Rabobank, the leading Dutch lender in the agriculture sector, said yesterday its direct exposure to Russian sanctions was limited but some of its clients were suffering big losses due to a ban on imports of fruit and vegetables.
While there are signs of economic recovery, the outlook for 2014 is uncertain, the bank said, partly due to the Ukraine crisis and the possible impact on the global economy.
Net profit slipped 3% to €1.1bn ($1.4bn) in the first half of 2014 due to a one-time €214mn charge for the nationalisation of peer bank SNS Reaal.
After taking “considerable provisions” this year the number of non-performing loans is expected to fall thanks to the economic recovery, Rabobank chief financial officer Bert Bruggink told journalists.
But Rabobank said the trade conflict between the West and Russia over Ukraine, which had led to a series of sanctions and counter-sanctions, “represents an uncertain factor.”
“Some additional uncertainty came in the last few weeks, mainly in the greenhouse sector, due to the Russian sanctions,” Bruggink said. “We hope that this will not lead to additional losses, but at the moment it’s hard to predict.”
The “sanctions can have an adverse impact on a number of our business customers and may therefore also adversely affect Rabobank’s result to a limited extent.”
Rabobank is the largest lender in the Dutch farms sector, which had just started to benefit from an economic upswing, but were now taking “a severe hit” caused by price falls and the sanctions, he said.
The Dutch statistics office said this week the country’s agriculture sector will suffer about €300mn in lost business, with Russia accounting for about 10% of all Dutch exports of vegetables, fruit and meat.
Another European bank with exposure in the agriculture sector is Austria’s Raiffeisen Bank International, which said yesterday it expects “no significant impact” from the trade conflict with Moscow.
Bruggink said that “the largest part of the economy in the Netherlands and elsewhere is doing better, with the clear exception of the real estate sector.”
The bank took provisions of €1.2bn of its real estate portfolio in the six-month period, he said and “we expect that trend to continue in the second half of the year.”
With the Dutch real estate market believed to have bottomed out after a 20% fall in home prices since 2008, a possible recovery is seen in 2015.
Rabobank, the largest Dutch mortgage lender, said in a statement it was not yet able to give guidance on the possible impact of the European Central Bank’s asset quality review, or “stress test” of European banks.
The bank said it “was expecting a cautiously continuing economic recovery in the second half of the year,” citing rising consumer consumption and positive signs in the housing market.
The bank said its liquidity position remained strong in the quarter, at €103bn, while the private sector loan portfolio decreased by €1.5bn to €433bn.