Whether it is responding to current market conditions, continuing to expand its capabilities or targeting high growth sectors, Bank of America’s EMEA corporate banking head outlines to Marie Kemplay why he believes the bank is in strong position.

Richard King new

In times of economic disruption, it is often the core functions of banking that come to the fore. Clients across sectors are looking for support with accessing liquidity, managing their risk and ensuring operational finances run smoothly.  

This is something that Richard King, Bank of America’s (BofA’s) head of Europe, the Middle East and Africa (EMEA) corporate banking, knows well. “In corporate banking, we are de facto, product agnostic, relationship managers for our clients,” he says, stressing the importance of maintaining strong client relationships and implying an up-close awareness of the challenges firms are currently facing.

Increased volatility

“Market volatility has no doubt has gone up dramatically, and there continues to be an uncertain economic outlook,” he says, referencing the now familiar issues that have coalesced to create a distinctly gloomy backdrop in recent months.

For the “average corporate”, he observes that market conditions have squeezed the affordability of loan and debt financing. “Their mix of spread and rates may have increased by, say, 200 basis points over the last six months, which is clearly a lot on a relative basis.” For many operating within the high-yield space, these increases have been “even more pronounced”, he says, adding that “for some high-yield clients the market hasn’t even been open to them”.

Providing advice

This is where, he says, expert advice can make the difference in current market conditions between being able to raise capital or not at all. Mr King emphasises that close coordination between corporate and investment banking is a central part of BofA’s model, in order to ensure clients receive an integrated offering.

“How to address those bond market liquidity challenges is a big part of our dialogue with clients at the moment,” he says. Crucial in such circumstances is “being ready to take advantage of windows of opportunity,” he explains, “ensuring that preparedness for clients, so that they can be nimble and act quickly when it is an ‘on’ day for the markets.”

Mr King also reflects that the bank’s global status, with its large balance sheet, is a big draw in present conditions. “Some of our clients do need to bolster their liquidity, because their ability to access the markets is constrained at the current time, and we are able to support them using our own balance sheet.”

Managing risk

For those clients that are able to access the market, they have also been keen to utilise so-called “pre-hedging” solutions, to offer some level of protection for market exposure during a volatile period. “We’re supporting clients to hedge before they go to market and even, in some cases, intraday where rates have been moving around a lot,” he says.

In fact, the full risk management playbook is currently being utilised. He observes that with the US dollar strengthening and an uncertain outlook, a lot of clients are looking for foreign exchange (FX) hedging solutions. Similarly, with commodities prices (from oil and gas to precious metals) jumping, the bank has also been helping clients with many commodities-related risk management solutions.

The use of so-called deal contingent hedges has also been on the up, to offer some level of FX protection for those entering into merger and acquisition deals. Mr King observes: “In a typical market, when pitching to clients you would focus on the execution, and then if there was time at the end you would talk about hedging options. In the current markets that’s almost flipped, because those risks are one of the most significant things on clients’ minds.”

Reaching new clients

Developing and leveraging the bank’s full capabilities in order to reach new clients has also been a significant focus for Mr King. He reflects that the bank has continuously developed in the past 13 years since BofA and Merrill Lynch came together (and are now under the combined BofA banner). “We’ve spent a long time bringing together a combined and powerful platform, identifying the right client mix, building up the right teams and working our way up the league tables.” Here he pauses to say that BofA is currently year-to-date number three in overall investment banking revenues both in EMEA and globally, according to Dealogic data. “We are clearly making progress,” he says.

The growth strategy is ambitious and broad, with the bank seeking to add clients across sectors. “We want to grow the platform across the whole of the BofA franchise,” says Mr King, and he believes it is going in the right direction, with BofA having increased its client base across the region in the past 18 months.

High-growth sectors

In addition, however, there is also there is also a particular focus on attracting clients in high growth areas, with dedicated resources being funnelled towards this client segment. This means a shift in approach where promising companies are targeted earlier in their lifecycle than may have traditionally been the case. “It’s important that we are able to cover them earlier in their lifecycle, where our services can be impactful for them, across corporate and investment banking,” Mr King says.

“We think carefully about the sort of clients who will really benefit from our integrated offering of banking products, as well as strategic advice and support throughout their growth journey, to the stage where they may be looking at an initial public offering or selling the business. The earlier we can support them, the better it is for them, and the better it is for us.”

Identifying the “winners of the future” to target is an inexact science, he reflects, but the bank calls on its experts in relevant industry and country verticals across the business to offer their insights on key emerging companies, as well as broader numerical analysis of the high-growth universe of companies. “Key for us is that we are able to add value,” he says.

These high-growth areas encompass highly innovative sectors such as fintech and healthtech “and dozens of other tech-enabled sectors”, as well as more traditional areas such as infrastructure. There is a lot of activity happening across Europe and the Middle East to develop infrastructure, which includes the creation of new assets, as well as upgrading existing assets with digital capabilities (to improve efficiency and effectiveness) and as part of efforts to transition to a net-zero economy. “We have been supporting a number of infrastructure transactions over recent months, which remains a growth business for us,” he says.

Supporting sustainability

BofA has dedicated teams and experts across technology verticals and infrastructure, as well as its growing sustainable finance team, which supports financing for assets such as wind farms and other renewable power generation. The group also has broader aims, with it working under BofA’s target to mobilise $1.5tn of financing towards sustainable finance initiatives by 2030 – covering both environmental projects and social development.

Mr King observes that despite the broader market disruption, client engagement and activity around environmental, social and governance (ESG)-linked financing has continued to be robust. Here BofA has positioned itself globally as a leading player, currently in first position globally for 2022, year-to-date, as a bookrunner for ESG bonds and loans, measured by volume raised, according to Dealogic. However, he is keen to stress BofA’s engagement with clients stretches far more broadly, to cover supporting them with their overarching ESG strategy, net-zero targets and key performance indicators.

Mr King also stresses that BofA has been focused on its own sustainable business practices, in the broadest sense. “Culture is really important to me,” he says. “I think the bank generally has developed a strong culture that supports and promotes diversity and inclusion. For me, it’s important as part of creating that broader sense of trust, integrity and collaboration, and I believe that feeds into our dialogue with clients too.”

Embracing change

Despite the challenging market conditions, Mr King also feels it is an important time for banks and for developing morale within teams. “Something I say to junior bankers is that the one thing you can guarantee in banking is change, whether that’s bank strategies, client needs or market changes,” he says. “We saw that in an extreme way during Covid-19 with banks adapting to an entirely new environment, and now we are seeing it again with the inflationary pressures and the interest rate environment changing. I think it’s important to stay calm, embrace those changes and learn through the different cycles.”

He observes that although for certain parts of investment banking the current environment is creating challenges, for banking more broadly, including corporate banking, there are some tailwinds. “Our transaction banking business is having a strong year; there have been increasing levels of activity coming out of Covid, card usage etc, and in a rising rate environment that’s generally good for us.”

He also observes that bank lending has been recovering after a challenging period during the worst of the Covid-19 pandemic. “There are clearly challenges ahead but we are well placed to continue to support our clients both now and in the future. Relationship banking is a long-term business,” he concludes.  

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