Treasury Outlook for 2013: A Year of Opportunity
Is 2013 the year everything changes? While the economic challenges are far from over, proactive corporates are also sensing the opportunities afforded by the new landscape. Citi’s recent Treasury Outlook for 2013 conference highlighted key trends from each of the four major regions, and the different ways in which the bank is engaging with clients to design solutions to address the macroeconomic, regulatory and geographic trends.
With the US avoiding the fiscal cliff for now, and growth in Asia stabilising, it is easy to think that the worst is over for corporate treasurers, finance directors and supply chain management heads. Yet it may still be too soon to become optimistic. As such, Citi’s recent Treasury Outlook for 2013 conference brought together a number of corporates, financial services professionals and industry experts to discuss key trends they can expect for the coming year, and how best to not only safeguard against threats, but also take advantage of the opportunities.
The conference kicked-off with Michael Saunders, Head of Western Europe Economics, Citi, providing a macro-economic outlook for the year ahead.
“In Europe, the economy will disappoint,” stated Saunders. “Europe is finding it very difficult to become insolvent, and as a result, is sitting on debt it cannot shift. And the sovereign crisis in the region is far from over, with a Greek exit likely within the next few years.”
The message was clear. Those expecting a quick return to a healthy global economy will be disappointed, particularly as a deep European recession means a slow recovery.
The key question, however, was how this outlook may affect corporates in the year ahead – with concerns about liquidity constraints and the possible US debt ceiling at the top of many agendas. In addition to this is the looming implementation of Basel III, which could reduce the capital available to certain corporates, encouraging them to instead look towards the public markets, or shadow banks.
“The total capital requirements in 2011 were around 8%,” explained Rajesh Mehta, EMEA Head, Treasury and Trade Solutions, Citi Transaction Services. “By 2019, global banks that operate in markets where regulators believe there could be a systemic risk could have to keep around 15.5% of their capital.” Given this, “banks are likely to prioritise investment grade companies when it comes to lending,” Mehta noted.
However, these challenges also offer opportunities for those willing to take the necessary steps to increase operational efficiency and hence competitiveness. Citi’s Transaction Services business in each region is reacting to trends by implementing initiatives that mitigate risk, increase simplification and standardisation, and encourage investment.
EMEA: Danger and opportunity
Swati Mitra, EMEA Region Head, Corporate Client Sales Management, Citi Transaction Services, opened by reminding delegates of a quote cited by John F Kennedy, stating that “The Chinese use two brushstrokes to write the word ‘crisis’. One brushstroke stands for ‘danger’ and the other stands for ‘opportunity’”.
“EMEA is a region that reflects this philosophy,” explained Mitra. “While clearly there are many challenges in Western Europe driven by Eurozone considerations, we are at the same time seeing many opportunities for growth and investment in Central & Eastern Europe, Middle East and Africa.”
In order to take advantage of these opportunities for growth, corporates are recognising the need for more efficient treasury operations. Given this, the biggest priority in the region is a move towards simplification and standardisation of transactions, with the SEPA deadline providing an opportunity to re-evaluate and re-engineer bank account and liquidity management structures.