RABOBANK: TAKING THE COUNTRY BY STORM
by Lynn Henderson, Editorial Director
In 1994, veteran Rabobank employee Cor Broekhuyse accepted the assignment of building the bank's agricultural business in Australia.
Six years later, he and his team had not only accomplished their goal, but exceeded everyone's expectations by growing it to become the second largest ag lender in the continent with a 20% share of the Australian market.
Rabobank has always been unique in the world of banking since its original founding in 1898 by a group of Dutch farmers. They organized it as a co-op to "provide their rural communities with access to fair and reliable sources of credit and to help build and support each other's business."
Staying true to its mission, Netherlands-based Rabobank, now has an astounding 90% market share among ag producers in its home country. Continually seeking ways to grow its business, in 1978 the bank began expanding internationally, opening overseas funding centers and then its first international branch in 1981, in New York.
Rabobank is now the world's 25th largest bank with over $650 billion in assets and operations in 37 countries. On top of that, Global Finance magazine currently rates it the 3rd safest bank in the world (of the 30 safest, only four are headquartered in the U.S., none are reported to be in Canada) - and the only one of the top three banks that is not government-backed.
But, back to its Australian success story, how did it happen?
"We had virtually no presence in production lending in the country when we got started," Broekhuyse, who was raised on a Netherlands dairy farm, reports. "First, we made a key acquisition of a bank that was active in the ag market. Then we introduced a new 'interest only' loan that was revolutionary to the marketplace and gave our managers an important new business tool. Also, I was fortunate enough to build a team of professionals who truly understood the needs of the Australian ag market place."
Four days before 9/11, Broekhuyse, arrived in New York, NY, after being appointed as Rabobank International's Regional Manager-Americas, where he has responsibilities for the bank's activities in North and South America.
Although Rabobank has been active in the U.S. since 1981, and has grown to be one of the largest lenders to American food manufactures and corporate agribusinesses (see sidebar), up until 2003, it had little presence in the ag producer market segment - one that had become a top priority for the bank.
To serve the segment, Broekhuyse and his team implemented a plan similar to the one that was so successful in Australia.
Four years ago, Rabobank purchased El Centro, CA-based Valley Independent Bank, a full service retail bank with a presence in key agricultural areas. Three years ago, it acquired St. Louis, MO-based Lend Lease Agribusiness (formerly Equitable Insurance's ag lending group) that specialized in long-term land mortgages, and Cedar Falls, IA-based Ag Services of America that specialized in short-term operating loans.
Along the way, the bank introduced an "interest only" loan, which it calls a "real estate secured revolving line of credit," to U.S. ag producers.
The result? Rabobank currently has over $5 billion in assets under management to U.S. ag producers, and $15 billion in loan commitments to corporate food and agribusiness clients, making it one of the largest providers of ag credit in the country.
STRUCTURE AND PRODUCTS
The bank is organized into three business units to serve the North American market:
• RaboAgriFinance, financial services for ag producers, headquartered in St. Louis, MO, over 100 relationship managers and locations nationwide - headed by Richard Henderson.
• Rabo International Corporate Banking, services for food and agribusinesses, headquartered in New York, NY, five regional offices in North America - headed by Robert Bucklin.
• Rabobank, N.A., full-service retail community banking, Roseville, CA.
"Our RaboAgriFinance unit offers a complete line of ag financial products and services," reports Henderson. "This includes operating lines of credit, real estate loans, crop and livestock insurance, and vendor-supplied credit. In addition, many of our customers around the company country have access to all of the services offered by our banks in California, including online banking, checking accounts, trust services, etc."
The unit has nearly a nationwide footprint (see Fig. 1). It has headquarters in St. Louis, MO, and regional offices in Cedar Falls, IA; Stockton, CA, and Fresno, CA, overseeing approximately 75 relationship managers and 32 offices. "We have loan production offices in eight retail bank locations in California, 2 additional offices around the country, and 25 of our relationship managers work from their homes," Henderson says. RaboAgriFinance has a total of approximately 325 employees, serving thousands of customers in every sector of production ag.
"As a cooperative," Henderson explains, "Rabobank is able to reinvest the profits earned in our U.S. businesses, back into in the growth of our U.S. businesses."
The ag lending unit has ex-panded rapidly in the past few years, hiring 130 new staff members since 2003. "In all of our hiring of relationship managers and loan analysts, we emphasize the need to have an ag or ag lending background," Henderson says.
One of its fastest growing services is its Supplier Relations Department which develops and administers credit programs for some of the nation's top seed companies and agricultural retailers. These companies enjoy the benefits of a "captive finance" product without the capital investment and administrative cost associated with an in-house program. Rabo provides all of the capital and backroom required.
"Rabo has a different approach to this segment of the market since we view the supplier as our customer," says Tom Levasseur, Managing Director of Supplier Relations for RaboAgriFinance. "We work hard to understand our client's needs and bring ideas and solutions that add value to their businesses and benefits for their clients."
Companies can also market credit programs on a co-branded basis with RaboAgriFinance and its QuickLink Credit brand.
Still, having a major presence with well-trained and motivated professionals handling a full suite of financial services does not guarantee success in the hotly competitive ag lending market space. Especially if the organization is a relative newcomer to the marketplace.
So, what is RaboAgriFinance's competitive advantage?
"I think we have several," Henderson explains. "When competing with local banks, our full range of lending products includes several that most of them don't offer, such as long-term real estate mortgages. They tend to concentrate on the shorter term credits.
"Also, ag is our core business. While the typical bank loan officer is serving a multitude of different businesses, our in-depth knowledge and ability to understand the intricacies of the ag producer market provides us with the opportunity to present real solutions that fit the borrower's individual operation."
When competing with the Farm Credit System, which does offer long-range financing and has an ag heritage, Henderson believes his organization's advantage comes from its national and global capabilities. "Just one example of our scope and how it gives us an advantage," he continues, "are the number of dairies that have moved from California to the Midwest. Our presence in California can assist them on the move-out, and our presence in the Midwest helps them move in and run their operations."
In the past, RaboAgriFinance has targeted mostly the large-scale producer. Even that is changing. "Our goal is to become the preferred provider of financial services to the best ag producers in the U.S.," Henderson says. "Because of our new score card credit rating program, we can now be efficient in providing a suite of lending services to small-sized operators.
Another competitive advantage: due to Rabobank Group's strong safety rating, it has earned AAA status in the funding markets, allowing it to secure funds at lower rates. "So, we are always competitive in our pricing or terms," Henderson says.
COMMUNICATIONS AND MARKETING
In a move that jolted the agricultural financial community into the 21st century, two years ago Rabobank attempted to acquire FCS of America, Omaha, NE, the 2nd largest Farm Credit Association in the country. "Although the acquisition wasn't completed," Lynne Burns, Head of Corporate Communications, says, "there were still a couple of resulting benefits to Rabobank.
"First, the publicity put Rabobank squarely on the radar screen for ag producers' and the production ag community in general. Secondly, we learned that, as well known as we were among the food and agribusiness community in the U.S., it did not necessarily extend into the rest of the farm and ranching communities.
"We have successfully been in the ag financing business for over 100 years and we have a sincere desire and plenty of resources to serve the market," Burns continues. "So we started an aggressive marketing communications program to raise our bank's profile and visibility among ag producers and those who influence them. We also wanted to show the ag community that we are committed to their market by making this investment."
Working with their agency Morgan & Myers, Burns and RaboAgriFinance VP of Marketing Tad Mozena, launched Rabo's first-ever U.S. ad and public relations campaign targeted toward ag producers. Mozena says, "The message we wanted to send was, we want you to be successful, and we will supply the resources you need to achieve it. We want to work with the best producers - not necessarily the largest, but the best operators - and we will put our resources, our strength, our pricing and our knowledge to benefit you, to empower you to achieve your goals for your farm or ranch."
The campaign included print and, radio ads, direct mail, exhibiting at farm shows, and sponsoring events at the major trade association conventions. It also included unique events, such as teaming up with Pioneer Hi-Bred to sponsor FFA's "New Century Farmer" program, and making a substantial contribution to the new Iowa FFA Center.
With the client's permission, the bank will erect a sign on facilities that are being built from funds lent by Rabo.
"We also host a number of customer appreciation and prospect events," Mozena reports. "We have a very unique resource - our 80-person global research team conducts and provides our clients with proprietary research on developments, issues and trends in every major sector of agriculture worldwide. Whenever possible, we feature our research experts at our customer meetings. The clients love to interact with them because of their global view of the industry and sector expertise."
He reports the first year's brand building effort was highly successful, achieving an approximate 20% level of unaided recall in one study of its name among major ag producers. "We are committed to the U.S. ag market," Mozena says, "so we are continuing our marketing and communications efforts."
Henderson, raised on a Nebraska ranch, has been in the ag credit business for 30 years. He says, "I have never seen an ag economy like this one. With the advent of biofuels and a raising population demanding better diets, I think it looks pretty bright.
"At Rabo AgriFinance," he says, "we intend to continue to grow our business and build our infrastructure to service our growing number of customers."
"The North and South American ag markets are extremely important to Rabobank," Broekhuyse says. "It represents 50% of the bank's international business and represents a significant potential market. The U.S. ag producer credit market alone is a $200 billion segment. Yet, there are no clear market leaders in it, served by nearly dozens of institutions.
Given Rabobank's successful track record, that seems likely to change.
CORPORATE FOOD & AGRIBUSINESS BANKING
For 25 years, Rabobank's Food and Agribusiness Banking has been active in the U.S. and Canada.
It provides financing to clients engaged in all sectors of U.S. processing distribution, manufacturing and service of food - from the "farm gate to plate" - and is the market leader serving this segment.
In addition to providing credit, the bank also provides import/export financing, merger and acquisition advisory services, trade and commodity financing, and capital markets services and products.
The group currently has approximately 100 employees.
In a survey conducted earlier this year of over 120 of the top firms in the U.S. food and agribusiness industry, Rabobank was named the "premier food and agribusiness bank in the U.S." by over two-thirds of respondents. More than five times as many respondents voted for Rabobank as those who voted for the nearest competitor.
The survey was conducted by Windham Partners LLC, an independent U.S. market research firm, and included companies operating across all segments of the U.S. agribusiness industry, including manufacturers, processors, distributors, retailers, and food service firms, in all sectors of U.S. agriculture, including beef, pork and poultry, dairy, produce, grains and oils, crop inputs, wine and other beverages,
cotton, seafood, timber and commodities.
1898 establishment of
• Cooperative Association of Raiffeisen Banks
• Cooperative Central Farmer's Credit Bank (Boerenleenbank)
1972 Merger of Cooperative Central Raiffeisen-Boerenleenbank or Rabobank
1981 Rabobank enters the U.S. focusing on Food and Agribusiness companies
2002 Acquires Valley Independent Bank, El Centro, CA
2003 Acquires Lend Lease Agribusiness and AgServices of America (St. Louis & Cedar Falls)
2005 (January) Acquires Community Bank of Central, California, Salinas, CA
2006 (November) Announces proposed acquisition of Mid-State Bank & Trust, Arroyo Grande, CA