GTR and Global Trade Search’s (GTS) second annual salary survey has revealed that the profile of trade finance within institutions has grown. The big challenge is encouraging more talent to the industry, writes Rebecca Spong.
Banks are continuing to build up their trade finance capabilities, recognising that transaction banking represents a good source of low risk fee-driven business.
Against this backdrop, salaries and bonuses continue to increase at a steady rate, reveal the results of GTR/GTS’s second salary survey.
Since the last survey in mid-2010, there have been a number of high profile hires in the trade finance market with banks such as Barclays, JP Morgan and Bank of America Merrill Lynch all investing in expanded trade finance teams. More recently, banks such as Westpac have decided to re-enter the market. Many a global head of trade finance has told GTR over the past 12 months that they have been set high targets for growth.
This suggests there has been a U-turn in the perception of trade finance. The results of the survey back this up; with almost half of respondents reporting that the status of global transaction services is improving within their organisation. One survey participant reflects: “Transaction banking has always been the step-child within the investment bank.”
Yet slowly and surely the product sector is beginning to shake free from this image as an unwanted but necessary arm of banking, and beginning to be seen as a division that generates important revenue.
As another survey contributor remarks: “The investment banking brigade continues to look at us commercial bankers as glorified post office workers but there is at least now the recognition that we also make some money and with maybe a lower risk of losing it.”
These comments follow news that many banks in Europe and the US are reporting reduced investment bank revenues and slowing trading activity in areas such as fixed income, equities and currency.
Such news is likely to spark widespread job cuts in the investment bank business in the run-up to the end of the year. With that in mind, it is perhaps a good time to be a trade finance banker.
Historically, trade finance bankers have always been paid less than investment bankers, and their business has been less bonus-driven than other areas of the banking world.
Yet salaries in trade finance continue to rise each year, with just under 60% of survey participants reporting that their total compensation package, including bonus, increased compared to last year. Just over 10% reported a decrease in the overall value of the package and approximately a third said they saw no change at all.
In terms of base salaries, excluding bonus, around three-quarters reported a rise of less than 10% or no change at all. The most likely area of the industry to see a salary increase was in the structured trade and commodity finance division, with one in three reporting a 10-30% uplift. Those working in credit insurance also seemed likely candidates to see a significant increase in salary.
It is important to note that almost half of the respondents in the survey are based in Europe, Middle East and North Africa regions and almost half have 15 years or more experience.
In addition, close to 50% say they work in origination departments, with 8% saying they have a back office role (see tables on page 18 for full breakdown of salaries, regions and areas of business).
Last year, possibly due to pressure to reduce the bonus culture in banks, the GTR/GTS survey found that base salaries were often increased to compensate for reductions in bonuses.
However, this is not necessarily the case this year. Over three-quarters of respondents stated that increases in salary were not to make up for lower bonuses.
In spite of many headlines surrounding the proposed deferral of bonuses by major global banks, the majority of respondents (70%) to this survey reported that their bonuses were not subject to deferrals or being paid in stock.
The highest occurrences of any type of bonus deferral were recorded in the UK, where one-third of respondents said they had some kind of stock-related or deferred bonus, but most saying this would only apply to one-third or less of their overall bonus.
In terms of the value of bonuses, the largest proportion of respondents said their most recent bonus was between 10-20% of their current base salary (a fifth of respondents). Just over 10% said their bonus was between 20-30% of their salary while less than 4% saw a bonus of over 150% of their salary.
The work-life balance
In terms of what respondents valued in their current jobs, almost 60% said that ensuring a good work/life balance was a priority.
Having a good team atmosphere and working relationship with colleagues was also ranked highly, with the survey revealing that those based in Europe and Asia seemed to like their colleagues the best.
It seems, however, that respondents would soon ditch their current role with its good work/life balance, if offered the right salary package. Indeed, almost three-quarters said that the potential to earn more would be the main reason for jumping ship.
Other highly-ranked reasons for moving roles would be to develop skills, take on increased responsibility and gain a more prestigious corporate title. Reputation of the employer was also cited as an important consideration when moving jobs.
The future of trade finance
Given that a large proportion of survey participants had at least 15 years experience in the industry, there is a need to figure out where the next generation of talent is going to appear from.
As Sarah Hutton, director of GTS comments: “One of the most interesting things to come out of the survey was that it confirmed something that we had always suspected and that is the global transaction services sector is facing a talent pipeline shortage.”
She adds: “Of those who responded, around 63% had more than 10 years experience while those with less were significantly under represented suggesting that the sector has not sufficiently invested in its emerging talent.”
When asked whether working in trade finance has become a more attractive career option for graduates entering the financial services industry; a resounding 60% said yes.
What seems to be essential is being able to communicate this message to prospective graduates, as other areas of banking continue to be more attractive.
“It is still not perceived as prestigious as working in the investment part of the bank,”one respondent complains. Another remarks: ”More needs to be done to promote global transaction services at universities and colleges.”
What was also noted as an obstacle to building a successful career in trade finance is that it tends to be dominated by very experienced bankers and that it gives the perception of being a closed shop.
One survey respondent comments:“It’s a challenge to get a start in an international-related career. Everyone I work with has more than 30 years of international banking experience. It’s like a club that’s hard to get admitted into.”
Steve Dodd, director at GTS adds: “Part of the talent shortage that the sector is facing is due to poor PR. Investment banking has always been perceived as more exciting than global transaction services which is why the majority of graduates go into it.
“However, when you look at the technical and personal attributes required for a successful career in global transaction services looks like a pretty exciting and worthwhile option.”
He adds: “Overall, global transaction services professionals have never really been the type to chest beat and blow their own trumpets, but maybe they will beed to do so in order to attract the younger generation.”
Despite the increased profile of trade finance, and the fact it is not threatened with the same level of job cuts as witnessed in investment banking, it seems that there is still a fair amount of work to do to make the industry more attractive to newcomers.
GTS-Global Trade Search is a joint venture between Healy Hunt and Exporta Publishing. It specialises in global transaction banking recruitment across structured trade and commodity finance, export finance, supply chain finance, cash management, political risk insurance and related legal services. For further information regarding this survey or recruitment enquiries, contact email@example.com or firstname.lastname@example.org
Where is the centre for trade finance excellence?
There has been much talk about the shift of gravity in the financial world moving ever eastward, yet the GTR/GTS survey suggests that London is hanging on to its position as a leading centre for trade finance expertise.
In particular over 50% of respondents see London as the leader in the provision of structured trade and commodity finance, with Geneva coming in a close second. Even those based in North America and Asia reportedly still look to London for
London maintained its leading role as the centre for supply chain finance (SCF), although to a lesser extent as it was closely followed by New York, Hong Kong and Singapore. Within SCF, there seems to be a more regional focus, with those based in North America seeing New York as the leading hub while those in Asia following the lead of Singapore.
Would you recommend a career in trade finance?
Faced with volatile markets and increasing regulation, would you recommend a career in trade finance? Is it a career option that graduates should be encouraged to pursue?
In spite of the turmoil in the banking world, 60% of survey respondents replied positively saying that overall they would recommend it as a career. The biggest promoters of trade finance were found in the Middle East and Africa, while the least keen to spread the word were found in the UK.
Almost 50% recommended structured trade and commodity finance as the best and most profitable business to work in. A career in trade and supply chain was almost as popular, but the least recommended career path to take was in export credit-agency-backed financing.