Rabobank to Eliminate 9,000 Jobs in Overhaul of Dutch Lender

  • Chairman Draijer announces bank's strategy through 2020
  • Lender to sell 150 billion euros of mortgages and loans

Rabobank Group will eliminate 9,000 more jobs over the next three years, the Dutch lender said as it announced a strategic overhaul that includes a revamp of its century-old cooperative structure.

The Netherlands’ biggest mortgage lender also plans to reduce the amount of home and business loans on its books by 150 billion euros ($165 billion), 22 percent of its total balance sheet, in preparation for tougher capital rules in Europe, it said in a statement Wednesday. Closely held Rabobank recorded assets of 675 billion euros at the end of June.

“We need to make fundamental changes,” Chairman Wiebe Draijer said in the statement. “Change that needs to be made in our businesses in the Netherlands and around the world.”

Draijer, a 50-year-old former McKinsey & Co. partner who took over last year, is trying to keep costs in check as customers switch to mobile and Internet banking services. The job cuts, representing about 20 percent of the bank’s 47,000 employees, come on top of 3,000 positions already slated for elimination and mainly involve back office and support staff.

Farming Roots

Rabobank, a cooperative formed in 1898 to serve Dutch farmers, has struggled to keep pace with changes in banking because of its legal structure. As part of the overhaul, the 106 local units of the Netherlands’ second-largest lender completed an agreement to work together as a single entity with one banking license and a common annual report. Under the agreement, decision-making will be concentrated in a general council comprising direct representatives from each local unit.

“Rabobank was always one step behind ING and ABN Amro in cutting jobs and selling assets because of its decentralized decision-making process,” said Jos Versteeg, an analyst at Theodoor Gilissen Bankiers NV in Amsterdam, referring to the country’s two other big banks. “The fact that they’re changing to a single cooperative is a very important development. It’ll make them more agile.”

Rabobank set a target range for its common equity Tier 1 ratio of between 14 percent and 17 percent, with a total capital ratio of 25 percent to 30 percent. The new strategy calls for a gross profit of 2.1 billion euros by 2020 through cost savings and greater income, which will lead to a cost-income ratio of around 50 percent and return on invested capital of 8 percent, according to the statement.

“They’re feeling the heat with new competitors entering the Dutch mortgage market and capital requirements weighing on their balance sheet,” Versteeg said. “They had to slim down a bit.”

California Probe

Draijer is also trying to repair Rabobank’s reputation after the bank admitted wrongdoing in a 2013 settlement over interest-rate manipulation and paid a 774 million-euro fine. The lender still faces an investigation by the U.S. Department of Justice involving concerns over anti-money-laundering controls at its U.S. unit, Rabobank National Association. The U.S. asked the subsidiary in June for information about its procedures, and Rabobank said it was cooperating.

Bloomberg News reported in October that the U.S. is investigating whether some bank officials impeded internal efforts to scrutinize customer accounts and to report suspicious transactions at a branch of its California banking unit near the Mexican border. Some bank officials are also suspected of trying to cover up the alleged activity by withholding documents from the Office of the Comptroller of the Currency.

Rabobank wrote off 600 million euros in the value of its U.S. unit in August, saying the outlook for the business had deteriorated. It blamed costs, stricter capital requirements and a faltering loan book.

“We had a reputation as one of the world’s most stable banks,” Draijer said on a conference call with reporters Wednesday. “It’s important to have a strategy to once again belong to those banks.”

Before it's here, it's on the Bloomberg Terminal.