The world's biggest transaction banks are set to gain further from the current industry turmoil, on the back of posting record revenues in 2022.

Concerns over the safety of bank deposits have sparked a flight to quality among customers, resulting in outflows of cash from small banks into the relative safety of large financial institutions, said Eric Li, research director at Coalition Greenwich, a division of CRISIL, an S&P Global-owned research company that tracks bank revenues.

This will benefit the revenues of the world's largest transaction banks, including Bank of America Corp., Barclays PLC, BNP Paribas SA, Citigroup Inc., Deutsche Bank AG, HSBC Holdings PLC, JPMorgan Chase & Co., Société Générale SA, Standard Chartered PLC and Wells Fargo & Co., which form part of Coalition Greenwich's transaction banking index.

"The banks we are tracking are the biggest banks — every single one of them is safe," Li said in an interview.

Record revenues

Coalition Greenwich's latest transaction banking index showed combined revenue of $37.7 billion from cash management services and trade financing in 2022, 36% higher than in 2021 and a record since the global financial crisis.

Revenues from cash management, which covers products within payables, receivables, liquidity and balances, increased 45% year on year as central bank rate hikes drove up net interest income. Trade finance revenues were up 5% on higher demand for products such as supply chain finance.

Small banks 'to suffer a bit more'

Revenues could grow further this year thanks to expanding deposit bases at the largest banks, said Li. For the transaction banking industry at large, however, Coalition Greenwich has downgraded its revenue expectations for 2023, he said, adding that the outlook for growth is more uncertain.

"The biggest banks are going to benefit disproportionately in the current environment and the smaller banks are going to suffer a bit more," Li said.

Bank of America obtained more than $15 billion in new deposits in a matter of days after SVB Financial Group's failure, Bloomberg News reported March 15. Deutsche Bank also saw incoming deposits in the days after the collapse as customers "fly to quality," Reuters reported, citing CEO Christian Sewing.

The banking industry turmoil has also driven an inflow of deposits into money market funds. About $286 billion flooded into such funds between March 1 and March 23, the Financial Times reported, citing data provider EPFR.