Greenwich Associates Announces European Trade Finance Leaders
HSBC, Deutsche Bank and BNP Paribas are the leading providers in European corporate trade finance, according to the results of a new report from Greenwich Associates.
Over the past two years, the results of Greenwich Associates research have pointed to a shift: Some European companies are changing the way they use trade finance. Historically, companies in Europe and most developed markets have used trade finance products and services mainly as tools for mitigating counterparty risk. However, companies in parts of Europe have begun to use trade finance more often as a source of credit. This practice strongly resembles corporate behavior in Asia, where companies routinely employ trade finance as a core source of credit.
“Some companies in Greece, Italy, Spain and other European companies have found their access to traditional bank credit severely constrained,” says Greenwich Associates consultant Robert Statius-Muller. “When access to other sources of credit is limited, trade finance can serve as an important alternative.”
The market for European trade finance is dominated by three banks with global reach, the report found. HSBC, Deutsche Bank and BNP Paribas are each used as a provider by roughly a quarter of large European companies that employ trade finance products and services. Behind these evenly matched leaders is another group of three competitors of a much different nature. Whereas the top trio has built its position on broad networks spanning most, if not all, of the European countries, the next three banks owe their rankings largely to their strength in their home markets or regions. UniCredit, Commerzbank and Nordea are all providers to 17-18% of large corporate trade finance user in Europe, with most of that business originating from companies in Italy, Germany and the Nordics, respectively. Together, these six banks are the 2013 Greenwich Share Leaders in European Large Corporate Trade Finance.
Deutsche Bank was rated as the quality leader in its domestic German market, providing reliable service across the rest of the continent. BNP received high ratings for quality across Europe, with the strongest scores coming from companies in France and the Benelux.
HSBC was found to be used as a provider by 54% of large U.K. corporate trade finance users, placing the bank squarely at the top of this market. Next came RBS, with a market penetration of 34%, followed by Lloyds at 30%. These providers also received the market’s top scores for quality. As a result, these three banks share the titles of 2013 Share and Quality Leaders for Large Corporate Trade Finance in the U.K. In Germany, Commerzbank and Deutsche Bank are tied at the top of the trade finance market with penetration scores of 81%. Next was UniCredit at 55%. These three banks are the 2013 Greenwich Share Leaders in Large Corporate Trade Finance in Germany. The 2013 Greenwich Quality Leader for Trade Finance in Germany is Deutsche Bank. Approximately 73% of large corporate trade finance users in the Nordics use Nordea as a provider, making the bank the leader in this market. Danske was second at 42%, followed by SEB at 30%. These banks are the 2013 Greenwich Share Leaders for Trade Finance in the Nordics. Danske and Nordea share the leadership for the 2013 Greenwich Quality Leader Award in the Nordics.
Competition among trade finance providers has intensified since the announcement of new bank capital rules under Basel III, which make trade finance margins look increasingly attractive relative to those in businesses hit with higher capital charges. However, there still remains a strong link between corporate lending and transaction banking, and companies still award disproportionate amounts of cash management business to key credit providers. That is especially the case in the more routine, less sophisticated parts of the business that still generate the bulk of volumes.
“For that reason, we expect national banks that have maintained long-standing lending relationships with companies in their domestic markets to maintain their franchises in trade finance — or at least in domestic trade finance,” said Greenwich Associates consultant Dr. Tobias Miarka.
Large global banks continue to gain advantages over smaller rivals with more limited reach. Some trade finance business has begun to consolidate in the hands of large providers for several reasons, including these banks’ stronger balance sheets, broader global reach, sophisticated IT platforms and integrated services.