Tariffs reshape trade landscape, opening new doors for global transaction banks

New tariffs introduced in 2025 are prompting shifts in global trade patterns, creating both risks and opportunities for transaction banks.

Tariffs may reduce trade volumes, potentially impacting bank revenue, though they could also increase demand for financing as companies adjust their supply chains, said Eric Li, head of competitor analytics – banking research at Coalition Greenwich.

Banks must adjust their services to support shifting trade routes, including enhancing cross-border capabilities and helping clients manage greater foreign exchange exposure in a changing regulatory landscape, Li said.

2025 outlook

Global trade volumes may decline in 2025, but demand for guarantees and financing is expected to stay strong, Li told S&P Global Market Intelligence via email.

Li said slower trade activity could weigh on banks' cross-border payments revenue and deposit balances.

Banks with significant exposure to trade between the US and China may face challenges, though rising intra-regional activity and new routes could offer some offset, Li said.

While the full impact of tariffs is still unclear, banks "are proactively engaging with clients to set clear expectations and offer expert advice as they refine their risk management frameworks," he said.

Banks confident

Some leading transaction banks say they are well positioned to navigate global trade shifts and capture new business.

Citigroup Inc.'s "deep knowledge and breadth of capabilities" will support the bank as companies restructure supply chains, CEO Jane Fraser said during the first-quarter earnings call April 15, noting that high tariffs could influence the US and global economies and reshape trade flows.

"We'll be in the middle of facilitating that. So we expect to be very busy there, along with the hedging and associated financing activity," Fraser said.

Citigroup managed to grow through past disruptions, including the COVID-19 pandemic and the Russia-Ukraine war, by helping clients hedge foreign exchange, interest rate and commodity risks, as well as adjust their financing, she said.

"We are a port in the storm," the CEO said.

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BNP Paribas SA CEO Jean-Laurent Bonnafé expects US tariffs to drive increased financing activity as European companies adjust to changing trade dynamics.

"There's a lot to come in terms of restructuring, refinancing, deleveraging, mergers and acquisitions [etc.]," Bonnafé said during the first-quarter earnings call April 24.

HSBC Holdings PLC CEO Georges Elhedery said earlier this year that the bank is positioned to support clients as they respond to changes linked to US tariffs. With a network covering 85% of trade corridors, HSBC is "very well placed to support our customers adjust and position their businesses to navigate these tariffs," Elhedery said during the bank's full-year 2024 earnings call Feb. 19.

2024 revenue

Global transaction banking revenue fell in 2024 after reaching a record high the previous year, driven by rising interest rates, according to Coalition Greenwich data.

Combined revenue at the 10 biggest transaction banks declined 1% year over year to about $46.90 billion, the firm's latest sector index report shows.

The drop was due to weaker trade finance and cash management revenue in the first half of 2024, though both segments rebounded in the second half, the report said.

Regionally, Europe, the Middle East and Africa were the only areas to post a slight increase. Revenue in the Americas fell 2%, while Asia-Pacific was down 1% from 2023.

Coalition Greenwich — a division of CRISIL, an S&P Global company — tracks transaction banking revenues at Bank of America Corp., Barclays PLC, BNP Paribas, Citigroup, Deutsche Bank AG, HSBC, JPMorgan Chase & Co., Société Générale SA, Standard Chartered PLC and Wells Fargo & Co.