Last year the combined share of the top three banks (Deutsche, UBS and Barclays Capital) was 40.44%, a decline of more than 5% from the previous two years. It wasn’t just the remainder of the top 10 that was catching up (market share of this group increased 3% over 2009), but the market share of those in 11th to 20th places also increased by around 3%. There the competition for share seemed to end. Perhaps the most telling statistic was that the top 20 banks had more that 90% of the market in each of the last four years.
It used to be a common belief that share would gravitate to a few technologically advanced flow-monsters but last year’s results showed some reversal of that process. Additionally, it is difficult to see the top 20 improving further on its 90% slice of the pie. Will this year’s poll see banks outside the top 20 claw back some market share?
We have seen recognition by banks of the value of the FX franchise. FX was seen to have withstood the chaos of the crisis remarkably well in terms of liquidity, as well as consistency of profit. Such recognition was reflected in greater investment both in personnel – data from Simon Head at CorrelateSearch shows FX-related hirings were up more than 40% in 2010 over 2009 – and technology. Many banks have sharply increased their e-commerce spend. And banks outside the top 20 have been part of this increased investment.
After last year’s poll we pointed to advances made by Australian and Scandinavian banks outside the top 20; this year we could see that strides have been made by Spanish banks and, in the UK, by the dark horse itself.
It is more than a year now since Marco Pelizzoli went to Santander to head the bank’s push in e-commerce, so there might have been time to improve on the bank’s ranking at 32nd in the overall standings and 26th in e-trading.
BBVA’s recent hiring of HSBC’s former global head of FX, Andrew Brown, was indicative of its increased focus on FX; while Brown will have not have joined in time to have anything to do with it, the bank should have moved up from its lowly 40th position.
Lloyds, an insignificant 47th in last year’s poll, might also be making good progress through the field. It has made a few key hires in the last year in both sales and research – Robert Garwood, charged with running FX sales and leading the development of FX e-commerce is an example – and the bank has made no secret that it is investing heavily in technology.
But it was a funny little episode this week on the research side that made me look again at Lloyds. On Wednesday sterling was still under pressure after Tuesday’s dire GDP figures with EUR/GBP looking bid at 0.8660. However, suddenly bids disappeared and 20 minutes later the spot had dropped 30 pips to 0.8630, before trading lower again during the afternoon. A nice move but nothing too unusual, except I later heard from several sources that “the move was due to Lloyds Bank putting out a short-term sell recommendation.”
You might expect such a reaction to a Goldman or Pimco missive, but Lloyds? Perhaps this shows that not only is the bank taking itself more seriously in FX but that the whole market is starting to pay attention too. Or perhaps I’m extrapolating unnecessarily and the move and the research note (by Lloyds’ technical strategist Tim McCullough) are unrelated. In any case, McCullough’s initial target is 0.8544, though he sees potential for the cross to eventually go to 0.8352; the suggested stop-loss is 0.8716 on a four-hour close basis. You could call it a tip straight from the (black) horse’s mouth.
