Back to basics: global investment banks beef up transaction business in Asia

HONG KONG (Reuters) - 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 focussed 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 realise 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.



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 capitalise 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."




Trending News

Xiaomi pumps Rs 3,500 crore into India business

BlackBuck's out to raise $150M in new round, valuation likely to jump to $800 M

With $21 Billion, Azim Premji among world’s top philanthropists

Google agreed on a $45M exit package for India-origin exec accused of sex abuse

HSBC pegs Zomato's valuation at $3.6 billion ahead of Swiggy

PayU in talks to acquire online payments firm Wibmo for $60M

Quikr close to acquiring refurbished goods marketplace Zefo in all-stock deal

What life looks like after a layoff from an IT company

General Atlantic & Tencent pump in another Rs 80 Cr in ed-tech unicorn Byju's

US Senator Warren vows to break up Amazon, Facebook, Google

SoftBank extends tech reach with $5B Latin American fund

Coverfox hits the market to raise $50M in new financing round

Cognizant faces US lawsuit alleging discrimination

China's Huawei sues US over federal ban on using its products

Germany's Delivery Hero acquires Zomato's UAE biz, invests in India ops

Ahead of deadline, debate rages on e-commerce policy

Flipkart rejigs reporting of Myntra-Jabong head Amar Nagaram

Grofers raises fresh funds from existing investors, valuation hits $425M

Sachin Bansal invests Rs 250 Cr each in NBFCs Altico & IndoStar: Report

I-bank Wolet files $800k suit over Flipkart’s Upstream buy

Flipkart FY18 revenue up 50%, but losses grow 5x

Pine Labs in talks to acquire Amazon-backed Qwikcilver for $100M

India can become 2nd largest 5G market in 10 years: Huawei

Alibaba rival Pinduoduo seeks to raise $1.5B

Twitter Q4 revenue grows to $909M as video ad sales surge

Mukesh Ambani to invest $1.4B in West Bengal, will help e-commerce expansion

Etail may lose Rs 40,000 crore, retail to get a 3rd of it

Steadview Capital invests $74M in Ola valuing it at around $6B

Byju’s ups revenue to Rs 490 cr in FY 18, losses drop by half

Agritech startups Sabziwala and LivLush merge their business under new entity Kamatan

Avail Finance lands $17.2M from Matrix Partners & Ola, Freecharge and Flipkart founders

RBI suggests tax sops, self-regulation to build fintech space

Swiggy hires new CEO for its Access Service, gets new CFO

Logistics company Delhivery registers 44% increase in FY17 revenues

WeWork to acquire one of the oldest social networks, Meetup

Qualcomm rejects Broadcom's $103 billion offer

EasyRewardz gets $2 million Series-A funding

'Anemic' iPhone 8 demand drags Apple shares lower

Lending platform Lenden Club gets Rs 3.5cr in Equity Investment

On festive sales, Flipkart says 65% clients from Tier-II cities