FINANCE & BANKING

East & Partners: HSBC loses ground in Asia’s trade finance market as competition intensifies

Competition in Asia’s trade finance market is heating up, with the incumbent primary trade finance market share leader HSBC continuing to lose ground, said research firm East & Partners Asia.

While HSBC’s share of primary relationships has declined by 3.5% per year over the past three years, Citigroup and Standard Chartered have further entrenched their places among the region’s largest enterprises, gaining 2.8% and 5.2 % year-on-year respectively, according to the firm’s latest round of the Asia Trade Finance Markets Program, which interviewed CFOs and corporate treasurers from the Top 1,000 firms (by revenue) across Asia.

The Bank of India is the fastest growing trade finance provider among large corporates in Asia with 20% annual growth between January 2015 and January 2018, albeit from a low base, the research firm observed.

Other banks that have recorded double digit growth rate include Bank of China (18.1%), Maybank (14.5%) and Sumitomo Mitsui FG (12.1%), it added.

Average primary wallet share declines

Due to increased competition in the market, wallet share positioning as primary trade finance provider continues to decline as Asian corporates spread their wallet share across multiple providers, East & Partners Asia noted.

Average primary wallet share has slipped from 53.1% in 2015 to 46.9% in 2018 – the lowest level recorded since the first half of 2014, the research firm pointed out. Several regional banks, including Maybank, Mitsubishi UJF, ICBC, Sumitomo Mitsui FG and Bank of China alongside Standard Chartered have bucked this trend, the firm said.

Standard Chartered, HSBC, and Citigroup continue to outperform in wallet share as a primary provider, capturing close to two-thirds of all customer’s trade financing flows, according to the research.

Trade finance competition is only set to increase, as more banks vie for customers in the region, said East & Partners Asia’s Analyst, Sangiita Yoong.

The research found that competitive pitching activity continues to rise, with 67.1% of corporates reporting unsolicited approaches from trade financiers in the past six months, compared to 52.3% in January 2015.

Sumitomo Mitsui FG and Mitsubishi UJF showed the biggest growth in terms of outbound pitching volume, increasing at an annual rate of 60.1% and 41.5 % respectively since January 2015, the research indicates.

“Product delivery and advisory expertise are the top factors in determining how Asian corporates select a trade finance provider, as opposed to price,” said Yoong.

“Large corporate trade customers in the region expect knowledgeable, highly personalized service from their trade account officers as well as improved trade loan facilities and conditions. According to the latest research, banks that are positioned to deliver on these two critical initiatives will be talking to over 61.7% of all key drivers behind customer switching in trade,” Yoong added.

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