Back to basics: global investment banks beef up transaction business in Asia

Wed Apr 19, 2017 7:09pm EDT
 
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By Sumeet Chatterjee

HONG KONG (Reuters) - With dealmaking in Asia sluggish and Chinese investment banks taking market share from global rivals, some foreign banks are ploughing resources into transaction banking, the workaday business of financing trade, managing cash and facilitating payments.

At a time of growing intra-regional trade in Asia, the largest trading region in the world, and expansion of supply-chain networks beyond China, transaction banking promises to offset slowing revenues elsewhere.

While existing transaction banking powerhouses including Citigroup and HSBC are expanding sales and reach, firms who have traditionally focused more on investment banking, such as JPMorgan and Deutsche Bank, are also bulking up.

In its inaugural transaction banking league table, industry analytics firm Coalition this week ranked HSBC and JPMorgan as the two strongest performers in 2016 in Asia, based on revenue, versus a year earlier.

"Across the board, we do see most of the traditional investment banks are investing in transaction banking," Eric Li, London-based research and analytics director at Coalition, told Reuters.

"They realize the investment banking pool is more volatile, and secondly there is very limited room to further improve," he said, adding the top 12 foreign banks' revenue concentration in investment banking was already above 60 percent.

In contrast, these banks account for just 15 percent of the market for cash management in the region, Li said.

As a result, the banks are gearing up to tap a likely pick-up in trade and using their investment banking platforms as a lever to pick up more transaction business, which consumes less capital and delivers more stable returns.   Continued...

 
A view of the exterior of the Citibank corporate headquarters in New York, New York, U.S. May 20, 2015.   REUTERS/Mike Segar/Files