Money-center banks continue to dominate the commercial letter of credit business, according to a ranking compiled by American Banker.

Statistics for the first six months of this year show that money-centers sharply increased their outstanding letters of credit, far outdistancing regional banks in volume.

That contradicts predictions made by bankers and analysts only a few years ago that money-center banks were abandoning trade finance operations due to thin margins and the amount of personnel required to run them. At the time, many analysts and bankers said that foreign banks and regionals like Norwest Corp. and NationsBank Corp. would come to dominate the market.

Letters of credit are a guarantee by a bank that it will make a payment to a beneficiary provided certain conditions are fulfilled. Those used in trade transactions are known as commercial letters of credit. They are the equivalent of an order to pay a certain sum of money to a seller, or exporter, of merchandise after the bank receives documents that the goods have been shipped. The bank, in turn, receives the money it pays out from the buyer plus a fee, usually a minimum 0.25% of the amount when the letter is issued and 0.25% when payment is effected.

"Assiduous investment by money-center banks has kept letters of credit from becoming the straight commodity product it was three to five years ago, and a lot more regionals are entering the business because it's a safe way to get back into international," said Edward Furash, a Washington-based consultant.

He and others noted that the investments, coupled with stable fees and large volume, have helped make trade finance a profit center again. The letter of credit business has also received a boost from increased world trade and spreading financial deregulation, which have given local companies easier access to foreign currencies.

"There's been an increase in exports because of the low value of the dollar, while imports - including commodity imports - have not experienced any decline," Mr. Furash said. "It's a good source of fee business and it's become a lot more focused," he added.

The American Banker ranking put Citibank, the main banking unit of Citicorp, at the top of U.S. banks in trade finance.

Over the six-month period surveyed, Citibank increased the amount of outstanding letters of credit by nearly 23%, to $5.92 billion.

Outstanding letters of credit issued by Bank of America, the second- ranking player, rose nearly 27% to $3.97 billion.

Chase Manhattan Bank ranked third with $3.4 billion, up nearly 13%, while No. 4 Chemical Bank increased its outstandings by 15.74%, to nearly $3 billion. Chase and Chemical are scheduled to complete their planned merger in the first quarter of 1996.

Bank of New York, which has made a major effort to automate and expand its commercial letter of credit operations, increased its outstandings by 11%, to $2.3 billion.

Bankers and analysts said banks are likely to increase their involvement in both trade finance and letters of credit. "It's fee-based, it doesn't use up capital, it's profitable and it's a very attractive business on all fronts," said Susan Rugnetta, senior vice president for global payments and trade finance at Bank of Boston Corp., parent of First National Bank of Boston, the biggest regional bank in letters of credit.

The company earlier this year embarked on a major push to expand its trade finance-related operations in both Latin America and Asia. Ms. Rugnetta said that expansion, combined with growing demand from new and existing retail customers for letters of credit to back imports, means Bank of Boston will likely continue to post "double-digit" growth in the area.

Total outstandings in commercial letters of credit at the top 100 banks rose by more than 14%, to $37 billion, the survey found. First National Bank of Boston ranked sixth with $1.55 billion in outstandings, followed by Philadelphia's CoreStates Bank with nearly $1.2 billion.

Bank of America Illinois, the former Continental Bank, had $793 million, and No. 9 First National Bank of Chicago had $742 million.

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