By Gordon Platt
BEST FOREIGN EXCHANGE PROVIDERS: REGIONAL WINNER
Citi’s foreign exchange operations, CitiFX, had a very good year in 2012, which marked the bank’s 200th anniversary. Its FX volume continued to expand rapidly, and it gained market share and increased profitability, even as the global FX market contracted.
Jeff Feig, managing director and global head of G10 foreign exchange at Citi, says: “We are very excited about the phenomenal reception given our Velocity 2.0 trading platform [introduced in January 2012] and we are setting new highs in active users as well as volume. In addition, we have been very aggressive on pricing.”
CitiFX’s turnover continued to grow by more than 25% last year, following a gain of 30% in 2011. The bank’s global reach, with FX operations in 83 countries, gives it a major advantage. “We continue to improve our distribution capabilities, and we have some of the top strategists in the business,” Feig says.
Citi is continuing to develop its platform further. “We’ve been rolling out new features at a fast and furious pace,” Feig says. “We have added new options functions and algorithmic trading alternatives. There are some exciting mobile releases coming.” The most recent innovation is the Citi Access Platform that gives clients access to 46 trading programs developed by external managers.
Deutsche Bank has invested in technology to process information more quickly. It has increased the speed at which prices are delivered, helping the bank to capture more business. And it has increased its focus on risk management and margining. Credit risk management, which is essential in keeping risk-weighted assets at optimal levels, also affects pricing and the amount of margin required of clients. Because of its automated margin calculation system for exotic derivatives, the bank is able to trade them electronically.
Deutsche Bank’s third-quarter 2012 revenues increased 18% from the same period a year earlier, thanks in part to a 65% jump in investment banking revenues. Earnings slipped 3%, but beat analyst expectations.
HSBC trades foreign exchange in more than 60 countries, including 22 in Asia. In addition to Hong Kong, HSBC intends to make Singapore a hub for the bank in Asia. The Monetary Authority of Singapore wants “qualifying full banks” such as HSBC to set up local subsidiaries for their retail operations.
Other key Asian markets where HSBC is looking to expand are Australia, China, India, Indonesia and Malaysia. In addition, it considers Taiwan and Vietnam as strategic markets in the region. HSBC was the first international bank to be granted a license to expand in rural China. According to a recent report by HSBC’s currency analysts, “The world wants Asia. Following the reduction in global tail risks after central bank policy actions, flows into emerging Asia have picked up, and Hong Kong is no exception. The tentative signs of recovery, led by China, have also encouraged flows into the region.”
In April 2012, HSBC expanded into the retail FX business in Hong Kong, offering margin trading on Oanda’s fxTrade platform. Frederic Boillereau, global head of FX and commodities at HSBC, says: “Strategic technology investment continues to be a fundamental focus for us. Ease of access to our prices and liquidity is demanded by all customer types, and retail traders are no different.”
Standard Bank, which uses the Stanbic Bank brand in certain African countries, is the leading FX provider in its home market of South Africa, with a 30% market share. The bank has 30 dealing rooms across the globe, including 18 in Africa.
“Africa continues to be central to the Standard Bank’s growth strategy, and we are excited to be playing a leading role in local market development on the continent,” says SJ Kok, head of global market sales, Africa. “Standard Bank has the ability to provide foreign exchange pricing in 40 of the 54 African countries.”
The group has more than 1,000 branches in Africa, and its FX volume grew by 27% last year. “Our on-the-ground presence enables Standard Bank to provide local market solutions that differentiate our offering from others’,” Kok says. “We are passionate about building our African client franchise across segments and geographies, so the growth that we are experiencing in this area is encouraging. Africa’s rich mineral endowment and growing middle class is capturing the attention of investors globally.”
Standard Bank has a strategic relationship with Industrial and Commercial Bank of China that enables it to facilitate trade and foreign exchange flows between China and Africa.
National Bank of Kuwait
National Bank of Kuwait, the country’s largest lender, has the capacity to handle the big-ticket deals that its peers cannot. NBK has the largest dealing room in Kuwait and is the leading bank for corporate FX services.NBK has an extensive regional presence, with operations in Bahrain, Egypt, Iraq, Jordan, Lebanon, Qatar, Saudi Arabia, Turkey and the United Arab Emirates. It is also present in leading financial centers worldwide.
In the first half of 2012, NBK’s profits from international operations grew by 44% year-on-year. “In addition, our recent move to increase our stake in Boubyan Bank strengthens our presence in Kuwait’s Islamic banking market and opens new growth prospects for the group,” says Ibrahim Dabdoub, NBK’s group CEO. “NBK will continue to focus on core banking activities both in and outside Kuwait, with a clear strategy that aims at diversifying our income sources.” NBK is the leading market maker and liquidity provider in the dollar–Kuwaiti dinar currency pair, in which its turnover exceeded $120 billion in 2012. The bank deals in more than 80 currencies.
Citi’s leading FX market share in Latin America has continued to expand with the introduction of new technology and a continued focus on deepening customer relationships. With trading desks in 22 countries in Latin America, the bank serves more than 12,000 FX clients in the region.
With its speed of execution and low transaction costs, Citi’s new FX trading platform, Velocity 2.0, provides 24-hour trading in 130 currency pairs. Citi is also introducing a new version of its CitiFX Pulse platform designed primarily for corporate clients. The trading platform includes customized end-to-end solutions that comply with local regulations and market conventions in each country in the region. Multinational clients are able to view all transactions done by their various subsidiaries throughout Latin America.
Citi executed a number of multibillion-dollar FX transactions in Brazil last year in connection with corporate acquisitions and financings. It led the Central Bank of Brazil’s FX volume rankings for the fifth year in a row.
Singapore-based DBS has grown rapidly in recent years and expanded into regional markets. It commands a leading 20% market share in Southeast Asia.
Peter Soh, managing director and head of FX trading at DBS, says: “Our vision and long-term strategy is to grow our market share and expertise in Asian currencies. With our understanding of local markets and in-house structuring capabilities, we are able to provide solutions to help our customers meet their FX needs.”
In addition to its home market, DBS has FX trading teams in Hong Kong, China, India, Indonesia, Taiwan, South Korea and Vietnam. DBS is an active market maker and a major FX market participant in the region, including in FX derivatives and currency risk management.
DBS also helped develop a second offshore market for the Chinese currency in Singapore, in addition to a Vietnamese dong offshore platform. The bank is one of the largest interbank traders in China and has 12 branches in India.
SEB has the largest FX team in the Nordic region, and it is a global market maker in the Swedish krona, the Danish krone and the Norwegian krone. Robert Celsing, global head of foreign exchange at the Stockholm-based bank, says: “SEB’s foreign exchange operation focuses on Nordic markets and Nordic products globally. The bank has a strong FX culture and exceptional teamwork.”
During the last year, SEB has continued to gain market share and volume in the Nordic countries. “We have made significant progress in Finland, where we are top-ranked across the corporate segment,” Celsing says. “We offer the best online platform among our Nordic peers, and our local sales teams have built strong relationships with our clients.”
SEB has a global network and provides a full range of FX products in 16 financial centers. This year it added an onshore FX offering in Ukraine.
CENTRAL & EASTERN EUROPE
Société Générale made a strategic commitment to Central and Eastern Europe over the past decade and has continued to invest significant resources in the region in the past few years. Altogether, SG owns 18 banks in the CEE region, and it is a leading dealer in many regional currencies, including those of Russia, Poland, the Czech Republic, Romania and Bulgaria.
“In addition to leveraging SG’s retail banking network across the region, which gives us unrivaled access and insight into local markets, we have also continually developed our FX platform,” says Marc Zaffran, SG managing director and co-head of CEEMEA corporate sales. “The CEE region, including Russia, remains a core focus area for the bank.” SG CIB’s fixed-income platform operates in Russia with Rosbank, in the Czech Republic with Komerční banka, in Romania with BRD, and in Poland through a full branch of SG CIB. In addition, the bank has a dedicated emerging markets desk in London. SG offers onshore pricing and settlement in illiquid, frontier currencies out of New York.