Export finance head interview – Investec
TXF talks to Investec about some of the major trends impacting the export credit sector at the present time.
Chris Mitman, global head of export finance at ~Investec^, in London
TXF: How is Investec’s export finance sector business line doing?
Investec, like other regional and specialist banks, is relatively new to the export finance market so we are growing. The product is particularly relevant currently to our cus- tomers in the power, aviation and marine sectors and in our home market of sub-Saharan Africa.
TXF: How is pricing being affected by a) liquidity b) competition?
The price at which banks will fund remains historically diverse between the various ECA programmes, but seems to be narrowing from the extremes we saw during the earlier part of the global financial crisis (GFC). US ExIm pricing has been helped by capital markets appetite for that product, particularly for aviation transactions, and especially during this period of quantitive easing (QE).
TXF: How has Investec been affected by regulation?
Investec currently runs a zero capital model for its export finance business. So unlike incumbent players with export finance businesses built around their balance sheets, there has been little to do around Basel III other than understand and monitor how it affects other FI appetite for the product. Regarding OECD rules, we think these are particularly favourable currently for renew able energy projects in category zero countries.
TXF: Where do you think Investec has a real advantage in the market?
Being a new player, Investec can choose where to play in the market so we are focused only on transactions where we can make a real difference, and not just knowledge of a particular ECA programme.
Clearly there is a lot of noise around new investors in export finance. The reality is, outside of aircraft and US Ex-Im this is still a developing story.
Investec is relatively unique as a project developer/lessor in its own right in the power and aviation sectors, so we have that perspective and expertise to offer our importer and exporter clients and also our ECA partners. Beyond our sector expertise regionally our focus is clearly sub-Sahara where Investec’s brand is strong.
TXF: What sectors, countries or clients do you see being major users of export credit/ECAbacked finance in the medium term?
Africa is often cited as the most exciting region, but activity to date has been relatively limited when taken in a global context. But it will grow. It is a continent which requires regional expertise to find the right partners to put a transaction together.This is critical.
TXF: In what ways have the ECAs changed in the way they operate?
The GFC has led to an exciting time of change and development for all of the banks in the ECA market. We are seeing that feed through to ECA product innovation from direct funding through to the securitisable guarantee product.
TXF: How important is it for you to move assets off-balance sheet, and what comment can you make in relation to new investors in export finance?
Clearly there is a lot of noise around new investors in export finance. The reality is, outside of aircraft and US Ex-Im this is still a developing story. One of the biggest challenges is of course financing projects with longer drawdown periods. XF: What are the future prospects for the sector? There is still room for a regional or global SEK or PEFCO-type entity in the market. This has often been mooted, and the GFC has shown these entities to be sustainable funding sources even in the face of prolonged adverse market conditions.
The Next article: Export finance head interview – Nordea