If you’re a student or graduate about to start a front-office banking career in Hong Kong or Singapore, you’ll probably have trading or investment banking in mind. You may want to rethink your plans. New product-revenue figures from research firm Coalition suggest that the growth areas in Asian banking are in the decidedly more mundane fields of transaction banking, securities services, and lending.
While the three sectors have long offered stable deal flows (and stable jobs), in 2018 they all outperformed equities and FICC in terms of year-on-year revenue increases.
Transaction banking as a product collectively generated $34bn in revenues for banks in APAC in 2018, a 7% rise from the previous year, according to the new data, which was compiled from more than 200 corporate and investment banks. If you want to work in transaction banking, cash management is your best bet. The cash management revenue pool in Asia has been growing since 2016, “primarily driven by liquidity management and balances” says Coalition. Trade finance performance at banks has been “mixed”.
Citi, HSBC and Standard Chartered – three firms with large Asian operations – have been building in transaction banking recently. At Standard Chartered, transaction banking income was up 5% year on year in the first quarter, driven by cash management, which enjoyed a 14% rise.
Meanwhile, revenue from lending products increased by 3% to $74bn last year, as banks in Asia benefited from “improved strong volume growth in vanilla products combined with increases in specialised lending activities”.
Revenues in securities services (e.g. custody and fund services) went up the most (9%), “led by growth in equity markets and a more favourable interest rate environment, particularly in North Asia”. At $6bn it generated the lowest total revenues of all the six products that Coalition looked at, however.
While IBD revenue inched up last year (driven by “exceptional performance from IPO and FPO’s in ECM, and M&A deal completion activity”), it was a bad year to be working in equities (down 7%) and FICC (down 6%). Coalition blamed the equities fall on “underperformance in both equity derivatives and cash equities which continue to face margin compression”.
Equities and FICC revenues tanked at many global banks in Asia in the final quarter of last year. APAC fixed-income sales and trading revenues at Credit Suisse decreased 91% year on year in Q4, while equities revenues fell 28%. At HSBC, which generates most of its profits from Asia, markets revenues fell 7% in 2018, with much of the decline happening in an “extraordinarily weak” fourth quarter, CEO John Flint told analysts. Another Asia-focused bank, DBS, reported “unfavourable market conditions” in Q4, as profits in its markets unit slumped 68% for 2018.
Image credit: tuaindeed, Getty
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