Grounded dealmakers unable to fly at a moment’s notice for pitches or spend money on wining and dining clients due to the Covid-19 lockdowns, have saved some of the world’s largest banks over $1bn in the past 12 months.
Travel and entertainment costs have slumped at large investment banks including Goldman Sachs, HSBC, UBS and Deutsche Bank, according to Financial News‘ analysis of their annual reports, as Covid-19 lockdowns have restricted high-flying investment bankers to conduct multi-billion-dollar transactions over Zoom.
HSBC spent $300m less on travel in 2020 compared to a year before while Swiss bank UBS saved $209m on similar costs — a reduction of 55% — which it pinned on “Covid-19-related restrictions”.
The biggest drop was at Deutsche Bank, with year-on-year travel costs slumping by 70% to just €76m, while Goldman’s ‘market development’ costs, which includes travel, dropped by 46% to $401m in 2020. NatWest Group travel costs also fell by 67% last year.
Collectively, these banks have saved around $1.1bn on travel, and some big lenders realised that restrictions imposed upon them during the pandemic could lead to permanent cost-savings.
Christian Sewing, Deutsche Bank’s chief executive, said recently that the bank has “started to examine our real estate set-up and will certainly not return to the same level of travel costs we had prior to Covid”.
Mark Tucker, HSBC’s chairman, also hinted that the bank would look to retain more video conferencing over in-person meetings in the future.
“Like the rest of the group, the board had to adapt its ways of working in 2020. We met virtually for much of the year, which brought benefits including less travel and more frequent, shorter meetings,” he wrote in HSBC’s annual report published in February. “It will be important for us to consider how we retain what has worked well over the last year once restrictions are lifted and it becomes possible to travel once again.”
In the early days of the pandemic, M&A bankers suggested that a lack of in-person meetings would hamper deal activity, particularly for larger transactions where strong relationships and trust is required. However, the top 12 investment banks made $49.4bn from their advisory units in 2020, an increase of 23% on 2019 and the highest number for a decade, according to data provider Coalition.
In normal times, senior investment bankers have a brutal schedule, travelling across the world for pitch meetings, board meetings and introductions to new clients. The pandemic has bought some respite.
“I used to get picked up at 5am to hop on an early flight to somewhere in Europe, flying back at 5.30pm and then get back home at 8pm, usually just for a one-hour meeting, which could just as easily be done over Zoom,” said a recently retired senior dealmaker. “Please let those days stay behind us.”
Philip Drury, head of Citigroup’s banking, capital markets and advisory unit in Europe, the Middle East and Africa, told FN previously that bankers will “think twice” about travel in the future.
“We will think twice about getting on a plane for one meeting, particularly internal ones, and have found video conferencing is very effective for a lot of capital markets execution,” he said. “But for less transactional businesses, where strategic advisory discussion is required, we will look to travel in the post-Covid world. There needs to be a balance.”
Guy Hayward-Cole, head of Emea advisory at Nomura, added that banks’ M&A teams have become more profitable and many would look to retain this with less travel.
The lack of travel has also bolstered banks’ environmental credentials, which have come under increasing scrutiny from investors as lenders pledge to pull back from financing fossil fuels and make their own operations carbon neutral. Barclays does not break out travel costs, but its CO2 emissions dropped from 19,133 tonnes in 2019 to 8,569 tonnes last year as bankers remained grounded.
However, some dealmakers caution that competitive pressures could see travel return once the lockdown is lifted. “If one of our largest competitors is showing up, visiting clients face-to-face, you can imagine the pressures that’s going to put on us to do the same,” one head of investment banking told FN.
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