Choosing transactional banking partners is often one of the most important decisions a treasury team ever makes. But what do top treasuries look for today in a transaction bank? We asked Etihad Airways to talk us through their selection criteria.
Corporate treasuries do not tend to change banks very often. The Etihad Airways treasury team, who recently announced the signing of new deals with Citi and the National Bank of Abu Dhabi, are no exception. “This is the first time Etihad has done something of this scale,” Adam Boukadida, Deputy Treasurer at Etihad Airways recently told Treasury Today.
The infrequent nature of the decision only adds to the gravity of the exercise for corporate treasuries. After all, when something is decided barely once a decade, getting it right first time is absolutely critical. There are no second chances. This is the first time Etihad have done a global exercise of this sort in their 12 year history.
Etihad’s selection of a new transactional banking partner, part of a treasury transformation project, was therefore conducted with a very high level of care and diligence. “As we do with any large mandate or transaction, we ran a formal RFP process which was very transparent, open and interactive, and completely fair,” Boukadida explains.
“We considered a total of 14 banks for this project, including Abu Dhabi and GCC-based institutions as well as the international institutions you would expect to see. And after a series of discussions, workshops and the team carrying out various types of analysis, we decided on the approach we would take.”
The right expertise
The approach that was decided was to agree a new mandate with Citi to become its international transactional banking partner outside of the Middle East. This was shortly followed by a second deal with the National Bank of Abu Dhabi for the airline’s Middle East business. Boukadida says that there were several factors that influenced the final decision.
Firstly, treasury were impressed by the products and services being offered by both the banks, especially around working capital and interest optimisation. Importantly, however, the banks were also able to demonstrate, through their client portfolios, that they understand companies like Etihad and have the right airline sector expertise – as well as solutions – to meet their particular needs. This proved to be the clincher for Etihad’s treasury.
“In addition to the product and service, both of our partners have a wealth of experience in the sector,” Boukadida says. “This was why, in the end, we decided to go with two banks globally, rather than regional partners.”
The right technology
The other area treasury were looking very closely at was technology. At the same time as selecting new transactional banking partners, enterprise resource planning solutions were also being overhauled across the group, while treasury itself were working on enabling SWIFT connectivity and bringing in a new centralised treasury and risk management platform to support the group’s activities.
In the context of such an overhaul, it made sense for treasury to go with what it was already familiar with. Since Etihad had an existing relationship with Citi in some countries (India, Jordan and Nigeria among others) and for several specific services, introducing the bank’s technology promised to be much more straightforward. “There was no need for us to familiarise ourselves with their platforms, technology and ways of working,” says Boukadida. “It was basically to enhance what we already have.”
Citi’s cross-border capabilities were another big incentive to take global what they were already doing with the bank in several countries. Like many airlines, Etihad Airways manages group liquidity centrally out of their head office in Abu Dhabi. A key requirement was therefore for a global solution to bring liquidity back to head office. “The repatriation process for excess funds across our global network is a key factor to how we manage cash and liquidity.”
Meeting in the middle
That Etihad’s existing relationship with both banks stretches beyond the sphere of transactional banking, was also considered during the selection process. At a time when regulation means banks are having to be much more selective about where they extend their balance sheet, this becomes a very important consideration.
“We have close relationships across a wide range of products and services with both banks, not just the transactional bank,” says Boukadida. “We spend a significant amount of time with our banking partners. As an airline our requirements are covered by all of the different areas across the bank from asset and structured financing to foreign exchange and commodity risk management, and of course trade finance and transaction banking capabilities.”
Time well spent
Finding a bank with the right level of expertise, technology and solutions – and, not to mention, one with which a mutually profitable relationship exists – is not an activity that can be done quickly. It is not surprising, therefore, to hear Boukadida say that a considerable amount of time was committed to the project.
But a project of such importance is well worth the time investment. As Boukadida’s comments reveal, selecting a new banking partner is not only a once-in-a-decade decision. It is also a once-in-a-decade opportunity; a chance to put in place the right technology, processes and relationships to support treasury as the department in turn supports the growth of the business in the years ahead. And with this deal with Citi and the National Bank of Abu Dhabi, Etihad’s treasury team are confident they have achieved exactly that.