Stuart Roberts was hired as global head of trade at JP Morgan in June this year, joining from Citi, where he was global head of trade sales. Since Roberts took on the role, the bank’s trade department has undergone something of a reshuffle, with high-profile names including Jeremy Shaw, head of trade finance for Europe, leaving their roles, while Michael Quinn, managing director of global trade and loan products, is said to be retiring next year.
In this exclusive interview, GTR sat down with Roberts to find out more about his objectives for the coming months, what the opportunities and risks are, and how he sees the trade and export finance market evolving.
GTR: What are your aims and objectives at JP Morgan, and how do you intend to catch up with the bank’s peers in the trade finance market?
Roberts: We are at an exciting stage of development. JP Morgan has historically been a phenomenal bank to banks and has been very active in the export finance market. Our focus is shifting to increasing share in the corporate trade market, particularly the structured trade finance market. We want to add a different flavour to what we do, going beyond coverage and balance sheet, so we are looking closely at our supply chain finance offering and large-scale portfolio trade receivables securitisation related products.
GTR: What market factors are having the most impact on the trade and export finance business at the moment?
Roberts: The universal things that we are seeing are: the impact of negative interest rates, a lukewarm European economy, slowing growth in Asia, and the end of the credit cycle approaching. Many banks are looking to the US because that is where the vast majority of positive yielding debt now comes from, so people are thinking carefully about what kind of assets are for sale and who is originating them.
Beyond that, there are two key things going on in the export finance market. First, there are declining year-on-year returns on invested capital. As a result, there is reduced confidence for large capex investments. Secondly, the long-term interest rates on debt are so low that you have to consider why anyone would not just go straight to the bond market.
The one thing I would say is around foreign direct investment flowing out of the emerging markets. Traditionally, export finance is countercyclical to the emerging market quantum, so if we see continuing deterioration in FDI across the emerging markets, then export finance should become attractive. That said, there is so much uncertainty at the moment that this has become harder to predict.
GTR: What is your take on the threat of disintermediation by fintechs?
Roberts: We frequently partner with fintechs, and indeed invest where it makes sense for us to do so. In the trade space specifically, I think private equity presents more of factor to consider than fintech. We’re approaching the end of the credit cycle, valuations are high, so many are moving towards short-term investments. Trade fits into that space very nicely and there is an obvious partnership between banks and those looking for investment rates where we can marry the different types of capital into a suitable structure.
GTR: What about US Exim? Will it come back, and does it still have the capacity and knowledge base to support trade?
Roberts: There’s a general expectation that it will be reauthorised, and this ties in to a theme of rising trade nationalism. The momentum is there. However, we can’t forget we are at the end of the capex cycle. It’s generally believed that China is slowing, the big emerging market airline boom is over and we are seeing rising defaults across the airline industries. The shipping industry has also decelerated, and while the main segment that is still showing growth is cruise ships, it’s worth pointing out that the shipyards that make those cruise ships are backordered for four or five years. US Exim will be fine, but the export finance market is against a backdrop of significantly reduced demand.