WASHINGTON: Revenues in transaction banking declined by 2% for 1H 2016 for the 12 largest global corporate and investment banks – the second consecutive drop according to analytics company Coalition.
Performance in transaction banking, which looks at trade finance and cash management, declined from US$18.3bn in the first half of 2015 to US$18bn in 2016. In the last half yearly review, which compared 2H 2015 to 2H 2014, earnings in the sector dropped 6% from US$19.5bn to US$18.4bn. Coalition’s monitor tracks the performance of Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Société Générale and UBS.
The biggest drop came in trade finance which saw a revenue drop of 9% from US$4bn to US$3.7bn, largely reflecting reduced volumes. Cash management was more stable with a 1% improvement from US$14.3bn to US$14.4bn.
The drop in trade finance was significantly impacted by reduced volumes and volatility within commodities trading, explains George Kuznetsov, to GTR. Asia saw the biggest decline, with some decline in the Emea region too. Supply chain finance was the only area with resilient performance within trade finance, he says. In Europe, the persistently low interest rate environment, with further rates cuts, has led to a decline in cash management revenue.
Revenues in the corporate investment banking (CIB) sector as a whole also continued to slide, with a 12% drop year on year. Revenue for the sector, which looks at fixed income, currencies and commodities (FICC), equities, IBD and securities services, as well as transaction banking, stood at US$103.8bn in 1H 2016 compared to US$118.5bn in 1H 2015. IBD saw the biggest drop, with a 20% decline in revenue, while equities, FICC, and securities services experienced 18%, 11% and 5% reductions respectively.
Looking forward in terms of transaction banking, higher interest rates in some regions are expected to help the cash management numbers, says Kuznetsov. He adds that on the trade finance side, which is very macro, it’s much more difficult to forecast, especially with some big events on the agenda, such as the US elections.
