Transaction bank profiles: Danske Bank
Danske Bank once saw transaction banking as a product-driven business operating as a back-office function. But a change in strategy sees the bank close to returning to the top 20 global cash managers.
Cost-cutting lies at the heart of Danske Bank’s turnaround since the global financial crisis. But there have also been a number of strategic initiatives in its banking business that are bearing fruit – repositioning its transaction banking business is one.
The bank wanted to change the composition of its income, reducing its reliance on its markets business and boosting revenues and profits in transaction banking.
Danske also regarded transaction banking as a compelling way to gain access to a stable funding source and crucial liquidity by generating ample sticky corporate deposits.
Søren Kyhl, global head of transaction banking at Danske, says the importance of the business to the banking group cannot be underestimated.
“The transaction banking business area offsets some of the negative impact of regulation that affects other parts of the bank,” he says. “We have great expectations and ambitions for transaction banking.”
Gaining greater recognition among its clients for repositioning the business since 2012 would certainly be one, and there Danske is making good progress. It ranks as the number one cash manager for non-financial corporates in the Nordic & Baltics region for the first time this year, moving up from third in each of the previous years since 2010.
On the brink
Globally, Danske is on the brink of returning to the top 20 best global cash managers for non-financial corporates for a decade, having been ranked 22nd this year – up from 26 in 2013, 2012 and 2011.
“We have a very strong Nordic footprint and a very strong product line,” says Kyhl. “Our Nordic set-up is unique, as we use a common IT platform across markets, and this allows a company treasurer to view cash flows in real time across currencies. That is something we get great feedback from, as it helps simplify the life of our customers.”
He adds that the bank is proving adept at developing new technology solutions for clients, one example of this being its post-trade service product – developed within its derivatives and securities services business – which it developed in collaboration with one of its corporate clients.
“Basically, it takes the hassle of regulatory reporting away from customers, leveraging economies of scale at our end and allowing customers to focus on their core business,” says Kyhl.
|We want to grow
our business in the Nordic countries outside Denmark
Other technological innovations include OneTrader – a browser-based full-service FX trading platform that enables in-depth pre-trade market analysis and top post-trade functionality.
Kyhl, formerly co-head of Danske’s markets division, says that the potential to bring closer integration between the markets and FX business, in particular, and the transaction banking business is huge.
“We will continue to invest in developing our product offering with new product lines such as the post-trade service, as we believe that regulatory developments provide opportunities for us to exploit our existing set-up,” he says.
Kyhl adds: “We also have some work to do with regard to tying our transaction banking products closer together with the rest of our investment banking product line. I have a background in the markets area and see a significant potential in tying transactions such as FX to the transaction banking products. This will make things much easier for our customers and strengthen our relations with them further.”
Danske’s transaction banking client base is broad and ranges from SMEs to large corporates and institutional clients across most sectors.
Danske says that among the top 100 global corporates that have operations in the Nordic region, more than 50% of those companies bank with them too.
Kyhl says: “As with everyone in the financial markets, our customers focus on being prepared and able to meet the regulatory changes that are coming, as well as on bringing down costs. We see it as our job to be able to guide and advise our customers. Apart from that, the classic transaction banking discipline of managing working capital and liquidity is something that is never far from the top of the list for our customers.”
What about Danske’s priorities for transaction banking over the next couple of years?
“First of all, we want to tie transaction banking even closer to the rest of our business,” says Kyhl. “We are making good progress, but we want to continue to improve. Secondly, we want to stay in the lead when it comes to developing innovative products and solutions that help our customers.
“The world in which our customers operate is changing rapidly – and we need to be at the forefront in this area if we are to help our customers in the best possible way. Finally, we want to grow our business in the Nordic countries outside Denmark, for example by applying our cash management products in the Swedish SME segment.“