This month we ask Clare Francis how the financial markets landscape has evolved in the past three years. We also discuss strategies for responding to the knock-on effects of the crisis in the next 12 months.

Could you give me a brief overview of your role and how things have changed since you joined the bank three years ago?

I’ve recently been appointed as Head of Sales and Derivatives Structuring at Lloyds TSB Corporate Markets. That appointment is a result of the integration of Bank of Scotland (BOS) Treasury Sales into the existing Lloyds Financial Markets Sales team. This integration was sparked by the merger with HBOS, which was approved in January this year.

With the merger, the scope of my role has grown. We now have a team of 300 client-facing people across the UK, US, continental Europe, Australia and the Middle East. This has developed from a base of 100. Our role continues to be to provide our clients with a service across research, risk management advisory, accounting, and liability management in the asset classes of rates, inflation, FX, emerging markets and commodities. We provide these services to many of Lloyds Banking Group’s clients, covering corporate, commercial, institutional and wealth (high net worth individuals).

Even before joining Lloyds TSB Corporate Markets, the team had been working hard, backed extensively by senior management, to improve our client service offering. As a result, we’ve been growing each part of the business to ensure the infrastructure, the sales coverage, the relationship management and the support teams provide seamless execution from front to back end.

For example, in the trading area we have brought in many senior figures in entirely new roles to build the exotic derivatives business – inflation, rates and FX. These positions, that didn’t exist in the business before, cover quantitative development, research and trading – so we are continuing to invest in developing our platform to support our clients’ changing needs despite the downturn.

What are the core activities of Lloyds TSB Corporate Markets Sales and Derivatives Structuring business?

Our core activities are really threefold:

• Working with customers to identify and evaluate financial risks to which they are exposed.
• Providing bespoke risk management solutions across the asset classes of interest rates, foreign exchange, commodities, inflation and emerging markets.
• Specialising in a personal, customer-focused end-to-end consultative service backed by seamless execution.

Backing that up we also have asset and liability management (ALM), economic research, IFRS (International Financial Reporting Standards) consultancy and a derivatives structuring team, which form our ‘trusted risk advisory’ proposition. This proposition is all about taking an integrated view of customers’ business, rather than a product-focused view, and supporting clients with increased value-added services.

And really the foundation of this is the fact that we are a relationship bank. Last month, Lloyds TSB Corporate Markets was crowned ‘Bank of the Year’ for the fifth year in a row in the Financial Director’s Excellence Awards. What’s key for us is that this is voted by customers – by over 550 UK Financial Directors.

Could you give an example of how corporates can benefit from this ‘trusted risk advisory’ approach?

To quote one of our clients, Gordon Hurst, Finance Director of Capita, “We believe this risk advisory proposition that Lloyds Corporate Markets continues to provide speaks volumes. The combination of experience on the risk management side, coupled with accounting and economic research, is undoubtedly a step forward. Getting two like-minded teams together, where we can both benefit, is crucial in these difficult times.”

As part of the service, we regularly visit clients and we seek to provide an integrated and comprehensive service. For example, we might have our FX advisors, our debt capital markets advisors and our interest rate advisors, together with research, accounting and structuring, all in a room for a brainstorming session with the client. In the last month this has ranged from a FTSE 100 telecoms company to a small private company in the North of England. Our ALM teams serve both our Corporate and Institutional sectors.

This is an interactive way of helping our clients work through their financial risk issues and it helps us understand our clients’ priorities. As well as streamlining the whole process, we find it really helps with idea generation and a two-way open dialogue that can exceed client expectations. However, there is always a lot of hard work on both sides getting to the point of trust where a bank is given the opportunity to prove delivery.

Which activities have clients been most interested in since the onset of the financial crisis?

Within all client sectors, the whole concept of risk has taken on increased senior oversight, mainly as a result of the crisis. Early last year, Finance Directors getting involved in risk and liability management decisions was probably not heard of, but now these decisions are being taken at a senior level, to the extent that many senior figures are now actively involved in day-to-day transactional cash management decisions.

Early last year, Finance Directors getting involved in risk and liability management decisions was probably not heard of, but now these decisions are being taken at a senior level.

Foreign exchange volatility has been increasingly high over the last few months; sterling is getting some respite from the recent lows, but increased volatility has resulted in many questions from our clients.

In response to this, our trusted risk advisory approach has really borne fruit. Clients need a strong analytical framework to support the risk management activities they undertake. The development of our ‘Currency Ranker’ and ‘Traffic Light’ interest rate and FX research helps our clients explain volatility within a boardroom or treasury committee context, for instance.

In recent weeks we have also seen increased enquiries on inflation, and the fact that five-year swap rates have been falling recently has prompted treasurers to ask themselves – ‘is now the time to hedge?’

What differentiates Lloyds TSB Corporate Markets from its peers?

In a word: service. We are very aware there is much external competition and we need to work hard. We have brought in a lot of new, experienced people who all share the same vision, which is simply how do we continue to offer our clients a great risk management service in a rapidly changing market? For us this really encompasses the whole ‘trusted risk advisory’ approach.

We believe in listening to our clients and we implement enhancements to our services based on the feedback received in external surveys. We appreciate that in some cases we have further to go but the momentum we are building is impressive and we believe we have the best UK platform from which to leverage future growth.

We’re very proud of the feedback we have received in the FX space, for example. We achieved five top five positions in FX Week’s Best Bank Awards 2008, in categories including best bank for FX in London and best bank for spot FX. As well as moving up the ranks in FX Week, we have also seen that momentum has been reflected in other client surveys that we have been conducting.

Building and maintaining our client relationships is key for us, especially with the ongoing merger. Our relationships are core to our business and one of the biggest challenges that we have in putting together our new organisation is to take a mix of highly talented individuals, continue to invest in new talent and make sure that the integration is seamless in the eyes of our customers. That’s where we believe so many have failed, but for us it is our primary concern. We have to remain externally focused.

Our success, despite the market conditions, has come by not over-concentrating on any single client type, unlike some more traditional bank approaches.

With this approach, we can achieve very good scale as the products we deliver can be repackaged and rebranded across most of our client sets. In turn, this allows us to bring a very competitive product to market. For example, the portfolio optimisation models we have built across asset classes for the institutional arena equally help within wealth, and can also be used by our corporate clients looking for yield pick-up.

However, one of the most important points to make is that this model can only be successful if our clients trust us and are prepared to open up – our foundations are built on a long-term client relationship business and our relationship managers work alongside us to ensure we are not plugging square products into round holes.

What will be the strategic focus over the next 12 months or so?

Obviously we have seen interest rates fall over the past year, and we are concerned about potential rising inflation. These are key risks in terms of assisting our clients throughout 2009 and into 2010. We also have a keen eye on equity and credit markets.

As such, we will be continuing to expand our inflation platform. We also believe that FX volatility will persist, and we will continue to invest significantly into our FX trading, research and exotic capabilities – for example, hiring key developers to support us in the extension of that platform. At the end of the day our role and strategic focus is to try and help our clients identify and manage risk.

Throughout the crisis we have seen clients drop their trading volumes over their e-platforms, preferring to turn back to the phones, but we are now seeing signs that this trend is reversing.

Early last year, Finance Directors getting involved in risk and liability management decisions was probably not heard of, but now these decisions are being taken at a senior level.

The delivery of our state-of-the-art e-platform, MarketsLink, has really allowed us to increase market share and penetration, which we foresee continuing in the coming months.

Coming to the table slightly later with the e-platform has meant that we’ve been able to implement a very up-to-date financial markets trading platform for both our foreign exchange and liability offering, at a time when our competitors are looking to reduce investment.

Clients will be looking to tap new sources of liquidity and to reshape their balance sheets. Lloyds TSB Corporate Markets is well placed to help them in both respects. Across the wider business, we will continue to develop our debt capital markets offering and in fact, we’ve been very successful in developing this platform from a standing start.

In the past 18 months we have increased the number of bonds mandates that we have led – 13 corporate and 13 institutional deals in that period. And I am proud to say that on the back of some of these deals my teams have also been able to increase the number of swap auctions they have led.

We also have a developing equity capital markets platform and we are working appropriately with this team to ensure we move forward together to serve our franchise.

Lastly, the focus for 2010 is not only integration in a client-centred way, but also embedding and increasing the multi-asset class, risk advisory services that we offer to make sure that we can continue to differentiate ourselves in this space.

What is your best piece of advice for treasurers at the moment?

I think the important thing is to continue to take some time out of busy schedules to be open with your trusted banks. As costs are cut across the board, a bank’s risk solutions team can provide some interesting input to ensure the conclusion of some key challenges, in what are very unique times for us all.