Rabobank Groep, the biggest Dutch mortgage lender, recorded a 41 percent rise in profit after loan impairment charges plunged in the first six months of the year.
Net income jumped to 1.52 billion euros ($1.69 billion) from 1.08 billion euros a year earlier, the bank said in a statement on Thursday. Goodwill impairments fell 70 percent to 356 million euros, as the economy strengthened after returning to growth last year.
The recovery from a two-year recession was less apparent in other areas of the earnings report. Domestic loans shrank 1 percent from a year earlier as customers took advantage of low interest rates to step up mortgage payments. While private loans grew by 4.7 billion euros over the first half to 434 billion euros, that was mainly due to the weaker euro.
“It is vital that we continue to reduce costs and improve income further, given the intensive competition and stricter capital requirements,” Chairman Wiebe Draijer said in the statement. “We will give higher priority to improving profitability and strict control of the volume of our risk-weighted assets.”
Draijer, a 49-year-old former McKinsey & Co. partner who took over last year, is overseeing efforts to trim 10,000 jobs by 2016, or about a fifth of the workforce. He is also trying to repair Rabobank’s reputation after the century-old cooperative bank admitted wrongdoing in a 2013 settlement over interest-rate manipulation.
That effort may be complicated by fresh questions about its U.S. unit, Rabobank National Association. Rabobank said the Justice Department has asked the subsidiary for information about its money-laundering controls and that it is cooperating with the requests.
Rabobank logged a 600 million-euro charge to correct the value of its U.S. unit, saying the outlook for the business has deteriorated. It blamed costs, stricter capital requirements and a faltering loan book for the write-off on its subsidiary, which caters to California farmers.
Net interest income, a gauge of financial strength, declined by 1 percent to 4.5 billion euros from a year earlier. The lender said that it was charging some large customers to hold their money, passing on costs from the European Central Bank’s year-old negative interest rate policy.