Rabobank parent group posts 39% drop in profits

Rabobank, the second-largest Dutch bank by assets, said first-half profit fell 39%, hurt by legal costs and restructuring expenses.

Net income dropped to €924m from €1.5bn a year earlier, the closely held bank said in a statement. The lender increased provisions by €514m to compensate clients whose interest-rate swaps backfired after the 2008 financial crisis.

Restructuring costs, partly tied to job cuts, jumped to €190m from €26m a year earlier.

Chairman Wiebe Draijer, a former McKinsey & Co. partner, is cutting at least 9,000 jobs and aims to offload €150bn in assets by 2020. Rabobank, a cooperative formed in 1898 to serve Dutch farmers, has struggled to keep pace with its competitors and changing bank regulations because of its legal structure.

The 106 local units of the lender last year agreed to become a single entity with one banking license and a common annual report. Steps to improve efficiency, including digitalisation “are proceeding at a rapid pace,” Mr Draijer said in the statement. “The very large loss of jobs associated with this presents a huge challenge to all employees,” he said.

Loan impairment charges fell 58% to €148m in the period, as the Dutch economy continues to strengthen. Rabobank agreed in July to settle a long-running derivatives dispute involving swaps sold to small- and medium-sized Dutch businesses. The lender will compensate about 9,000 clients that had bought about 11,000 swaps that backfired after the 2008 financial crisis. The derivatives, designed to protect against interest-rate increases, caused financial hardship for many when the climate changed after the crisis.

Mr Draijer is also trying to restore Rabobank’s reputation after the bank admitted wrongdoing in a 2013 settlement over interest-rate manipulation and paid a €774m fine. The lender is also being investigated by the US Justice Department over money-laundering controls at its US unit, Rabobank National Association.

A US grand jury is weighing testimony from several current and former Rabobank officials as the US government seeks to tie alleged money-laundering lapses at the bank to specific individuals.

* Bloomberg