Rabobank pretax profit falls 30%

Rabobank Ireland's pretax profit fell almost 30 per cent last year, according to accounts just filed at the Companies Office.

Pressure on interest margins due to a series of interest rate hikes by the European Central Bank (ECB) saw pretax profits at the IFSC operation fall from €55.8 million in 2005 to €39.3 million last year.

The group, which operates in the areas of treasury dealing, structured finance, corporate lending and management, made a net profit of €37.8 million, down 26 per cent on the previous year.

Net interest income at the Irish operation of the Dutch bank dropped 25 per cent from €78.9 million to €58.7 million in 2006, a year in which the ECB increased the base interest rate in the euro zone five times. Operating income also fell significantly, decreasing 31 per cent to €54.2 million, according to the figures.

However, the directors' report noted that operating expenses also fell, declining from €26.3 million to €14.7 million.

Rabobank Ireland is exposed to rising interest rates because some of its long-term fixed-interest earning assets are funded by short-term debt.

The bank is also exposed to liquidity risk and Rabobank Ireland's accounts include a note that under its short-term liquidity policy its Irish entities are always in a position to meet their commitments in a timely manner regardless of any instability in financial markets.

Assets at Rabobank Ireland fell from €28 billion to €24.6 billion last year, as a number of high value structured finance transactions matured. Around 65 per cent of its assets are held with Rabobank's Dutch entities, while the remaining 35 per cent comprises loans to business clients in Ireland and overseas and a portfolio of investment bonds.

Rabobank Ireland's IFSC operation is separate from RaboDirect, Europe's largest online bank, which launched a savings operation in Ireland in 2005. It recently sought to assure Irish savers that its AAA credit rating status - the highest possible - meant that it would not suffer the same problems the befell Northern Rock.