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World's Top Transaction Banks See H1'17 Revenue Rise As Cash Management Peaks

Cash management revenues grew by 7% year-over-year to $11 billion at the world's 10 largest transaction banks in the first half of 2017, driven by higher volumes and increased net interest income, according to Coalition's latest transaction banking index.

The index tracks Barclays Plc, JPMorgan Chase & Co., Bank of America Corp., BNP Paribas SA, Citigroup Inc., Deutsche Bank AG, HSBC Holdings Plc, Société Générale SA, Standard Chartered Plc, and Wells Fargo & Co. and covers revenue from all institutional clients and corporates with annual turnover in excess of $1.5 billion.

The cash management growth was the strongest on record since Coalition began the tracking in 2011 and was enough to reverse a two-year negative trend in overall transaction banking, the research firm said on September 18. Total transaction banking revenues at the 10 banks saw a 4% year-over-year increase in the first six months of 2017, compared to drops of 2% and 6% in the same period of 2016 and 2015, respectively.

The slowdown in the previous two years was largely due to trade finance revenues, which hit their lowest level in seven years of $2.8 billion. The overall decline in trade finance was 5% year-over-year and was chiefly due to a 9% plunge in structured trade, where low client activity led to a commodities trade slowdown.

Cash management revenues Trade finance revenues

Weak macro hits EMEA

The weaker macroeconomic environment, including lower interest rates, was a barrier for growth in the EMEA region, where first-half transaction banking revenues fell by 2% year-over-year. The total revenue volume amounted to $4.3 billion at June-end, compared to $4.4 billion in the six months ended June 2016 and $4.6 billion during the same period in 2015.

There was a recovery in Asia-Pacific with the 10 tracked banks gaining market share and booking higher net interest income in the six months to June. Overall transaction banking revenues in the region went up by 7% year-over-year to $3.5 billion, reversing the downward trend observed in the previous two years.

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With an 8% rise in transaction banking revenues to $6 billion, the Americas region continued to outperform thanks to an increase in payments, currency clearing, and higher interest rates, according to Coalition.

Outlook

Global transaction banking revenues in the second half are expected to continue on a similar track as in the first six months, with trade finance remaining weak and cash management being the main growth driver.

"We probably will see volumes in trade finance growing slightly higher comparatively to the same time last year, but we are looking at a 5% decline in the first half [of 2017], so it is unlikely that the second half will provide us with a rebound," said Eric Li, research and analytics director at Coalition. There is going to be a decline rather than "a growth story" in trade finance revenue for the full year, he said in an interview.

On the other hand, cash management revenues are likely to improve in the second half as performance was relatively strong across the three regions, Li said.

Given those factors, overall transaction banking revenue for the full year should grow at a similar clip to that seen in the first half, Li said, projecting an increase of 4% to 5% compared to 2016.

Trade finance and cash management revenues by region

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