Rabobank Closing Commodity Lending Offices in Cost-Cutting Bid

(Bloomberg) -- Rabobank Group is closing three of its trade and commodity finance offices, marking the latest blow to an industry still reeling from a series of frauds and defaults.

The Dutch lender, best known for financing agricultural traders, will shutter operations in London, Shanghai and Sydney, Jasper van Schaik, global head of trade and commodity finance, said in a memo seen by Bloomberg. Wholesale banking activities at these locations won’t be affected, according to the memo sent to clients. Rabobank said in a separate statement that it’s still reviewing a proposal to centralize its European trade and commodity finance operations from London to Utrecht.

Rabobank’s move, first reported by Fastmarkets, is just the latest hit for the commodity trade finance business. Some of the largest players in the space have exited or pulled back after a series of losses and scandals were unearthed from Asia to the Middle East amid the pandemic. Dutch rival ABN Amro NV decided to exit commodity trade finance altogether while industry pioneer BNP Paribas shuttered commodity lending at its once-mighty Swiss operations.

“The decision was made to implement a more lean, strong and cost-efficient” organization, van Schaik said in the memo, adding that changes to the business have been accelerated by the pandemic, trade wars and “significant fraud and default cases in our line of business.”

Rabobank said in its own statement that it’s creating a more “focused” trade and commodity finance business but remains “fully committed to its clients across all commodity sectors.”

The bank has been reviewing its trade and commodity finance operations since last year. The lender took a hit from its exposure to companies including Argentina’s bankrupt soy-export giant Vicentin SAIC. Lawyers representing Vicentin creditors including Rabobank last year told a New York judge they suspected about $400 million of funds had been siphoned to sister firms.

Rabobank’s trade and commodity finance operations will continue from Utrecht, Singapore, Hong Kong, New York, Sao Paulo, Buenos Aires and Nairobi, according to the memo sent to clients.

French bank Societe General SA is among the other institutions that have cut exposure to the sector, closing its Singapore commodity trade lending unit. ING Groep NV named a new global head of trade and commodity finance at the end of last year and brought its structured commodity finance operations in Geneva and Asia into its trade and commodity finance business.

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