Dutch banking giant sees Australia as central to its future
June 2011
A recent annual meeting of the Rabobank Advisory Board determined that Australia will be a future powerhouse of global agriculture. International food and agribusiness experts emphasised the commercial opportunity Australia presents for companies striving to be part of the growth story already unfolding as Asia seeks sustainable food sources.
Such factors underpin the investment Rabobank has already made in Australia, a thriving market where close to 60 per cent of agricultural production is exported into global supply chains.1
“Farmers here are among the most competitive and progressive in the world,” says Rabobank Australia & New Zealand CEO, Mr Thos Gieskes. “While the level of expertise in Australia is very high, farmers welcome opportunities to innovate and enhance their operations. Everything is world standard so if you come to do business you must be able to add value.”
Mr Gieskes expects further investments from the Dutch banking giant, as it positions itself to capitalise on Australia’s comparative advantages in quality food production, especially for the fastgrowing Asian markets to the near north, which are becoming more affluent, urbanised and sophisticated.
Rabobank in Australia
Formed by Dutch farmers in 1898 to finance agricultural enterprises, Rabobank Group now operates in 48 countries, enjoys a AAA credit rating and is one of the world’s leading financial institutions. Rabobank Australia & New Zealand, part of the international Rabobank Group, is one of Australasia’s leading rural lenders and is a major provider of banking and investment services to Australia’s agribusiness sector.
Rabobank initially opened a representative office in Australia in 1991, assisting its Dutch clients already present in the market. By 1994 the bank had identified unique opportunities in agribusiness banking and investment, acquiring the Primary Industry Bank of Australia and expanding Australia’s financial services industry. Gieskes explains this was a deviation from the bank’s usual international growth path.
“We found there were many good food and agribusiness companies in Australia, and since we are the world’s leading food and agribusiness bank, we must have a big presence in Australia.”
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Staff from Rabobank's Shepparton branch in Victoria - one of 60 branches throughout Australia. Photo courtesy of Rabobank.
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Rabobank’s long-term global projections for food production and consumption identified Australia as a key location for global food security. After analysing other factors such as availability of arable farmland, stable climate, sound government, openness to trade and growth of domestic markets, Rabobank made a large investment in Australia. It now has 60 branches throughout the country.
“Rabobank selected countries where we believe we should expand our farming finance business,” Gieskes says. “Clearly, Australia is one of the countries that will play a critical role in feeding other parts of the world, especially Asia. We are firm believers in the future growth of agribusiness in this country.”
The opportunities in Australia’s financial services sector have also supported Rabobank’s decision to expand its business in Australia. The financial sector is the largest contributor to Australia’s national output, generating more than 10 per cent.2 This sector continues to grow more rapidly than most, benefiting from significant structural reforms and strong economic growth over the past two decades.
Encouraged by the success of its rural lending, in 2008 Rabobank introduced its European online retail deposits banking model to Australia by launching RaboDirect. Gieskes says the move into online retail banking will help Rabobank grow and diversify its funding base, which is essential to prevent liquidity issues during times of financial crisis.
“It is a different market for us because RaboDirect is focused on urban areas,” Gieskes says. “We want to access more funds in cities through online retail banking, and use it for our lending business in rural Australia.”
Gieskes says a significant achievement in Rabobank Australia & New Zealand’s 2010 annual results performance was the growth of its RaboDirect online retail deposit arm with the raising of A$2.74 billion of new retail deposits in the year. Overall, Rabobank Australia & New Zealand achieved record results in 2010 with a net profit after tax of A$182.9 million, up 7.5 per cent on 2009. Total Group revenue for the year of A$532.9 million exceeded budget, partially driven by above-market asset growth in the Rural Banking business.
The bank continued its branch expansion program and now has 91 branches across Australia and New Zealand, predominantly located in key rural and regional centres.
In Australia for the long term
For the past six years, Rabobank has been awarded best agribusiness bank in Australia by the independent Merrill Lynch Business Banking Review. Gieskes says the award is testament to their long commitment to Australia’s strong food and agribusiness sector.
“As a farmer you want a banker with you in good times and bad,” says Gieskes. “If we have leaner years we simply wait for better times. We all know farming is a volatile business. But you must keep the view that after rain, comes sunshine. Farmers live with these realities, and so do we.
“Australia has been very good for us. We have endured seven years of relative drought; hard conditions for farmers. In that time we have only increased our presence in Australia, and it is gratifying now when I meet farmers and see smiles on so many faces.”
Rabobank’s tenacity is appreciated by its clients and financial markets. For example, in late 2010, Rabobank Group became the first bank in history to issue a 100-year bond. Institutional investors bought US$350 million worth of the bonds, endorsing the bank’s long-term outlook, and affirming their belief that Rabobank will still be around in 100 years.
Such sustainability is a cornerstone for Rabobank, and the basis for further investment in Australia. Rabobank recently hired a corporate social responsibility (CSR) specialist in the Netherlands who will work with Australian staff to enhance the bank’s CSR activities. Gieskes says the CSR specialist has worked for many years with Rabobank in Europe on initiatives designed to make banking more beneficial for communities, and these learnings will be shared with the Australian market.
Rabobank’s long term vision and astute ability to take advantage of market gaps have proved successful in Australia. “We will never be the most dominant bank in this country, but we might come to have branches in many more towns in rural Australia,” says Gieskes.
About Rabobank
Rabobank started as a credit cooperative formed by Dutch farmers in 1898 to finance agricultural enterprises. Still structured as a cooperative, the international Rabobank Group now operates in 48 countries, enjoys a AAA credit rating, and has more than €650 billion in assets. For over 12 years, Rabobank has ranked in the Top 10 of Global Finance Magazine’s list of the world’s safest banks.
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1 Department of Agriculture, Fisheries and Forestry, Australia’s Agriculture, Fisheries and Forestry at a Glance 2010.
2 Australian Bureau of Statistics, 5204.0 – Australian System of National Accounts 2009-10, Table 5, Gross Value Added (GVA) by Industry.
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