; domestic private banking through Schretlen & Co.; and leasing, trade finance, and vendor financing through subsidiary De Lage Landen. With assets topping Nfl 550 billion in 1999, Rabobank is also making moves to join the new single-currency market. In October 1999, Rabobank announced its intention to form an alliance with German cooperative bank Deutsche Genossengesellschaft (DG Bank). Initially planned to take the form of a joint-venture partnership, the alliance is expected to lead to full-fledged merger in the early years of the new century.

Farmers Cooperative Movement in the 19th Century

Rabobank’s origins lay in the cooperative banking movement of the 19th century. In 1864, Friedrich Wilhelm Raiffeisen, of Heddesdorf in Germany, started up a local banking cooperative that was to inspire similar cooperatives worldwide. Raiffeisen’s model was based on providing mutual assistance to its members, especially in the form of loans and other financial assistance, providing a sense of commitment to community that has remained a hallmark of the cooperative banking movement into the 21st century. The Raiffeisen banks operated on a local basis as part of a larger cooperative network. Administration was frugal, and all profits were reinvested in the bank. The Raiffeisen form of cooperative banking soon spread across the German border into the Netherlands, where it held a strong appeal for the country’s farmers.

The first Dutch financial organization to meet the full criteria of the Raiffeisen model was the Coöperatieve Landbouwersbank en Handelsvereeniging, in Lonneker, near Enschede. Established in 1896, this bank remained in operation for nearly 70 years, and remained an independent operation until the late 1950s. The establishment of the Lonneker bank, and its emphasis on the agricultural community, inspired the startup of other farming-focused banking cooperatives. Hard hit by the economic climate, and finding little assistance from the traditional financial community, the Netherlands’ farmers turned to the Raiffeisen cooperative model of mutual aid. The first of these farmer-owned cooperative banks appeared in 1897, called the Boerenleenbank (or “farmers loan bank”), in the town of Geldorp, quickly followed by similar Boerenleenbanks in Leene, Heeze, and Heeswijk. By the following year, the Boerenleenbank concept had spread through much of the Netherlands.

In 1898, the first initiatives were taken to group together the many independently operating Boerenleenbanks under a central administration. In June of that year, a group of southern farmers’ banks formed the Coöperatieve Vereeniging van Raiffeisen-Banken en Landbouwvereenigingen in Utrecht. This was followed soon after in the north by the creation of the Coöperatieve Centrale Boerenleenbank in Eindhoven. Member banks of both the northern and southern cooperatives remained independently operated, yet benefitted from a central administration. The Dutch farmers’ union, the Nederlandsche Boerenbond, which had been behind the formation of the banking cooperatives, had initially intended to form a single, nationally operating central organization. Efforts were made to merge the two groups together in that same year. The two organizations, echoing traditional north-south tensions, were unable to agree on a merger, however.

By the 1920s, the farmers’ banking cooperative movement had spread throughout the Netherlands, comprising more than 1,200 locally operating member banks. The combined assets of these banks gave the cooperatives a position as one of the Netherlands’ largest savings and loan institutions. These farmers’ cooperatives retained a near-monopoly on the agricultural community savings and loan market until the 1950s, when the Dutch banking industry began to restructure. Where banks had typically focused on single-product activities, more and more banks were beginning to offer multiple products. In 1957, for example, the country’s commercial banks began offering savings accounts for the first time.

The farmers banking cooperatives quickly responded to the changing banking climate by expanding their services. In the early 1960s, the cooperatives began offering insurance services. In 1965 the cooperatives added commercial accounts and other services. In that year, the Centrale Boerenleenbank acquired Amsterdam-based private broker and bank Schretlen & Co. Two years later, the two cooperatives joined together to form the Bankgirocentrale. By the end of the decade, both cooperatives were also operating travel agency services.

At the start of the 1970s, the two cooperatives announced their intention to join forces. The actual merger took place in December 1972, forming the Coöperatieve Centrale Raiffeisen-Boerenleenbank. The new organization quickly became known as Rabobank. Comprised of more than 1,500 independent banks, which took on the Rabobank name, the new financial institution became one of the country’s top three providers of banking and other financial services.

International Bank for the 21st Century

Despite diversifying its portfolio of financial products since the early 1960s, Rabobank remained focused on providing traditional retail banking products to an exclusively Dutch, and especially agricultural market. In the late 1970s, faced with increasing competition from traditional banks, the farmers’ cooperative began to open outwards. In 1970s, Rabobank joined with a number of other European banking cooperatives to form the Único Banking Group. Two years later, Rabobank dropped the membership requirement for its private depositors; only customers arranging business and professional loans were required to become Rabobank members. This change enabled Rabobank to find wider appeal among the general Netherlands population, and by the 1990s the bank was able to claim that roughly half of the country’s 14 million citizens were customers of one or more of its financial products. Nevertheless, Rabobank succeeded in retaining a large membership base, which neared some 600,000 by the end of the century. At the same time, Rabobank had successfully maintained its low operating costs and strong profits, enabling the bank to achieve the coveted Triple-A rating from both Moody’s and Standard & Poor.

Rabobank’s future growth opportunities in the Netherlands remained limited, however. Yet increasing pressure from its capital-rich, publicly listed competitors, at a time when financial barriers among European Community member states had begun to fall—culminating with the introduction of a single European currency in 1999—forced Rabobank to look beyond the Netherlands’ borders. The bank took its first international steps in 1983, when it acquired 84 percent of ADC A Bank in Germany. Also during that year, Rabobank opened its first overseas office, in London, heralding the launch of the company’s global operations, Rabobank International.

Rabobank also began stepping up diversification of its product portfolio. In 1986, the bank began offering mutual funds and shareholder products, including the Rabobank Obligatiefonds and the Rabobank Andelenfonds. The bank also stepped up its activities beyond the agricultural sphere, to the extent that, by 1987, loans to the business community outpaced loans to the agricultural market for the first time. In that year, also, the banks leadership was given to Herman Wijffels. As head of Rabobank until the late 1990s, Wijffels was given much of the credit for developing Rabobank’s international business and transforming it into one of the world’s top financial institutions. By the beginning of the 1990s, Rabobank determined to diversify its activities in order to become a full-service financial services provider offering banking, investment, and insurance products.

Company Perspectives:

We, the staff and management of the Rabobank Group, have as both point of departure and primary goal the best interests of our customers. We aim to add value by: providing those financial services considered best and most appropriate by our customers; ensuring continuity in the services provided with a view to the long-term interests of the client; commitment to our clients and their concerns and issues so that we can contribute to achieving their ambitions. We believe it is important that clients immediately recognise and personally experience the following values in all our activities: integrity: we act according to our stated aims; respect: we will interact with clients so that they experience our respect for them; expertise: we must be able to fulfill every promise we make.

While Rabobank’s publicly traded counterparts were able to finance aggressive expansion and acquisition programs, Rabobank, guarding its private, cooperative status, had to look elsewhere for growth. The cooperative took a two-pronged approach. The first part involved extending its financial expertise, particularly in the high-growth food and agricultural sector, to a worldwide scale. For this the company pursued an internal growth strategy, opening new branches and entering new country markets, while also seeking local partnerships and acquisitions in the agricultural banking sector, such as the 1989 purchase of Primary Industry Bank of Australia. By the middle of the decade, Rabobank International was present in more than 30 countries; by the beginning of the new century, nearly 160 Rabobank International and other subsidiary branches operated in more than 40 countries.

The second prong to Rabobank’s 1990s growth strategy came through a series of strategic mergers. The first occurred in 1990, when Rabobank merged with insurance cooperative In-terpolis, bringing the latter’s portfolio of insurance products to Rabobank’s customers. Rabobank also entered the sales promotions products category (leasing, wholesale financing, and other debt financing) for the international durable equipment manufacturing market with De Lage Landen. Both Interpolis and De Lage Landen operated primarily in the Netherlands, but with worldwide interests as well. In the early 1990s, Rabobank, which had developed a modest assets management business, began to approach Robeco, one of the world’s leading assets management companies, based in Rotterdam. The cooperation between Rabobank and Robeco became a partnership when Rabobank acquired 50 percent of Robeco in 1996, with an option to acquire full ownership, and completed the acquisition in 1998. The total purchase price of around NfL 1 billion gave the privately held Robeco the much-needed capital to fund its own worldwide expansion and added Robeco’s strong assets portfolio to Rabobank’s list of products.

By the late 1990s, Rabobank’s transformation into a diversified financial products provider had largely been completed. Yet the bank remained a relatively small player in a market set to see explosive growth with the launch of the Eurodollar in 1999. As its publicly listed competitors moved towards an aggressive consolidation of the European financial market, mirroring a continuing worldwide consolidation, Rabobank was forced to look beyond the Netherlands borders in order to secure its position in Europe. Analysts saw the inevitability of alliances among Rabobank and its European cooperative counterparts, such as Credit Agricole of France. Instead, Rabobank turned first to Dutch insurance broker Achmea Holding NV, with the intention to form a 50-50 joint venture offering asset management, pension, life insurance and other insurance products. That deal, however, fell through.

Meanwhile, Rabobank International’s ambitious expansion program—in particular its attempt to expand beyond its food and agriculture base into the health sector and other markets—had begun to cut into its parent’s profits, threatening Rabobank’s prized Triple-A rating. Rabobank responded with a series of job cuts and a refocusing of Rabobank International on the bank’s core expertise in the food and agriculture sectors. Rabobank, meanwhile, had not yet given up in its attempt to find a suitable partner for its European growth. In October 1999, the cooperative announced its intention to form a 50-50 joint venture, with an eye toward a future merger, with fellow cooperative bank, Deutsche Genossengesellschaft, known as DG Bank. The move, greeted with approval by market analysts, suggested further partnerships and mergers within the European cooperative banking movement, still a financial force in France, Belgium, Spain, and Germany after nearly 150 years.

Principal Subsidiaries

Rabobank International; International Private Banking & Trust; Interpolis; De Lage Landen; Robeco Group; Nedship Bank; Schretlen & Co.; Glide Investment Management; Rab Vastgoed.

Principal Competitors

ABN Amro Holding N.V.; ING Groep N.V.; Fortis, Inc.; Caisse Nationale de Credit Agricole; Deutsche Bank AG; HSBC Holdings plc.

Key Dates:

1864:: A cooperative bank is founded by Friedrich Wilhelm Raiffeisen in Heddesdorf, Germany.
1897:: Boerenleenbank (“farmer’s loan bank”) is founded in Geldorp, Netherlands, with Raiffeisen’s bank as a model.
1898:: Grouping of the many bank co-ops occurs, under Coöperatieve Vereeniging van Raiffeisen-Banken en Landbouwvereenigingen in the south, and Coöperatieve Centrale Boerenleenbank in the north.
1925:: Dutch farmers bank cooperative achieves national penetration.
1957:: Dutch banking is deregulated.
1961:: Co-ops introduce insurance services.
1965:: Co-ops introduce commercial banking services.
1967:: The two major co-ops form a joint-venture, Bankgirocentrale.
1969:: Travel agency services are introduced.
1972:: Rabobank emerges from the merging of the two major co-ops.
1986:: Rabobank begins offering mutual funds.
1999:: A joint-venture and merger agreement with DG Bank of Germany is planned.