Dutch lender Rabobank has warned that provisions for souring loans could climb by an additional €2 billion this year and there would be a significant hit to profit as the coronavirus and market volatility drive defaults.
The additional provisions roughly equate to the cooperative bank's 2019 profit and are among the biggest booked by a European lender.
Dutch rival ABN Amro, with one of the biggest exposures in Europe to the global oil and gas industry, has warned its 2020 provisions could reach €2.5 billion. Its loan portfolio is about the same size as Rabobank's.
Rabobank, which reported 2.2 billion euros in profit for 2019, reports earnings for the first half of 2020 in August.
"We will continue to assess the impact of the Covid-19 crisis on our financial performance, but it is at this point in time too early to give a reliable indication of the impact on our aggregate net profit for the full-year 2020," it said in a statement that it described as a Covid-19 update.
In the first quarter, for which the bank does not usually release full results, Rabobank said non-performing loans had dropped by €525m since December 31 to 15.2 billion, equivalent to 2.7% of the €418 billion loan portfolio.
Rabobank did not specify which part of its loan book would see a rise in defaults.
The bank said 13% of its loan book was to sectors highly affected by the crisis including food services, flowers, leisure and the travel industry, and to a lesser extent US animal protein, dairy and sugar.
The bank has a €10.9 billion exposure to the energy industry, where it lends to companies involved in trade and commodity finance and to renewable energy projects.