Transaction banking revenues decline for first time in three years
Transaction banking revenues took a hit in the first quarter of 2020, with Asia-Pacific and the Americas the worst affected regions. Marie Kemplay reports.
Global transaction banking revenues saw a pronounced decline in the first quarter of 2020, according to Coalition’s latest Transaction Bank Index. The index, which tracks revenue at the world’s 10 largest transaction banks, found there was a 6% decline in revenues between the first quarter of 2019 and that of 2020.
Revenue from cash management declined by 7% year-on-year from $6.4bn to $6bn, while trade finance revenue declined from $1.5bn to $1.4bn. It is the first time there has been a quarterly decline in transaction revenues in the past three years. With Covid-19 disruption having a major impact on businesses and economies around the world, a more significant decline in the second quarter of 2020 is likely, as the full impact of the crisis begins to be felt.
Cash management revenue was particularly hard hit by declines in liquidity and balances revenues as acute increases in deposit balances were offset by sharp declines in net interest margin. Payables and receivables revenue remained largely flat. Across trade finance, revenues were largely stable despite global supply chain disruptions and lower global trade volumes. Traditional trade revenues saw a marginal decline due to trade loans being lower in pandemic-affected areas, however this was partly offset by widening spreads.
One positive area
Supply chain finance revenues continued a pattern of growth thanks to higher financing volumes. However, commodities trade finance underperformed during the first quarter, with this period covering the major oil price decline seen in recent months and reflecting overall lower transaction volumes.
Revenues declined across all three global regions, however Asia-Pacific and the Americas were the most impacted, with revenues in Asia-Pacific falling 8% year-on-year from $2.2bn to $2bn and 7% year-on-year in the Americas from $3.3bn to $3bn. Revenues across Europe, the Middle East and Africa (EMEA) held up better and saw only a marginal decline.
As the first region to be affected by the pandemic, Asia-Pacific saw the steepest first-quarter decline, with consistently lower revenues across most product areas in both trade finance and cash management. In the Americas, overall revenue was dragged down by a sharply lower performance in liquidity and balances revenue, while in EMEA, both trade finance (excluding commodities trade finance, which is likely to have seen an impact from oil market disruption) and cash management were more resilient.
