Companies’ increasing reliance on international trade as a source of revenue growth is helping the world’s biggest banks rebuild client relationships and reclaim corporate banking business lost during the global financial crisis. These gains are coming at the expense of local banks – except in Asia, where booming international trade has increased corporate demand for products and services from global and local providers alike.
The results of a new Greenwich Associates Market Pulse of 528 large companies in Asia, Europe and North America suggest that the reputational damage suffered by global banks during the crisis has largely dissipated in the eyes of their biggest corporate clients. Global banks appear to have won back the trust of corporate executives by putting their balance sheet issues behind them and competing aggressively for large companies’ business. Also working in these banks’ favour is companies’ growing demand for the international banking products and services in which global providers excel.
Companies around the world give the strongest reputational scores to JP Morgan, which is judged to have a ‘strong’ or ‘very strong’ reputation by 80% of companies in the study. Rounding out the world’s top five banks in terms of reputational strength are: HSBC, (rated strong/very strong by 74%); Goldman Sachs (72%); Deutsche Bank (71%)’ and BNP Paribas (66%). “Although some of the banks hit hardest during the crisis are still working to restore companies’ trust, most global banks have seen their reputations within their corporate client base rebound to levels that would be considered impressive in any industry,” said Greenwich Associates consultant John Colon.
Global Banks Capitalise on Companies’ International Growth
Fifty-four percent of large companies say they are becoming more reliant on global banks for credit and capital financing related to their international businesses. Among companies in the US, that share hits 63%. When it comes to international cash management and trade finance, 58% of companies worldwide say they are relying more on global providers – including 71% of companies in the US.
More generally, companies are demonstrating a preference for global players over regional and local providers when it comes to the allocation of their financing business. Greenwich Associates asked companies participating in the study to name the banks that would win additional business from them if they were forced to move business from their current providers. In the US, the clear winners were JP Morgan and Bank of America Merrill Lynch (BofA Merrill). In Europe, the winners were BNP Paribas and Deutsche Bank. In Asia, companies most often cited Citi and HSBC.
A similar pattern is apparent in cash management and trade finance, where JP Morgan and BofA Merrill lead in the US. Deutsche Bank tops the ranking in Europe and Citi and HSBC are the market leaders in Asia. “Companies trying to grow sales and production in foreign markets require a host of banking services ranging from credit and cash management to foreign exchange and trade finance,” said Colon. “These demands play directly to the strengths of the world’s biggest banks.”
Local Banks Feel the Pressure – Except in Asia
To at least some extent, the recovery of major global banks appears to be occurring at the expense of local competitors – at least in developed markets. During the banking crisis, local banks that avoided huge write-downs from bad assets picked up new corporate relationships. They did so by stepping in with credit and other essential services as stressed global banks pulled back their balance sheets and companies in the US and Europe sought new sources of financing and stability.
Even at the time, however, it was unclear how these local banks would be able to retain these gains when global banks recovered and were once again able to bring to bear their bigger balance sheets and robust capabilities. Many local banks are seeing those concerns play out as global players regain their footing and companies increasingly look to international trade, as opposed to domestic business, as a source for growth.
The one big exception: Asia, where local banks are gaining corporate banking relationships instead of losing them. With international trade booming in the region, Asian companies have stepped up their demand for the products and services of both local and global providers.
Almost three-quarters of Asian companies (73%) say they are increasing their reliance on local banks for capital and credit related to international business and 63% say they are leaning more heavily on local banks for their international cash management and trade finance needs. Meanwhile, 53% say they are increasing their reliance on global banks for credit and capital tied to international business and 57% are turning to global banks more often for international cash management and trade finance.
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