Financial Institutions: Leveraging the opportunities of a heterogeneous sector

The financial institutions sector is very heterogeneous and presents specific challenges and demands that must be addressed when providing funding and advisory services. Regulation, sustainability, and the macro environment are key elements to take into account to capitalize on business opportunities in this complex segment.

Banks, large fund managers, insurers, pension funds, sovereign wealth funds, and hedge funds comprise a very large and complex sector, that of financial institutions, which, even in their very nature as investors and capital managers, also need financing and advisory services to undertake their activity. This group of financial institutions contributes to the dynamism of the capital markets both as issuers and investors in different types of assets. Some entities, such as sovereign wealth funds, are also key figures in managing the liquidity and investment projects of states, especially among large commodity-producing countries. Following on from this, the work carried out by the BBVA CIB team is of special importance, where the experience and knowledge in various areas allow the bank to connect its capabilities with the different business units of these large groups and find business opportunities for both parties.

The experience and knowledge of BBVA CIB teams allow the bank to connect its capabilities with the different business units of these large groups and find business opportunities for both parties.

Many entities require, in addition to specific knowledge of their business, a higher level of sophistication in the creation of products or provision of financial services, which adds an extra level of complexity to the financing activity. Iván Poza, BBVA CIB's sector manager for Financial Institutions, explains the importance of having an expert team with a high degree of knowledge of these types of institutions: "Since the financial crisis, regulation has become much stricter and requires institutions to optimize their balance sheet management. As a result, offering funding through an instrument that is typically a repo collateralized by bonds or other assets has become one of the most important activities for many financial institutions, such as banks or insurance companies, and one that also requires a high degree of sophistication on the part of the entity that designs and provides this funding." BBVA CIB not only provides advice on these types of secured structures and other funding solutions but also provides its expertise in the design of Investment Solutions through structured products, in addition to the sale of fixed-income instruments, DCMs, syndication services, provision of hedging, derivatives, correspondent banking, trade finance, and cash management, among other things. The range is very wide and specialized.

BBVA CIB's differential proposal lies in its specialized team, relevant global capabilities, and adequate credit rating to provide these services to other financial institutions. Geographical presence is essential, and BBVA's experience in emerging markets is outstanding, providing key knowledge when advising on products such as bonds and other fixed-income instruments. Iván Poza explains: "The value chain we have designed for the corporate world has been perfected and transferred to the institutional world. Therefore, we can also approach the treasuries, the most sophisticated teams of all these financial institutions, and we can offer them access to other investors, structuring their debt, equity, and/or funding instruments." BBVA's platform is also recognized for its innovation in structured products, giving large global private banks and other entities access to cutting-edge products and differentiated investment solutions.

Sustainability in the Financial Institutions sector

The financial institutions sector has a strict regulatory requirement since they also bear a fiduciary responsibility. That is why they have the social component very present, they are in a very advanced state of adaptation and planning aligned with sustainability objectives, and they have fully integrated, especially banks, ESG criteria.

Regulatory frameworks are having a great influence on this paradigm shift, and many banks or entities such as fund managers have already joined alliances such as 'Net Zero', of which BBVA is a member, to reduce greenhouse gas emissions to as close to zero as possible. For their part, fund managers are adopting much more restrictive investment criteria than before, thanks to new regulatory frameworks such as the SFDR, the CSDR, etc.

BBVA CIB has a wide range of experts in advice related to sustainability issues, to share their knowledge to assist these large entities, for example, in aspects related to issuing social or sustainable bonds, among other things. The sectoral coverage model of BBVA CIB  responds to these changes in business models, the necessary specialization by industry, and the impact of sustainability.

However, the paradigm shift in financial institutions will also be marked by the macro environment, the stability of financial markets, and regulation. These variables, accompanied by the ever-present component of sustainability, will open up new business opportunities that will require sophistication, specialized knowledge, and a close relationship with clients to respond to the new challenges that will arise in the future.