“It’s a very exciting time to be a transaction banker,” says John Gibbons, quite sincerely.
Gibbons is Deutsche Bank’s head of global transaction banking, a unit that helps clients with activities such as cash management and trade finance – work that has rarely set bankers’ pulses racing. But transaction banking is making strides into new technology, which has brought fresh energy to the field. Not to mention that, in the post-crisis era, many banks are finding that activities with solid, reliable returns – and less of the kind of risk that gives regulators heart palpitations – are exactly what is needed.
Part of Gibbons’ enthusiasm comes from his belief that his business will be “the flashpoint for finance and technology”. Deutsche Bank is now planning hires to build out the digital side of the business, though it has long focused on the technological opportunities in transaction banking, launching its Autobahn App Market to let clients access electronic services back in 2011.
“Are digitisation and new technologies disruptors? They could be, but they’re also enablers,” Gibbons said, citing new opportunities in areas such as blockchain, machine learning and the cloud. “Our job inside the transaction bank is to embrace new technology, new partnerships and new ways of looking at our businesses, and bring it to our customers.”
Back in the fold
There have been periods in which Deutsche Bank positioned its transaction bank outside its broader corporate and investment bank. Chief executive John Cryan brought it back in as part of a restructuring announced in late 2015. And despite other changes since, transaction banking is staying put. When the bank announced another revamp of the investment bank in March, it said transaction banking would “remain an essential part” of that division and receive new investment.
That speaks to the stability of transaction banking, something the German bank could really use right now. Executives hope an €8bn equity raising earlier this year helped put at end to worries about capital levels in the wake of a $7.2bn settlement with US authorities over mis-selling mortgage-backed securities. But that was just one of a series of turnaround initiatives. Cryan said in April that the bank has “to do our homework”, adding: “We still have work to do to catch up with regulators’ and our own expectations about our control environment and risk management.”
Gibbons arrived to head up the transaction bank last October, during a particularly difficult period for the bank. Rumours had been swirling that hedge fund clients were pulling business. Jobs were being cut.
The heads of the bank’s departments came together as a group in order to “make sure our clients got the information they needed when they needed it,” Gibbons says now. “I became another person in that team, in front of clients making sure they understood the situation and the facts around the bank’s position.”
Strong and stable
Gibbons had less to worry about than some of his peers. Deutsche Bank’s transaction banking business has been bringing in annual revenues of more than €4bn for the past five years. The bank’s sales and trading activities, by comparison, were more lucrative but also more volatile over the same period. Post-crisis, several banks have found the reliability of transaction banking revenues a big benefit.
Gibbons’ appointment marked a return to Deutsche Bank after about 15 years. He re-joined from JP Morgan, where he ran treasury services for Europe, the Middle East and Africa. At Deutsche Bank he replaced Werner Steinmueller, who led transaction banking for 12 years and moved to become the bank’s chief executive for Asia Pacific.
He described transaction banking as Deutsche Bank’s “DNA” – when the bank was established in 1870, it was to finance trade between Germany and the rest of Europe. “We are the founding business for the entire of Deutsche Bank,” he said.
As Deutsche Bank finds its feet after difficult years, Gibbons is confident that his business can help it to develop long-term relationships with corporate clients. “When a client selects a bank as their transaction bank, they’re placing a tremendous degree of confidence and trust in that institution,” he said. “They’re establishing a relationship that is going to go on for decades.”
He added: “In transaction banking, you sit at the heart of the bank’s relationship with a client. You have daily dialogue with them. You’re at the heart of their key cash flow, supply chain finance, securities custody, trust work – you are core to everything that the customer does in the financial space.”
And as companies scale back the number of banking relationships they have, the relationships built through transaction banking become more important, Gibbons said.
“Companies today are not going to work with loads of banks anymore,” he said. “They’re going to pick and choose a small group of banks that are going to be most relevant to their needs. The transaction banking relationship is where that relevance starts.”