Capital Markets
Operating revenue topped $79bn, 18% ahead of 1Q25. ECM, Advisory and Equities outperformed, with FICC also contributing meaningfully. Costs rose, but at a slower pace; as a result, the aggregate profit surged 21%. AMER banks outperformed their EMEA counterparts in revenue and profit growth.
US regulators’ Basel III endgame proposals look far softer than first feared. By removing duplicative capital charges, easing the G‑SIB framework (moving to 10bp steps), restoring the usability of internal models for market risk, and lowering operational‑risk requirements for low‑loss businesses, the package could reduce overall capital needs for US banks. The UK and EU are moving in the opposite direction: the PRA’s Basel 3.1 rules and the EU’s CRR3/CRD6 implementation both raise Tier 1 requirements. The result is a widening regulatory gap, leaving UK and European banks at a growing structural capital disadvantage versus US peers. Citadel Securities has moved into high‑touch equities trading, potentially marking a major shift in market structure. The firm is using its scale in electronic market‑making – dominant US retail flow, ultra‑low‑latency tech, and real‑time pricing – to compete directly with banks in block trading and human‑driven execution. By sourcing blocks directly from institutions, Citadel can offer tighter pricing and faster execution, potentially pulling flow and margin away from investment banks. By comparison, banks face structural constraints: balance‑sheet limits, tighter risk rules, and internal conflicts.
Commercial Banking & Treasury Services
Commercial banking was steady and relationship‑led, while treasury services remained a standout performer with strong payments, liquidity and trade activity.
Loan growth was modest but stable, with continued utilisation of revolvers and working-capital lines. Corporate deposits remain a key funding source, though pricing pressure persisted as clients sought higher yields. Treasury‑linked and advisory‑adjacent engagement stayed strong, especially among mid‑market and multinational clients. Banks are marking down loan portfolios of private credit groups.
Treasury services remained a structural outperformer, with broad‑based growth across payments, liquidity, and trade. High volumes and strong cross‑border flows supported a strong momentum in payment fees; clients continued to ‘hyper-optimise’ cash, driving growth in operating balances and yield-bearing solutions; and letters of credit, guarantees and supply-chain finance saw healthy demand, especially in APAC and Europe. Treasury teams have moved from piloting to producing, using AI for anomaly detection, cash forecasting, and fraud prevention. Standard Chartered’s survey of 300+ corporates shows rising use of Chinese renminbi across operations: firms now have 23% of revenues and 25% of costs in RMB, but only 14% of debt, highlighting a financing gap. Adoption is driven by operational needs — trade settlement, supply‑chain finance, balance‑sheet alignment and risk management. Regionally, Greater China and North Asia are extending RMB use into funding and liquidity; SE Asia is driven by supply‑chain flows; the Middle East and Africa by energy and infrastructure trade; and Europe/Americas by capital‑markets issuance and selective funding diversification.
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