Coverage: weekly note · Information to 26 February 2026
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TGB Weekly Research Note · 26 February 2026
Trade volumes held up better than expected in 2025, but bank trade finance income flattened as margins compressed and asset yields fell, while Suez Canal traffic stayed far below its earlier level.
The desk view
World trade did not contract in 2025: the WTO raised its forecast for merchandise trade volume growth to 2.4%, helped by frontloading and AI-related goods. Trade finance revenue at three large international banks lagged that growth in volumes. Standard Chartered's Trade & Working Capital income fell 1%, with fee growth offset by lower average volumes and margin compression. HSBC's Global Trade Solutions revenue excluding notable items rose by 1.8%, and the average rate on DBS's trade assets fell by 95bp. Suez Canal receipts fell 45.5% in Egypt's fiscal year to June 2025, and Egypt's central bank was still assuming only a gradual normalisation of Red Sea shipping. Our reading is that the pressure on trade finance in 2025 came mainly from rates and margins rather than from a collapse in demand.
Trade volumes held up, helped by frontloading
The WTO's October 2025 update put growth in world merchandise trade volume at 4.9% year-on-year in the first half of 2025, with the value of trade up 6%. Drivers included frontloading of imports into North America ahead of tariff increases, and AI-related goods, which accounted for nearly half of the expansion and rose 20% in value. The WTO raised its 2025 forecast to 2.4%, from 0.9% in August, but cut its 2026 projection to 0.5%, from 1.8%. It warned that higher tariffs and elevated policy uncertainty would eventually unwind some of the frontloading. It expected transport services export growth to slow to 2.5% in 2025, from 4.5% in 2024, and to 1.8% in 2026.
HSBC said global growth in 2025 was stronger than expected as tariff-related headwinds were offset by AI investment and trade growth, but that the changing approach to trade relations had increased uncertainty. Standard Chartered said trade tensions from US tariffs were a focal point during the year, tapering in the second half, and that global trade has broadly readjusted.
Red Sea disruption kept the Suez route depressed
Suez Canal dues were $8.8 billion in FY 2022/23 and $6.6 billion in FY 2023/24. In FY 2024/2025 receipts fell 45.5% to $3.6 billion, as net tonnage fell 55.1% and the number of transiting vessels fell 38.5%. In January–June 2025 receipts were $1.80 billion, against $1.83 billion a year earlier. In July–September 2025 they rose 12.4% to $1.05 billion, with net tonnage up 8.6%. The Central Bank of Egypt described a marginal recovery in net tonnage in the third quarter of 2025, and its growth forecast assumed only a gradual normalisation of maritime transport in the Red Sea after the armistice in Gaza. That is a recovery from a low base, not a return to the route's earlier level.
Bank trade income flattened as margins compressed
Full-year results for 2025 show trade finance income broadly flat to lower. Standard Chartered's Trade & Working Capital income was $1,202m in 2025 against $1,218m, and $283m in the fourth quarter against $312m. The bank attributed the decline to lower average volumes and margin compression, offsetting growth in fees.
HSBC, which said it facilitated around $900bn of trade in 2025, reported Global Trade Solutions revenue excluding notable items of $2,732m against $2,684m. Fourth-quarter revenue was $668m, 2.1% below the $682m of a year earlier. Fee and other income in the business was flat at $1,462m against $1,460m. HSBC's commitments on documentary credits and short-term trade-related transactions fell 1.9% to $6,959m at the end of 2025.
At DBS, average trade assets rose 1.7% to S$43,060m, but interest earned on them fell 15% to S$2,103m as the average rate dropped from 5.83% to 4.88%. At DBS, at least, the pressure on trade finance earnings came from rates rather than volumes.
Trade finance income at three banks, 2025 vs 2024
| Bank and measure | 2025 | 2024 |
|---|---|---|
| HSBC Global Trade Solutions revenue excl. notable items, $m | 2,732 | 2,684 |
| Standard Chartered Trade & Working Capital income, $m | 1,202 | 1,218 |
| DBS interest on trade assets, S$m | 2,103 | 2,473 |
| DBS average rate on trade assets | 4.88% | 5.83% |
Source: HSBC Holdings plc, HSBC Holdings plc Data Pack 4Q 2025, 25 February 2026; Standard Chartered PLC, Standard Chartered PLC 4Q'25 and FY'25 Results (RNS 1097U), 24 February 2026; DBS Group Holdings Ltd, DBS Group Holdings 4Q25 Performance Summary, 9 February 2026.
The gap persists
ADB estimates that the global trade finance gap remained at $2.5 trillion in 2025, unchanged from 2023, or about 10% of global trade, down from 10.6%. In its survey, 80% of banks expected demand to rise as companies diversify markets and reconfigure supply chains. The survey suggests that SME rejection rates (41%) have fallen close to those for large and mid-cap corporates (40%). This suggests that unmet demand, not a shortage of it, remains the industry's problem, and that a weaker 2026 trade outlook would arrive while bank trade margins are already thinner.
What to watch
- 5 May 2026: HSBC first quarter 2026 results, the first read on Global Trade Solutions revenue this year.
- 4 August 2026: HSBC interim results for the six months to 30 June 2026.
Primary sources: Central Bank of Egypt, Press Release: Balance of Payments Performance During FY 2024-2025, 7 October 2025; Standard Chartered PLC, Standard Chartered PLC 4Q'25 and FY'25 Results (RNS 1097U), 24 February 2026; Central Bank of Egypt, Monetary Policy Report Q3 2025, 30 October 2025; World Trade Organization, AI goods and frontloading lift world trade in 2025 but outlook dims for 2026 (Global Trade Outlook and Statistics, update October 2025), 7 October 2025; HSBC Holdings plc, HSBC Holdings plc Data Pack 4Q 2025, 25 February 2026; DBS Group Holdings Ltd, DBS Group Holdings 4Q25 Performance Summary, 9 February 2026; Asian Development Bank, Demand for Trade Finance to Rise Amid Supply Chain Realignment—ADB Report (Global Trade Finance Gap Survey), 15 January 2026; HSBC Holdings plc, HSBC Holdings plc 2025 results (RNS 3236U), 25 February 2026; Central Bank of Egypt, Press Release: Balance of Payments Performance in the First Quarter of FY 2025-2026, 21 January 2026.