Analyzing corporate liquidity and discovering sales potential with corporate customers are two sides of the same coin. During the Corona crisis, VR-Bank Memmingen quickly developed an existing application for a liquidity indicator.
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Around one in four European companies (43 percent) assume, according to the “European Payment Report 2020” by the credit management provider Intrum, that the risk of customer delays or defaults in payment will even increase in the medium term. Answers from finance and controlling experts from almost 10,000 companies in 29 European countries were evaluated for the study and published in September. Many of the companies affected can only close these financial gaps with short-term bank loans.
Corona offers opportunities in corporate banking
“During the Corona crisis, companies made extensive use of bank loans to secure their liquidity and are still doing it,” quotes Bankmagazin author Barbara Bocks in her article “Is the big end coming?” Carsten Baumgärtner, Senior Partner and Expert for Corporate Banking at the Boston Consulting Group. The latter also sees opportunities for financial institutions in the current situation, “which, on the basis of a clearly defined corporate customer strategy and a corresponding loan portfolio management, can also provide loans to companies that have so far had no business relationships or only minor commitments with them.”
“In corporate banking, the transformation backlog of business models due to the low return on equity in many places in connection with increasing risk burdens will lead to short-term structural adjustments that are perceived as severe. Corporate lending and transaction banking in particular will be affected as a result of the relocation of value chains,” explains Hans -Martin Kraus, partner at Deloitte in Consulting Strategy & Business Design in an interview with the Bankmagazin author.
This requires a strategic credit risk and liquidity management at the banks, writes Florian Kappert in his bank magazine article “Making the risk of transactions calculable” (edition 9 | 2020). “The fear of a possible bankruptcy has become a reality for many companies as a result of the crisis and is still part of everyday life. The most insidious thing about the situation is that it can quickly lead to a domino effect. Not just the companies themselves, too the experts in banks and savings banks who advise companies on their financial security should take this into account. ”
Environmentally and socially-related financing on the rise
“From today’s, preliminary point of view, segments such as wealth and asset management as well as many areas of investment banking are currently still largely corona-resilient,” says Deloitte expert Kraus, highlighting a positive trend in the crisis year. According to the “Sustainable Financing and Investing Survey” by the British bank HSBC, this applies above all to the segment of sustainable financing and investments. The pandemic gave them a huge boost. Of the 2,000 or so participants surveyed worldwide for the study, more than 90 percent rate the consideration of environmental, social and governance aspects (ESG) as important or even very important.
Banks need sustainable business models
But sustainability has not only become an important topic in investment banking, but also in the business models of banks and the criteria for lending. “So far, however, climate risks have often been overlooked or underestimated in risk management programs. If companies want to remain operational, however, it is necessary to integrate resilience into the core of the business strategy. This makes the pandemic particularly clear,” writes Vincent Manier in his Springer Professional guest article ” How finance departments manage climate risks better “.
“The necessary change processes require a lot of investments that are to be made available through existing mechanisms of the financial markets. Financing via banks through simple lending is also one of them. Against this background, the EU has developed the Financing Sustainable Growth Action Plan, so that capital flows are directed towards sustainability, Managing financial risks and promoting transparency and a long-term perspective “, explains Katja Mayer in the book chapter” Sustainability from a financial market perspective “(page 122).
According to the Springer author, the basis is the development of the EU taxonomy, which proposes a classification system for sustainability. According to her, further framework conditions are anchored in parallel in many other directives relevant to the financial market, such as MiFID II (Markets in Financial Instruments Directive) or AIFMD (Alternative Investment Fund Manager Directive). “In the process, expectations of the actors are sharpened, green products and requirements are determined and definitions are derived.”
Pandemic pushes further digitization of financial institutions
The Corona crisis gave the digital transformation in financial institutions a similarly big boost as the topic of sustainability. Many branches were closed practically overnight or only remained open in “emergency mode”. What seemed hardly possible for a long time: Many bank employees now performed their tasks from home, customers were advised by telephone and conferences were held digitally.
But in an international comparison, the German financial institutions are only in the middle when it comes to digital transformation, as the analysis “Digital Banking Maturity 2020” showed in autumn. “One of the most important findings of the study is that the digital champions were able to react faster and more appropriately to changed conditions even during the Covid 19 crisis. The clear driver here is the respective degree of digital maturity,” explains Deloitte partner Jürgen Lademann the results of the study .
The analysis identified five key developments that set the benchmark in international competition:
- Covid-19 has changed banking and specifically accelerated the development of digital channels.
- Digital champions score significantly better in terms of the cost / income ratio and return on equity.
- Banks in particular have to close the gaps in the end-to-end digital sales process in order to participate in the steadily growing online / mobile segment.
- Young challengers adapt new trends and innovations faster than established players.
- Digital champions manage to operationalize the user experience (UX) in a measurable way as a decisive decision-making feature for customer attractiveness and loyalty.
The Pwc experts Hartmut Reinhard, Ricco Rentz and Timo Sommerfeld explain why this is more necessary than the use of digital tools in their bank magazine article “Making digitalization controllable” (issue 2 | 2020):
For digitization to be successful, it is no longer just about using modern technologies, but also about changing corporate culture and organization as part of a digital transformation. In addition, entire business models are being put to the test. “
You can find all the latest articles about the Corona crisis here
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