Cash management survey 2012: No sign of the cash cow drying up
Despite the constraints of some banks’ reorganization and forced restructuring, as well as prolonged low interest rates, transaction banking has become a vital contributor to revenues. Those with a strong presence in the business would like to push harder still.
Four years ago – as Lehman Brothers collapsed and the world stood on a precipice – a number of the world’s largest banks discovered a gem in their product portfolio. Transaction banking had always been central to many banks’ offerings – without payments the global economy can’t function. However, almost overnight its combination of high returns on equity, annuity-style revenue generation and a sticky customer base made it irresistible for a sector that knew investment banking returns were about to nosedive. A quick glance at the stellar performance figures from leading transaction banks for the year preceding the crisis was enough to convince many of the value of the business. For the first six months of 2007, Deutsche Bank’s global transaction banking (GTB) unit had a pre-tax return on equity of 85% compared with corporate banking and securities’ 42%.