Boots on the ground in Asia
Managing important relationships is delicate and is built over time. It also requires knowing exactly what underpins the basis of that relationship.
Since the global financial crisis, discussion around counterparty risk and bank relationship management has escalated up the agenda. As financial institutions were forced to pull out of markets and the cost of capital increased as a result of banking regulation, those relationships have sometimes come under strain.
Rebuilding that trust requires transparency and honesty from both sides. Treasurers and CFOs need to know what they can expect in terms of the quality and breadth of service and for how long. Banks also need to know they are not just being utilised only for their deposit-taking services or low-cost liquidity.
For its part, ANZ has put its money where its mouth is, having last year agreed to sell its retail and wealth management business in five Asian markets. The bank’s CEO, Shayne Elliott, made clear his commitment to expand the institutional banking business.
This means focusing on trade, cash management, foreign exchange, debt and renminbi services for corporate clients in the region. “We want to focus our resources on what we are good at,” Elliott stated in October.
And what ANZ is good at is following the trade flows to and from Australia and New Zealand to Asia as well as intra-Asia. Strong at home, ANZ has institutional banking businesses in 34 markets globally; the core of these operations is concentrated in 15 Asian markets, including China.
“On one side it’s about moving with our customers overseas, particularly into the Asia-Pacific region,” explained Mark Evans, managing director of transaction banking. “On the other it is also about understanding the key movers and shakers in Asia and beyond, serving their needs as they trade into Australia, New Zealand and intra-Asia.”
Evans is keen to impress the degree of “on the ground” expertise ANZ has in the core markets it plays in. It may be one thing to know how a letter of credit works, but having the local knowledge to receive that and then transact it in accordance with local regulations in, say, Jakarta, is what can differentiate a regional bank from a pure-play local institution.
“Having that presence adds true value – the advisory capability to execute, understand local business practices,” Evans said.
But it does mean making sacrifices. For ANZ, along with other banks in the region, it means targeting customers it can serve well and, frankly, profitably. Over the past few years, ANZ has been providing services to over 20,000 corporate customers in the region. However, many were using ANZ for the occasional transaction, using the AA- credit rating and the reputation of the bank.
“Our decision was to cut down the number of customers to those that really value the services we have; focusing on our strength in trade, financial markets, debt syndication, and cash management,” said Evans.
In return, ANZ wants to work far more closely with its clients, resolving some of the more painful and fundamental problems they face. Given its pedigree in trade, for example, Evans believes it is well placed to mitigate short-term working capital needs and ultimately support trade growth in emerging markets in Asia.
ANZ already operates in geographies that represent 70% of global trade flows, and it expects Asia will account for approximately 60% of global GDP by 2050. This growth will be led by 10 economies, all of which ANZ has a presence in.
Click to enlarge
Key sector focus areas for ANZ naturally include agriculture, natural resources, property, and infrastructure projects that support emerging market development, Evans emphasised.
ANZ has a very healthy reputation throughout Australia and New Zealand for managing client relationships and valuing them. According to FImetrix, a market research agency, ANZ is ranked #1 with regards to the amount of visits to clients and its effectiveness. It also has very loyal customers, with 91% likely to recommend them to other banks.
Data, data, data
To offer a flavour of how ANZ will work with customers, it’s worth thinking about how transactional data can play a pivotal role in improving treasury performance. Again, transparency is key here, and ANZ is able to play back and review the effectiveness of its transactions, along with the effect of its internal practices on its customers. By comparing that to a peer group, clients can establish where simple changes can be made that markedly improve key treasury KPIs.
“For example, trade customers could find that their cash conversion cycle (CCC) is being slowed up by days (even weeks) simply because of poor documentation handling,” said Evans. “Fixing that problem up front can speed your CCC up. We conduct around 300 consultations a year and we provide training to ensure our clients get the value they need.”
In terms of broader trust in a financial institution’s commitment to keeping treasurers’ money safe, ANZ has been at the forefront. It’s not just about the credit rating; it’s also about protecting against external criminal activity. Cyber crime is here to stay and banks need to have robust measures in place.
“We know, for example, that institutions with a weaker cyber perimeter are more likely to be attacked than those with a reputation for strong cyber capabilities,” Evans said.
To cement its commitment to cyber security, ANZ announced the appointment of former Australian government intelligence officer Lynwen Connick as its chief information security officer, a new role for the bank.
“The speed in which technology is moving and the speed in which criminals can deploy that technology is increasing – we need to be ahead of the game,” Evans concluded.
That sentiment is being applied to the way in which ANZ manages its corporate client relationships too – staying ahead of the game.