Standard Chartered said that in both the year to September 30 and the third quarter alone income from its transaction banking business fell by a mid-single-digit percentage compared with a year earlier. Standard Chartered said that volumes across its cash and trade business, consistent with the first half, remain strong, and up by double-digit percentages both for the year to date and when compared with the third quarter of last year. The bank said that margins in the third quarter remain materially lower than in the equivalent quarter of 2012, with margins in trade now some 26 basis points lower, and margins in cash some 15 basis points lower. However, Standard Chartered said that margins in both trade and cash are now broadly stabilizing, potentially providing support to revenue and profits from a business that is increasingly being used to deepen banking relationships. Managing a companys cash management embeds a bank within its fabric in a way that all but ensures a long-term business relationship. Banks may see it as a valuable entry point into a relationship, says Nadine Lagarmitte, global head of payments and cash management for financial institutions at HSBC. But there are challenges. You need scale to be globally competitive in this business, but the key is to be able to meet clients needs with solutions that are appropriate and suitable for them, and this varies across sectors. Relationships Kash Ahmad, managing director and head of UK cash origination at Barclays, adds: There has been an evolution in the way both banks and clients view banking relationships. Banks no longer only need to commit balance sheet to be seen as key partners, he says. There is a greater appreciation of the less capital intensive but equally important relationships and solutions provided by the transaction bank. It isnt only the banks that have changed their view of transaction banking. Before the financial crisis, corporates didnt focus as much on the availability of cash or counterparty risk exposures, says Richard King, head of UK corporate banking and DCM at Bank of America Merrill Lynch. Now these areas are seen as paramount, so the transaction-banking relationship is far more important to the treasurers and CFOs of our clients.
Client priorities have changed, says Ahmad: Where once the focus was entirely on yield, now there is a greater appreciation of additional factors, such as security and accessibility. If a client is looking to deposit money and the return is a few basis points less, that is one thing. But if there is a possibility of losing access to that money, then that has potentially more serious consequences.