Unicredit: more support for exports to get out of the crisis

In this interview with two Unicredit executives, in key positions in the bank to look after customers operating abroad, bank-company communication skills emerge, but also the many difficulties for our companies in these moments of market turbulence international markets, between regional crises and fierce competition. What emerges above all is the need for greater system-level support to help our companies overcome these difficulties, as happens in competitor countries.

Garioni: UniCredit is the Italian banking group with the largest foreign network and with a great vocation for the internationalization of our businesses. How much of a part do foreign operations play in your business with corporate clients? 

Francioni and Padovani: UniCredit is to all intents and purposes a leading bank at European level with strong local roots, for which foreign operations with our corporate customers play an absolutely important part. Our Institute intermediates, in Italy, an important share of these operations, about 20%. Our interest in the sector, therefore, can only be very high. UniCredit is one of leading European financial groups with a strong presence in 22 countries – the largest international banking network in the Central and Eastern European region – and an overall international network spread across approx 50 markets.

Thanks to a network of approximately 4.000 bank correspondents and numerous collaboration agreements with leading foreign banks, it is one of the main networks on the global banking scene.

It is evident that since we are so "internationalized", we are aware and therefore very attentive  also to the risks, to the difficulties but also to the opportunities connected to the work of our companies abroad. It is also this wealth of experience that allows us to be ever closer to our corporate customers, and not only to large companies, but to those of any size. Attention to customers is also demonstrated by our strong presence on the national territory with a dedicated specialist network, which in Italy as regards trade finance è made up of a vast network of Foreign Trade Centers and Trade Finance Specialists, dedicated to providing assistance and solutions to customers operating abroad.

Garioni: After the great global crisis, the slightest recovery that took place in Italy was driven by exports. Were there sectors in which this revival of exports was most evident?

Francions: After an extremely negative 2009, last year we noticed an interesting recovery in exports. For some product sectors there was even an increase of 30%. Among these, those that stood out more than the others were: the chemical sector  textile, leather and its products and the mechanical one (from taps to valves to machinery in general, primarily those for packaging). We firmly believe that exports can play a dual key role: a short-term crisis exit strategy and a medium-long term growth and development strategy. In short, to combat the crisis, our companies need more internationalisation, and no less foreign projection.

Garioni: Are there trade and export finance tools that are more used by our exporting companies in recent times? In the Export section of FIRST online we have published two important recent loans of yours: the one for the export of ATR 72 aircraft to Russia and the one to the Russian company VTB leasing: and for the rest?

Paduans: We have observed how the recent international economic crisis has made companies more sensitive to the use of instruments that offer a higher level of risk coverage. In particular, we have noticed a greater use of tools trade finance such as documentary credit and the related forms of coverage and financing that can be offered in combination (commitment, confirmation, discount, etc.) To give an example, until 2008 confirmed documentary credits constituted approximately 25-26% of the total export credits received, while in 2009-2010 (and up to now) this ratio has grown up to peaks of 38% (currently 35%). It should be noted that – again following the crisis – some emerging markets (for example Algeria) have made the use of documentary credit compulsory for their imports or do not ensure coverage in foreign currency, if made with other means of payment. The same happens with regard to the issue of international guarantees to support the various stages of export of goods and services (bid, advance e performance bonds) as well as for more specific export finance instruments such as, for example, supplier credits (supplier's credit) and buyer credits (buyer's credit), like the two transactions you mentioned.  

Garioni: In your opinion, why, despite the increase in the riskiness of foreign countries and counterparts, do our companies find it difficult to use instruments – financial and insurance – to hedge against credit risk? And, remaining on this theme, does Unicredit evaluate differently (for example at the level of internal credit rating) the company that has a prudent attitude compared to the one that does not hedge itself against these risks?

Paduans: As mentioned, the recent international turmoil has led companies to make greater use of the tools trade and export finance, although some of them are not yet aware of all the services currently available for risk mitigation. Precisely for this reason, our commitment to raise awareness in this sense is extremely strong, carried out not only through our Specialist Network, but also through training interventions aimed at companies, designed to broaden their level of knowledge, allowing them to evaluate more thoroughly the problems but also the opportunities that an operation can present.

We do not know that companies, in general, find it difficult to use more protective financial instruments (such as the confirmation of documentary credits, the discount on bills and bank commitments and so on). Of course, protection has increased in cost and this may have led some exporters in difficult financial situations or with narrow margins to sometimes give up the use of hedging instruments. It is clear that we look with absolute respect from a credit point of view at exporting companies that use products that mitigate commercial risk, especially in times of severe crisis in various geographical areas, such as the current one.

As far as our experience as an institution is concerned, our commercial exposures, in support of Italian exports, have continued to grow since the beginning of the crisis, testifying to the support we offer to our customers which is combined with the willingness to hire foreign risks.  

Garioni: Are you thinking of some innovative tool to finance and cover risks for Italian companies that sell and invest abroad? 

Paduans: The research and development of new solutions or the improvement of the current offer of products and services is an integral part of our business, in which we strongly believe. The innovation of our range  products and services of trade finance it is essential to always offer our companies new solutions that allow them to be competitive and operate with greater tranquility in international markets. We can claim to be able to offer companies a range of absolutely innovative and in some cases exclusive products and solutions. As far as exports are concerned, we are able to satisfy any need to cover both credit (commercial and political) and other risks (such as, for example, the risk of transport of goods). The same can be said regarding the financing of supplies (for export), purchases (for import) and in general for any other activity linked to the internationalization of the company. We would like to point out that, in the past months, we have received the  ABI prize and the first National prize for innovation (conferred to us by the President of the Republic), with the @Global Trade product: a completely web-based platform (link: http://www.unicreditcorporate.it/servizi/global_trade.htm), multi-bank, multi-counterparty easy to use capable of supporting companies in transactions related to the trade finance business. We are also working on new commercial levers in order to reach where our banking system has not yet arrived in complete form, i.e. finance the foreign corporate customer through the import discount (L/C) with deferred settlement and the Supply Chain Finance.

Garioni: How much is your international network used, especially in the countries of the new Europe, to support Italian companies that export and invest abroad? I am referring above all to local financing, which Italian companies need to operate in the various countries.

Francions: In fact, the UniCredit group is able to offer Italian companies excellent support in all markets, especially in the new Europe, thanks to a widespread presence through a network of branches that has no equal among our competitors. Furthermore, in all countries we are organized with Teams dedicated to receiving Italian customers (Italian Desk) at the disposal of Managers in Italy and customers, to facilitate the completion on-site visit of all the necessary banking procedures (for example opening of accounts, granting of loans, etc.). In particular, with regard to funding we have  a dedicated product called Cross Border Plus Credit.  In this sense, Italian companies can count on such efficient assistance that it can be compared in all respects to that which they already receive from us in Italy. And in foreign markets where bureaucracy, local practices and different legislations, and last but not least the language, often constitute significant obstacles, UniCredit is in a position to offer concrete and tangible added value. A fact that summarizes all of this is that in 3 years we have supported around 15 Italian companies in their expansion in Eastern Europe. We have various initiatives to guide exports, the latest in order of supply is "East Gate" (carried out with the patronage of the Ministry of Economic Development, see the link https://www.unicredit.it/it/progetti-territorio/eastgate/?idc=555). It is about  a project focused on nearby markets that interests thousands of our entrepreneurs who are thinking of entering or enhancing their export flow towards the markets of Central and Eastern Europe.

Garioni: What part does international culture play in the training of your staff? I ask because banks often notice, especially in the credit sector, a lack of knowledge of operations with foreign countries, and therefore an unsatisfactory assessment of customers' credit needs. 

Francioni and Padovani: Our attention in providing consultancy to companies, which we define as specialist, is possible because we pay close attention to the continuous training of our staff. Our catalog of internal training courses regarding issues related to trade and export finance is developed in such a way as to be able to provide recipients with in-depth knowledge of the various aspects based on the various roles (Relationship Manager, Specialist, etc.) and contribute to maintaining - within our Institute - the good level of international culture that has historically distinguished. Particular attention is given to the definition of the credit intervention necessary for the single customer and the single operation, in order to allow the credit sector a more reasoned assessment of the proposed credit lines.

Our firm will is to continue on this path while maintaining this peculiarity, and pursuing a perspective of constant improvement and improvement of our capabilities aimed at fully satisfying the needs of our customers.

Garioni: For years there have been no significant changes to our internationalization support system, even though they had been announced, such as, for example, the introduction of a Consolidated Law on the matter, the reorganization of the entities and so on. Don't you think that this, let's call it this way, "disinterest" in politics penalizes our banks as well as our SMEs? And what are the most urgent measures that should be taken?

Francioni and Padovani: We can see that the attention of other countries for their customers is always very high. Our majors competitors Europeans, primarily Germany and France, frequently organize events and meetings in the countries of greatest interest to promote their customers, with the help of their chambers of commerce and embassies. It should be remembered that in the period 2007 – 2010 we recorded a decrease in the Italian share of world imports and exports of 0,5% and 0,6% respectively and a loss of one position in the rankings both in world imports and exports, where Italy moved from seventh to eighth place.[1] The margins for improvement present in Italy certainly see us ready to do our part in contributing to the support of exporting companies and companies investing abroad with initiatives and business solutions aimed at successfully accompanying them in their internationalization projects.

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