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Best Transaction banking house: HSBC |
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Also shortlisted: Citi and Deutsche Bank |
It is symbolic that Samir Assaf, chief executive of HSBC’s global banking and markets division, is to give the keynote address at this year’s Sibos conference, the annual jamboree for the global transaction banking and services industry.
On one level, this highlights the extent to which investment bankers are increasingly embracing a business that was never really one of their own, but one that has become so much more important to the corporate and investment banking proposition.
Every global bank boasting a universal banking model has been investing heavily in transaction banking to capture an ever-greater share of the stable and lucrative revenues this relatively capital-light business can generate.
On another level, it speaks directly to the investment and focus HSBC has placed on transaction banking in recent years, when its payments and cash management, securities services and global trade and receivables finance businesses have grown from strength to strength.
It has not been easy. HSBC agreed to pay a record $1.9 billion money-laundering settlement to US authorities last December, illustrating the acute operational risks and compliance challenges banks face. But HSBC has arguably become stronger as a result.
HSBC’s vast global banking network across developed and core emerging markets, combined with a strong set of credit ratings and robust capital adequacy position, are key to its strength.
Total combined revenues from the three businesses hit a record $11.4 billion in 2012 – up 9% on a year earlier – with payments and cash management (PCM) generating that largest chunk at $6.2 billion. The PCM business has recorded a compound annual growth rate of 15% since 2009.
In addition, 2012 revenues from global trade and receivables finance (GTRF) and security services were equally healthy at $3.5 billion – up $300 million on a year earlier – and $1.7 billion, respectively.
Combine that with the fact that HSBC was voted the number one international cash manager by non-financial companies and financial institutions globally in Euromoney’s 2012 annual cash management survey and the bank has had a good year.
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| Diane Reyes, global head of payments and cash management at HSBC |
“About a year ago we were not only investing heavily in the business, but we had just announced the new structure, which ultimately was about elevating the transaction banking business, both in payments and cash management and GTRF, higher in the organization to the position it holds today,” says Diane Reyes, global head of PCM. She adds: “It’s been important to elevate the level of recognition, knowledge, understanding and commitment to our product businesses. I do believe now that we are a leader in this business, and others are now replicating what we have done.”
Recognition and an understanding of the importance and nuances of the business at the executive level is important, and part of what flows from that is an added incentive to improve it. Launching new products is one component of this, enhancing existing products is another.
In PCM, HSBC has expanded and upgraded its global liquidity solutions and global billing system platforms, and enhanced its online and mobile cash management services. More than 630 million payment transactions worth over $10 trillion were handled over HSBCnet and HSBC Connect in 2012.
Reyes points to the success of HSBC’s mobile payments and collection application, which she says has about 13,000 customers that have transacted about $11 billion through it since its launch in 2011.
Playing to its strength as the leader in the cross-border renminbi market – offering the full cash management product suite in over 50 global markets – HSBC achieved a number of firsts, including being the first foreign bank to offer an automated cross-border sweeping structure for multinationals. This essentially helps companies centralize onshore and offshore renminbi management.
HSBC was also the first bank to enable Chinese subsidiaries of multinationals to settle renminbi cross-border payments and collections with their parent company’s overseas treasury centre.
In GTRF, in which HSBC commands 77% of global trade, with teams in more than 60 countries, one of the bank’s core focuses has been to develop its commodity and structured trade finance capabilities.
“In the context of soft commodities, we’ve been building our commodity and structured trade finance teams globally and it’s a very powerful story,” says James Emmett, head of GTRF. “Where we stand apart is that we can be at both ends of the transaction. We’re in Latin America and we’re in Saudi Arabia, we’re in the Middle East and we’re in Asia Pacific, and so we’re being talked to because we have the capability to provide that end-to-end solution.”
HSBC’s local presence in emerging markets is undoubtedly one of its core strengths, but it combines that with a breadth and depth of relationships in developed markets too, encompassing everything from small and medium-sized companies right up to blue-chip multinationals.
