Banks' revenues from international trade finance fees are in the best shape for years due to increasingly volatile cross-border trade relations that are driving traders towards letter of credit (L/C) terms according to Coalition, a banking-industry data tracker.

It says that volatile relations include US President Donald Trump's protectionist approach to doing business with China and Mexico and uncertainty about whether the UK will leave the European Union without a trade deal.

Growth anticipated

Trade finance revenue at a group of the world's biggest banks reached US$5.8 billion in 2018 says Coalition.

It points out that this is the first time in six years these revenues are on track to grow even further in 2019.

L/C values up

Coalition also notes that the value of L/C grew to US$2.5 trillion in 2018 from US$2.3 trillion in the previous year, according to data drawn from transactions conducted over the SWIFT messaging platform.

The data tracker says this increase was driven by increasing demand for guaranteed payment by exporters worldwide.

Trade tensions have spurred demand for banks' services as intermediaries in the cross-border movements of goods and services according to Coalition, which says banks make significant revenues by extending credit and offering payment guarantees to companies when they engage in international trade.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.