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Global East Analyst Meeting Insights - February 2024

Global East Analyst Meeting Insights - February 2024

(19 February 2024 – Global) East & Partners global analyst meeting insights provide a valuable insight into emerging business banking research and advisory trends at the critical intersection where “voice of the treasurer” meets “voice of the bank”.

What are East & Partners analysts, financial services clients and Corporate Treasurer research base focusing on as the new 2024 calendar year commences?

Surging Corporate Private Credit Demand

UBS estimates the rapidly growing private credit market has almost tripled in size since 2015. The surging acceleration in borrowing from private credit courses in preference to vanilla bank debt and debt issuance has seen the market expand from a value of US$875 billion in 2020 to US$1.4 trillion in 2023 according to Morgan Stanley research. Private credit has grown rapidly from US$500 billion of assets under management (AUM) in 2014 to almost US$1.7 trillion AUM in 2024 while Preqin projects private credit markets to expand to US$2.3 trillion by 2027.

Originally primarily perceived as a financing source for commercial enterprises turned away from other credit facilities, private credit has developed into a credible rival to traditional bank debt and liquid markets including syndicated loans and high yield corporate bonds. The World Bank calculates the annual financing gap for the world’s Microbusinesses and SMEs at just over US$5 trillion with almost half that value attributed to Asia. Banks have retreated from lending to many large buyouts and SMEs due to elevated regulatory costs imposed to protect taxpayers from having repeatedly to bail out lending built on high leverage and maturity mismatches.

Stubbornly high inflation requiring interest rates to be set “higher for longer” and increased market volatility has boosted the private credit sector as borrowers seek out the increased flexibility that private lenders offer. Or is this impulse primarily driven by banks constrained lending appetite for certain sector verticals?

“As liquid market activity fell significantly, private credit was able to step up and step in. The combination of locked-up capital and experienced managers able to discern the appropriate credit opportunities, has meant private credit is taking even more share from banks and the liquid markets” - Nuveen Co-Head of Senior Lending, Randy Schwimmer.

Does the burgeoning private credit market risk becoming a bubble? UBS Chairman Colm Kelleher warned of the risks surrounding private credit, declaring that a single incident could spark a "crisis in confidence" that leads to a major crash.

East & Partners analysis closely tracks corporate treasurers’ triggers for switching both within their own panel but also from banks to private credit sources. As behavioural impulses change quickly, how do banks effectively sell to the modern treasurer in a market exhibiting significant flux?

Exclusive Global Insight Report Insights

Following the insightful “Resurrection of the RM” Global Insight Report uncovering the evolving role of a successful relationship manager (RM), East’s next highly anticipated report will reveal how much influence and power the Corporate Treasurer yields within their organisation. The analysis will provide a bank guide to effectively selling financial services and relationships to large corporates, as directed by those buying themselves.

How many competitive pitches do treasurers typically receive for their transaction banking business each year? What top five factors influence treasurers’ decision on which bank is successful in the final mandate for RFPs? What regular performance monitoring do treasurers report to their CFO or Exco on their transaction bank’s performance? Stay tuned for the exclusive insights available in late April 2024.

Embedded Finance Future Priorities

Leading global banks are racing to expand investment in embedded finance capability, evidenced by HSBC recently investing US$35 million in supply chain finance and B2B commerce platform group Tradeshift as part of plans to create a new joint venture (JV) company focused on the development of embedded financial services.

The new JV is planned as a fintech that develops technology to be utilised by HSBC to embed its transaction banking solutions into Tradeshift and other fast-growing eCommerce and marketplace venues. The business, which will launch in H1 2024, will be 75 percent-owned by HSBC and 25 percent-owned by Tradeshift.

“I am delighted to be leading this exciting fintech venture, which reflects HSBC’s vision to help businesses grow as they increasingly operate across e-commerce platforms. The JV’s technology will embed HSBC solutions into such venues so that customers can access financing when and where they need it” - Vinay Mendonca, HSBC GTRF Chief Growth Officer and incoming Fintech JV CEO

Trade & Supply Chain Finance Service Enhancement

In line with underlying developments in the trade and supply chain finance market, East & Partners global research services have aligned analytics capturing detailed breakdowns of traditional vs non-trade finance solutions, risk mitigation and bank guarantee usage, trade documentation digitisation progress and barriers to uptake and integration of ESG principles in the supply chain. Contact East for further details on the expanded core reporting conducted in Australia, New Zealand, Asia and globally based on direct interviews with importers and exporters with active trade financing arrangements in place.

At the conclusion of 2023, key trends to monitor closely included a shake-up of Global Business FX with AMEX decommissioning its international offering, a longitudinal summary of import/export engagement by country, uncertain UK pension scheme endgame objectives and the group’s annual Business Banking Outlook featuring an invaluable snapshot of the current market environment based on the firm’s primary market research based on direct interviews with over 75,000 enterprises each year globally - the intelligence of decision makers, by decision makers.

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