U.S. banks' foreign assets declined slightly in the first half, with a few banks dominating all major categories of international operations.
According to the latest American Banker survey of U.S. banking activity abroad, outstanding commercial and industrial loans by the top 10 U.S. banking companies fell by slightly more than 1%, to $134 billion.
Analysts attributed most of the decline to cutbacks in lending to Asian, Eastern European, and Latin American countries after sharp currency devaluations sparked a massive capital flight from those regions.
Citigroup Inc., the top U.S. banking company in international operations, was one of the few that actually increased its overseas activity during the period, posting a 5% increase in commercial and industrial loans, to nearly $60 billion.
J.P. Morgan & Co. and Bank One Corp. also posted slight increases, but lending by Chase Manhattan Corp, the second-ranking bank, and Bank of America Corp, No. 3, fell slightly.
Despite the overall decline, foreign operations continued to account for a hefty percentage of activity at big U.S. banking companies.
Overseas commercial and industrial loans accounted for nearly 77% of such lending at Citigroup, or $59.6 billion; 48% at J.P. Morgan, or $6.4 billion; 42% at Chase, or $24.3 billion; and 36% at FleetBoston Corp., or $9.3 billion.
Including other types of loans, the amounts lent to foreign borrowers were even higher. Citigroup, for example, booked $133.5 billion of loans through its foreign offices, Chase $37 billion, and Bank of America $36.6 billion.
Elizabeth Morrissey, a managing partner at Kleiman International Inc., a Washington-based financial consulting firm, said the drop in the first half of this year is unlikely to recur.
"I don't see vast amounts of money going into emerging markets," she said, but we definitely do see a recovery in capital flows."
She also said lending is becoming a smaller component of U.S. banks' international activities.
Much of the international activity by banks will be in capital markets services such as bond underwriting and mergers and acquisitions rather than in straightforward lending, she added.
The Basel-based Bank for International Settlements made a similar prediction in its latest report on international banking. "Many countries have retained or regained access to the international capital markets, albeit at higher costs," the BIS report said.
Other measures of activity, such as commercial letters of credit and spot foreign exchange contracts, also indicated that major U.S. banks remain heavily involved in international operations despite financial turmoil abroad.
They also show that a growing amount of business is being concentrated in the hands of a few major players.
Citigroup, the top bank in foreign exchange activities, registered nearly 150 million contracts in spot currency trading, Chase nearly 145 million, J.P. Morgan 62million, and Bank of America 51 million.