For European companies, fears of a trade war between the US and China – and the populist political movements rocking the European Union – highlight the risks and opportunities of doing business across the EU’s vast single market.
Europe’s major economies are closely linked, which allows problems to spread across borders very quickly, says Francesco Manuele, head of Intesa Sanpaolo’s Frankfurt branch. But that same connectedness makes the coordination with its clients so important and also smooths the path for companies to expand beyond their domestic market and build an international presence. It is exactly this process that Manuele’s 35-strong team in Frankfurt are here for.
“Our clients are definitely concerned about the current situation between the US and China,” he says. “It affects the whole of the EU, but especially Germany because it’s the global champion in exports. The economy is still growing, and clients are not as worried as they were at the end of 2018, although the more positive signs we can see still need to be confirmed.”
Intesa Sanpaolo’s Frankfurt branch has a balance sheet of about €4 billion, of which some €1.5 billion are drawn facilities, with the remainder comprising available facilities for cash or guarantees. The office is divided into two main teams: an Italian desk that manages Intesa Sanpaolo’s relationships locally with the German subsidiaries of around 480 Italian companies; and an international desk that covers more than 40 large German, Austrian and Swiss corporates from sectors such as automotive, energy, construction and retail. Most have operations in Italy and Central and Eastern Europe.
“In terms of client numbers, the branch is mainly active day to day in supporting Italian companies’ subsidiaries in Germany, but in terms of lending exposure, typically via large commitments in syndicated facilities, our business with German, Austrian and Swiss corporates is larger. These relationships represent opportunities to diversify our investment banking operations here in Frankfurt and across the entire Intesa Sanpaolo Group,” Manuele explains.
He points to the Frankfurt team’s success in December 2018 in winning a mandate to arrange a €2 billion revolving credit facility and participate with other international banks in a €150 million commitment to one of Germany’s – and Europe’s – largest retailers. Intesa Sanpaolo was one of nine banks invited to pitch for the role of mandated lead arranger and bookrunner. It was appointed thanks to the strength of its syndication desk in London, but also Intesa Sanpaolo’s long-term relationships with this retailer in Germany, Italy and Croatia. “Even in a month like December we were able to finalise the deal in only four weeks,” says Manuele.
“The language barrier is still significant, so our dedicated relationship managers can be the bridge between our knowledge of the specifics of Germany and their experience in Italy”
The Frankfurt team believe their added value to clients comes from being part of the wider Intesa Sanpaolo network, its strong and healthy balance sheet, centred on the bank’s domestic strength in Italy, but strongly supported by its growing branch network across Europe and globally. The branches aim to be responsive local points of contact for major foreign companies operating in Italy or other markets, seeking to expand those relationships by introducing clients to other teams based in markets they wish to target. He cites the example of Intesa Sanpaolo’s Warsaw branch, which can assist German clients in the key Polish market.
While building cross-border relationships with major German, Austrian or Swiss companies is a top goal for Manuele and his team, the Frankfurt branch’s roots are in helping Italian clients expand into Germany. Its expertise and connections are especially important, he says, to smaller and mid-sized Italian companies that do not have the resources to look after their needs internally.
“For these smaller companies, working with Intesa Sanpaolo in Germany is a huge advantage because it helps them enter the German market with a partner they know well and that has over 40 years’ experience in the market,” he says. “From their perspective, working with us in Germany is the same as working with us in Monza – we can pick up the phone to their local Intesa Sanpaolo relationship manager in Italy and clarify the situation quickly. The language barrier is still significant, so our dedicated relationship managers can be the bridge between our knowledge of the specifics of Germany and their experience in Italy. Moreover, the Italian desk relationship managers are often able to help the Italian company in smoothing the relationship with the German subsidiary, and vice versa.”
He sees important opportunities for Italian companies in Germany’s renewable energy sector, which has grown quickly since the country decided to close its nuclear power stations, and with the presence of the leading OEMs in automotive to support the massive change also taking place in this industry. Intesa Sanpaolo has built a rapid and flexible trade finance offering to support clients – not only those exporting from Italy to Germany, but also clients who have opened manufacturing operations locally to be closer to their major German customers. On the supply-chain side, the branch’s recent launch of its Trade Receivables Finance product allows Italian groups to access liquidity when they enter into supplier relationships with major German customers.
“We give them tailor-made solutions,” he says. “That’s not a slogan – it’s a reality. We know each of our clients well, which means we can make decisions quickly and ensure the facilities fit their needs very closely.” Bigger German competitors find it hard to operate this way, he says, because they necessarily have more layers of decision-making to go through.
In its search for growth areas in Germany, the Frankfurt branch sees exciting potential in providing financing for the circular economy – in which companies move to business models that aim to minimise waste, reduce consumption of finite resources or adopt renewable energy sources.
“Financing this segment isn’t just something that’s nice to talk about,” says Manuele, “it’s part of the reality for industries that are going through huge change and our experience in this field is hugely valuable.” From the mass launch of electric vehicles to transforming retail by changing logistics systems and rethinking the way packaging is used, Intesa Sanpaolo’s team has relevant experience to offer clients.
“Our whole purpose is to put things that have value in front of our clients and help them go where they need to go.” By the end of this year, he says, the list of destinations will include Australia, following branch openings in Brazil and Turkey – yet more borders that Manuele and his team want to help their corporate clients to cross.
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