The annuity income that comes from transaction banking is prized for the stability it brings especially following the global financial crisis. But as banks trained their attention on this side of the business, the somewhat tranquil existence of transaction bankers has now been shaken.
Witness the musical chair of the past two years. Industry veteran John Laurens, who headed HSBC's payments and cash management business in the region since 2007 quit to join DBS to head its global transaction services in November 2014 - even shifting his home base from Hong Kong to Singapore.
Going in the other direction is Abdul Raof Latiff, another industry stalwart, who relocated to Hong Kong from Singapore in October last year to take on the role of managing director, regional head of product management for HSBC, after nearly 10 years at J.P.Morgan including as head of its successful Asean business since 2011.
J.P.Morgan has been undergoing change. It had a good run in recent years scoring important wins at The Asset Triple A Treasury, Trade and Risk Management Awards, including the much-coveted Triple A Best Transaction Bank in 2014. But recent movements at the bank, including its transaction banking champion, Tom DuCharme, who stepped down in February 2015 as co-head of banking for the region to take on a new role, suggest an unsettled period for now.
The biggest change in the region was of course the decision by RBS to shutter its business. This was somewhat of a pity as the bank was gaining headway during the past three years to build a credible transaction banking franchise. But the writing was nevertheless on the wall given how the UK's Chancellor of the Exchequer was unhappy with RBS and the pace of its recovery. What better way to cut costs than to shrink its international operation.
Ahead of that, Manfred Schmoelz, RBS' head of transaction services, quit at the end of last year and joined The Warranty Group as executive vice-president for the Asia-Pacific. Schmoelz boss, Carole Berndt, who was based in London as the global head, also left to join ANZ as managing director and head of global transaction banking - one of the most coveted jobs in transaction banking last year. Other departures from RBS included Anand Pande, who was its global head of trade; Adrian Ong, who was head of Singapore and now is a managing director and head of cash management at Singapore's United Overseas Bank.
To be sure, transaction banking was already facing considerable headwinds not least from the low interest-rate environment. Competition among banks was also quite intense leading to spread compression especially in trade finance. Add to that were the credit issues such as the Qingdao commodity fraud case, which tainted several international and domestic Chinese banks.
The 2014 financial results of these banks, which were released this quarter, reflected a mix year. Citi, which serves the multinationals/large local corporates (MNCs/LLCs) segment, saw its global treasury and trade business grow by a mere 1% to US$7.9 billion.
HSBC, which serves both the MNCs/LLCs and also the SME (small and medium enterprises) market, has by far the largest revenue on a combined basis totalling US$10.3 billion, a rise of 4.7% from a year ago. For its MNCs/LLCs segment, it posted a 3.8% revenue rise with payments and cash management accounting for US$1.8 billion while global trade and receivables finance posting total revenue of US$767 million. For the SME space, HSBC's payments and cash management revenue increased by 7% to over US$5 billion and its global trade and receivables finance revenue was ahead by 2% to US$2.7 billion.
Deutsche Bank, which serves a similar segment as Citi, recorded total global transaction banking revenue of US$4.6 billion, a 1.9% rise from a year ago. Deutsche Bank's number included its securities services business.
Standard Chartered saw its transaction banking income decline by 3% to US$3.8 billion largely on the back of a fall in its trade finance by US$103 million even as its cash management business was marginally ahead of 2013. Similarly, J.P.Morgan reported a decline in revenue for its treasury services business by 2.4% to US$4.1 billion.
Among the banks in this region, the picture looked better. ANZ saw its transaction banking revenue top US$1.3 billion, a rise of 8% from a year ago (ending October 2014). It reported double-digit growth in revenues in New Zealand (19%), Pacific (17%) and Asia (15%) with the latter accounting for just over US$315 million, the second largest contributor to total revenue behind its home market of Australia.
Another strong performer revenue-wise was Singapore's DBS, which posted a 9% year-on-year growth to over US$1.2 billion. DBS' number, which included contribution from its security and fiduciary services, was the highest-ever it has achieved.
The Asset unveils the nominees for this year's Triple A Treasury, Trade and Risk Management Awards. For the past three months, these banks have showcased their best solutions and explained how they have navigated the business in 2014.
The Asset also spoke to CFOs and treasurers during the period to gauge their views on the industry and the best service providers. They also participated in The Asset Treasury Review 2015, which attracted close to 800 CFOs and treasurers, a jump by 83% from a year ago.
The winners of The Asset Triple A Treasury, Trade and Risk Management Awards, will be announced at the gala dinner on the 30th of April 2015 at the Four Seasons Hotel. If you are interested to join the dinner please click here.
To view the list of winning Asian Champions solutions click here.
To view the list of winning Regional solutions click here.
To view the list of winning Country solutions click here.
To view the list of winning SME solutions click here.
