Since the 2008 financial crisis made large physical networks an unjustifiable luxury, Western banks have increasingly relied on an army of peripatetic bankers to service clients in emerging markets.
Take emerging Europe, for example. In the early 2000s, most larger US and European players had outposts in multiple cities across the region, from Budapest and Prague to Kyiv and even Almaty.
With a couple of exceptions, these networks have long since dwindled to a handful of small offices in Warsaw, Istanbul and Moscow. Coverage of other markets, as well as product and sector expertise, is provided on a fly-in basis from hubs in London, Frankfurt and elsewhere.
Covid-19 has temporarily grounded these ‘suitcase bankers’. Weeks on the road have been replaced by long hours on Zoom, as even the most-needy and tech-averse clients concede the necessity of remote communication.
Clearly, it helps that deal flow in labour-intensive areas such as M&A and primary equity issuance has also ground to a halt. The Eurobond market is booming, but borrowers are mainly sovereigns or well-known corporate names that require little hand-holding.
With European countries only now warily emerging from lockdown, the consensus is that this temporary freeze on transactions will persist through the summer months.
Come the autumn, though, bankers see scope for a big pick-up in activity. By that time, government support programmes will likely have come to an end, but many firms will still be feeling the impact of the pandemic in reduced demand due to social-distancing requirements and public nervousness.
That could create opportunities for cash-rich investors – indeed, emerging Europe locals say global private equity firms are already on the hunt for bargains in the region.
Banks and their employees are unlikely to be enthusiastic about business travel if a one-day trip could turn into two weeks of self-isolation
Meanwhile, tech companies and other winners of the pandemic may well look to take advantage of ultra-low rates to raise capital.
If restrictions on international travel have been fully lifted by then, the assumption is that it will be back to business as usual for the suitcase bankers.
But that is a big if.
To get to that point, not only would all countries have to open their borders and remove quarantine requirements, there would also need to be a reasonable assurance that these measures would not be reversed at short notice.
Banks and their employees are unlikely to be enthusiastic about business travel if a one-day trip could turn into two weeks of self-isolation, either at home or abroad.
At the same time, there will be some deals that can’t be done on a fully remote basis. Getting entrepreneurs comfortable with the idea of selling their businesses will be easier in person, while even the most gung-ho investors will want a trusted intermediary to look over a manufacturing plant before parting with their cash.
This would work to the advantage of those few investment banks that have maintained extensive physical networks, such as Citi and Rothschild in emerging Europe.
More interestingly, it could also give a big boost to local players. The more ambitious investment banks in central Europe, for example, have long pitched themselves to global firms as sources of local expertise and contacts.
If, to this, they can add the ability to travel freely within their own country and even – if more states follow the Baltic model and open borders in regional clusters – the wider central and eastern Europe region, this could make them invaluable partners in the early post-Covid era.