Competition hotting up in Australia’s Trade Finance markets

(24 February 2004 – Australia) Australia’s Trade Finance markets are set to grow 8.4 percent in fiscal year 2004 with bank fees and transaction charges reaching A$840 million, according to new research by East & Partners.East’s inaugural Trade Finance report also forecasts
Australia’s Trade Finance markets – commercial and corporate – will grow 9.3
percent in FY2004/05 with market value reaching A$915.6 million net of
financing revenues.

The report shows National Australia Bank (NAB), ANZ and Westpac to be the
clear leaders in terms of share of primary Trade Finance relationships in
both the commercial and corporate market segments.

ANZ is the standout banker among the Top 500, owning almost a quarter of
relationships in this market yet trailing NAB in the commercial sector – a
clear indication of the different demands of each market, as well as the
segmentation focus individual banks have been adopting.

“Large internationals, such as HSBC, Citigroup, and ABN Amro, expectedly
show up strongly in the market and are helping drive a lot of new product
deployment, especially e-Trade platforms over the coming 18 months or so,”
East & Partners principal analyst Paul Dowling said.

“Trade Finance is well and truly back on the radar for the major domestic
banks and we are seeing renewed vigour from all banks to improve their
performance in this area. The recent US-Australia free trade agreement has
only added extra impetus and incentive for banks to get it right,” he said.

“Our findings have reinforced the view that customer service is the key to
market success. Many trade customers feel as though they have been left
alone and ignored for far too long.

“Ordinary service performance by banks is reflected in a relatively low
wallet share held by primary trade financiers [see Table on next page] in
their customer relationships. Not owning more of their customers’ trade
business is the penalty for banks that under-deliver in these markets,”
Dowling said.

East’s report shows that large corporate clients are increasingly putting
their Trade Finance requirements out to tender, often through third party
consultants, in order to drive price down and make sustainable selections.

“This has traditionally made it a difficult market for international banks
to generate sustained profits, with some large deals going sour, such as Pan
International in the 1990s,” Dowling said.

“As a result, there has been a significant shift by banks to utilise
insurers in covering customer/country trade risk rather than carrying such
exposures on their own books; the two major players being Altradius and QBE/Trade
Indemnity Australia,” he said.

According to East’s report, the three worst areas of trade financier
performance against customer expectations are:

The three best performing areas are:

The full analysis report and further information is available by contacting:

Paul Bartholomew
Executive Editor
East & Partners
Tel: 02-9247 5955
Mob: 0410 400 156
paul.b@eastandpartners.com
www.eastandpartners.com