Shop talk: Ahmet Bekçe
Soon to make the move to New York from his current base in Dubai, Ahmet Bekçe, the newly appointed head of global export and agency finance origination in Citi’s Treasury and Trade Solutions department, recently took the time to speak with TXF about market prospects and concerns, and what Citi brings to the table.
TXF: Congratulations on your new role. What do you think are Citi’s key strengths in export agency finance?
Ahmet Bekçe (AB): I think the core strength, which is relevant to the entire bank, is our global network. I don’t think there’s any other financial institution that comes near us in terms of global physical presence, being on the ground in so many countries. With that presence comes a great deal of local knowledge. This is extremely valuable for our clients in the context of export and agency finance (EAF).
If you think about the way most banks operate in this space, there is a lot of focus on just one side of the transactions – usually the exporter side – in terms of deal flow and origination, whereas in our case we can capture the opportunity either on the borrower or project level, or with the exporters.
A further strength that complements our global network is the diverse range of the products and services that we offer across treasury and transaction banking, corporate banking, investment banking, project finance, and all the way into the consumer banking in certain places. The set of capabilities that we bring to the table is incredibly valuable, as we can be more creative – for example, in terms of structuring transactions for the right investor base, either in the traditional bank market, or in the capital markets, which is an increasing trend that we see. EAF as an asset class is getting more and more attention in the non-traditional investor space. The interest of non-bank investors means there is a lot more value that we can create because of who we are, and the way we are able to connect these opportunities to different investor bases through our global platforms.
TXF: Which sectors or markets do you currently see as particularly ripe for Citi as growth prospects?
AB: We focus on the areas in which the bank is strong, both in terms of market and in terms of industry, but there are certain trends in activity that dictate the direction of the business. Transportation continues to be very busy, both in terms of aviation and shipping, but also transportation infrastructure; renewables, oil and gas, telecommunications, metals and mining, these are all sectors in which we have strong coverage and good relationships.
There are also industries that are undergoing significant changes, such as telecoms where there is now huge investment in 5G. We must focus on how we create opportunities and organize ourselves as a global institution so that we can help our clients, both the exporters as well as the telecom operators, to create financing solutions using official agencies.
In terms of geographies, in the past this business traditionally was centered on developed market to emerging market flows, but now we are seeing a lot of DM to DM, and in certain cases EM to DM - depending on where you place China. I won’t get too specific, but some bright spots at the moment include the Middle East, Latin America, Emerging Asia - and Europe generally if you think of 5G and renewables. There is activity across the board.
TXF: Given the sectors and geographies mentioned, do you feel that the bank has a balanced book or is there overexposure in some areas?
AB: We certainly try and be balanced. I think that in the past, globally and not just us on our own, there was heavy exposure in some areas. There was a lot of focus on aviation as an asset class, as well as shipping, but over the last few years there has been a move towards more diversified exposure. The growth in opportunity in the industries and markets that I mentioned before has helped. So, I don’t feel that we are overexposed. Obviously, we have our own limits and frameworks that we operate within, and so far, we don’t feel over-exposed in any specific industry, country, or with any ECA, and we are able to manage and rebalance our portfolio as required. In fact, we would like to build up our asset base because recently we were unable to replace some of the run-off we had in the portfolio.
TXF: Will you book and hold, or are you looking to distribute and sell down to the market and other investors? You mentioned other alternative investors earlier.
AB: We would like to ramp up the intensity of the business, so we would like to originate more, distribute more, and hold more. If I can summarize it like that!
TXF: Often on these deals Citi comes in as initial mandated lead arranger or mandated lead arranger, in terms of lending hierarchy. In growing the book, are there transactions in which the bank would participate at a lower level if the deal fundamentals stack up?
AB: We are very pragmatic, and we believe in partnership. This is not a market with hundreds of players, so we are all each other’s partners. We compete, but we also collaborate constructively. And if it makes sense, then we would look at a deal of that nature, because maybe there’s a relationship that we would like to support. We don’t come to this with egos, but we are commercial. By the nature of our franchise, we tend to find ourselves in a leading position, not necessarily the leading bank, but one of the leading banks.
TXF: How do you see competition in the market at the moment? Some people see it as being quite aggressive when it comes to pricing.
AB: We never compete on price unless we find a more creative or efficient way of delivering a solution. We will not chase basis points. We usually focus on approaching deals from a value addition perspective. As I said, sometimes you will have the most efficient solution and because of that, maybe that means you also have the most aggressive pricing on that occasion, but it would be because we found a different way of approaching the problem, and I think this goes back to my earlier comment that there is a much bigger interface between the traditional ECA market and the capital markets. If we can play a valuable role and intermediate in that flow, which I think we are in a great position to do, then we can also create efficiency for our clients and reflect that both in the terms of the deal and the pricing.
If we don’t provide constructive or innovative solutions and make this all about basis points, then I don’t think our clients are going to benefit from that in the longer run. If you’re going to have fewer banks active in this space because there’s a huge amount of pressure on margins, then you will have fewer players to deliver solutions, and neither the ECAs, nor the exporters, nor the potential borrowers and beneficiaries of this sector of financing are going to benefit from that in the long run.
TXF: Do you have any other general concerns in the market at the moment regarding the future of the business?
AB: Currently, regulatory change remains a priority that we must address. There is a lot of interpretation to be done concerning the implementation of Basel III. Where does this asset class fit in terms of the pecking order of liquidity? There is a lot of discovery work and debate and discussion happening both internally at banks, as well as at the regulators, and a lot of interaction between those two parties.
I would see that as not necessarily a challenge, but rather as a process of education and adaptation. It is an area where we’re going to have to spend a lot of time to make sure that it’s the right outcome, and that this asset class is not unnecessarily punished. Especially as it is a market that is a useful, valueadded provider of capital in situations and in places where commercial sources are not readily available.
This is an asset class that is effectively a government guarantee with a mix of pure commercial risk. If you cannot efficiently differentiate that from other assets from a capital and liquidity perspective, both for the collective market as well as at individual institutions, then that would be a very negative outcome.
Global Head, Export
Citi Treasury and