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Tepid domestic demand spurs interest in US clients

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UK banks offer gateway to key export markets

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European banks hold just 7% of $429 bln revenue pool

By Lawrence White and Sinead Cruise

LONDON, Nov 1 (Reuters) - Britain's big global lenders

HSBC ( HSBC ), Barclays ( JJCTF ) and Standard Chartered ( SCBFF )

are vying to tap into a boom in U.S. commercial banking as

corporate America seeks expertise for international expansion

plans.

At stake is a growing pool of U.S. commercial banking

revenues, which reached $429 billion in 2023 from $310 billion

in 2019, helped by a strong U.S. economy and a boost to margins

from higher interest rates, previously unreported data from

consulting firm BCG showed.

European banks collectively share less than 7% of those

revenues, but see good growth opportunities regardless of who

wins the election on Nov. 5, driven by global trade flows.

"The East-West trade is really important for HSBC ( HSBC ) because of

our very strong presence in Asia ... but actually for the UK,

the main corridor in terms of business volumes is

transatlantic," Stuart Tait, HSBC UK's head of commercial

banking, told Reuters.

In the year to June 30, the value of payments made by HSBC

UK's business clients to the U.S. rose by 15%, while

transactions in the other direction rose by 5%, Tait said.

Rising merger and acquisition activity on either side of the

Atlantic is one factor driving business. U.S. companies like the

UK tech and R&D sectors in particular and UK valuations look

relatively cheap, Tait said.

In the first six months of 2024, U.S. firms on HSBC's ( HSBC ) books

acquiring UK businesses or creating new subsidiaries in the UK

rose by 71% year on year, while UK-based clients doing the same

in the reverse direction increased by 45%, HSBC ( HSBC ) data showed.

"Banks like HSBC ( HSBC ) can focus on 'trade corridors' with the

U.S. for commercial banking clients and gain share," Amit

Sukhija, a senior manager at BCG, said.

The push to expand in the U.S. comes after British banks

such as HSBC ( HSBC ) scaled back in Europe in recent years, amid

struggles to persuade domestic corporate clients in markets such

as France and Germany to buy more of their services.

There have been challenges in HSBC ( HSBC ) and Standard Chartered's ( SCBFF )

core Asian market too, with both lenders having incurred losses

in China amid a crisis in the Chinese real estate market.

NEW ERA

The boom in U.S. business marks a more positive era after

the British banks' chequered recent past, including HSBC's ( HSBC )

disastrous push into subprime mortgages just prior to the 2008

crisis.

HSBC ( HSBC ) and StanChart have also between them paid over $3

billion in U.S. fines over failings in anti-money laundering

controls since 2012, while Barclays ( JJCTF ) in 2022 agreed to a $361

million penalty over mis-selling of securities in the U.S.

The problems prompted the banks to prioritise corporate

business over retail banking in the U.S.

Executives in London are coy on whether presidential

candidates Republican Donald Trump or Democrat Kamala Harris

would be better for their prospects.

"The question on policy will not just be decided by the

presidential election, but what happens in the house, and what

kinds of officials are put in, who can get confirmed, and you

really won't know all of this until into the first quarter,"

Barclays ( JJCTF ) CEO C.S. Venkatakrishnan told Reuters on a media call.

Barclays ( JJCTF ) made 31% of its revenue in the U.S. in 2023 versus

25% in 2022 as its heavily U.S.-based trading business performed

strongly and it grew revenue from its growing credit cards

business.

The bank's third quarter results last week showed the

increasing importance of the U.S. to Barclays ( JJCTF ).

It reported a 8.4% return on average allocated tangible

equity, a measure of profitability, at its U.S. consumer banking

division in the nine months to end-September, up from 5.7% a

year earlier.

Barclays ( JJCTF ) is hiring more sector experts to help win business

from rivals, executives at the bank said last month.

It has also doubled U.S. dollar deposits at its New York

branch in 2023 and again in the eight months to August this

year, as it brings on board more corporate customers, its

co-heads of investment banking said in the presentation to

investors.

Emerging markets focused-Standard Chartered ( SCBFF ) is leaning on

its ties in its historical roots in Asia, Africa and the Middle

East, to serve big U.S. corporates expanding in those regions.

Chief Financial Officer Diego De Giorgi told Reuters the

bank also wants to grow its presence among U.S. financial firms

as StanChart tries to hit a target disclosed on Oct. 30 of 60%

of investment bank income from the sector, up from 49% in 2023.

"Many of our strong relationships... are in Europe and the

United States, and we will continue to invest there with

financial institution clients," he said.