BBVA transforms its corporate finance model
We work with our corporate clients to offer them the most innovative financing solutions
Over the past decade, corporate finance has experienced significant structural change due to tougher regulations and evolving market dynamics. With lower demand for credit and historically low interest rates, the industry is facing a situation of greater competition and lower profitability.
At the same time, the digitization of the industry and the corresponding emergence of new technological competitors are forcing corporate banking to alter their more traditional forms of interaction (“human to human”). This transformation aims to concentrate these “human to human” interactions in advisory services and carrying out more complex processes. In fact, procurement of the simplest financial services is an increasingly automatic process in which the bank’s role will become less visible to clients in the future.
In this new environment, banks have to build up their competitive advantages in one or more of the following areas: obtaining economies of scale due to volume; offering better prices; and services that are so unique that clients are willing to pay for them.
Offering services that stand out from the rest will be a fundamental factor in ensuring the sustainability of the business. This is more than just creating unique products. It’s about identifying which product best suits the specific needs of each client and when they should acquire, or even cancel that product. Without a doubt, it means offering clients continued advisory services to help them achieve their long-term goals. To do so, the combination of self-service capabilities with advanced data analytics will be crucial.
To address these challenges, BBVA’s strategy is to transform its corporate finance model by combining a new high value loan origination model with innovation in products and services made possible through new technologies.
New high value business model: “Lead to distribute”
The bank seeks to be the leader of all the financial operations in which it participates. This allows BBVA to not only increase income from each operation, but also to rotate its portfolio, improving profitability, and to use capital more efficiently.
In this regard, BBVA’s strategy is based on three pillars:
- Being selective with the criteria that define its client portfolio. This will allow BBVA to identify clients and provide each with the utmost attention, and to develop a strategic picture of the sectors and key companies.
- Being extremely disciplined in its price policy in order to ensure profitability from the use of capital at all times.
- Offering advisory services for financial solutions in order to improve their clients’ experiences, adapting to their needs. BBVA has combined the loan and bond teams to help ensure debt support is comprehensive. The bank also bolstered its advisory team for corporate finance and project solutions.
This new origination model has translated into greater profitability in terms of Return on Regulatory Capital, as well as a higher Net Promoter Score (NPS) for client experience.
Innovation is the key to success
Furthermore, BBVA is simplifying corporate finance processes, turning to new technologies like “blockchain” to digitize the process of negotiating and contracting loans. The bank is constantly pursuing innovation in both the new products it offers and the new technological platforms it develops.
Green, or sustainable loans are one example of the new products BBVA offers in which the bank is the main promoter on a global scale and the undisputed leader in Spain. Other examples that demonstrate BBVA’s commitment to innovation include the first global pilots of a corporate loan and a corporate line of credit through blockchain, as well as the first flexible loan.
Also in wholesale banking, BBVA is harnessing the benefits of technology to add greater agility and transparency to its products in order to move toward a Do-It-Yourself financing model for clients, business and corporations.
Finally, in the new corporate finance model it is critical to use the data we have on clients and the markets in an intelligent manner. Clients are increasingly sophisticated, better informed and more demanding. That’s why the financial solutions that we offer them need to be based on thorough data analysis and expert level knowledge of the company and the industry. That is the only way to have a strategic dialogue that translates into a satisfactory client experience.