BAML corporate bank head champions global integration

When Fernando Vicario became the sole head of Bank of America Merrill Lynch’s (BAML's) corporate bank in Europe, Middle East and Africa (EMEA) in 2016, it had enjoyed seven years of consistent growth. Having been the co-head of the corporate bank as well as co-head of BAML’s debt capital markets (DCM) business since 2012, Mr Vicario had a hand in its good run.

But three years ago, the economic landscape was starting to shift because of a more challenging geopolitical climate. The UK voted to leave the EU in June, sending shockwaves through the corporate community, the US presidential elections ended in an unexpected victory for Donald Trump in November, and in December US authorities announced tougher sanctions against Russia amid allegations of election hacking. “There has been more managerial attention on the corporate banking business, in response to the challenges of sanctions and big regulatory changes,” says Mr Vicario.

As market conditions have become more volatile, it has become more important than ever to provide good advice and consistent service to corporate clients. BAML’s global corporate banking franchise was built to handle a tricky environment, as it focuses on offering solutions to its clients thanks to a fully integrated service offering, according to Mr Vicario. Not just that, “our target is to be one of the top three corporate banks globally,” he says.

Full-service integration

In order to achieve this goal, BAML's corporate bank has put clients’ needs front and centre in a different way than it did a few years ago. In an interview with Financial News in 2013, Mr Vicario, alongside his then corporate banking co-head Paul Richards, put forward the ‘plus one’ approach, whereby coverage bankers would look to add one product per client relationship.

“The plus one approach is no more,” says Mr Vicario, adding that most big clients don’t want off-the-shelf products. “Instead, clients need tailor-made solutions. Corporate banking has become much more advanced to address more complex situations. The way we add value is by offering broad banking solutions and bespoke outcomes through our global network.”

This type of integrated service offering is labour intensive and requires knowledgeable all-round bankers as well as product specialists. “Since the merger between Bank of America and Merrill Lynch, the corporate bank has been investing in its talent pool, including hiring for both junior and senior positions in every European country, as well as in emerging markets,” says Mr Vicario.

The other side of the coin is BAML being very selective about the clients it takes on. “It is good to date, but you only get married when you know it’s right,” quips Mr Vicario.

Product champions

Industry knowledge is of great importance, and this requires close ties between the corporate and the investment bank. “In order to have real integration, our corporate banking and DCM teams sit together all across the EMEA region,” says Mr Vicario. This allows for intense coverage, but also coordination to avoid bombarding clients.

To avoid losing specialist knowledge, which is a risk run by such a globally integrated approach, Mr Vicario is fostering product champions in the corporate bank. This is an opportunity for up-and-coming directors, looking to make their mark, to push product-solution themes.

“This way the bank provides free education on diverse topics, such as rates, commodities, global subsidiary banking, leasing and so on,” says Mr Vicario. “We recently had an innovation product champion speak to a group of senior bankers about programming and artificial intelligence,” he adds.

Operational risk management

Education is not limited to its own bankers, and BAML also offers advice to clients on a multitude of complex issues that have arisen in recent years. Operational risk management has become a huge part of the corporate bank’s operations.

“The corporate bank has been there to teach clients about new regulations and sanctions-related risks, both legal and reputational, cybersecurity threats and infrastructure risk, to name a few,” says Mr Vicario. Furthermore, BAML has helped certain clients in their efforts to digitise their business.

Technological advancements have allowed the banking industry to become smarter and faster, using data more intelligently in a similar way to wholesale banking. BAML was one of the first Single Euro Payments Area (SEPA)-compliant banks, which aims to make it easier to move euro-denominated capital around the SEPA region. 

“For instance, our technology allows us to better monitor payment flows and predict corporate cash flows, which in turn improves access to and control over liquidity,” says Mr Vicario. Through working capital optimisation, BAML has been able to create internal value for corporate clients.

Global presence

Before joining BAML in 1995, Mr Vicario worked in various roles at Deutsche Bank for 10 years, both in Germany and Spain. He has experience working in the UK, the US and with Latin American institutions, giving him a breadth of experience across developed and emerging markets.

Globalisation, which has shifted into a higher gear over the past few years, has made it ever more important for the corporate bank to grow its inbound and outbound subsidiary banking services. “There has been a huge boost in outbound corporate banking activity out of EMEA into other regions, such as Asia and the US, as well as a lot of US and Asia-Pacific clients coming into Europe, where we aim to add value,” says Mr Vicario.

The bank prides itself on being a real multi-currency global DCM house. “BAML’s DCM desk has gone from a leader in dollar-denominated transactions and a competitor in sterling and euro transactions to a true leader in all major currencies,” says Mr Vicario.

Within Europe, much of the growth for the corporate bank is coming out of the big economies, namely the UK, Germany and France, but Mr Vicario is happy with the strong performance of its outfits in southern Europe, the Benelux region and the Nordics too. Outside of Europe, BAML maintains a big presence in key markets where, as Mr Vicario puts it, “the music plays”, namely the US, China, Brazil, India and Mexico.

Emerging and attractive

At a time when many other corporate banks are scaling back activities in emerging markets in the face of greater economic uncertainty, BAML is determined to stand its ground. Mr Vicario knows that in corporate banking the adage of ‘location, location, location’ holds very true indeed. “One needs to be successful in lead markets in order to be successful in any peripheral markets,” he says, but concedes emerging market volatility can make business difficult.

Mr Vicario is of the opinion that there are still enormous opportunities to do business in several emerging market countries, both in the short and long term. “Just look at the number of huge deals being done in the Middle East, in Saudi Arabia, the United Arab Emirates and Qatar,” he says. But in order to get the lead bank mandate, it is necessary to have subject matter expertise in every location.

“When the prospect of further interest rate hikes in the US were mooted earlier in 2019, emerging markets got a bit of oxygen,” says Mr Vicario. Though the China-US trade conflict has flared up again recently, there is more faith that both parties will come to an agreement than there was in late 2018.

Different shades of green

Responsible investment has emerged as one of the biggest themes in corporate banking and investments in recent years. About one-quarter of global assets under management incorporate sustainable investment principles, with 53% of these in Europe, according to data provided by the bank. This trend shows no sign of slowing down any time soon, according to Mr Vicario.

“There is growth not only in green bonds, but in a huge number of business areas, such as green loans and green leasing for instance,” he says. “Sustainability concerns are a topic in essentially every one of our client relationships.”

Aside from the obvious social benefits, environmental, social and governance (ESG) principles are a strong bellwether for earnings risk, making them a good investment from a purely financial perspective as well. BAML aims to be a leader in sustainable investment. The bank committed to deploy $125bn in support of low-carbon businesses by 2025 through its Environmental Business Initiative, but is slated to already hit this target by the end of 2019. BAML recently announced it will mobilise an additional $300bn in capital to global environmental business efforts by 2030.

The bank’s efforts on the ESG front are not limited to external clients, as it is committed to fostering a diverse and inclusive work environment. Mr Vicario’s passion for his work and team is evident throughout the conversation. “If you want happy clients, first you need happy employees,” he says.