Banking goes back to basics
(6 March 2019 – Global) Revenues from transaction banking rose 9 percent last year as the mundane task of helping businesses manage their cash flow has quietly become the fastest-growing area for the world’s top banks.
Data from industry monitor Coalition shows the top 12 investment banks’ revenue from transaction banking, encompassing both cash management and trade finance, increased 9 percent last year to $31.3 billion.
The relative performance of transaction banking was even better among the market’s biggest players with HSBC increasing revenues at its global liquidity and cash management business by 21 percent to almost $8.5 billion last year.
At Citigroup revenues from treasury and trade solutions rose 8 percent to $9.3 billion last year, eclipsing fixed-income trading in the fourth quarter to become the single biggest earner at Citi’s investment bank.
The marketwide transaction banking boom came as rising US interest rates allowed banks to make better returns on the money held on deposit by their cash management clients.
“It’s a very rate-sensitive business that also has underlying growth,” said Takis Georgakopoulos, head of JPMorgan’s wholesale payments division, describing how his treasury business naturally profits as global interest rates rise, and is also reaping the rewards as “supply chains become more and more global” despite trade wars.