Global trade faces a number of challenges. The World Trade Organisation (WTO) predicts only modest growth in cross-border trade for this year, at just 2.8 percent. This marks no improvement on 2015’s growth rates, and the fifth consecutive year of growth under three percent. Meanwhile, 2017 looks set for a mere 3.6 percent growth.
Such growth rates are particularly sluggish when compared to the expansion recorded before the 2008 financial crisis, when world trade grew at an average of seven to eight percent per year. In fact, growth in world exports and imports has remained very disappointing over the years since the 2008 crisis and the 2010 rebound. Rather than expanding faster than world GDP – a sign of economies opening up, new investment and growing globalisation – trade has performed about in line with the expansion in world GDP (see Fig. 1).
In such a testing environment, recovery in trade and sustained globalisation depends on the banking industry more than ever. For a bank like Commerzbank – established in 1870 to facilitate international trade – this is a prime concern. If it is to ensure another 150 years of trade, it knows that it must prioritise close relationships with its corporate clients, following them wherever their trade takes them.
Pursuing such a relationship-driven, customer-focused approach means a bank must be prepared to take a globalised attitude to business. Not only does this mean serving trade across established, developed markets in Europe; it also means branching further out across the globe, in order to help its customers benefit from considerable new opportunities in Asia, Latin America and Africa.
Clearly, a bank needs to be able to provide adequate support to these companies as they navigate their new opportunities worldwide. It must have access to the necessary global correspondent banking networks to facilitate cross-border trade, and it must provide tailored expertise to corporations in order to secure them from risk, advise them on local markets, and optimise their strategies. Lastly, it must ensure that the banking infrastructure offered to corporations is modern, digitalised and future proof.
Growth in world exports and imports has remained very disappointing over the years since the 2008 crisis and the 2010 rebound
A new trading base
Facilitating international trade since 1870 has given Commerzbank a great deal of experience when it comes to working with exporting companies. In an export-led country such as Germany, corporations are, unsurprisingly, shrewd when it comes to choosing banks that can meet their foreign demands. With its ethos having stayed true to its origins, Commerzbank’s client-focused approach means the bank has become the go-to choice for corporations.
The numbers reflect Commerzbank’s drive to serve the needs of the export-led economy: working from 150 locations, the bank has become the strategic partner for over one million corporate customers in Germany alone. The bank finances more than 30 percent of Germany’s foreign trade, and it has the trust of more than half the country’s SMEs – not to mention over 90 percent of its large corporations.
But, just as Germany’s integration with its European neighbours has grown, business itself has become more European, and so Commerzbank has followed suit: in order to help facilitate corporations’ business, the bank now sees Europe as a whole as its core market. In fact, in addition to enjoying a leading position in foreign trade business, Commerzbank is a market leader when it comes to dealing with export letters of credit in the eurozone, with a figure of over 18 percent.
Austria, for instance, is just one piece of Commerzbank’s European puzzle. With 700 German clients working in Austria, it was a logical step for Commerzbank to follow. Indeed, with the ambition to be the bank of choice for international corporate banking in Austria, Commerzbank has already made a good start; posting double-digit growth in earnings, expanding the Vienna office to around 40 employees, and supporting both SMEs and large corporations.
Switzerland is another example of Commerzbank’s drive to be Europe’s international bank. Like Germany, this exporting nation – with its highly productive and skilled workforce, and top-class infrastructure – provides a thriving opportunity for Commerzbank to help corporations grow their international business. Working in the country for nearly three decades, Commerzbank now enjoys a relationship with over three quarters of the top 200 Swiss companies, as well as its thriving SME sector, having expanded its presence with six new local offices and over 140 staff.
Of course, globalisation means European businesses are increasingly expanding beyond established markets in Europe to seek new prospects overseas. The WTO has noted that, despite facing a challenging 2015, emerging economies have driven the rise in global trade volumes over the past 30 years. While developed countries once drove about 70 percent of global trade, today they account for no more than 57 percent.
Eager to tap into the potential of such worldwide shifts, corporations have looked to trade in emerging and maturing markets in Asia, Africa and Latin America. However, this causes companies’ global supply chains to become more complex, meaning they must deal with ever-increasing numbers of unfamiliar trading and banking counterparties.
This is why Commerzbank regards global expansion as essential in order to be the key bridge between these counterparties. Indeed, it has been a driving theme in the bank’s growth story. Now with branches and offices in over 50 countries worldwide and more than 11,000 employees outside of Germany, Commerzbank’s goal is to meet its clients’ demands as they expand to take advantage of critical markets in Asia, the Middle East and Latin America. For instance, it facilitates trade flows in key growth markets and countries such as Bangladesh, Brazil, Egypt, Nigeria and Turkey.
Experience and presence in European countries, however, remain key to this growth. This is because highly connected bases in Europe can serve as important hubs for corporate clients’ overseas business.
In particular, Commerzbank has found the Iberian Peninsula to be a springboard from which companies can seek new opportunities in South America. This is why the bank sees Spain – Germany’s second-largest trading partner – as a key location: not only is the country home to subsidiaries of 1,200 of Commerzbank’s German clients, it also hosts 600 of the bank’s Spanish and Portuguese corporate customers.
This lays the groundwork for Commerzbank to follow trade to Brazil, for example. With the establishment of a new branch in São Paulo this year, Commerzbank will be able to offer the full range of corporate and investment banking to medium and large businesses – both for European companies working in the country, and Brazilian companies looking to trade with Europe. In fact, around 1,600 German companies already operate in Brazil – the largest stock of German corporations abroad – of which the majority are customers of Commerzbank.
Tools of the trade
There are several unique assets on which internationalising corporations can rely that are key to the success of Commerzbank’s global growth. Chief among these is Commerzbank’s global correspondent network, which provides the bank with a strong presence in international markets and allows Commerzbank to cover 70 percent of global export markets and trade flows for its corporate customers.
Commerzbank also thinks it essential every client has a dedicated relationship manager to navigate them through these international networks. Acting as a corporate client’s first point of call, the relationship manager oversees the customer’s business, helps them through projects and offers crucial advice on strategy and financing.
Taking a proactive, relationship-based approach – offering a trusted second opinion on strategic opportunities worldwide, and alerting corporate clients to regulatory changes – relationship managers also help firms set up overseas business accounts, and liaise on their behalf with various specialist Commerzbank teams for the right solutions and products. For instance, they can direct a globalising client to debt and equity capital markets, cash management tools, commodities hedging, and M&A and corporate financing.
Undoubtedly, the risks of entering new, exotic markets can be significant. But this is why Commerzbank operates one of the most active risk mitigation desks in the world, in order to sustain trade and help corporate customers remain competitive in challenging markets.
For instance, a recently established major representative office in Abidjan, the economic capital of the Ivory Coast, is also set to serve as an innovative research hub for Africa, channelling insights and information on risk and building knowledge, trust and contacts for new trade opportunities in Africa’s long-term development.
Another asset Commerzbank sees as essential to its corporate clients is digitalisation. Recognising a digital-driven experience is the new normal for modern and efficient corporate business models, Commerzbank has invested heavily in technology for its corporate clients. By fostering the development of financial technology as part of its ‘digital agenda’ the bank has made it a priority to adapt to the digital economy.
A notable example is the pioneering use of trade processing centres. With two already established – in Poland and Malaysia – and more in the pipeline, these centres allow corporations to do business around the clock, every working day, with their trade unaffected by global time differences.
Certainly, following the client’s business is a something to which all banks aspire. But supporting corporate customers across the globe – from Germany to Brazil, and from Bangladesh to Nigeria – requires a relationship and technology-driven commitment few financial institutions can muster.