Photo Credit: Reuters

Global I-banks beef up Asia transaction business

20 April, 2017

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.

“We contribute in terms of relationship, we contribute in terms of funding, and we contribute in terms of a steady source of business,” said Lisa Robins, Asia Pacific head of global transaction banking at Deutsche Bank.

“I won’t say (it) doesn’t use capital, because we do use capital, but it’s a relatively efficient business.”

Robins declined to give a business forecast, but the bank said in May last year that within transaction banking, the share of revenue coming from Asia could rise to a quarter in the coming years from 18 percent.

Boosting Headcount
While 2016 saw many foreign banks cutting investment banking headcount in Asia to cope with sluggish deals activity, staff additions for the transaction banking business was strong, headhunters and some bankers said.

This year, global banks’ headcount for transaction banking in Asia could rise 5 percent, while investment banking is likely to be flat or fall 5 percent, said John Mullally, director of financial services at headhunter Robert Walters.

JPMorgan, for instance, has added more people both on the sales side and the product side in transaction banking in Asia, helping it expand its share, said Muhammad Aurangzeb, head of its Asia Pacific corporate banking.

Banks such as Deutsche and JPMorgan are also increasingly using their investment banking clout to win more bread-and-butter trade finance and cash management services to develop their client relationships.

“We are saying (to investment banking clients) we want to go wider and deeper with you,” said Aurangzeb.

“We don’t want to just do an M&A trade, or your IPO or your block trade and forget about it till we meet again in a year and a half’s time.”

They will nevertheless face stiff competition to win market share from global rivals such as Citigroup and HSBC that have much bigger balance sheets and banking networks in the region.

HSBC, for example, is looking to add around 500 new staff in commercial banking, which includes transaction banking, in Asia Pacific this year, to capitalize on initiatives such as China’s “One Belt, One Road” project, which aims to develop trade and connectivity with the rest of Eurasia.

“Economic weight is shifting to Asian and Middle Eastern economies which are expected to grow their GDP threefold between now and 2050,” said Ajay Sharma, HSBC’s regional head of global trade and receivables finance in Asia Pacific.

“That’s the sweet spot for our customers and our global footprint.”

Like this report? Sign up for our daily newsletter to get our top reports.


Leave Your Comment
JPMorgan elevates Rohit Chatterjee as M&A head for Asia-ex Japan; Kaustubh Kulkarni to head investment banking in India

JPMorgan elevates Rohit Chatterjee as M&A head for Asia-ex Japan; Kaustubh Kulkarni to head investment banking in India

Bhawna Gupta 3 years ago
Global financial services firm JPMorgan Chase & Co has named Kaustubh Kulkarni as the new head of its investment banking division for India, as per...
HSBC Acquires RBS' India Commercial, Retail Banking Ops

HSBC Acquires RBS’ India Commercial, Retail Banking Ops

TEAM VCC 7 years ago
Royal Bank of Scotland (RBS) has announced the sale of its retail and commercial banking operations in India to Hongkong and Shanghai Banking Corporation Limited...
StanChart ASEAN & South Asia CEO Ajay Kanwal steps down over ‘disclosure lapse’

StanChart ASEAN & South Asia CEO Ajay Kanwal steps down over ‘disclosure lapse’

TEAM VCC 9 months ago
Ajay Kanwal, regional CEO for ASEAN and South Asia at Standard Chartered Bank, has resigned from the British bank with immediate effect over a disclosure...
No Comments

Global I-banks beef up Asia transaction business

Powered by WordPress.com VIP