Ouch! Banks need to transform Balance sheets

- October 30, 2014 3:17 AM | Categories:

arrow going through the floor_43 I just saw where Standard Chartered lost almost 9% in their stock value in one day and profits fell 16% year-to-year in the third quarter. Not a good day! The Wall Street journal analyst sited three reasons, and I quote: 1. Strategy: Revenue growth has become almost nonexistent but Standard Chartered so far has made only minor moves to adjust to a world of rising costs and lower economic growth. 2. Outlook: Things will probably get worse before they get better. Exiting businesses and taking risk out of lending and trading books “will impact near term performance,” but the actions […]

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International Payables – Where the headaches begin

- October 29, 2014 2:39 AM | Categories:

4e33facbaea5a70b_headache Globalization has resulted in dramatic growth in trade flows. While governments like to focus on exports, many companies source both finished goods and raw materials globally. In the past, when buying overseas, companies issued letters of credit and really outsourced the management of A/P to banks (documentation checking, payments, etc.). Now, many companies buy on open terms and must manage a web of invoices that occur not just with suppliers, but with consolidators, agents, inspection agencies, truckers, etc. Many companies I have dealt with over the years have built legacy processing systems both on the inventory and A/P side to […]

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Supply Chain Finance Application Market Still Small

- October 28, 2014 1:55 AM | Categories:

TFM OPINION The market for applications that facilitate finance by providing a platform that augments information to transfer assets (in this case a supplier receivable) to Investors has seen tremendous amount of developments and press releases these last few years, but particularly the last few months. There is one major reason why there is a rush by vendors to claim this space – banks are not lending. Banks say, and markets say, there is no loan demand. Is that true? Does small and medium size businesses need working capital? You bet. In fact recent data from the International Finance Corp […]

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Should Accounts Payable be a Profit Center?

- October 27, 2014 3:35 AM | Categories: ,

I am old school, and old school thinks companies make money by selling products and services above cost. Included in those costs are direct operating costs (or costs of goods sold on the balance sheet) and Sales General and Administration costs (or indirect costs). Pricing should cover the direct and indirect costs. But recently I have been seeing articles around using the rebates and supplier discounts from various programs to measure A/P as a profit center. Is that sound? Are progressive companies really thinking they have found a new revenue stream? Whatever happened to A/P focusing on improving the process, […]

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Eurozone Stress Test Failures Show a Real Need for Non-Bank Solutions

- October 24, 2014 11:35 AM | Categories:

Probably the most significant news for vendors that are creating assets for investors via their technology (procurement, einvoicing, networks, etc.) is the fact that banks lack capital. No more evident is that than 25 banks failing a Eurozone stress tests (19% surveyed) while up to 10 of those continue to have a capital shortfall. See this WSJ piece. This is extremely material. What it means is banks either raise capital, shed assets or both. This will penalize companies, banks and countries that banks deem require too much capital. Tom Elliott, deVere Group’s international investment strategist commented: “If the stress test is […]

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Inventory Finance and Balance Sheet Management– Pushing the Envelope

- October 23, 2014 3:37 AM | Categories:

For a company like Starbucks, which has major spend categories such as coffee, cocoa, tea, sugar and dairy products, commodity price risk represents a primary market risk, generated by purchases of green coffee and dairy products, among other items. If someone could take the risk of holding that inventory off their balance sheet until they needed the products for conversion, that would be have tremendous balance sheet implications. Companies are spending a lot of time on how to reduce inventory. Strategies that exist today include the following: Use Copackers – A copacker is a contract packager that provides a turnkey service […]

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Financing Future Supply Chains

- October 22, 2014 4:01 AM | Categories:

Banks have gaps in their supply chain finance product portfolios and are not lending to certain segments of the market (e.g. SMEs). Banks complain of reduced loan demand, but that is only coming from sectors that they are still open to finance. With the rise of platform providers that augment information to enable transfer of assets, what will the market look like in 5 years? Vendors sell accounting and integration software to banks to facilitate factoring, trade finance, forfeiting, asset based lending, invoice discounting and other techniques. But these solutions only see content from one side of the relationship. The […]

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Banks Trade & Supply Chain Business Under Silent Attack

- October 21, 2014 4:24 AM | Categories:

157242394 Why banks should care about new models of open account trade credit? Banks have developed trade and supply chain finance capabilities to service the open account trade flow. For the most part, the success here has been limited, as banks typically serve only one side of the transaction and have limited structured data outside of purchase order and invoice data. As Jason Busch commented recently, “A new era of capabilities brought forth by the rise of purchase-to-pay (P2P), order-to-cash (O2C), e-invoicing and supplier/business networks combined with third-party capital sources is challenging the existing bank ecosystem in the trade financing area.” […]

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Are P2P models the death of Factoring? CFA Webinar to explore

- October 20, 2014 6:06 AM | Categories: ,

Noose There is much spin and confusion going on around new models for finance. And of course a massive movement to create non bank entities to fund wholesale and consumer credit. The trick is understanding the information that enables the transfer of assets. Many of the solutions in the market started out as some integration proposition and now threaten various banks areas – factoring, trade & supply chain, commercial finance, etc. I will be presenting a webinar “Is a P2P and Financing Comet About to Hit Factors?”. The webcast, hosted by Commercial Finance Association (CFA), the international trade association dedicated to […]

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IMF says Shadow Banks could endanger Global Financial Stability

- October 20, 2014 3:12 AM | Categories:

imfLogo_large I just downloaded and scanned the International Monetary Fund (“IMF”) report on Shadow banking. You know when the IMF talks about shadow banks comprising the global financial stability, that this is a big issue. IMF believes Shadow banking, broadly defined as credit intermediation outside the conventional banking system, constitutes about one-fourth of total financial intermediation worldwide. I did a brief post on this a few months back which proved to be quite popular. See Size of Shadow Bank Market Grows What the market lacks is data. I asked the question are we pushing risk where it cannot be seen? The […]

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European Banks need to raise 700+ billion in new capital

- October 17, 2014 3:30 AM | Categories:

Morgan Stanley estimates that the 27 biggest European banks need to raise total requirement $732 billion to $777 billion by 2019. That’s the equivalent of either shedding three JPMorgan banks or issuing new bonds that can be considered part of capital. Regulators are looking to have these banks add to core capital to ensure that in future crises the senior bond holders take losses and not taxpayers. Equity is expensive. Suffice to say all of this will have an impact on future trade credit pricing. Right now, banks are still fighting for deals, and margins are particularly thin on supply […]

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BNP Paribas lacks USD clearing capabilities – impact on commodity trade

- October 16, 2014 3:23 AM | Categories: ,

The logo of BNP Paribas is seen on top of the bank's building in Fontenay-sous-Bois, east of Paris As part of BNP’s punishment for violating U.S. sanctions against Sudan, Cuba and Iran, in addition to being fined $8.9 billion, a New York banking regulator suspended the French bank from clearing transactions in energy trade finance for the whole of 2015. BNP has a huge energy franchise with over 200 front-office professionals in North America, London and Singapore serving the Bank’s global client franchise for oil and oil products, base and precious metals, agricultural commodities, carbon and investor solutions.  They help finance the production, the transformation and the marketing of various commodities such as energy and metals. The ban […]

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