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Transaction banking revenue down 6 percent

Thursday 24 March 2016 | 10:50 AM CET

The transaction banking revenue was down 6% year on year in 2015 – its first drop in five years – according to analytics company Coalition.

The company tracked the performance of Bank of America Merrill Lynch, Barclays, BNP Paribas, Citi, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan, Morgan Stanley, Société Générale and UBS, which between them earned USD36.8 billion from transaction banking in 2015, compared to USD39.1 billion in 2014.

Within the sector, revenue from trade finance went from USD8.8 billion to USD8 billion, while cash management dropped from USD 30.3 billion to USD28.7 billion.

Despite trade having slowed continuously for the past few years, transaction banking revenue was still growing until 2015, going from about USD35 billion in 2010 to its peak of USD39 billion in 2014.

Pressure in commodities and a slowdown in emerging markets let to lower revenue in trade finance, particularly in commodities trade finance and letters of credit,” says Coalition, adding that supply chain finance, on the other hand, outperformed due to increased client demand.

Conversations in the market point to maintained downward pressure on trade finance pricings despite growing regulatory costs. This is due to the combination of trade reduction (fewer transactions) and a return of liquidity in the bank market (more financiers), which has led to increased competition.

Still, transaction banking is not the worst-performing segment of financial institutions’ corporate and investment banking (CIB) branches. Revenue from FICC (fixed income, currencies and commodities), banks’ trading segment, dropped by 9% in 2015, to USD70 billion. Investment banking and securities services also saw declines of 5 and 6% respectively. Only equities grew (by 10%) in 2015, driven by derivatives and prime.

Revenue across the CIB Index has declined more than 10% since 2010. In contrast to the overall decline, moderate improvement has been observed in transaction banking, which has led to its growing contribution, the report adds.

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