Rabobank Profit Falls as Losses at Real Estate Unit Widen

Rabobank Groep, the biggest Dutch mortgage lender, said profit last year dropped as losses at a real estate unit widened and it paid a 774 million-euro ($1.06 billion) fine for rigging interest rates.

Full-year net income fell 2 percent to 2.01 billion euros, the Utrecht, Netherlands-based bank said in a statement today. The real estate business reported a loss of 817 million euros compared with 113 million euros a year earlier as loan-loss provisions in the Netherlands jumped 24 percent.

Rabobank is cutting as many as 10,000 jobs in the Netherlands by 2016 as it seeks to increase profitability and boost capital buffers amid limited growth in its home market. Market conditions will remain difficult and value adjustments on loans are expected to stay at a high level in 2014, Rabobank said.

A Dutch central bank review of lenders’ commercial real estate loans found provisions and capital levels for Rabobank were “within scope,” the company said. The lender increased provisions at the unit in the second half as the quality of loans deteriorated, it said.

The Dutch regulator conducted an inspection of the lending ahead of a European Central Bank asset quality review of 128 of Europe’s biggest banks, which include Rabobank. Chief Financial Officer Bert Bruggink said today that he is optimistic about the outcome of the health check, which the ECB expects to complete by November.

Robeco Sale

Profit last year included a gain of 1.6 billion euros from the July sale of asset-management arm Robeco to Japanese financial services company Orix.

Financial institutions including Rabobank and UBS AG have been fined a total of about $6 billion since June 2012 for manipulating Libor, the benchmark interest rate for more than $360 trillion of securities worldwide. More banks face penalties this year and over a dozen people have been charged in parallel U.S. and U.K. probes.

Rabobank has been selling assets abroad as it seeks to boost its core Tier 1 ratio, a key measure of financial strength, to 14 percent by 2016 from 13.1 percent at the end of 2012. After completing the sale of Robeco, the company agreed to sell its Polish bank to BNP Paribas SA (BNP) in December for about 1 billion euros.

To contact the reporter on this story: Maud van Gaal in Amsterdam at mvangaal@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net

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