Snapping a two-year decline, transaction banking revenues at the world's 10 largest banks involved in the business rebounded in 2017 on the back of continued improvement in cash management and a milder decline in trade finance, according to Coalition's latest transaction banking index.
The index tracks Barclays Plc, JPMorgan Chase & Co., Bank of America Corp., BNP Paribas SA, Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, Société Générale SA, Standard Chartered Plc and Wells Fargo & Co. and covers revenue from all institutional clients and corporates with annual turnover in excess of $1.5 billion.
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Revenues from transaction banking at the 10 banks totaled $28.8 billion for the year, up 5% from $27.4 billion booked in 2016. The bulk of the total came from cash management revenues, which grew 7% year over year to $23.1 billion — the highest level since Coalition began tracking the data in 2011.
In contrast, revenues from trade finance fell to their lowest level in the index's history, slipping 3% to $5.8 billion.
The annual decline in trade finance revenues, which follows a steeper 12% drop in 2015 and a 9% fall in 2016, came as "soft demand in a subdued market environment" continued to challenge commodities trade, Coalition said.
Eric Li, research and analytics director at Coalition, noted that while volumes for trade finance increased during the year, margins continued to to decline, driven in part by increased competition from new entrants into the space — namely Japanese banks.
"This time last year, many of us had hoped that trade finance would rebound in 2017," Li said in an interview. "But we only got 50% of the prediction right. Trading volumes did increase, but margins were still weak ... because several Japanese banks, which had not been major players, decided to jump in."
Asia-Pacific leads, EMEA struggles
Transaction banking revenues from the Asia-Pacific region shot 9% higher year over year to $7.2 billion, marking the first time in three years that the region outperformed other parts of the world. Coalition attributed the improvement to higher volumes and increased net interest income, particularly in liquidity management.
The Americas also saw a stronger result, with transaction banking rising 8% over the year to $12.1 billion on the back of higher cash management revenues.
In EMEA, meanwhile, transaction banking revenues slipped 1% in 2017 to $9.5 billion, marking the third year of decline for the region, as increased competition and a weak performance in the first half of the year weighed on results.
Optimism for 2018
For 2018, Coalition's Li expects that cash management revenues should continue to grow at a steady clip, adding that it "would not be surprising to see cash management grow by 9% or 10%" in the year.
Trade finance revenues also have a chance to return to growth in 2018 as volumes are expected to further improve, Li said. It is too early to say whether margins also will help drive that growth, he added.
In its report, Coalition noted that 2017 saw higher volumes in letters of credit and other traditional trade products, while structured products saw a marked improvement during the second half of 2017.

Click here to view the FY'17 article on the investment banking revenue report by Coalition. |
Coalition is wholly owned by CRISIL. S&P Global Market Intelligence and CRISIL are owned by S&P Global Inc.



