The prospects for global transaction banks seem slightly brighter in 2017, reversing the trend of the last few years of decreasing revenues. Revenues from global transaction banks increased by 4% in H1 2017 compared to -2% in 2016 and -6% in 2015.
That’s according to new data from research firm Coalition, which show that transaction banking revenues in Asia-Pacific (APAC) and the Americas continued to grow, expanding 7% and 8% respectively. However, the EMEA (Europe, the Middle East) region didn’t perform nearly as well, shrinking 2%.
Cash management revenues continued to make great strides in the first half of 2017, seeing an overall growth of 7%, representing the highest level of revenue growth in the last seven years. Revenues grew 8% in payable/receivables services and 3% for liquidity/balances services.
The report highlights that net interest income had improved over the past year. Banks adhering to the opportunity in this space have been pushing more of an advisory role with their cash management clients by walking them through complex regulatory schemes and clearing processes. Additionally, banks have used technology to not only allow for the automation of treasury practices but also to better assess the FX risks associated with international payments.
Trade finance, on the other hand, continued its downward slide, seeing a decrease of 5% in revenues, largely due to continued price compression in the market. The report found that revenues for traditional trade shrunk by 9% in H1 2017, compared to H1 2016. Moreover, revenues for structured trade services fell 3% in the same period.
As a result, banks have had to dig deep, with some targeting local currency financing due to the high margin business found in large Asian economies such as China and India. The struggles in trade finance have also offered banks an opportunity to evaluate their trade portfolio and exit from potential credit risk exposures.
Coalition tracks the performance of the 10 largest transaction banks globally. The Index comprises BAML, BARC, BNPP, CITI, DB, HSBC, JPM, SG, SCB and WFC.