Australian banks’ selling success in Asia and management of narrowing margins hinges increasingly on developing strong trade finance relationships, according to research from East & Partners.
The analyst firm reports that as global financial markets enter a tailspin these key strategic initiatives become inherently tougher to attain. East interviewed 1,855 chief financial officers (CFOs) and treasurers as part of its August 2014 trade finance report, now in its 10th year.
The report indicates that the ‘Big Four’ Australian banks’ cumulative share of institutional trade finance relationships grew from 54.0% to 63.8% in the six years from August 2008.
“ANZ, CBA, NAB and Westpac each employ contrasting methods for building their presence in trade both home and abroad, so far recording variable degrees of success,” the report states. “As it stands one bank among the Big Four has extended its considerable lead over the competition while the bottom ranked Big Four offering has made significant strides in the last two years.”
This compares to a more muted market share increase by the major foreign banks offering trade finance services in Asia. BNP Paribas, Citi and HSBC increased their combined share of primary institutional trade relationships only marginally from 23.5% to 24.3% since 2008.
Heightened trade finance competition stems from a number of influential factors, says East Australian banks see it is a viable conduit to further market share gains for associated products and services via cross sell initiatives, particularly with businesses orientated towards Asia.
As part of trending customer satisfaction ratings collected across 20 product and service factors ANZ ranks number one for the provision of innovative trade solutions in both institutional and corporate segments, achieving scores of 1.35 and 1.46 respectively (where 1 = satisfied and 5 = dissatisfied). This places the bank narrowly ahead of HSBC and Citi.
The report comments that the ability to incorporate transaction banking, trade and business foreign exchange (FX) functions is not to be underestimated. This rings true when issuing Letters of Credit invoiced in currencies other than the Australian dollar (AUD) given the exposure to currency risk and an ever more volatile FX market.
Higher wallet share is a defining characteristic of those banks that best collaborate transaction banking, business FX and trade finance roles, giving the customer a seamless suite of tools to address their trade financing concerns. Customers surprisingly turn to their own suppliers (75.6%) or colleagues (81.4%) for trade finance advice, shunning their relationship banker (3.3%) and consultants (6.9%).
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