Lloyds TSB’s trade finance team believes its relationship-focused strategy is the key to its success, helping keep it ahead of others in the market. GTR speaks to Mike Gilham, director and head of financial institutions trade finance, and Sumit Jamuar, managing director, head of financial institutions sales at the bank.
A lot of banks are beginning to talk about relationships but we’ve consistently focused on our relationships with our corporate clients,” remarks Sumit Jamuar, managing director, head of sales, financial institutions at Lloyds TSB.
“The trade finance industry now has a renewed focus and momentum. I attended the Baft (Banker’s Association for Finance and Trade) conference in New York in November last year and many were talking about what new relationship-focused strategies they are working on, but some of us had already started implementing such ideas a long time ago.”
Jamuar moved into his role as head of sales in 2009 with the position being newly-created after Lloyds TSB merged with HBOS.
However, since joining Lloyds TSB in 2003, he has held a number of senior roles in client coverage, strategy and new business set-up.
He was the chief strategist for the wholesale and international banking division at Lloyds TSB, and before that led the delivery of Lloyds TSB’s sharia’h-compliant banking offering.
Being a strategist, he is keen to tap into the trade finance expertise in the bank and help deliver it to clients in the most efficient, customer-friendly and profitable way possible.
That expertise in trade finance is led by Mike Gilham, director and head of financial institutions trade finance, who was instrumental in setting up the business.
Gilham joined the bank in 2003 as a technical manager within trade finance. Having developed a strong expertise in the field, he works closely with industry bodies such as the British Bankers Association and the International Chamber of Commerce.
His team is ever-expanding, with a number of internal appointments made in recent months. Tracy Roche and Neil Reid have moved internally in 2009 to join the financial institutions, trade finance team as associate directors and they join Samuel Amoako, Joao Querido and Khoa Huynh.
Gilham also believes that being relationship-focused as opposed to product-focused has helped his team’s success. “The fact that other banks are turning towards relationship strategies supports our longstanding relationship approach,” he says. “Feedback from our customers in the UK and other key trading centres suggests that they really do look at a bank’s approach over a period of time,” he adds.
Being able to support clients in the difficult times is crucial to maintaining business when markets pick up again, he explains.
Now under Jamuar’s direction, the trade finance FI team has been brought together with other divisions including cash management and treasury management services. Jamuar hopes that by strengthening the links between these various branches of transaction banking, they will be able to further improve their product offerings to clients.
“What I can do is provide senior management focus to support this interaction, and harness the energy in terms of our long-standing expertise to deliver what we want to clients – this will create a far stronger proposition to clients,” Jamuar explains.
Gilham adds: “We have a model that transaction banking and trade teams are part of individual businesses. So we currently sit in FI and look after FI-related trade, and we have similar teams on the corporate relationship side. This helps us work hand in hand with the relationship managers which means we are not focused on delivering a particular product but meeting customers’ requirements.”
Improving not reinventing
However, Lloyds TSB is not radically changing its approach to trade at all. “It’s not about refocusing our efforts, rather it is about maximising our support to our customers and fine-tuning that process,” Gilham notes.
In fact, the fine-tuning also applies not just to bank-to-corporate relationships, but to the image and position of trade finance within Lloyds TSB itself.
“It is important to make sure trade finance is properly positioned and understood at all levels through the bank,” Gilham says.
Having absorbed HBOS’ corporate client base, and coupled with the bank’s own client base, Lloyds TSB has a strong network of UK clients across a range of sectors, and providing them support and in turn supporting the UK economy, is of paramount importance.
But to ensure the best possible service, Gilham argues that the bank must effectively share knowledge and expertise between teams.
“If one team finds an innovative way to support customers, we ensure we share that knowledge.”
Working capital needs
A strong driver of potential growth for trade finance is in supporting customers’ working capital. Jamuar says: “There is a lot of focus on working capital, and we say to our clients, ‘Look at your balance sheet: you have some things on the right hand side, and some on the left hand side, now what can we do to monetise the left hand side of the sheet? Do you need to look at different ways of structuring your liabilities?’”
But to provide such a service you need a central source of expertise. Jamuar explains: “You need expertise in trade finance – someone like us who is known in the market that can not only swiftly commit to a deal at a competitive price, but also execute the transaction seamlessly. That really is providing the best possible support to customers.”
An example of how trade finance has helped UK corporates access working capital is a £1.460mn (US$2.4mn) letter of credit deal arranged by Lloyds TSB for the UK corporate Severn-Lamb in mid-2009. Under this deal, the LC, accompanying guarantee and optional export loan helped support exports of leisure trains to South Korea, and provided the firm with working capital needed to finance equipment due under subsequent export contracts.
In such a transaction, it is clear how the deal benefits the UK corporate, providing working capital at the necessary production points, and the highly structured nature of the deal also ensures there is enough security to minimise the risk Lloyds TSB takes on. This customer- and risk-focused approach, among others, enables the trade business within Lloyds TSB to enjoy a very positive relationship with its risk and credit colleagues.
Gilham says: “We have an excellent relationship with our credit and risk colleagues, and even in challenging times we enjoy significant amount of support and credit appetite. Trade finance is low risk, there is an underlying flow of goods and it is very visible in terms of how the transaction works and how it actively supports a customer.”
Gilham’s team has also been far less reliant on the secondary market to offset risks, and therefore didn’t suffer as much as others in the first half of 2009.
He explains. “And we have strong relationships with partner banks we worked with so we were able to distribute transactions where we needed to. We see the secondary market as a reciprocal business and that’s put us in good stead.”
Lloyds TSB’s team is also heavily involved in discussions with government agencies on ways of supporting UK exporters. It is presently liaising closely with the UK export credit agency ECGD about its new scheme to cover short-term letters of credit. Gilham comments, “We are fully aligned with the government’s commitment to support both the UK economy and UK exports.”
However, Gilham notes that although there are a number of valuable government-led or multilateral-led initiatives in progress, a key to the success of the industry is cooperation between banks and industry bodies to address the issues facing the trade finance market, such as regulatory and capital treatment.
Jamuar echoes these thoughts, remarking: “There needs to be industry-wide action via global forums and bodies such as Baft, rather than bilateral discussions.
“Baft is coordinating and driving the industry-wide agenda, and that is very encouraging.”
With the wider trade finance market becoming more focused and integrated, and the appeal of trade finance as a financing tool growing, Lloyds TSB hopes to be able to capitalise on these trends.
“There is a totally different scenario now compared to let’s say five years ago,” observes Jamuar.
“Then, when you spoke to someone they’d say ‘trade finance is not as relevant – I trust everyone (my counterparties), so I’ll increasingly trade on open account, and finance myself with ease.’ But now they say, ‘actually I do need that intermediary that is the bank, and to finance specific deals, to ensure I get paid for the goods and services I provide’.”