U.S. Trade Finance Remains Concentrated with Top Five Banks
According to a report issued by Greenwich Associates, the U.S. trade finance market is highly concentrated, with a trio of providers maintaining a commanding position and the vast bulk of business held by a group of just five banks.
Approximately 35% of large U.S. companies do business with Bank of America Merrill Lynch, Citi and JPMorgan. The top 5 is rounded out with the addition of HSBC and Wells Fargo, both of which have achieved market penetration levels of 23-24%. These banks are the 2014 Greenwich Share Leaders in U.S. Large Corporate Trade Finance.
The 2014 Greenwich Quality Leaders in U.S. Large Corporate Trade Finance are Deutsche Bank, JPMorgan and RBS.
Despite this high level of concentration, companies have seen some significant shifts in the competitive landscape of providers over the past several years. In domestic trade finance, up-and-coming Wells Fargo capitalized on an opportunity to gain ground.
“Many of the banks are weighing the thin margins for trade finance against the increasing capital requirements from Basel III,” says Greenwich Associates consultant Andrew Grant. “We are seeing some banks actively pulling back in certain segments while others aggressively step in to fill the void.”
Throughout this period, one trend remains consistent: The international needs of large U.S. companies are expanding. With companies eying Western Europe, Asia and Latin America, banks with broad international networks have a clear advantage, and providers including HSBC have capitalized on this demand with strong gains in market penetration.