Dutch financial group Rabobank shut down a business unit that provides structured notes to the retail and institutional markets this week, Money Management can reveal.
“We announced yesterday to staff that we will close our equity derivative operations in London and Hong Kong,” said Arjo Blok, head of global financial markets at Rabobank.
The bank’s equity derivatives operation, which closed on Thursday this week, provided structured notes primarily to private banks and the institutional market. It has also provided structured notes for retail structured product providers such as Meteor Asset Management and Gilliat Financial Solutions, although it was not a major player.
Mr Blok said “a couple of dozen” employees will be affected by the closure and the firm will consult with them in the next few weeks to see if they can be redeployed elsewhere within the firm.
Rabobank’s decision to close the business unit was made so that it can focus on core strategies, Mr Blok said, adding that the extra capacity gained will allow the company to grow its risk management and capital markets offerings.
“It’s less driven by financial performance of that side of the business and more about focusing on the strategy of the institution,” he said.
However, Mr Blok said the equity derivatives operation was predicted to decline in the coming years. “We felt that the revenue potential would be less going forward,” he said.
Despite its minimal involvement in the retail structured products sector, Rabobank’s departure is not expected to have a major impact on the market.
Adrian Neave, managing director of Gilliat Financial Solutions, said Rabobank was a small player in the retail market that was unlikely to be the first choice for distributors because they lacked the size and liquidity of other banks. “In terms of mainstream options, such as FTSE plans, why go to Rabo when you can go to Barclays Capital?” he said.
However, Mr Neave said the bank’s decision to pull out of the UK was unfortunate because of its strong credit rating. “It’s a shame because they have strong credit. I think when rates go up again they’ll be missed,” he said.
“But banks being banks, if rates go up, they might come back.”
